Last Updated on
As discussed in a previous post that explains the change or makeover to my investment portfolio, this investment owner's contract is long overdue. I had meant to create one (well, five years ago) when I initially read The Intelligent Investor, but never got around to it.
The investment/ diversified portfolio comes from one of my favourite go-to sites, by Dan Bortolotti (an author of Moneysense magazine among other publications), Canadian Couch Potato. The dollar amount I am contributing will vary, but I am aiming for $500 to $1000 a month. I will also plan to rebalance once a year to make sure that the asset allocation continues to pertain to my investment portfolio.
I will continue to have some dividend stocks, and will continue adding to them, but I will be cognizant of not adding too much Canadian exposure to my investment portfolio.
The weighted MER is 0.19%. With Questrade, buying ETFs is commission free (any ETF that is traded on the North American market) but selling ETFs incurs a commission. Unfortunately I will have to do this manually because it is an ETF but this will be okay as I will make sure I contribute regularly on a monthly basis (e.g. set up a reminder for myself for the second Friday of the month).
Here's a little more detail about the ETFs:
- VAB- Bond aggregate index, invests in public and investment grade Canadian bonds, top holdings are government bonds.
- XIC- 100% are Canadian holdings, with the top holdings to be RBC, TD Bank, Valeant pharmaceuticals, BNS, Canadian National Railway. The MER is 0.05%
- VXC- Approximately 50% of the holdings are in USA, with the top holdings to be Apple (I'm a little hesitant about this being the top holding), Microsfot, Exxon, Wells Fargo, Johnson and Johnson, GE, and Berkshire Hathaway. The rest are 23% Europe, 15% Pacific and just under 10% to be Emerging Markets. It has a 2.3% dividend. The other concern is that it is just over 1 year old.
Likely the VXC All-World Ex Canada will end up needing to be outside my RRSP, maybe my TFSA… this will be more tax inefficient but there is no other choice as I will have maxed out my RRSP and I do not want to sell my TD e-series at present.
Therefore, as quoted/ slightly modified from The Intelligent Investor: The Definitive Book on Value Investing by Benjamin Graham Revised Edition (2006), on page 225:
I, Young, Hereby state that I am an investor who is seeking to accumulate wealth for many years into the future.
I know that there will be many times when I will be tempted to invest in stocks or bonds because they have gone up in price, and other times when I will be tempted to sell my investments because they have gone down.
I hereby declare my refusal to let a herd of strangers make my financial decisions for me. I further make a solemn commitment never to invest because the stock market has gone up, and never to sell because it has gone down. Instead, I will invest $500 per month, every month, through a dollar cost averaging plan into the following diversified portfolio:
- 25% into VAB (Vanguard Canadian Aggregate Bond Index ETF)- into TFSA
- 25% into XIC (iShares Core S&P/TSX Capped Composite Index)- non-registered account
- 50% into VXC (Vanguard FTSE All-World Ex Canada ETF)- RRSP
I will also invest additional amounts whenever I can afford to spare the cash.
I hereby declare that I will hold each of these investments continually through at least the following date (minimum 10 years) after the date of this contract: August 1, 2015.
The only exceptions allowed under the terms of this contract are a sudden, pressing need for cash, like the loss of my job or an emergency, or a planned expenditure like a down payment for a house or a tuition bill.
I am, by signing below, stating my intention not only to abide by the terms of this contract, but to re-read this document whenever I am tempted to sell any of my investments.
This contract is valid only when signed by at least one witness and must be kept in a safe place that is easily accessible for future reference.
Young and Thrifty
August 1, 2015
Young and Thrifty readers
Readers, do you have an investment owner's contract?
Latest posts by Young (see all)
- How to Get More Money Back from your Tax Return - February 21, 2018
- The Ultimate Pet Insurance Guide for Canadians – 2017 Updated! - December 3, 2017
- Book Review: The Behavior Gap – Simple Ways to Stop Doing Dumb Things with Money by Carl Richards - July 2, 2017