Finance

Why I Use An AIO ETF

A central tenet of my writings has been the need to simplify. I abhor complexity. I have lived with complexity in the past and it does not wear well with me. Your mileage may vary.

With the advent of these AIO (All In One) ETFs, it has made my investment plans simpler.

I know about tax loss selling. I only started buying my ETFs in May 2018 and I have experienced two tax loss selling opportunities. One in October 2018 and again in December 2018.

October went fine but then I doubled the port and December happened.

I knew that it was best to trade the ETF when the bid- ask is a 1-2 cent spread. But when the time came and the market was nosediving, I ended up pulling a market buy for my XAW. I think the bid-ask spread was about 7-9 cents.

Ouch. That one hurt.

So I got caught in the whipsaw during this one trade. I can only imagine my sheer terror when I try to buy and sell with over ten times the amount in December. No thanks. I will pass on these strategies. I shall allow the taxes to fall where they may.

I tend to learn quickly. Thankfully. I am also quite aware that I better keep it brutally easy thus the AIO ETF strategy.

I am buying a Global Stocks and Bonds fund. I am not trying to knock it out of the park here.

I know how to build great excel spreadsheets which light up whenever it overrides the 5% bands for my asset allocation. But I also know that I want to spend less and less time on this stuff. But more importantly, I need to get myself out of the way.

I understand the reasons why I hold my portfolios. I do not trust myself to do it as efficiently as Vanguard can. It really is that clear to me.

That is also why I intend to set up dividend reinvestment plans on each account. Automate ruthlessly where possible.

My ultimate plan is that the entire process will whirl in the background with minimal upkeep needed by me. That would be nice.

I have been pleasantly surprised by my husband recommending even more ways that we can simplify. He wants us to buy a bond ETF in the RRSPs which would negate having to buy GICs yearly. Then I truly would have nothing to do.

The whole point of money is to have financial EASE. I do not want or need money for luxuries. That’s not even on the radar for me.

I would rather pay extra MER for these AIO ETFs. I know I can make it cheaper by continuing with a three ETF strategy. I know I can make the taxes less by strategizing where each asset would best be held. I know I can harvest tax loss selling but I do not think I will bother.

The truth is, in my hands those so-called solutions may backfire. That has certainly happened to me in the past. Focusing on minutiae while the train is hurtling towards me on the other side.

This way, no matter what happens, I will have financial ease. And no. Hiring a financial advisor would NOT be helpful. I do not need a person between me and an automated strategy.

I am a financial nerd. But I also know myself. I tend to take my eyes off things often at the worst possible times.

How is that for insight?

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Finance

Passive Income and AIO Changes Again

Passive Income

I love passive income. I have been tracking our passive income since the beginning of the year. Our passive income has no rhyme or reason. I did not realize that until I started tracking this.

My husband was very clear about passive income. He said he would be happy to work less if I can generate more passive income. Interesting. He is consistently inconsistent.

I am seeing more options when I track the passive income. Once again tracking is important. I should have started this ages ago. I have zero reasons why I did not. Many personal finance sites argue incessantly over dividend growth investing versus the total return approach.

However within the realm of SBD (small business deduction) territory, I prefer a smaller dividend thanks. My husband says he would work less. He only says that. I have given him plenty of options to work less over the past dozen years. He has never taken me up on it.

In any event I am planning to make a monthly updated sheet to document my passive income.

But here is a start. My iShares ETFs paid dividends in February thus the spike.

Personal

Corporate

Total

2019- 01

2045

6703

8748

2019- 02

4075

11889

15965

YTD

6121

18593

24714

AIO (All In One) Fund Changes Again

Last week I wrote how I was planning to buy VBAL (60/40) in my CCPC portfolio. Thankfully I had not pulled the trigger when a few days later my husband tells me how he would like to use VEQT (100% total world equities) if the market dropped.

Interesting.

I reminded him that the point of these AIO funds is so you DO NOT TINKER. But of course he is an incessant tinkerer. This works for him for almost everything, except investing. Actually it even worked for our real estate investing so I see why he thinks this way. But it is the opposite of what we should do for our index investing.

So I am back to using VGRO. If he going to tinker, I might as well not tie it up with ETF’s where I have to do interesting math.

Holding the entire RRSP as fixed income will allow us to use VGRO in our CCPC account. Even though VGRO is 80/20, it would not end up as that asset allocation. Perhaps closer to 65% equities instead. And we are both fine with this.

The asset allocation percentage is a guideline as far as I am concerned. Using these AIO funds will help keep us within the right ballpark.

Portfolio Update- I can not keep up with which iteration this is…

Retirement

RRSP

Laddered 5 year GICs

Discretionary

CCPC

VGRO [DRIP]

Estate

TFSA

VGRO [DRIP]

I plan to buy VGRO in my CCPC next week. I will even set it up for a dividend reinvestment plan.

Yeah, I write this stuff down. When my husband queries why we did certain things, I can refer to these posts.

Now I am back to using VGRO as my sole ETF. I think this will be simpler overall.

Maybe this is why mainly one person manages the investments. Or have to resort to using an advisor. But man I have made this pretty simple for my husband to think through. Even my kids understand what I am doing and why.

Anyhow let the games begin…

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Finance

Helping The Children- 2019 Edition

This is the question that I ask myself. How much help do the children really need and could I be harming them instead?

I have a tendency to push against my own belief systems if only to make myself revisit the initial plans again.

People change. My children progress through various stages. I admit that I progress through various stages.

Tuition Costs

My son is 20 years old while my daughter is 18 years old. Both live in the unit on the main floor. They do not pay rent since both are attending university. We also pay for their tuition costs.

They work part time for their own spending money for outings with their friends. I have offered that they could live at the university residence but the added costs would be added to an ongoing ledger. They would be responsible for paying those extra costs back upon graduation.

I did not want to hamper their growth by forcing them to stay home during university. I do not want them to become people who make all decisions based on money. I certainly did not. My mother lent me the funds during university which I paid off completely within a year of graduation.

I want my children to recognize that decisions have trade offs. You just have to clarify the costs and decide if you want to take those on. I have witnessed many parents simply deny their kids without offering a reasonable alternative.

For now, both of them prefer to stay at home. But this could change and I plan to allow them to exercise their options. Offering them the choice may be better than an ultimatum.

We plan to pay for the children’s undergraduate degree. Their postgraduate degree would be debatable. I prefer they apply for student loans instead. I do not believe I owe them to stay in university for an extended period of time.

Although I went to 7 years of university, I do not believe that this is the only way. Admittedly, I have zero advice for what degree they should pursue except that they like it somewhat.

Housing

This is the area which we think about carefully. I have written that our personal residence will form part of our estate plan. This is one of the last tax free bastions left in Canada.

The only other benefit we have added was to carve out two fully independent units that they could live in even if they start their own families.

But we plan to keep the titles on these homes in our names. I have witnessed the sad realities when parents gave their married children control of the properties too early. The spouse walked off with half of the asset. I am NOT okay with that.

We figure that offering them a unit to START their adult lives would be all we would want to do. Otherwise we might resent how they live their lives if we try to help too much. That would be unhealthy and best avoided.

TFSA

The ole tax free savings account. I see this little gem as another avenue to assist the children. The tax free savings account is not creditor proof unlike the RRSP. However it offers wonderful advantages otherwise.

I plan to use this account to invest for the children. Thus the purchase of VGRO (80/20 portfolio). This account does not factor into any of our retirement or discretionary income plans.

I carved this portion out since we might have a tendency to start thinking of our portfolio as one unit. I do want to see things this way. I do not want to think that our spending should have any noticeable impact on our bequeaths.

Besides if I plan this properly, the kids should have a simpler life and hopefully they will benefit from my plans while we are alive.

The beauty of a TFSA is that these accounts start with small sums. I want them to experience the power of compounding and to have the ability to follow the growth of these funds. I am teaching them patience and to value the long game.

So the plan in 2019 are thus:

  1. Pay for their university tuition- undergraduate degree
  2. Allow them to use our two extra units when needed.
  3. TFSA- invest for growth and hopefully this could help them attain FI.

I plan to offer them a “floor” so to speak. The generation of their upsides will be on them. The children have been working to pay some of their university costs even when we say we would cover it.

Otherwise I am only letting them USE the assets not OWN the asset. This will give us full control and the understanding that these assets are ours. This will allow them to pursue whatever careers or relationships they please without unnecessary concern from us.

I write this not to pretend that I have a bulletproof formula. This is just my version in 2019. If there is anything I have noticed, is that things change. I am interested to see how this will change in the future. Would I laugh at the naivete of my 50 year old self?

Perhaps. But writing this down helps me think about things. Problems and issues do not go away simply because you choose not to attend to it.

Just ask any couple where one person tries to stonewall their partner. The issues continue to escalate until it is almost irreversible. Not a good idea.

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Finance

Clear Your Filters

Life is all about clearing your filters. If you spend any time on the Internet you recognize how important this really is. The Internet has answers to anything. The bigger problem is knowing what questions to ask.

This is true with personal finance. Everyone has answers. Everyone has a strategy. The biggest problem is figuring out how everyone’s answers relate to your specific problem.

Just as an add in, be very careful about taking advice off the Internet. Be very careful taking advice from anyone who does not have skin in the game. As a physician, you see this all the time. Everyone will offer advice to your patients. But you are the one who could potentially be sued if things don’t work out as planned.

I have learned to be extremely cautious listening to advice from anyone who does not have skin in the game.

I am careful listening to advice from people who are employed. Employees can hide behind the insurance and the back up of their employers. Having been self-employed for practically my entire career I can promise there is a massive divide between taking risks yourself versus hiding behind your employer.

In personal finance there’s a massive divide between taking advice from someone who has only read a book about it. Or taking advice from someone who has actually done it.

Along that spectrum there is a massive divide between someone who is old enough to have lived through certain experiences. Or reading advice from someone who has never experienced anything in their young lives. They just don’t know what they don’t know. Call it false bravado. Take your pick.

I no longer focus on how anyone gets wealthy. I care about how people stay wealthy and sane.

Back to developing filters.

Here are my filters for 2019 in personal finance. I disregard or minimize.

  • Anything that predicts the future since they are likely wrong.
  • Any travel hacking since I tend to be terrible at these things.
  • Anything that I have to waste extra time for savings since I barely shop.
  • Anything that requires me to be smarter than anyone else because I am not.
  • Anything that my husband and my children can not follow through since life can happen to any of us.
  • Dividend investing since I will never consistently watch the individual companies.
  • Trying to optimize my portfolio since the target keeps moving anyhow.

I change the filters in my home heating system regularly. One could be vigilant to keep their mental filters cleared as well.

We live in an age of too much information. Perhaps it is due to getting older or maybe I am more aware of what I am looking for. But I find that I am able to ignore so much out there.

That was how I thrived during school. Here is a hint. Doing well in school while enjoying life requires the ability to know what information to ignore.

It has become evident that the “portfolio” part of paper investing is a commodity. The recent onslaught of AIO (all-in-one) funds have proven this. I have woken up to this phenomena.

I am grateful that these products have finally arrived in Canada.

The process is similar to our societies’ newfound love with decluttering. There is a reason Marie Kondo has a show on Netflix. Many folks are realizing that a better life is attained via subtraction.

And this is also the case with health. Many of our chronic illnesses accumulated from ingesting or imbibing too much.

Financial information and opinions abound. If you do not hone in on what matters to you, you will get lost very quickly. You will experience paralysis by analysis.

I often tell my husband that we must begin with remembering what areas money will help. It certainly does not help with all areas of life.

This step is immensely important. Because once you can figure that out, the path to solutions are usually a straight line.

This is what our latest revelations showed. I asked my husband if he had any interest in managing the investments, like ever? And he honestly said that he would rather go fishing, do martial arts, running or any of the plethora of hobbies he enjoys.

I had just spent March 1st buying GICs and 90 day bank terms. It struck me that he would never do this.

Thus I have finally decided to pull the trigger to simplify this nonsense further. The CCPC will consist of VBAL. Instead of trying to construct a 60/ 40 portfolio using VGRO and GIC ladders, just buy a 60/ 40 AIO.

The issue with premium bonds being less tax efficient for VBAL in taxable accounts is not a permanent problem. And to have a blindingly simple strategy FOREVER will more than make up for any tax inefficiency that may occur occasionally.

Recently I wrote that my portfolios can not get any easier. Well actually, it just did.

Here is the latest iteration:

RRSP

Retirement

Fixed Income

Laddered 5 year GICs

CCPC

Discretionary

60/40

VBAL

TFSA

Estate

80/20

VGRO

I knew I struck gold when my husband beamed that even he would be HAPPY to manage this.

Uh oh, now I’ve really done it…

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Finance

Channel The Inner Pre-Med

I have never been a particularly competitive person. But I have met many ultra competitive folks during undergraduate, medical school, residency and in practice.

We could channel this innate trait which many of us possess and use it for our finances.

Not enough physicians understand that your financial statement is your report card as an adult.

Our networth should be displayed as digital bubbles above our head or plastered onto our forehead.

People would burst out laughing if they watch someone come out of their McMansion. Folks would laugh when they see you driving your leased Porsche while dropping the children off to the private school. It is only due to the ability for us to hide our true financial statements where anyone can get away with these shenanigans.

But numbers don’t lie. Many who are on unstable financial footing are well aware of it. Even if they try to delude themselves, eventually the facts bear itself out.

If we could channel the inner competitiveness within our profession to compare what matters. What is your level of financial security, how is your cash flow and what is you net worth?

I have never been one to take things to the extreme. There are financial bloggers who will argue that cash flow is more important than net worth. But it is like anything that people want to tell half truths to themselves about. The truth is not that one is better than the other. It is your cash flow AND your networth that matters.

This is similar to when people want to lose weight. There are camps who say that the diet is all that matters. And another camp will say you have to exercise a lot or else you won’t lose the weight. The fact is you need to control both diet AND exercise.

That single word “AND” makes all the difference. The people who want to use the word “OR” are people who are trying to take a shortcut. Be careful with which word you decide to use.

And I’m not talking about political correctness. I am not such a person. I am a rather straight shooter. Thank goodness I could be self employed. I am likely unemployable at this stage.

I am referring to the words that you use to think for yourself. Those words will drive your actions. Political correctness is to help you be accepted by other people. The bigger question is how do you accept yourself.

We could channel these pre-med tendencies of comparison and competition. Where everyone knows the score. We were people who admired those who gained acceptance to medical school by taking the more academically challenging programs versus those who took the easier programs.

Those who have been successful in their medical journey are very discerning when it comes to truth and non-truths. Doctors as a group are ruthlessly comparative. The problem is that we all hide the financial truth from one another. Therefore many have no basis of understanding where any of us really should be.

And so many of us rely on someone outside of medicine who works in a authoritative position to tell us if we have enough. We have made each other blind to any financial standard.

Maybe as a profession we should vaunt those who continue to practice and serve the public in spite of financial independence. We should not be waylaid by looking at those with fancy homes, fancy cars and other status seeking displays.

We all needed to be better before we could entered this profession. I really don’t see why so many have lost their way.

The persistence that so many of us possessed to allow us to gain entry into this profession. We must channel that to propel us along the path of financial independence that many seek.

Who would not want financial independence? This will allow you to live with financial ease. This will allow you to actually do what you want. For many this will allow you to practice without worrying about the bottom line. What a freaking relief that would be.

Those who say that money is not important will tend to lie about other things as well. In our current society, money matters. So deal with it.

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Investment Minimalism

Portfolio Account Investment
Retirement Portfolio RRSP (tax deferred) Laddered 5 year GICs
Contingency Portfolio Taxable Account High Interest Account
Discretionary Portfolio CCPC- HoldCo 75% VGRO + 25% Cash/GIC
Estate Portfolio TFSA (tax free) 100% VGRO [DRIP]

My likely financial picture will consist of 1 ETF- VGRO, some GICs and cash.

I own my home, a joint home with my mom and our office unit.

I mainly use MD Financial and one credit union.

I have an MD advisor but the last time I met with him was in 2007.

2019 is starting to become very interesting. Things are getting more focused. The stars have aligned with my investment plan.

I have made the decision to use VGRO for my portfolios. I will start to purchase this within my CCPC during Q2 in April 2019.

I will sell the 3 fund portfolio of XIC, XAW and ZDB during the next tax loss selling opportunity.

Currently there are asset allocation portfolios offered by Vanguard, Blackrock and BMO.

The premium bonds issue within my CCPC is not a permanent issue. I prefer to have an ETF that captures 94% of the global equities and bond markets.

There are certainly more optimal ways to invest. But I could also do much worse. I am certain that I could find a plethora of ways to do much, much worse.

My To Do List

  • January:
    • RRSP- 20% of portfolio into a 5 year GIC
    • TFSA- Invest entire amount in VGRO
    • CCPC- Balance to 75% VGRO + 25% Cash/ GIC with incoming cash.
  • April, July & October:
    • CCPC- Balance to 75% VGRO + 25% Cash/ GIC with incoming cash

This can NOT get any simpler.

I should be able to balance the CCPC account with incoming cash flows. Therefore less taxation triggered. I have chosen to not have an automatic dividend reinvestment plan in the CCPC since I will be adding to this account quarterly.

Unless there is a massive move in the markets, I should be able to be hands off with the portfolios. This is exactly how I like it.

I understand the more I tinker with these portfolios, the worse I will do. Investing in this manner serves my slothful side very well.

I spoke about this investment approach with my husband. He said as long as he does not have to do anything, he is cool with it.

I showed him how simple it was going to be. He thinks even he can manage this now. But he still prefers that I do it.

My husband is quite used to me deconstructing things into their basic concepts. He has given up trying to impress me with complexity or jargon. He reserves that for his work thank goodness.

My CCPC will always take a bit more work.

But notice how incredibly simple the TFSA account can be. I set VGRO with a dividend reinvestment plan. Therefore, aside from the yearly buy in January, it is truly a set it and forget it plan.

These All In One Funds within a tax sheltered account and a DRIP can be extremely efficient.

It will be fun to see how these portfolios progress…

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Why Simplify It All?

Someone always wants your time, attention or money.

Businesses build in complexity to distract you. Thus it is extremely important to simplify and eliminate the unnecessary.

All this distraction is meant for people to drown out their own thinking. Zoning out allows businesses to imprint what they want you to feel and then for you to buy without questioning.

More information and more choices does not necessarily help you make better decisions. In fact you will more likely make a bad decision due to utter confusion.

Everyone KNOWS what to do. The issue is why is it so hard to do the right thing?

That is why I keep writing about keeping things simple. Anything I need to waste bandwidth on must be something that only I can do. Otherwise I best leave it to automate without me.

The internet is a wonderful tool- for good and for bad. The internet answers almost any question one can imagine. The bigger problem is making sure that you are asking the right questions…for yourself.

The only way that I can get myself to do pretty much anything is to simplify it. That is just how I am built.

Your mileage may vary.

That’s another thing I write about, you have to know yourself. Many options become clearer once you know what you are looking for.

I will give an example of simplifying. I practice daily yoga at home. In the beginning, I read about hourly routines which required joining classes and more physical fitness than I possessed.

I realize that big sticking points for me is trying to attend classes. That’s one of the by products of being self employed and semi retired for so long. My ability to show up on time at places has plummeted dramatically.

Thus I finally settled on a home routine for thirty minutes. Even that was too much. I found myself not doing my daily practice.

So what worked? I found a fifteen minute routine at home was the best for now. And I know that this is optimal for me since increasing the routine by a mere five minutes will make me stop practicing.

I was often surprised how small a change I would need to make myself not want to do something. Simply adding five minutes to a routine could make me stop a daily practice.

That’s the takeaway for me. I needed to keep any new habits extremely simple and then add to it very slowly. Like very very slowly.

What is my point with finances?

I find people have these outsized plans for investing. But then I find that they are in debt and have barely anything to show after working for over a decade as a physician.

I have become brutally honest with some close friends. I have to tell them that investing in more of a high school stage. Unfortunately for them, they are in the kindergarten stage. They have not graduated from the basics of money management yet.

I repeat, everyone knows what to do but most can not do it.

Folks need to take it slow and focus on the small steps that one can control. They need to follow through consistently. Managing money is similar to building a muscle. These habits take time.

And you need to develop the foundational habits of earning and saving. Investing is high school. You do not gain admittance until you pass elementary school first.

But trust me, if you can not consistently save the money. An “emergency” will surely come along and FORCE you to be unable to hang onto to your perfectly planned investments.

You can not control financial markets or regulatory risks. But you can focus on building a strong foundation so no matter what happens, you will survive and perhaps thrive.

I notice it is the older folks who write me about keeping things simple. And many of these folks are very wealthy.

I am beginning to see a correlation.

There is a template with those who keep their wealth.

You will notice that they play plenty of defense at this point.

The end game is to keep the wealth. Staying wealthy is a very different animal than getting wealthy.

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