Canadian Citizen and Resident

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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airahcaz
Posts: 1469
Joined: Sat Oct 31, 2009 3:37 pm

Canadian Citizen and Resident

Post by airahcaz » Wed Aug 08, 2018 12:29 pm

Relative is a Canadian Citizen and Canadian Resident and would like to open a non retirement brokerage account in Canada to start investing in a broad based index fund.

Fidelity said they only service retirement accounts Canadian Residents

Vanguard? TD? What's the next best place to look?

Then, he'd like an S&P500 index fund to start. Would he be able to invest in an American based index fund or have to buy the equivalent in Canada that tracks S&P?

TIA
1) Invest you must 2) Time is your friend 3) Impulse is your enemy 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course. (Plagiarized, but worth stealing)

Valuethinker
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Joined: Fri May 11, 2007 11:07 am

Re: Canadian Citizen and Resident

Post by Valuethinker » Thu Aug 09, 2018 9:41 am

airahcaz wrote:
Wed Aug 08, 2018 12:29 pm
Relative is a Canadian Citizen and Canadian Resident and would like to open a non retirement brokerage account in Canada to start investing in a broad based index fund.

Fidelity said they only service retirement accounts Canadian Residents

Vanguard? TD? What's the next best place to look?

Then, he'd like an S&P500 index fund to start. Would he be able to invest in an American based index fund or have to buy the equivalent in Canada that tracks S&P?

TIA
Don't buy a US one. At least I believe the tax issues could get painful.

I am out of date BUT:

TD Stockbrokers had pretty good discount stockbroking account.

https://www.ratesupermarket.ca/blog/cho ... brokerage/

https://www.moneysense.ca/save/investin ... ages-2017/

Canadian mutual fund market is high fee, and loads. I believe the Vanguard CA funds even pay loads. Again TD had efunds which avoided most of that.

There is the TFSA, an account which is after tax money (annual limit) but then no further tax to pay. So separate from RRSP (pre tax money, equivalent of 401k). One should definitely start with a full contribution every tax year (don't forget spouse, also).

Many of us have used ETFs (I am no longer resident in Canada, but I did buy what was apparently the world's first ETF, even before SPDR ;-)).

There are Canadian (TSX) listed ETFs which cover pretty much everything one needs:

- S&P 500
- EAFE (world ex Canada and USA); World with Canada and USA
- Canadian government bond fund

That's all you really need. The thing to understand is Canadian stock market is c. 40% financials and 40% resources - it's very poorly diversified. Thus you really don't want to overweight it more than the about 5% of world stock markets it accounts for.

Basically one needs 60% world stock market 40% Canadian government bonds (or whatever is appropriate %age split given age and risk tolerance).

https://www.blackrock.com/ca/individual ... -index-etf XWD would do the equities

https://www.blackrock.com/ca/individual ... -index-etf XGB would do the bonds

https://www.moneysense.ca/save/investin ... -for-2018/

https://en.wikipedia.org/wiki/List_of_C ... aded_funds I tend to use ishares funds partly out of forced of habit

The FInancial Wisdom forum is a Canadian version of Bogleheads and very helpful.

Also there is a Canadian wiki here.

SQRT
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Re: Canadian Citizen and Resident

Post by SQRT » Thu Aug 09, 2018 9:49 am

Not sure why you would even consider opening an account for a Canadian resident other than in Canada. The Canadian capital markets are well established. You can easily purchase securities from the US or anywhere else through a Canadian self directed securities broker. The big Canadian banks all have pretty good self directed securities firms. Biggest is TD. Simplest just to use the one owned by his bank.

Valuethinker
Posts: 35291
Joined: Fri May 11, 2007 11:07 am

Re: Canadian Citizen and Resident

Post by Valuethinker » Fri Aug 10, 2018 5:00 am

airahcaz wrote:
Wed Aug 08, 2018 12:29 pm
Relative is a Canadian Citizen and Canadian Resident and would like to open a non retirement brokerage account in Canada to start investing in a broad based index fund.

Fidelity said they only service retirement accounts Canadian Residents

Vanguard? TD? What's the next best place to look?

Then, he'd like an S&P500 index fund to start. Would he be able to invest in an American based index fund or have to buy the equivalent in Canada that tracks S&P?

TIA
I should say XUS or XSP -- both ETFs offered by ishares.ca (Blackrock) and purchasable via any discount broker, listed on Toronto/ TSX, should do it for the S&P 500.

XSP is currency hedged. I happen to hold that one, but generally I would say hold XUS, because it also gives you a currency exposure to USD. Canadians tend to travel in USA and imports are priced in USD, so it's no bad thing (given home equity, salary, Canada Pension Plan; all in CAD) to have some USD exposure even at the cost of more volatility.

https://www.blackrock.com/ca/individual ... -index-etf

I am a big fan of global diversification though, so I would favour holding XAW which gives you the whole world including Emerging Markets and is about 55% USA.

https://www.blackrock.com/ca/individual ... -index-etf

Be warned. If the investor goes for the Dividend Reinvesment Plan (DRIP) then it becomes a nightmare of record-keeping vis a vis Capital Gains Tax. AFAIK Canadian brokers don't do the calculation for you on that, keeping track of book cost. Having lived through the dubious pleasure of trying to track back a parent's portfolio for 30+ years from paper records, this can be more than a bit difficult ;-).

Throw in a Canadian government bond fund as per my earlier post and one is done and dusted. Important to use the maximum TFSA each year, and certainly to consider the education fund (if one has children of the right pre college ages).

It might be easier just to let the dividends pile up ("swept" into a Money Market Fund) and then rebalance once a year rather than to use a DRIP.

airahcaz
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Joined: Sat Oct 31, 2009 3:37 pm

Re: Canadian Citizen and Resident

Post by airahcaz » Fri Aug 10, 2018 9:04 am

ETF’s are hard to dollar cost average via monthly contributions cause of commissions.

Perhaps the most inexpensive way is to buy the Canadian brokerages index fund equivalent even though their MER is higher than the States?
1) Invest you must 2) Time is your friend 3) Impulse is your enemy 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course. (Plagiarized, but worth stealing)

Valuethinker
Posts: 35291
Joined: Fri May 11, 2007 11:07 am

Re: Canadian Citizen and Resident

Post by Valuethinker » Sat Aug 11, 2018 8:18 am

airahcaz wrote:
Fri Aug 10, 2018 9:04 am
ETF’s are hard to dollar cost average via monthly contributions cause of commissions.

Perhaps the most inexpensive way is to buy the Canadian brokerages index fund equivalent even though their MER is higher than the States?
It depends. The Canadian index fund equivalents can be a *lot* higher. Thus the resort to ETFs. One has to check - in the day, I used TD Bank efunds.

You wind up economizing on broking charges by doing so only quarterly or annually. However the minimum charges are sufficiently low for online discount brokerages that it might not be the worst thing in the world to do it monthly _ $12.50 pcm is only $150 pa - depends on how much you are investing each month, of course.

student
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Joined: Fri Apr 03, 2015 6:58 am

Re: Canadian Citizen and Resident

Post by student » Sat Aug 11, 2018 8:31 am

Valuethinker wrote:
Sat Aug 11, 2018 8:18 am
airahcaz wrote:
Fri Aug 10, 2018 9:04 am
ETF’s are hard to dollar cost average via monthly contributions cause of commissions.

Perhaps the most inexpensive way is to buy the Canadian brokerages index fund equivalent even though their MER is higher than the States?
It depends. The Canadian index fund equivalents can be a *lot* higher. Thus the resort to ETFs. One has to check - in the day, I used TD Bank efunds.

You wind up economizing on broking charges by doing so only quarterly or annually. However the minimum charges are sufficiently low for online discount brokerages that it might not be the worst thing in the world to do it monthly _ $12.50 pcm is only $150 pa - depends on how much you are investing each month, of course.
Yes. I believe the funds that you mentioned is reasonable. https://www.tdcanadatrust.com/products- ... r-diff.jsp

Valuethinker
Posts: 35291
Joined: Fri May 11, 2007 11:07 am

Re: Canadian Citizen and Resident

Post by Valuethinker » Sat Aug 11, 2018 8:48 am

student wrote:
Sat Aug 11, 2018 8:31 am
Valuethinker wrote:
Sat Aug 11, 2018 8:18 am
airahcaz wrote:
Fri Aug 10, 2018 9:04 am
ETF’s are hard to dollar cost average via monthly contributions cause of commissions.

Perhaps the most inexpensive way is to buy the Canadian brokerages index fund equivalent even though their MER is higher than the States?
It depends. The Canadian index fund equivalents can be a *lot* higher. Thus the resort to ETFs. One has to check - in the day, I used TD Bank efunds.

You wind up economizing on broking charges by doing so only quarterly or annually. However the minimum charges are sufficiently low for online discount brokerages that it might not be the worst thing in the world to do it monthly _ $12.50 pcm is only $150 pa - depends on how much you are investing each month, of course.
Yes. I believe the funds that you mentioned is reasonable. https://www.tdcanadatrust.com/products- ... r-diff.jsp
https://www.tdassetmanagement.com/fundD ... &site=TDCT

MER 0.51% by American standards that's extortionate for an international index fund. By Canadian standards it does not look too bad however I believe the iShares ETF is significantly cheaper. From memory 0.20% but I have not checked.

https://www.tdassetmanagement.com/fundD ... &site=TDCT

again MER of 0.51% For a bond fund that is going to be especially painful.

https://www.tdassetmanagement.com/fundD ... &site=TDCT

US index. 0.35% is a lot to pay for a US index fund. But I do not know the comparable Canadian alternative funds.

With the above 3 funds, roughly 40% Canadian bond fund, 30% international index fund, 30% US index fund the OP ('s friend) could roughly duplicate what I have been proposing here.

If the desire is to hold Canadian stocks as well I would suggest 10% max, and take that equally out of US and international index funds. So 25/25/10/40.

https://www.tdassetmanagement.com/fundD ... &site=TDCT Canadian balanced fund would be close enough. However the MER is 0.21% but I am assuming that is on top of the MERs of the TD funds that it invests in? But it does offer a one stop shop solution.


EDIT : gives fund MER of 1.21% so that approach does not work

https://www.tdassetmanagement.com/Fund- ... DB852E.pdf

The impact of pension plan should not be ignored. If it is a final salary/ Defined Benefit plan (usually public sector these days) then one can aim off on the bonds outside that. If it is Group RRSP or other Defined Contribution arrangement, then 60/ 40 stocks and bonds is still probably a pretty good mix assuming all portfolios are taken as one portfolio for asset allocation percentages (the aggressive may favour 70/30).

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