ETF Index Investing Course


  • Leanne

    Reply Reply May 3, 2021

    Situation: My spreadsheet says my US Equity holdings (VTI) are over target by 5% and some should be moved into fixed income, even after factoring in the remainder of RRSP contributions going into fixed income for the rest of the year.

    Not crazy about paying to convert proceeds of sale of VTI to CAD and also groaning about doing Norbert’s Gambit every time I want to move money back and forth. I guess my preference would be to leave it in USD in case the numbers flip back and I end up buying VTI 2-3 years from now.

    Do you ever park your USD in a USD fixed-income option?

    • Hi Leanne.
      One quick thing before we get started: Make sure that you are converting VTI to Canadian dollars when adding that number to the spreadsheet. All the other ETFs that you have in there are probably in CAD currency, so you want to compare apples to apples when determining whether you are underweight/overweight in any particular ETF.

      Onto your question:

      No, I haven’t personally ever had to do that as I changed my US target to 40% and since my RRSP is full, I ended up having to buy some US market ETFs in my TFSA and taxable accounts. So now if I do need to trim some US exposure because it’s overweight, I can just sell those Canadian listed ETFs (like VUN).

      I realize that doesn’t really help your situation though. Here are some potential solutions: First, are you more than 5% overweight in the US? I personally use 5% as the threshold so if I’m over that, then I rebalance.

      If you are over 5% overweight in US (after seeing what it actually is in Canadian dollars), and are uncomfortable holding that much in US, then one option is you could convert a sizeable chunk to Canadian dollars, and then that way you have some Canadian currency to use as a buffer. So even if you want to use it for the US market in the future, you could just buy something like VUN (instead of converting it again to USD to buy VTI), and that way you have some flexibility when the US market fluctuates. Yes, VUN won’t be as tax efficient as VTI in your RRSP, but it’s not like you are converting a $100k+ buffer. In other words, you would have most of your US holdings in VTI in your RRSP, but some in a Canadian traded ETF that’s in Canadian currency (like VUN for example).

      Another question is are you still investing? or are you fully in the decumulation stage right now? If you have income coming in that you are investing from your job, then you could rebalance by just investing in the underweight ETFs that you have. After doing this for some time, your weight in US should go down since you’re not putting any new money into the US while it’s overweight.

      Does that make sense? I’m not sure if I explained it clearly enough but let me know as there are definitely a few options here for you.

      • Leanne

        Reply Reply May 12, 2021

        Thanks, Kornel. Yes, your reply does make sense – thanks for giving such a thorough answer. I ended up parking some $ in a USD short term income fund last week. I made sure to choose one that had the type of bonds that are exempt from US taxes. I was more than 5% overweight in US stocks even after factoring in additional investment for the next year or two, so I wanted to correct it. Thanks again!

  • Bryce O

    Reply Reply February 24, 2021

    I am wondering if you can explain why you wouldn’t continually rebalance with every purchase (eg. monthly). Utilizing your extremely helpful spreadsheet makes it simple to rebalance through buying extra ETFs rather than then ever needing to sell.

    • By Kornel Szrejber

      Reply Reply February 25, 2021

      Hi Bryce. You are correct. My apologies if I didn’t make that clear in the video. In practice, when it comes to rebalancing, you are usually able to get back into balance (or very close to it) by just putting the new money that you are investing into the underweight assets. Like you said, the spreadsheet that I provide in the course makes it very easy to do as you’ll immediately see which assets are underweight, and so you know which ones to buy.

      There are some circumstances where rebalancing like this may be difficult:

      1. The first if there is a major market drop. For example during COVID when some of the equities fell 30%, it may not be possible to rebalance by just investing a portion of your paycheque that month. In those cases, you may have to actually do a rebalance by selling some ETFs.

      2. The other scenario where it may not work that well is if your portfolio is already pretty large, and you are no longer investing significant sums every month. For example, if your portfolio is at $1 million, then it’s hard to move the needle to get back into balance if you’re only investing $2,000 that month for example.

      In my own experience, when we were saving our way towards financial independence, we almost never had to sell to rebalance. We were saving 50%+ of our household income every month and so that was enough to get us back into balance (or very close to it) every month without having to actually sell anything. The smaller your portfolio is and the more you are investing, the easier it is to do. This also helped keep trading costs very low as with Questrade you only pay the commissions when you sell so if all you are doing is buying, you end up saving some money that way too.

      I hope that helps. Feel free to ask any follow up questions you may have.

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