2 Recent Buys – XGRO, RNX

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A quick update on a couple of purchases in our portfolios.

First purchase was same transaction repeated in two different portfolios – one in Mrs R2R’s RRSP, and the other in Baby R2R’s RESP account. For these portfolios, I follow a index investing approach and lately I’ve been thinking of moving to a simpler multiasset portfolio holding. I recently previewed the multiasset ETF options available in Canada. Based on that review, I decided to initiate a position in iShares Growth ETF Portfolio (XGRO.TO). This follows a 80/20 stock/bond approach and provides a one-stop passive investing approach providing global exposure. This was a small initial investment and over the months, I will continue buying regular amounts dollar cost averaging & building a full position. I still hold some bond positions that exist in these accounts and will leave them there for now until I am happy with the XGRO position & then sell those to go to a simple one-fund holding.

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MultiAsset ETFs – VGRO vs XGRO vs ZGRO

The Canadian ETF space has been undergoing some intense competition over the past few months. The big problem for retail investors has been to mix and match various ETFs to find a good balanced diversified multi-asset portfolio. How much weightage do you give stocks & bonds, how much per geographical region, hedge currencies or not….the choices are endless and overwhelming. Also, this came with the problem of rebalancing regularly and making the appropriate purchases on a regular basis.

The Canadian ETF providers have thus launched the all-in-one multiasset ETFs which addresses these problems and fills the gap in the market. I have received a few questions on this front, so I will try to provide a simple overview on this front. While there are different ETFs with different weighting based on risk tolerance (growth vs balanced vs conservative portfolio ETFs), this post will look at the growth-oriented series, since that seems to garner the most attention from the readers.

The three comparable growth multi-asset ETFs compared in this post are:

  • Vanguard Growth ETF Portfolio (TSE: VGRO)
  • iShares Growth ETF Portfolio (TSE: XGRO)
  • BMO Growth ETF (TSE: ZGRO)

All three have an approx 80/20 stocks/bonds approach.

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Recent Sell – BMO Utilities ETF

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A sector that has been under-represented in my portfolio has been the Utilities sector. The only exposure I had to the sector was via an ETF – BMO Equal Weight Utilities Index ETF (ZUT.TO). Even though the exposure has been small and the only one, I decided to liquidate my holdings in the ETF and will be looking to purchase some stocks in the sector instead. The ETF provided good stability and regular monthly income. However, there were a few things that bothered me that caused me to sell the position.

  • After owning the fund for close to 3 years, the fund price has remained flat – although I was earning 4% on the investment. While I dont really look for capital gains per se, I know that the income isnt being compounded as is achievable via dividend growing companies.
  • A thin exposure of just 12 companies – all in the Canadian sector, although some companies have operations in the US.
  • An expense ratio of 0.55% for owning just 12 companies! I dont really gain much of a diversification and dont see the value of paying 0.55% for such a thin ETF.
  • In addition, more than 10% of the exposure to one company – Just Energy Group Inc (JE.TO), which last time I checked had some horrible financial figures. I do not want any exposure to this company – let alone a 10% exposure while paying that damn fee for the privilege of investing.
  • No dividend growth.

With this sale, I lose $90.48 in forward annual dividends.

What’s next for those funds from the sale? I am looking to pick up some shares in individual utility companies. Some of the companies on my shortlist are:

  • Diversified Utilities
    • Algonquin Power & Utilities Corp (AQN.TO)
    • Atco Ltd (ACO.X.TO) / Canadian Utilities (CU.TO)
    • Brookfield Infrastructure Partners LP (BIP.UN.TO)
    • Brookfield Renewable Energy Partners LP (BEP.UN.TO)
    • Duke Energy Corp (DUK)
  • Electric Utilities
    • Consolidated Edison Inc (ED)
    • Fortis Inc (FTS.TO)
    • The Southern Company (SO)
  • Water Utilities
  • Natural Gas Utilities
    • ONEOK Inc (OKE)

What are your thoughts on these companies mentioned? Are there any other companies that I should be looking at?








Emerging Market Bonds

Back in February, I shared details of one of our long term plans for my wife’s portfolio of moving funds from an expensive mutual fund to low cost diversified ETF portfolio. This was also one of our financial goals for the year, which we were happy to put behind us. The post Building an ETF Portfolio can be found here. The long term goals of the portfolio remain the same as discussed, which includes passivity (following the passive investing route), simplicity, diversification, expense check, and dollar cost average into the selected funds. One thought that I’ve been debating for that portfolio is adding diversification in the fixed income portion. The fixed income exposure, which makes 40% of my wife’s portfolio comes from a single ETF called the BMO Aggregate Bond Index ETF (ZAG.TO). The ETF consists of high quality bonds (43% of the fund is made of AAA rated bonds) – consisting of federal, provincial and corporate debt.

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Building An ETF Portfolio

Regular readers of this blog are aware that we recently sold my wife’s expensive mutual fund holdings a couple of weeks ago. This has been long time coming and we finally got the funds transferred to a discount brokerage. Now comes the part of picking the ETFs. This article captures the exercise of building an ETF portfolio. Hope it helps you in your decision if you decide to go the route of passive investing.

The overall strategy remains as I mentioned earlier: my wife’s portfolio will use index funds via ETFs to invest in the broad markets using some rules of thumb in mind as discussed below. My portfolio will continue investing in more focused dividend growth stocks.

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