Canadian Dividends – Dividend tax credit makes Canadian dividendincome relatively tax efficient in a non-registered (ie. Withdrawals from a 401(k) or traditional IRA are taxed at ordinary income tax rates. With all these new choices to build a solid low-cost portfolio (even cheaper with commission-free ETF trading), it really is a great time to be an investor. VEQT offers a solid product comprising of 40% US, 30% Canada, and 30% international (including emerging markets). I would rebalance once or twice a year with VAB and ZDB. I will reorganize it this way. Taxable account: If the assets are in a taxable account, and you cannot be sure that you will not be trading them, you should assess if moving the holdings over to Betterment would make you better off in the long run. In TFSA’s forei… There are three benefits. I need to look into this ETF a little more, but Dan from Canadian Couch Potato does a great job explaining: It’s one of five asset allocation ETFs offered by Vanguard. Dividend Tax Credit 101 May not be combined with other offers. I figure it only distributes once a year so even if Questrade did not keep track of my ACBs perfectly, it would be easy to do myself with a yearly distribution. Something went wrong. Hence, it is taxable income of the employees under Section 17(1) by classifying them as perquisites. I'm planning to do the same one my registered accounts are maxed. So with a 100% equity portfolio, one big requirement is strong geographical diversification. However, owning 4 ETFs, 3 of which trade in U.S. dollars leads to currency conversion costs and higher trading costs (when adding new money, rebalancing, and when withdrawing in retirement). 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Non-Reg (20%-30%): XIU or VCN. The cost of capital gains taxes from liquidating may well be more than made up for with the benefits of a switch, including lower fees. Vanguard VEQT All-in-One 100% Equity Portfolio ETF, Best Canadian Online Discount Stock Brokerage, Wealthsimple Review 2020 – Robo Advisor & Wealthsimple Trade [UNIQUE PROMO], Questwealth Portfolios (Robo Advisor) Review, CI Direct Investing (Robo Advisor) Review, Canada’s Best Dividend Growth Stocks for 2020. Dividend Kings List – Companies with Annual Dividend Increases for Over 50 Years! Issued by local and state government and agencies in … Moreover, the tax effects of investing inside of a taxable account are arguably pretty light relative to historical norms. Personally, most of my Canadian equity ownership is through Canadian dividend stocks, so our family owns a lot of XAW (or equivalent through XUU/XEF/XEC) as you can see here. You want to have the most tax efficient and lowest turnover stuff in your taxable accounts. Thanks for subscribing! Learn how your comment data is processed. Reply. 2. Can you share some information on investing in a corp account? how, the dividend tax credit works with VGRO or VEQT in a taxable account? Posted by. When restricted stock or RSUs vest, you own the stock outright and have taxable W-2 income for that calendar year, along with your other compensation income. Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. 2006). Meanwhile, VEQT has a higher exposure to Canadian non-tech stocks at 7.86% compared to XEQT’s 5.15%. Any suggestions? And the quickest way to lose in taxable accounts is by investing in mutual funds that produce the most in taxes. Please check your email for further instructions. If you are extra fancy, you could consider a slightly lower cost 3-ETF portfolio like: View our comprehensive comparison of the best all-in-one ETFs in Canada to decide which is best suited for your needs. Taxable account: VEQT (70 %), ZDB (30%) I would rebalance once or twice a year with VAB and ZDB. If you have to own bond funds in a taxable account, you may earn a higher after-tax return using tax-free bond funds rather than taxable bond funds. For example, if you have Vanguard 500 Index Fund with a large amount of unrealized capital gains, and your asset allocation calls for Vanguard Total Stock Market Index Fund for domestic stocks, you may want to take dividends from Vanguard 500 … • In a TFSA or RESP, Level I withholding taxes apply and are not recoverable. Say No To Management Fees VEQT in taxable account. VEQT is a “fund of funds”, meaning it’s a wrapper that contains four other Vanguard ETFs. I read that people thinks there is too much canadian exposure with this ? I read that people thinks there is too much canadian exposure with this ? Valid receipt for 2016 tax preparation fees from a tax preparer other than H&R Block must be presented prior to completion of initial tax office interview. Offer period March 1 – 25, 2018 at participating offices only. For example, Vanguard’s version of XGRO is VGRO, and BMO’s version ZGRO. If you have extra funds for non-reg, if you have a spouse, you can fund his/her TFSA without any tax implications (unlike an RRSP). However, ZDB is tax efficient in a non-reg account. The accounts, though, are taxed differently. Never miind the loss of the OAS and related pensioner benefits. But investors in taxable accounts have only pocketed a 7% return over the past 10 years, dropping the fund’s aftertax return into the large-blend group's bottom half. The higher your income, the less tax efficient Canadian dividends become. Unless you have a burning need, to determine the CDN dividends component, you'll have to break own the entire ETF, which is not worth the hassle. I received a long email recently about taxable investing accounts which basically boiled down to this question:. It’s now worth noting that Ishares now has an equivalent (iShares Core Equity ETF Portfolio XEQT) with a slightly smaller MER and a bit less exposure to Canada. Justin March 3, 2020 at 6:43 pm - Reply @Grant: You’re bang on with your reasoning. Bonds and REITs and the like have higher turnover, so those should go in the tax advantaged accounts. Individual Account (taxable) This is a basic brokerage account. RRSP (40-50%): XAW (US/international/emerging markets) Author . Have you looked into the Horizons all in one etf’s? ← Dividend Increases, New All-in-One ETFs, Top Ranked Credit Cards, and More! Does that sound reasonable or am I missing something big here. Is that so? Horizons also has the HGRO which is 100% equity. Considering this, it … Here’s what’s under the hood: So when you sell a mutual fund at a price (NAV) higher than the price you purchased it, you will have a capital gain for which you will owe a tax. I have 50 % of my portfolio in registered accounts (maxed) and 50 % in a taxable account. For an investor who has no investments in taxable accounts, the difference in MER+FWT between VEQT and the mix of 4 ETFs is 0.36% per year. We max out all available tax-protected accounts including 401(k), 457, Backdoor Roth(s) and a 529 for our child. I don’t actually sell anything in my taxable account, but I do figure out how to allocate each monthly paycheck to the 3 funds to maintain my desired percentages. TFSA (30%-40%): VAB (fixed income) and possibly a REIT ETF like VRE Many thanks, Catherine. Rumours of an increased capital gains tax were put to rest last week when the Liberals unveiled their second federal budget with no mention of a change to the inclusion rate. Doing a typical 3 fund portfolio, but have money spread through several accounts, but the taxable account is growing the fastest and will continue to do so. →, https://milliondollarjourney.com/maxed-out-rrsp-and-tfsa-now-what.htm, https://www.moneysense.ca/columns/new-tax-efficient-etfs-from-bmo/. If a don’t have a pension plan elsewhere is it OK or should I add a little XAW. • In a taxable account, Level I withholding taxes apply, but are recoverable. My TFSA is full and my RRSP room is pretty much full from my RPP from work. This is called tax loss harvesting. Many thanks, Catherine. Therefore, always sell RSU shares as soon as they vest. The ONLY rebalancing I do is in my taxable account. Depending on your contribution room, it could look something like: One uestion, have you considered margin accounts for the non taxable to buy more ETFs? Today’s post helps solve that problem by looking at and comparing Vanguard’s VEQT vs. iShares XEQT vs. Horizons HGRO fund. If you are not contributing the maximum already, increase the contributions to the 401k plan, or fund a traditional IRA or a Roth IRA. Between VEQT and XEQT, the top 10 holdings are very similar. Sorry for the typo ! Just like the name suggests, VEQT’s asset allocation is made up of 100 percent equities. When securities are sold for a profit, there are generally taxes due. Between VEQT and XEQT, the top 10 holdings are very similar. I have the brokerage services of TDW and Questrade at my service. VEQT in taxable account. At an estimated MER of 0.25%, is it worth the convenience? Withdrawing from your RRSP, TFSA, and Non-Registered Accounts for Retired Canadians, How I Plan to Withdraw from my RRSP/TFSA to Fund Early Retirement, Early Retirement (FIRE) on Dividend Income – Dividend Taxes in Canada, Save Money with USD to CAD Foreign Exchange using Norbert’s Gambit, Canadian Investing Taxes: Dividends, Interest, and Capital Gains, SimpleTax Review: File Your Canadian Tax Return for Free, Canadian Legal Wills Review: Canada’s Best Online Will Kit, getting easier and cheaper to build a solid globally diversified portfolio using all-in-one ETFs, even cheaper with commission-free ETF trading. FT is the founder and editor of Million Dollar Journey (est. Press question mark to learn the rest of the keyboard shortcuts. Cue Vanguard’s All-Equity ETF Portfolio (VEQT). Does it provide a DRIP? As an alternative, I would suggest you look at products like iShares Core MSCI All Country World ex Canada Index ETF (XAW). The decrease in principal could be larger than your interest payment. it is all or nothing. Great Taxable Account ETFs #3: SPDR Short Term Municipal Bond ETF (SHM) Municipal bonds are made for taxable accounts. Thank you very much for your quick response, this helps a lot ! Is it tax sheltered? Great Taxable Account ETFs #1: iShares Russell 3000 ETF (IWV) One of the reasons why ETFs are great for taxable accounts is that they track indexes. I believe they’re HGRO, HCON and HBAL. Hi Catherine, check out the post today about having “one big portfolio” (https://milliondollarjourney.com/maxed-out-rrsp-and-tfsa-now-what.htm). Plan on investing $40-$50k in a few weeks in the new year. Because of … No. This approach is a slight deviation from the international norm, and results in some unusual outcomes in some scenarios - in most countries, the share awards are sourced according to where the employee was working during the vesting period (i.e. What is VEQT? :), I purchase some veqt. I set it to DRIP in Questrade. A taxable investment account (also known as a brokerage account) is funded with any amount of after-tax dollars and can be invested in virtually any type of security, including stocks, bonds, mutual funds, and exchange-traded funds (ETFs). Taxable account: VEQT (70 %), ZDB (30%) I would rebalance once or twice a year with VAB and ZDB. Let’s take a look at various investment instruments and their tax consequences: 1. Building a $1,000,000 RRSP Starting in your 30’s, 40’s, and 50’s. My TFSA is full and my RRSP room is pretty much full from my RPP from work. As a result, you would prefer to hold the U.S. dividend stock in your RRSP rather than in a taxable account. I am new at investing on my own and wanted to see if what I planned by reading your blog would be good. Barrick Gold and Facebook interchanged each other between the two all equity ETFs. If the employee is non-resident, with no taxable services in Ireland, then the awards are not taxable i.e. Please check your entries and try again. Investing. Don’t hold the RSU shares. VEQT swap based equivalent? Just to confirm there is no taxable event if I just buy and hold correct? I invest in HGRO in a corp account to avoid the tax headache and for preferential tax treatment. As an alternative portfolio, you could build: Then decide on your own ratio. VEQT Number of stocks 12,521 Median market cap $53.6B Price/earnings ratio 20.2x Price/book ratio 2.0x Return on equity 14.1% Earnings growth rate 12.5% Equity yield (dividend) 2.5% Sector weighting VEQT Technology 18.0 % Financials 17.8 % Consumer Discretionary 13.2 % Industrials 12.6 % Health Care 9.0 % Basic Materials 7.1 % Re-balancing multiple ETF's is not an issue for me Thanks I invest in a number of Canadian dividend paying stocks for long-term growth and income.. They use the swap structure for the underlying etf’s though there may be some distributions when they rebalance. If I understand correctly, theoretically you could report a tax loss with TIPS in times of severe deflation. But what if you are just starting out in your 20’s and have a super long time frame until retirement which would justify having no bonds in your portfolio? Taxable account: VEQT (70 %), ZDB (30%). The Vanguard All Equity ETF Portfolio trades under the ticker symbol VEQT. The keyword in that product is the “ex Canada” which means except Canada. One last thing, if I maxed my allocation for VCN in my taxable account (20 %) and don’t have room left for contribution in my registered account, should I rebalance with ZNB in my taxable account ? I downloaded Justin Bender’s Foreign Withholding Tax calculator at his Canadian Portfolio Manager blog and determined that VEQT only had an expected foreign withholding tax of 0.24 percent – or just half of the taxes imposed on VXC. If you already have a lot of Canadian equity exposure, then you may not want that much in Canada from an ETF. It’s Vanguard’s solution to a globally diversified 100% equity portfolio. Foreign Dividends – In non-registered accounts, foreign dividends are taxed 100%at your marginal tax rate (ie. I have the following question regarding the taxable account: Now that Vanguard introduced the all equity etf:VEQT I have three options: (60% stocks 40% bonds) Option 1: VUN (30%) , VIU (25%) VEE (5%) and ZDB(40%): Bond ETF more efficient in taxable account Option 2: VEQT (60%) ZDB (40%) Option 3: VBAL (the bond part not as tax efficient as ZDB) Which one do you thing would be … We have used the Vanguard Total Stock Market ETF (VTI) as an example. Math aside, I would maintain that most DIY investors would be wise to stick like glue to their one-fund solutions, even as their RRSP values continue to grow. Financial Freedom Update (Q1) – March 2019 ($48,200 in Dividend Income)! 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