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Well, I finally faced my investing inertia and did something with the $100,000.

A few weeks ago, I had a post on my monologue with myself on what I should do with the $100,000 that you often see sitting there in my net worth updates… that has been the case for many many months.  So thank you for your patience and I listened to your nagging and monthly questions as to why I had over $100,000 in cash sitting there.

Well, I finally faced my investing inertia and did something with the $100,000.  I spent hours and hours (sometimes I get manic and spend a whole day just thinking about the different options and calculating the potential losses, the potential gains, the potential monthly interest income) thinking about it and finally took action.

Investing is akin to starting a new relationship… there are risks involved but there is also plenty to gain.  There is so much uncertainty before you commit.  But once you committed the relationship will unfold and hopefully the gains will be fantastic!  But if you don’t do anything you will never know.

What I did with $100,000So… Yay me!  For taking action haha.

So to recap, the options I considered were investing in United States real estate, looking at implementing the Smith Manoeuvre, and looking at buying exchange traded funds.  So what I decided in the end was to buy exchange traded funds.  I pretty much revamped my RRSP portfolio and sold everything to start a new portfolio (minus the Bell and Telus shares that I own).

 Here is what I ended up doing with the $100,000:

I put $10,000 into the RRSP and basically I have paid off my Home Buyers Plan.

I put this extra money into the RRSP account I have with Questrade.  I used the Canadian Couch Potato’s suggested Exchange Traded Fund model portfolio (why mess with success, I ask?) after researching each component of the model portfolio.

So to summarize here is what I put in my newly revamped RRSP (which is about $20,000 worth):

  • 15% ZCN (BMO S&P/TSX Capped Composite Index ETF)—> I actually kept this outside of the RRSP in my margin account because it’s not taxed heavily like other things in my RRSP
  • 25% VTI (Vanguard Total Stock Market ETF) —> I had this from before but just added more shares
  • 20% VXUS (Vanguard Total International Stock ETF)
  • 10% ZRE (BMO Equal Weight REITS Index ETF) —> this satisfies my lack of rental income and rental property at present
  • 10% XRB (iShares DEX Real Return Bond Index Fund)
  • 20% XBB (iShares DEX Universe Bond Index Fund)

I also looked into NLY which is a US REIT and bought a few shares in this, again satisfying my lack of rental income and US real estate (thanks Liquid Independence!)

I also saved $5500 of this $100,000 for my TFSA contribution for 2014.

Then I proceeded to buy a lot of ETFs.

I bought $50,000 worth of CPD Claymore S&P/TSX Canadian Preferred Share ETF (haha thanks for the suggestion, reader of my blog!) and set a stop loss.  Stop losses are my friend.  Best Friends Forever.

I then bought Vanguard exchange traded funds (check out the Vanguard versus TD e-series post) with the remainder of the money.

  • 30% in VUS Vanguard U.S. Total Market Index ETF (CAD-hedged)
  • 30% in VEF FTSE Developed ex North America Index ETF (CAD-hedged)
  • 15% in ZDV  BMO Canada Dividends ETF
  • 25% in CLF ISHARES 1-5 YR LADDER GOVT BOND FUND

So, with all my purchases going to planned (some have yet to be executed because they haven’t dipped to the price I want to buy in at), here is my updated dividend income chart for your viewing pleasure (NB: I haven’t included all of the dividends and monthly income from the RRSP portfolio, I will update that next time!).  Exciting to be over $5000 in income though!

Screen shot 2013-10-08 at 10.31.07 AM

 

As of today, I am down $200 in CPD already haha but once I get paid my monthly income that should counteract this minor set back.  I still have over $50,000 in cash savings which is nice and appeases the non-risk taker in me.

So my dear readers, what are you thoughts?  Dividend lovers, should I have gone dividends all the way?  Are we going to start an Exchange Traded Fund versus Dividend Lover debate here?

 

Article comments

23 comments
Sean says:

Why not do the Smith Manoever AND exactly what you’ve done above?
You could have paid 100,000 down on a readvanceable mortgage and then proceeded to withdraw that same 100,000 in a sub account and invest. You would have achieved the same outcome while converting 100,000 of mortgage interest into a tax deduction. Win win.

David says:

I’m flattered you followed my suggestion so exactly!

It’s definitely frustrating watching an investment drop right after buying it but remembering what function it’s serving in your portfolio helps keep the noise in perspective.

Enjoy those tax-efficient dividends!

Young says:

@David- Merci! 🙂

Steve says:

I would have gone 100% dividend stocks but then again I am a little bit biased 🙂
I’m still not sold on ETFs but your plan looks solid.

I haven’t been to Y&T for a while so I read about your ordeal with $100,000. After my recent life changing event, I can honestly tell you there is no need to rush to the chapel. Enjoy your freedom and spend some of it!

Young says:

@Steve- Haha do you want to start the dividend vs ETF debate again? Awe thanks for your supportive words! Yeah, I’m a lot less uptight about it now. Guess perspective is 20/20!

Tony says:

I am doing some preferred share ETF recently and later started a small position in BMO’s ZPR instead of CPD.
btw EIF has been down drastically over the past month, do you plan to do anything with it?

Young says:

@Tony- I got in with EIF at a pretty low point so I’m just going to sit on it. I’m not investing more $ into it.. just have 100 shares.

These look like some solid investing choices, although I do have a question. It looks like you were keen on Dan’s couch potato strategy for $20,000 of your investments, yet you still proceeded to buy a lot of other ETFs that probably duplicate some of the stuff you had in there.

For instance VUS, probably duplicates a lot of VTI. I understand it is hedged, which is nice, but still an interesting decision. ZDV is also probably fairly similar to ZDN because we don’t have that many stocks in Canada to choose from anyway.

In any case, it looks like you’re doing great and you have a lot more investments built up than myself. I’m hoping to renew my focus on investing sometime soon and rebalance my portfolio a lot.

Young says:

@How to Save- Yup, you’re right! They are basically similar portfolios but with different ETFs. I just wanted to see how each of these guys are doing compared to the other.

Liquid says:

Thanks for the mention. It appears you’ve allocated that money very well 🙂 Looking forward to how everything will tie in to your net worth when you write your November update.

Young says:

@Liquid- Exciting isn’t it? Kinda makes me anxious lol.

Tyler says:

Hey Young, Awesome Stuff. Keep it up.
Canadian Couch Potato All the way !!

Did you put 50,000 $ worth of CPD in your Non-Registered portfolio and some in TFSA as well?

Young says:

@Tyler- I have some in my TFSA already (I think only about 100 shares or so) which I haven’t touched. Thanks for the kind words!

fiscally fit says:

Paralysis by analysis haha Always the worst 😉

Interesting choices. What metric(s) do you use to measure risk in your portfolio(s)? Are you concerned with lagging the benchmarks with the index funds?

fiscally fit says:

Actually scratch that second part. I really only care about how you measure risk in your portfolio

Great work and very smart moves. It’s not like you don’t have ANY stocks? 🙂

I’m buying more ETFs myself. I own enough individual stocks.

Young says:

@MOA- Which ones are you getting? 😉

Teacher Man says:

Well well well, look who is all about the couch potato strategy using ETFs these days! Good to see. No need to pick “dividends” the ETFs will make sure you get those as well. I’m just jealous your portfolio is so much larger than mine right now!

Young says:

@TM- Haha no comment. Are you rubbing salt into the wound? 🙂

I would never suggest to do dividends 100%. I prefer index funds / ETFs as the bulk.

You might want to add ECI.TO (Enercare) as one to research on your dividend list. I also liked ORAN (France Telecom), although they’re a bit more expensive now than when I bought them (good capital gain so far for me).

Young says:

@SSS- Sweet, thanks! I’ll have a peek when I get a chance!