Next, let’s take a look at the equity differences in our Light vs. Because it invests in lower-coupon bonds, with less taxable annual interest, ZDB is expected to be slightly more tax-efficient than the other two.
In taxable accounts, I’ve swapped out VAB and XBB in favour of the BMO Discount Bond Index ETF (ZDB). bonds) increases the duration risk from 7 years for the iShares Light portfolios to 8 years for the iShares Ridiculous portfolios. I’ve also excluded the iShares Core Canadian Short Term Corporate + Maple Bond Index ETF (XSH) from the iShares Ridiculous portfolios. This change also reduces the number of holdings in an already-complex portfolio.Īs iShares doesn’t yet provide CAD-hedged versions of their U.S.-based bond funds, it was an easy decision to stick with the iShares Core Canadian Universe Bond Index ETF (XBB) in most account types. I’ve instead opted for the Vanguard Canadian Aggregate Bond Index ETF (VAB) in all account types except taxable accounts. Specifically, I’ve dropped the foreign bond ETFs from the Vanguard Ridiculous portfolios, due to their higher product costs and foreign withholding taxes. Ridiculousįirst, there’s some foreign bond differences. I’ll take you through them now.įixed Income Differences: Light vs. In comparison, the Vanguard Balanced ETF Portfolio (VBAL) from the Light portfolio report would cost 0.42% in an RRSP, for a total cost difference of 0.28% per year.Īlthough the report looks intimidating, there are only a handful of differences between the Ridiculous and the Light portfolios. For example, in an RRSP, the Vanguard 40% bond/60% stock Ridiculous portfolio would have a combined MER and FWTR of 0.14%.
You can directly compare these figures to those found in the Light portfolio reports. For each asset mix, you’ll also find the weighted-average management expense ratio, or MER, as well as the foreign withholding tax ratio, or FWTR. In each section, we’ve adjusted the specific holdings to reduce product costs and increase tax efficiency within the overall portfolio. The report is further divided horizontally into three account-type sections: To allow for cost comparisons and other portfolio management conveniences, I’ve used the same Canadian, U.S., international, and emerging markets equity ETF weightings in both the Ridiculous and Light portfolios. Below the blue and grey donuts, you’ll find the percentage weights allocated to each ETF. Similar to their Light portfolio counterparts, the Vanguard or iShares Ridiculous portfolios are displayed from left to right, ranging from a very conservative 80% bond, 20% stock portfolio, all the way to a very aggressive 100% stock portfolio.
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Once again, you may now want to hit pause on this podcast, and download one of the Ridiculous model ETF portfolio reports, so you can follow along with me. You can click on either the Vanguard or iShares ETF buttons in Step 2, which will generate the report in a separate tab. The Ridiculous portfolio reports are also available for download in the Model ETF Portfolios section of the Canadian Portfolio Manager blog, to the right of the Light portfolios. But for the uncommonly intrepid, there may be rewards worth reaping.Īfter you’ve considered today’s Ridiculous model portfolios, it’s your call: Will you continue onward, or hit the emergency stop button and head toward the Light? You decide but first, let’s check out these ridiculously good-looking models. Most importantly, managing a more complex portfolio is, unsurprisingly, more troublesome. That’s fine, as long as you’re up for the challenge, and you know all the facts. But I know some of you may prefer to boldly go where no DIYers have gone before. To be honest, most of you can probably begin and end your adventures with a Light portfolio you’ll still be light years ahead of most DIY investors. Our models now range from our simple (but not simplistic!) Light portfolios, to our bordering-on-insanely complicated Plaid portfolios. I’m your host, Justin Bender, and in today’s episode, we’ll introduce our moderately complicated Ridiculous portfolios. Welcome back to the Canadian Portfolio Manager podcast, where we’ll continue on with our Spaceballs-inspired exploration of the new CPM model portfolios.
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