First I should say how fortunate US citizens are to have access to all the investing options you do, and be able to act with ease on the straight forward approach outlined in the PFC course!
In Canada, I’m finding it much more difficult to follow these ‘simple steps’.
To the best of my research (as a new investor), I outline the following points:
TDIF’s don’t exist in Canada.
Well actually… the 1st target date ETF just launched in February 2022! I think that is a discussion of it’s own; I have created a separate thread for that if anyone is interested.
‘Index mutual funds’ are generally less prevalent in Canada than in the US, and when they do exist they come at notably higher expense ratios. The ‘e-series’ from TD (a popular choice) has these ranging from 0.3 - 0.5% for each individual fund, or 1.2-1.4% for a complete portfolio of stocks/bonds. For this reason, every video or commentary I’ve come across recommends investing in ETFs instead.
Somewhere in-between a three-fund portfolio and a TDIF, there are 'asset allocation ETFs: an all-in-one portfolio that varies between asset allocation and your risk tolerance. These are automatically ‘rebalanced’ giving it an edge over a three-fund portfolio, but it still lacks the ‘re-allocation’ of TDIFs
Model Portfolios | Canadian Couch Potato
I am 28 years old, and personally I am considering to start off with a 80-20 approach (VGRO or XGRO), which closest mirrors the glide path of the TDIF’s presented in the course, via Vanguard:
- As a DIY investor our brokerages don’t seem to offer the same flexibility as in the US in terms of monthly auto-investments, possibly as a result of point #2 (I’m not referring to robo-advisors here, which may be able to do just that, because why pay more fees!) I believe this statement is mostly true (I hope I am wrong), although there seem to be some loopholes. More on this in below
Putting this altogether (in the context of available discount brokerages):
Index mutual funds are generally not listed in Wealthsimple or Questrade and so I am not able to invest in dollar amounts therefore limiting me to buy whole ETF shares. Questrade for example does not allow fractional shares at all, while WealthSimple does for limited stocks/ETFs (note: of the table in the couch potato link above, only VGRO and XEQT allow fractional trading on WealthSimple).
My ETFs of interest, VGRO and XGRO have MERs of 0.24% and 0.2%, respectively. I am leaning towards XGRO with just a slightly smaller expense ratio and more emphasis on US stocks/less on Canadian ones, but being a student of this course – since I want to invest early and often on autopilot – and since the performance of these competitor ETFs are generally so similar, is the option to purchase fractional shares reason enough to go for VGRO, just so I know I am always investing any excess cash I have? I’d like to work with a clean number like $500 into my account per month and bypass any need for monthly rationing (which may deter investing). FYI these ETFs cost ~$25-30 each
Back to point #4, “auto-investing”, as shown in the course, in which the brokerage buys a fixed amount/value of designated funds/ETFs is generally not available within our Canadian options. One exception I am reading is that certain iShares by Blackrock (like XGRO) are eligible for automatic purchasing on a fixed schedule through Questrade, through a program called “PACC”.
More info on this and a list of eligible funds below:
In this case it may be reason to go for XGRO and Questrade, instead of VGRO and fractional shares on WealthSimple. Questrade also allows DRIPs while WealthSimple does not, but the ability to buy fractional shares (for VGRO at least) alleviates some of that tension. These are just some of the workarounds Canadians need to deal with as the process is unfortunately not as clean.
Any thoughts on this @Jeremy ?
Going with any of these I understand I will need to revisit my allocations over time, (i.e. starting in 10-15 years; VGRO vs VBAL vs VCIN) but I hope this is enough to get started. FYI all, VGRO has been previously discussed on the board (search ‘Investing in VGRO’)
If anyone has any alternative strategies as a Canadian, please do share ~