Millionaire Teacher Adds $20,000 to International Stock Index

Today was the first time I’ve invested money since March 17, 2013. 

Looking at the money I regularly invest, the proceeds are clearly coming from far more than my (and my wife’s) salary.  Dividends (my brokerage doesn’t automatically reinvest them) earnings from my freelance articles and my book have juiced my invested deposits significantly.  But I want to be honest about how much I’m buying, so here it is.

I placed an order for 530 shares of Vanguard’s EAFE international stock market index.  The last time I posted about my money, my portfolio looked like this:

March 17th, 2013:

Today (May 7th, 2013) it looks like this, rounded to the nearest whole number:

I’ve always wanted to keep my bond allocation similar to my age.  As a newly turned 43 year old, my target fixed income allocation would be 43%.  But market gyrations don’t bother me much, so I’ve decided to keep my bond allocation hovering around 40% of my total.  As such—especially after my big bond purchase in March—I’m satisfied having 41% of my portfolio in a Canadian bond index.

You might notice, by the differing allocations above, that my international stock index has outperformed my U.S. stock index since March, gaining 5% compared to 3.6% for the International stock index, and 3.6% for my bond index.  Having said that, it’s still under-represented in my portfolio.  I like my international and U.S. exposure to be equally weighted.

Does it really matter?  No.  Just establish a goal allocation and stick relatively close to it.  My U.S. index holdings are currently $20,000 higher than my International index allocation, so this month’s purchase should even things up.

I’m not a stickler for exactness.  No studies, after all, suggest that being precise with your allocations is any better than letting it drift a bit.

Stay chill, remain calm, and invest your savings into diversified products with low expense ratios.  Many years from now, you’ll be glad you did.





Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (2nd Ed. Wiley 2017) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions. However, please read the Terms of Use, Privacy Policy and the Comments Policy.

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74 Responses

  1. Dillon says:

    Andrew – I have a question about adding new money, how would someone who is in all cash buy into this market ? I have read your book and I do understand this does not matter over the long run, but the human psychology factor of buying at these levels is keeping me in cash. Thoughts on best way to average in ? In my mid 30's, so long term hold.

  2. Hi Dillon,

    You could consider adding money over 6 or 8 quarters if you find it psychologically tough to invest all at once.. Much of what the media has done with their "U.S. market at all time high" is what's scaring you…and many others. Here's the reality:

    1. The markets rise, on average, two out of every three years. Based on history, it's hitting new highs often

    2. We haven't had new highs for a long time, so the media is creating headlines…and people's memories are short

    3. The markets are cheaper today than they were in 2007, 2000, 1999, 1998, 1997…. Levels of expensiveness should be measured relative to inflation and earnings. The markets are no where near an all-time high based on these measurements.

    Cheers,

    Andrew

  3. Jeff says:

    I've gotten off to a very late start in investing for retirement. At the age of 56 a few months ago I opened Vanguard accounts in total US bonds, total international stocks and total US stocks, in a ratio of 50-25-25 respectively. I bumped up the bond fund a bit later so now with recent gains it's about 52-24-24. My question is, should I aim for the classic ratio of my age to hit about 56-22-22, or should I be more aggressive and shift the ratios more towards where the growth is today? My current short term returns are bonds up 1.1%, international stocks up 5.9% and US stocks up 9.6%.

    Thanks,

    Jeff

    • Hi Jeff,

      If you will have a corporate pension or you don't mind taking slightly higher risk, you could reduce your bond allocation to 40% if you wish. Just my 2 cents.

      Cheers,

      Andrew

      • Jeff says:

        That's about what I was thinking, to drop it down to a younger man's level and then gradually shift it upwards as I approach retirement. I feel younger already!

        I read with interest your article about dodging a bursting bond bubble so I will give that some thought as well when I get ready to reallocate my fund proportions.

        Thanks for the G2,

        Jeff

  4. Emily says:

    Hi Andrew

    I'm not sure if you covered this before but how do you feel about DRIP?

    I have DRIP setup for my holdings in both TFSA and my non-registered account.

    I find it useful but is there anything about DRIPs that arent' beneficial? I only started investing in the past year so I'm still a newbie.

    Also, my commission is $9.99, what's a minimum amount of money you recommend saving up before buying an equity to make it worthwhile? I generally buy something if I have 6k – 7k saved up but I don't know if that's too little to justify the commission.

    Thanks!

    Emily

    • Hi Emily,

      DRIPs are fabulous. And if you are investing at least $3K, at a time, then the $9.99 commission per purchase is small fry.

      Cheers,

      Andrew

      • Emily says:

        Thanks for your reply Andrew!

        Do you think we're in a bubble right now. I have about 3k i wanted to put in VEA but I'm nervous that things are at a high right now…

        Also, what percentage of your portfolio do you recommend keeping in cash if any?

        • Hi Emily,

          The markets are a lot cheaper today than they were for most of the 1990s. I believe they're also cheaper (certainly international markets) than they were in 2007. Market levels should be measured based on earnings. With price to earnings levels nearly half of what they were in the year 2000, it's a certainty that the market is priced at half the level it was then. So no, I know we're not in a bubble. That doesn't mean the markets won't drop a bit. That's what they do, after all: markets fluctuate.

          As for cash, I don't keep any in my investment portfolio: just stock and bond indexes. I do think you should have emergency cash on hand that's accessible, if that's what you're asking, for home repairs, holidays, emergencies etc.

          • Emily says:

            Thanks Andrew! Are both VEA and VTI funds on the NYSE? Are these funds in $USD?

            Does it matter if I'm in Toronto and buy these funds? Would I lose out on the exchange rate?

            Thanks!

            Emily

  5. Zee says:

    Andrew,

    I have a question about my current RRSP situation. I’ve recently sold all of my high fee mutual funds and purchased 4 of TD’s e-series index funds with the following breakdown – 40% Bonds, 20% Cdn Indx, 20% US Indx and 20% Intl Indx.

    I still have 3 high fee mutual funds that are in the negative (each fund has a value of approx. $5000, 2 of the funds are at -4% and one fund is -47%). I’ve been waiting for them to return to their original value before I sell and apply the money to 1 of the 4 low cost index funds. My question is, do I continue to wait for the funds to rebound or do I sell, cut my losses and invest in the low cost index funds.

    Thanks,

    Zee

    • Hi Zee,

      Consider answering your own question this way:

      If you had fresh money today, would you buy these funds? If the answer is no, you have answered your own question.

      You do have money in these funds. Consider that money. Where would you rather have that money invested? If you wouldn't put fresh money into those funds today, you have to ask yourself why. Keeping money there is like saying, "These funds will do better than the market, so I will invest there." It's not logical reasoning.

      Does this make sense?

  6. Juan says:

    Hi Andrew,

    Thank you very much for sharing all this usefull information, I am totally new on this area and even though I read your book I have manny doubts. Well I hope you can help me with a couple of them:

    1- When buying a deversified index fund, let's say, one that has Canadian Bonds (I live in Canada), international stocks and Us stocks, what I understand from your book is that when buying this kind of products you own stocks from all the companies in the market (is that thruth?) that is what makes it an Indexed fund I think, if that is thruth, I would not have to worry about from what company I should buy stocks, right? because I am buying from every single company. Now, in your book you say that we have to know when a company is a good prospect for us to buy stocks, that is my confusion, I am lost with this, please help me !

    2- Let's say that I invest $ 10.000 in an indexed fund like the one I mentioned it in my first question. In theory, I would gain some interest every year, now my question is: is that interest going to be added to my account automatically every year or do I have to specify that I want it that way.

    Thank you very much Andrew, and sorry for my lack of understanding about this financial area.

    Juan

    • Hi Juan,

      The 8th chapter of my book deals with buying individual stocks. But you don't need to own individual stocks.

      An index fund comprises every stock within a given market–or at the very least, a broad selection of individual stocks within that market. With an index, stock selection isn't necessary.

      Profits come when the price of the index rises (capital appreciation) which occurs when the stocks within the index rise (in aggregate). You will also earn dividends along the way. You may have an option to reinvest the dividends. If you have that option, go for it.

      Cheers,

      Andrew

  7. Jeff says:

    A real n00b question for you: Can I as an American buy into a Canadian fund?

    Thanks,

    Jeff

  8. Eugene says:

    Hi Andrew,

    Firstly, thank you very much for your informative and enjoyable book. It made learning how to invest easy and help me get over my inertia to start!

    I've set up my Standard Chartered Brokerage Account and am deciding between purchasing Vanguard ETFs via the NYSE or LSE. The US 30% dividend withholding tax is a big concern. I did some simple calculations on how the 30% tax would affect "expense ratios" of Vanguard ETFs on NYSE and LSE and the numbers shocked me.

    [img ]http://i.imgur.com/vXkF9Du.png[/img]

    Considering the variable of the 30% dividend withholding tax and its impact on ER, it would seem that purchasing Vanguard ETFs via LSE would make better sense would it? Would appreciate your views on this. Thank you!

    • Eugene says:

      Unfortunately the picture doesn't seem to be able to show up in the post, so here's the URL instead: http://i.imgur.com/vXkF9Du.png

      • The complete post tax expense on VTI that you calculated is likely the best post tax deal on the U.S. market that anyone in the world will ever receive. Everyone pays taxes, even those buying those "tax sheltered" products on the Channel Isles (they also pay witholding taxes on anything domiciled in the U.S. but those investors don't realize it–though it says in their prospectuses). Sure, it would be nice to pay $0 tax (no capital gains and no dividend taxes) but that's not how the world works.

        As for synthetic ETFs (which I'm assuming you've listed) don't forget the added bid/ask spread and the level of third party risk you would take. If I were you, but would smile and take (what might be) the cheapest investment deal in the world…..until Vanguard makes ETFs available on the Singapore exchange. They're headed to Hong Kong soon, so why not here?

  9. Juan says:

    Hi Andrew,

    Thank you very much for your answer !

    Cheers,

    Juan

  10. Marypat says:

    Hi Andrew,

    I follow your blog with great interest and appreciation for your comments. Could you please give me your thoughts on this question – If you were only five years away from retirement, and just starting to invest in ETF's, would you still invest in VEA and VTI or would you consider them too risky?

    Cheers,

    Marypat

    • Hi MaryPat,

      The answer would depend on your risk tolerance and your (other) sources of retirement income. Personally, I don't think having 40-50% of my money in VEA and VTI would be risky, if I were five years from retirement. But I certainly wouldn't make the stock market the largest component of my retirement nest egg.

  11. Brunnenburg says:

    Hi Andrew,

    As you may recall, I'm a long-time reader and an avid indexer in Canada, but recently an unexpected (and, I should add, positive) concern has come up. I've received a large payment for a temp contract overseas in US$. There has been quite a bit of noise lately about the Canadian dollar going down as low as .90c to the US$, so I'd like to wait instead of exchanging it now at par. However, I don't want to let this chunk of cash rot in a chequing account.

    So here's the leadup and the question: I plan to invest half of the money in VTI and half in the Canadian index. This is an unregistered account (I've maxed out my and my wife's RRSPs and TFSAs. Do you know if there is a US-based ETF that tracks the TSX? In other words, a version of VCE or XIU in US$? I've looked over Vanguard's lineup of ETFs and couldn't find any.

    Thanks!

  12. You would lose out roughly 1% on the purchase of them, based on the currency spread. But the expense ratios are very low…lower than what we currently have on the Toronto stock exchange. The 1% hit would only occur when buying and selling. It wouldn't be a perpetual drag on the portfolio.

  13. jamie says:

    Hi Andrew,

    I've been discussing with my father about his Financial situation and it completely baffles me how the industry continues to falsify mutual fund returns in order to confuse the average consumer into purchasing an actively managed fund.

    My biggest concern is that my father has most of his retirement savings with Investor's Group and unfortunately it seems as though most of his money is locked into heavy redemption schedules. He has a portioni invested in GICs maturing in 1,3, and 5 year incréments and a smaller amount in a money market fund paying approx 0,95% MER… OUCH…

    I've been trying to convince him of making the switch to the e-series funds here in canada and better yet, maybe Vanguard ETF considering he might have more than me to invest at this point… what do you think is the best course of action? He is 61, with a company pension…

    Thanks,

    Jamie

    • Hi Jamie,

      To convince your father, try this:

      Explain what passive index investing is and how it works (if you haven't done so already) and explain how active investing works.

      Then give him a laptop and ask him to google this:

      "Build a portfolio of actively managed funds that will beat a portfolio of index funds"

      Everything he searches for will imply the opposite. He might need to discover this for himself.

      Then show him a compound interest calculator online, and have him plug in some numbers that he could consider for his grandchildren. If he won't think of himself, he might think of them. $10,000 invested at 8% per year for 30 years compared to $10,000 invested at 5.5% per year for 30 years. There's a good compound interest calculator at http://www.moneychimp.com

      He's paying roughly 2.5% more than you per year on his equity funds with IG. And wow! Those money market fund expense ratios. No wonder IG rakes so much money in!

  14. Roland says:

    Hi Andrew.

    Thank you for posting your investment ideas.

    I live in Switzerland. Would you please suggest in which Fonds I should invest. Especially to find an Index Fond for bonds is difficult for me.

    Thank you.

    Roland

  15. Roland says:

    Hi Andrew.

    I live in Switzerland. In which Index-Fonds should I invest?

    Thank you.

    Roland

  16. Paul says:

    Hi Andrew,

    With all the talk of the current "Bond Bubble" and the of risk declining principals, If I am looking to start my portfolio today should I still be looking to my approx age % in Bonds? If so what type of bonds (short duration?) Or look to keep that % in cash (savings rate 2%) for the moment.

    British age 35

    Cheers

    Paul

  17. Chris says:

    Hello Andrew,

    Love your book it really puts a great prescriptive into how simple it should be to invest and make money over time. I am 23 years old and I have played in the market made a lot of money and also burned a lot of money. One thing I learned is you can’t control things that CEO’s and boards do and if your not diversified enough it will really kick you in the butt. That is why I am so happy I found your book, I will follow this for along time and with the amount of money I put towards my 401k and IRA I should be in great shape when I am in my 60’s.

    Currently I have a Vanguard 401k and a Charles Schwab IRA along with a brokerage account. My Vanguard account is in 100% cash and I need to start investing it I am just a little nervous with the markets at the highs. I read the post about averaging in over 6 to 8 quarters and I think I might do that. I also put the max into my IRA every year. I do own some dividend stock in my Schwab account which I will continue to put additional funds towards every year.

    My question is should i do indexed funds in both my Vanguard and Schwab account? Or just do it in my Vanguard account like I had planned too?

    Schwab offers some lower fee solutions no load index funds but I am not sure what I should do on that?

    Any advice would be great.

    Thanks for the awesome book!

    Chris

  18. Gab says:

    Hi Andrew,

    It is fantastic to chanced upon your website! I was doing some research after given a proposal on Hansard investment fund, which sounded attractive to me for its tax-free benefits and sign up bonuses, until I found your website. After reading more into the posts, I am interested to invest on indexes instead.

    I am Malaysian and currently residing in KL, 30 years of age. I am very new at this and hopefully you can help me with some questions:

    1. How do I setup an account?

    – I understood a physical visit to Singapore was required for most expats. Hence I have a feeling I would need to do the same. I am not sure if there is a local agent in Malaysia that I could go to, and yet enjoy the tax free on capital gains as in Singapore.

    2. Is there a recommended agent I could perhaps look for?

    3. Seeing that your investments above are from Vanguard ETFs, would it be possible to invest in the same ETFs from DBS Vickers?

    4. What would be the determining factor for the ETFs you’ve selected? From the Vanguard website, there are a few ETFs which stood from the rest in terms of YTD, 1yr & 3 yrs performance. As a newbie, these would appear to be the most promising ones to go for. Do you think it is a good indication for selection?

    Appreciate your advise. Thanks!

  19. David Benton says:

    Hi Andrew,

    I am looking to open a Vanguard account in Australia. The LifeStrategy Growth Fund looks good (bonds, national and international stock index funds to ratio of 30 : 35 : 35) as I am 30, and so this fits in with all I have read.

    However, it seems that when I invest my money is automatically used to maintain this ratio (under Vanguard management), rather than my having freedom to buy where I want if and when prices drop. Is it enough that when prices drop my monthly investment will automatically adjust this balance by buying whatever has dropped (if this is how it works…)? Or should I look for something which I would have more control over? (If I should go for something which I have control over, can you recommend a product/company out of Australia?)

    Thanks!

    • Hi David,

      If the markets dropped mid-year, this Strategy Growth fund would rebalance: selling some bonds to buy into the cheaper stocks. They have a goal allocation between asset classes and they will stick to it. So you don’t have to worry about rebalancing if you own this product.

      To my knowledge, however, they won’t increase the bond allocation as you age. That part will be up to you. You’ll have to just start adding their more conservative products over time.

      Cheers,

      Andrew

  20. Barry says:

    I Re-Balanced recently,

    The first time that numbers said yes as it breached the bands

    Not a huge issue as I had some losses within the taxable account so the gains would offset these and I topped up on bonds

    My US Index went up over 20% within a 3 month period and was up over 40% over 12 months

    At the same time international was up approx 30% and the Aussie Index 20%

    Plus dividends

    If I am looking at
    1. US Index
    2. World Index
    3. AUS Index
    4. Bond Index

    Is the return the above percentages divided by 4 , plus dividends?

    Barry

  21. Barry says:

    Hi Andrew

    Just curious as to what dividends the 3 index funds have been returning?

    A friend was discussing 75% in an US Index Fund, 25% in an Aussie Index Fund and 25% in an emerging markets (china, india, HK) index

    He was hoping $2M invested would bring in 5% yield or $100k p/a

    Regards

    Barry

  22. Andrew says:

    Hi Andrew
    I Love you book. I’m just getting started and I was wondering why you do not invest in the Canadian stock index? Is there a particular reason or is the American and world just that much better?

    • On a personal level, my bond index is Canadian. So I have roughly 40% exposure to Canada. I won’t likely be retiring to Canada, so having 40% in Canadian currency is a lot. If I were retiring in Canada, I would have 40% in bonds, and roughly 20-30% in the Canadian index.

  23. Barry says:

    Your personal portfolio moves have been quiet

    No rebalancing yet, are you nearing parameters at all?

    Barr6

    • I did recently rebalance Barry, but I’ve been too busy to write about it.

      Cheers,

      Andrew

      • Barry says:

        Hi Andrew

        Hopefully you get some time to update soon on your re-balancing

        Things are just tracking sideways now at present for me, though within the next week or 2 I’ll have additional funds to contribute and top-up any laggards

        Barry

  24. Young says:

    Hi Andrew,

    I know you must be extremely busy, but would you find some time to write us about your rebalancing?
    Love to see it.

    Cheers,

    Young

  25. Luigi Rizzotto says:

    Hi Andrew,

    I have been an overseas pilot for about a decade now. I’m italian and I don’t have plans to return to Italy for another 10 years or so. I’ve never been into money and finance much, but my wife and I have always been good savers.

    My question for you (and your savvy readers) is in regards how to invest as an expat about 600.000$ lump sum received recently.

    I live in the Middle East in an area where there are no real options beyond sending the money home or to an offshore institution. I’m currently using Internaxx, based in Luxembourg.

    Cost per trade: Internaxx: ~30$ Us

    Additionally, Internaxx charges 0.05% “custody fees” per quarter to babysit my assets.

    Other financial advisors (HSBC, etc) charge 3% “entry fees” on managed international funds …

    Would you divide them as per the “couch potato” philosophy (I’m 45) with Internaxx or do you have other suggestions?

    Thanks, Luigi

    • Hi Luigi,

      This brokerage certainly sounds like a viable option. And yes, investing the money based on the couch potato strategy makes plenty of sense. The cost per trade (based on international pricing) seems quite low. Would this rate apply for large purchases as well as small ones? Most firms increase the commissions when the invested sum goes up. If this firm charges a flat rate of $30, I consider that excellent.

      Cheers,

      Andrew

  26. Luigi says:

    Hi Allan,

    Thanks for the reply. You are correct: he rate will increase for large purchases and internaxx/TD Direct Investing apply a 0,05% (max 180$/quarter) holding fees. But this is the only option that I’ve found here in the middle east to invest in index funds like Vanguard. As you mentioned in your book, been an european it make sense to invest in the “currency” that I will pay my future bills. At the same time I want to stay also in the US market. Would you recommend to have a sort of US and a EUR couch potato? If yes, Vangard offers no index funds in Europe. They only have ETFs Developed Europe (0.15% fee). What are your suggestions? Cheers, Luigi

  27. Luigi says:

    Hi Andrew,

    Thanks for the reply. You are correct: he rate will increase for large purchases and internaxx/TD Direct Investing apply a 0,05% (max 180$/quarter) holding fees. But this is the only option that I’ve found here in the middle east to invest in index funds like Vanguard.

    As you mentioned in your book, been an european it make sense to invest in the “currency” that I will pay my future bills. At the same time I want to stay also in the US market. Would you recommend to have a sort of US and a EUR couch potato? If yes, Vangard offers no index funds in Europe. They only have ETFs Developed Europe (0.15% fee). What are your suggestions?

    Cheers, Luigi

  28. Michelle says:

    Andrew,

    Thank you so much for Millionaire Teacher, it’s the first finance book that I pick up and actually read! Thanks for making investment inspiring and easy.

    I would like to start investing the few index fund that you recommend through Vanguard. I was told that I should put stop loss on everything I buy. Do I need to do that when I purchase these index fund? It seems like I only need to re-balance my portfolio once a year. In the meanwhile when I see the price of those index fun goes up and down, I just hold on to it. Is that right?

    I apologize that this might be silly questions. Thanks for your help!

    Michelle

  29. Ben says:

    Hi Andrew, loved your book. I followed your advice and set up a similar portfolio using the TD e series ETFs. My question is about weighting. A recent G & M strategy lab got me thinking about my allocation %s. I seem to remember that you were kind of overweight in a Canadian index fund versus a more equal balance between US and international with a Canadian weighting equal in percentage to its size relative to the world economy. Am I wrong in this observation? If not, what was your rational for this?

    • I disagreed with that article. But I don’t actually own a Canadian index personally. I live in Singapore, and won’t likely ever be living in Canada again. For that reason, I have just two equity ETFs: the U.S. and the international. However, if I were living in Canada, I wouldn’t want to take too much currency risk with my money. In other words, what currency would I be paying most of my bills in? The answer, of course, would be Canadian. So why take the currency risk of having 96% of my equity exposure not denominated in Canadian currency at all? Keep in mind that we journalists are always looking for something to write. And it may not always be to your benefit. Never forget that.

  30. VkS says:

    Hi Andrew,

    I’ve read your book and follow your blog. Thank you for the guidance and inspiration. After being convinced on Index investing, I’ve recently moved a big lump-sum into RRSP (Canada) and it would be amazing if you could share your thoughts on my allocation below. The weighted-average MER of the portfolio is 0.46%. I’m a 29 year old professional.

    iShares Canadian Fundamental Index Fund – 20%
    iShares US Fundamental Index Fund – 15%
    FTSE Developed ex North America Index ETF – 10%
    FTSE Emerging Markets Index ETF – 5%
    FTSE Canadian Capped REIT Index ETF – 10%
    FTSE Canadian High Dividend Yield Index ETF – 10%
    U.S. Dividend Appreciation Index ETF (CAD-hedged) – 10%
    Canadian Short-Term Bond Index ETF – 10%
    Advantaged U.S. High Yield Bond Index Fund (CAD-Hedged) – 10%

    Thanks!

  31. wee says:

    Hi Andrew,

    I am totally new to the investing arena and your book has simplified a lot of things for me. I am 21 years old this year and I have finally managed to save SGD10k for investing. Just wondering if it’s enough to start a simple portfolio. And if I were to start, should I open an account with DBS Vickers or Vanguard? And how should I allocate the percentage for the index funds? I’m Singaporean btw. Thanks a lot!

    Regards,

    Wee.

    • Hi Wee,

      Much depends on your nationality. You can’t invest with Vanguard’s index funds unless you’re American. But if you aren’t American, you could buy Vanguard’s ETFs via DBS Vickers or any other Singapore-based brokerage. You may want to start with Vanguard’s total world exchange traded fund with your $10K. It’s symbol is VT. Congrats on the great savings job so far!

      Andrew

  32. Joe says:

    Hi Andrew,
    I’m at an investing crossroad, and I’d like your feedback. I see you invest largely in ETFs rather than Admiral Funds, and I don’t know the point when I should jump over to ETFs. I think you once advised making the jump when the total value of the portfolio is around $250K; however, I don’t know if the jumps should be incremental or in three main lump sums, one for each segment (int’l, bond, and US). If it matters, all of my investments are with Vanguard, and I’m from the US.

    I am also curious why you chose VEA over VTIAX aside from the lower expense ratio. The growth patterns have been very similar after you negate VEA’s plunge in 2008.

    Please give me your thoughts.

    Thank you,
    Joe

    • Hi Joe,

      I’m not an American, so I can’t buy Vanguard’s index funds, just their ETFs. As for the Admiral shares, you should keep them. They’re fantastic! In my book, I mentioned people switching from TD e-Series indexes to ETFs once their accounts cross a certain threshold, but I never would have said that for anyone with access to Vanguard’s low cost Admiral index funds.

      Cheers,

      Andrew

  33. Gabriel says:

    Hi Andrew,

    I recently bought and read your book. It really opened my mind to ETF investing. However, I considered investing in the Vanguard Total World (VT) and Singapore’s STI ETF (cos I’m from singapore). Would it be better to go with the Total World or split it up into 2 like yours, the Total US (VTI) and Total Developed world (VEA)?

  34. Gabriel says:

    Hi Andrew,

    I recently bought and read your book. It really opened my mind to ETF investing. I was just wondering about putting my money into Vanguard Total World(VT) and Singapore STI. Is it a good idea to go for Total World or split it into 2 like your Total International(VTI) and Total US(VEA)?

  35. Gabi says:

    Hi Andrew,

    What is the difference betweenVanguard Total Stock Market Index Fund Investor Shares VTSMX and Vanguard Total Stock Market ETF (VTI) ?.

    Your book is great. Thank you.

    • Hi Gabi,

      There’s no difference, other than…

      Only Americans can actually buy Vanguard’s Total Stock Market Index Fund Investors Shares (VTSMX) but anyone could buy the ETF version (VTI). That said, if you aren’t American, it’s very important that you don’t buy VTI. If you do (and you reside outside of Canada) your heirs could be slapped with a very hefty U.S. estate tax bill when you die. I explained this all in my book, along with much more. The link is here, in case you’re curious. http://bit.ly/globalexpat

      Cheers,
      Andrew

    • Hi Gabi,

      There’s no difference, other than…

      Only Americans can actually buy Vanguard’s Total Stock Market Index Fund Investors Shares (VTSMX) but anyone could buy the ETF version (VTI). That said, if you aren’t American, it’s very important that you don’t buy VTI. If you do (and you reside outside of Canada) your heirs could be slapped with a very hefty U.S. estate tax bill when you die. I explained this all in my new book, along with much more. The link is here, in case you’re curious. http://bit.ly/globalexpat

      Cheers,
      Andrew

  36. Gabi says:

    Thanks Andrew for your quick response. I am not American citizen but I am resident alien (i.e. resident for tax purposes). I have been there for about 6 years as a student and eventually I will get a work visa, H1B.

    Assuming your answer completely applies to my situation, then what do you suggest I should do ?. Which ETF you suggest ?
    I intended to invest as you suggested in your book. 35% VBMFX (I am 33 years old), 35% VTSMX, 30% VGTSX. But I am not confident what to do now. May please help me in this point ?.

    Also I intend to add fresh money into my account every month, does this mean I need to do rebalancing every month or wait till the end of the year as “Potato Couch” ?

    I noticed that the expense ratio for Investor Shares are higher than ETF. Also the former requires minimum investment.

    Lastly as a Statistician, I cannot over-stress the importance your point that these things cannot be predicted consistently in contrast of what sales-people claim. We built very complicated mathematical/statistical models, all of them failed over the long run. There are too many factors to control plus finding patterns are overly-complicated.

  37. Utah says:

    Hi Andrew,

    I’m just getting into the index fund game and have transfered my rrsps and tfsa accounts to TD to take advantage of their e-series funds as outlined in your book and on Canadian Couch Potato. I have a simple and young portfolio under $50k

    I am planning to spread the e-series index investments out over a TFSA and an RRSP account to take advantage of their various perks. I have 2 questions that I hope you will be willing to offer your guidance with:

    1. Which indexes of the e-series be best suited for each account? I have read that perhaps US equity and international equity would be best in the TFSA due to their higher possibility of growth over the long term. Perhaps Canadian bonds being quite stable should be in the RRSP. Short version: which e-series indexes would you recommend placing in each account?

    2. Because I’ll have investments in an RRSP I can’t easily sell them to rebalance once a year. Does a “rebalancing with cash-flow” strategy have the same benefits? Instead of selling higher out-of-balance indexes, I would instead just focus on making purchases in lower out-of-balance indexes to achieve balance. I found that strategy here: http://canadiancouchpotato.com/2014/06/23/rebalancing-with-cash-flows/

    Will that work just as well?

    Many thanks in advance for your advice. Reading your book has had a fundamental affect on my life and given me great hope for my financial future.

    M

    • Hi M,

      To answer your last question first, you can rebalance any holdings within your RRSP. This involves selling, but not withdrawing funds from your RRSP. In fact, if you have a RRSP, you could feasibly sell everything, turning it into cash, and you wouldn’t be penalized unless you actually withdrew money from the RRSP. To answer your other question, I don’t think you need to make things that complicated. If it were me, I wouldn’t. I would build a diversified portfolio within my RRSP and within my TFSA. Some others might disagree. But those getting wrapped up in such minutiae don’t generally need to.

      Cheers,
      Andrew

  38. Utah says:

    Hi Andrew.

    Thank you for your quick response! I kinda of had an aha moment there with the RRSP rebalancing reading your comment. So, if I’m too high in an index, I can sell off, but leave that money to re-invest later or into another index in that RRSP. Great!

    Now regarding spreading my indexes out over the two accounts does your advice to “build a diverse portfolio with my RRSP and TFSA” mean that I:

    – Purchase all four e-series indexes in TFSA and in my RRSP account?

    or

    – Purchase two in TFSA and two in RRSP and not worry about which ones are in which because that’s getting too complicated?

    Thanks in advance.
    Utah.

  39. Matt says:

    Andrew thank you for such an amazing book. It literally changed my life.

    Question about VTIAX… why? In only one year since its inception has it outperformed VTSAX. I know theoretically we should diversify to include International assets as well… just having a hard time dedicating 30% of my portfolio to such a dud.

    Wondering what your thoughts are on it now?

    • Hi Matt,

      If you want to chase the winning stock market with fresh money, you will be investing like almost everybody else. By doing so, you will do poorly.

      In reality, different markets will have their years in the slumps and their years in the sun. Your job is to maintain a stable allocation. That means buying the international index (if it has fallen) and selling some of the U.S. index to do so (if the U.S. index has risen). That also means selling bonds to buy stock indexes if both stock indexes have fallen. You are at an emotional crossroads. And it’s from this point that most investors fail. Embrace that international market index. And next year, if it falls further, embrace it again. If you don’t have the courage to do this, you will be better off with a financial advisor who can do it for you. It sounds like you’re American. If you would like a coach, contact Robert Wasilewski. I mentioned him in my book. He can help you, charging just 0.4% of your account proceeds. And he will encourage you to fire him when you have the emotional aspects of investing under control.

      Cheers,
      Andrew

  40. Deb says:

    Hi Andrew,

    I bought your book and have read it cover to cover twice! I’ve been investing in mutual funds through banks and I’m ready to set up my own indexed portfolio. I’m also a teacher and am trying to follow your indexing tips for Canadians. When you talk about the TD e-Series indexes, I noticed that the US stock index you recommend (TDB902) is non-hedged, but the International stock index you recommend (TDB905) IS hedged. Is there a reason to go currency neutral with one type of fund over the other? Is it more advantageous to buy non-hedged indexes for both US AND International or hedged indexes for both? Any insight you can share would be greatly appreciated! I also want to add that it took me 3 weeks to get my e-Series account set up as not many branch representatives knew what I was asking for when I mentioned the e-Series funds!

    Many thanks in advance,
    Debbie

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