My Portfolio of ETFs

Everywhere I go, I have people asking me how I invest my own money and what kinds of things I invest in.  I’ve never had a problem sharing what I do, so I thought it would make sense to write about it.

The history

I came into the financial industry right out of University and worked for a big insurance company as their Retirement and Investment Specialist.  I spent over 5 years, teaching insurance agents and brokers about the merits of segregated funds and started investing in those segregated funds myself over 22 years ago.

Later, I ventured into business as a financial advisor who sold GICs and Mutual Funds to clients. My first book, Mutual Fundamentals, was a research based book on how to pick top quality mutual funds.  Right or wrong, I felt that picking mutual funds needed to be empirically based as opposed to being based on intuition, gut or instinct.  I developed a rating system called the Fund Filter and it got quite a bit of media attention, interest and success.   As a result, my portfolio also switched my portfolio from segregated funds to mutual funds.

In 2007, I sold my business and gave up my license to sell financial products to build my current business that puts financial education programs into the workplace.  Instead of selling products, my focus is on education and teaching.

Welcome to the world of ETFs

Investing ChartAs an empirically based investor, I could not help but be influenced by the amount of research on low cost, passive investing.  Even some of my own research lead to the conclusion that Fees do matter and the lower the fee, the higher the probability of higher returns.

If you are a fan of low cost passive investing, you’ll be drawn to the merits of Exchange Traded Fund (ETFs).  That’s where most of my portfolio is invested today.

What is an ETF?

Exchange-traded funds (ETFs), are similar to mutual funds in that they hold a basket of stocks, bonds or other investments. The difference between an ETF and a mutual funds is how they are bought and the fees associated with them.  Unlike mutual funds, ETFs are bought and sold on an exchange, like stocks.

The origins of ETFs began primarily with passive index based products.  In other words, most EFTS were simply mirrors of common market indicies like the TSX, S&P500, MSCI, etc.

Today, the ETF market has grown dramatically and now there are actively managed ETFs with managers just like mutual funds.

What ETFs  I own?

Before I disclose the ETFs I own, I must give a huge plug to Dan Bortolotti for all of his great information on the topic of ETFs.  His website Canadian Couch Potato and his book The Moneysense Guide to the Perfect Portfolio was very influential and helpful.  If you are wanting to learn more about ETF investing, I highly recommend his site and his book.

So, here’s my RRSP portfolio:

Investment ticker allocation
iShares S&P/TSX Small Cap XCS 3%
Vanguard International Stock VXUS 15%
MSCI World XWD 15%
BMO REIT ZRE 10%
BMO Aggregate Bond ZAG 22%
Vanguard TSX VCN 15%
iShares Dividend XDV 10%
Cash 10%
100.0%

 

It’s nothing fancy and there is little guesswork in the positions.  I keep about one third of my RRSP portfolio in fixed income investment.  The rest is in equities.

Where do I buy ETFs?

For me, I use a ‘do it yourself’ platform through Questrade.com.

Questrade is an online discount brokerage platform to buy stocks, bonds and ETFs.  I love the fact that I can buy any Canadian or U.S. listed ETF absolutely commission-free with no minimum holding period.

I only pay commissions when I am ready to sell my ETFs.  If you are interested in buying ETFs yourself, there are other discount brokerage providers so shop around but I have not had any problems with Questrade.com.

Written by Jim Yih

Jim Yih is a Fee Only Advisor, Best Selling Author, and Financial Speaker on wealth, retirement and personal finance. Currently, Jim specializes in putting Financial Education programs into the workplace. For more information you can follow him on Twitter @JimYih or visit his other websites Group Benefits Online and Advisor Think Box.

4 Responses to My Portfolio of ETFs

  1. Hey Jim,

    I was just wondering why the allocation of capital to MSCI world and Vanguard International stock when you could have build a portfolio much cheaper with XEF (MSCI EAFE Ishare) with MERs of just .200 and also avoid a foreign withholding tax drag on on your RRSP and TFSA accounts.

    Am I am missing something that is glaringly obvious? Please, would love your perceptive on this issue.

  2. Hi Jim
    I am a fan of ETFs…. We are 61 and low to medium risk tolerance.
    How would you tweak your ETF portfolio to fit our risk tolerance.
    Appreciate your input.
    Cheers, Sal

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