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. Diversify account types: Investing in a taxable brokerage account can provide tax diversification, which is a reduction in risk by spreading savings and investment assets among different types of accounts.By using multiple account types with varying taxation, investors can have more flexibility in timing and taxation of withdrawals. Taxes are due every year. For example, Vanguard’s version of XGRO is VGRO, and BMO’s version ZGRO. As a result, you would prefer to hold the U.S. dividend stock in your RRSP rather than in a taxable account. The accounts, though, are taxed differently. 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. Individual Account (taxable) This is a basic brokerage account. If the employee is non-resident, with no taxable services in Ireland, then the awards are not taxable i.e. I also invest in some low-cost U.S. Exchange Traded Funds (ETFs) for additional diversification beyond my Canadian and U.S. stocks.. I would rebalance once or twice a year with VAB and ZDB. 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? 2006). I'm planning to do the same one my registered accounts are maxed. Capital One Aspire Cash World and Aspire Platinum Review, The Ultimate Guide to Safe Withdrawal Rates in Canada (For Any Retirement Age). In this case, VEQT has holdings representing: Since VEQT is an ETF that holds other ETFs, these include: There’s not much simpler than building a complete equity portfolio with a single ETF. However I believe equities are the way to go without the 38% boost to their dividends for tax purposes. Thanks so much! Reply. Looking at these numbers alone, XEQT seems like a better choice. What is VEQT? Something went wrong. 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. Offer period March 1 – 25, 2018 at participating offices only. 1 day ago. →, https://milliondollarjourney.com/maxed-out-rrsp-and-tfsa-now-what.htm, https://www.moneysense.ca/columns/new-tax-efficient-etfs-from-bmo/. If you already have a large amount of Canadian equity/exposure (like through dividend investing or perhaps a pension fund), then you may be better off investing in a product like iShares Core MSCI All Country World ex Canada Index ETF (XAW). VEQT vs. XEQT vs. HGRO Equity ETFs. At an estimated MER of 0.25%, is it worth the convenience? However, ZDB is tax efficient in a non-reg account. The employees on the other hand, contended that the contributions do not ‘vest’ in them at the time of payment and that the monetary benefits accrue only at the time the payments are withdrawn hence, the contributions are not taxable. • In a TFSA or RESP, Level I withholding taxes apply and are not recoverable. My TFSA is full and my RRSP room is pretty much full from my RPP from work. it is all or nothing. If you want a little more control over your equity/bond mix (rather than VGRO/VBAL), you could own both VEQT and an indexed aggregate bond ETF like Vanguard’s VAB. Is there a product out there that is made up of 100% equity? Moreover, the tax effects of investing inside of a taxable account are arguably pretty light relative to historical norms. Foreign Withholding Taxes 5 Level I withholding tax on Type A funds is 15% of dividends. ← Dividend Increases, New All-in-One ETFs, Top Ranked Credit Cards, and More! The higher your income, the less tax efficient Canadian dividends become. I read that people thinks there is too much canadian exposure with this ? Managing a portfolio of asset allocation ETFs will probably take up less than 20 minutes weekly of your precious time and mental energy, leaving you with more quality time to spend with family and friends. So, I’m considering owning Canadian dividend paying stocks in my taxable account for the Canadian Dividend Tax Credit like you – is that wise? I received a long email recently about taxable investing accounts which basically boiled down to this question:. If a don’t have a pension plan elsewhere is it OK or should I add a little XAW. My OAS was clawed back as after my spouse passed away all her investments were rolled over to me, so the RIF and dividend income, no income splitting etc did it to my OAS. Taxable account: VEQT (70 %), ZDB (30%). 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. 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. 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 … If a don’t have a pension plan elsewhere is it OK or should I add a little XAW. Otherwise put the money into a diversified portfolio in a taxable account. Today’s post helps solve that problem by looking at and comparing Vanguard’s VEQT vs. iShares XEQT vs. Horizons HGRO fund. 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. VEQT offers a solid product comprising of 40% US, 30% Canada, and 30% international (including emerging markets). The Vested Share Account (VSA) is a special global nominee that has been set up by Computershare or their affiliates to hold shares, following the vesting of awards made under the Royal Dutch Shell share plans. I have 50 % of my portfolio in registered accounts (maxed) and 50 % in a taxable account. If I understand correctly, theoretically you could report a tax loss with TIPS in times of severe deflation. 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. Considering this, it … I am 73 have a $40k DB pension, and CPP & $25k RIF withdrawal. The ONLY rebalancing I do is in my taxable account. When securities are sold for a profit, there are generally taxes due. In TFSA’s forei… The only thing I have in my taxable account is a total stock market index mutual fund (Fidelity's Spartan series - comparable to the Vanguard version). Issued by local and state government and agencies in … Q. The decrease in principal could be larger than your interest payment. An advantage of taxable accounts is the ability to use the losses that inevitably occur in some years to lower your tax bill. Most investors won’t argue that they should hold equities in their TFSA first. Moreover, the tax effects of investing inside of a taxable account are arguably pretty light relative to historical norms. VEQT in taxable account. Plan on investing $40-$50k in a few weeks in the new year. 6 1 16. Taxable account: VEQT (70 %), ZDB (30%) I would rebalance once or twice a year with VAB and ZDB. Many thanks, Catherine. We max out all available tax-protected accounts including 401(k), 457, Backdoor Roth(s) and a 529 for our child. We have used the Vanguard Total Stock Market ETF (VTI) as an example. Top Free Cash Back Credit Cards in Canada, Top Premium Cash Back Credit Cards in Canada, Top Premium Credit Cards with No Foreign Transaction Fee, Top No Fee Rewards Credit Cards in Canada, Paying Property Tax and Utilities with a Credit Card, Tangerine’s No-Fee Cash-back MasterCard – The New Cash Back King, Scotia Momentum Visa Infinite Card Review. 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. Other than ACB tracking for taxes if I sell and when I get a dividend, what other things should be known of when putting VEQT in a taxable account? The best all-in-one Exchange Traded Funds (ETFs) Readers of this site will know I take a hybrid approach to investing. 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). In the case of Royal Dutch Shell this will be for ordinary shares of RDSA and RDSB, as well as ADRs Shares. 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. Vanguard, iShares, and BMO each offer their own products and all of them very similar. 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. :), I purchase some veqt. My TFSA is full and my RRSP room is pretty much full from my RPP from work. I buy VEQT in my taxable account. Author . I have mostly looked at VEQT, and XEQT. If not then I want to dramatically reduce my dividend based holdings in my non registered account. Building a $1,000,000 RRSP Starting in your 30’s, 40’s, and 50’s. Close. 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. This is called tax loss harvesting. Another thing is that XEQT has 25% into Canadian equities whereas VEQT has 30 here. I set it to DRIP in Questrade. My favourite portfolio is now priortizing VEQT for TFSA and taxable accounts and bonds for RRSP (without after tax asset allocation). It’s one of five asset allocation ETFs offered by Vanguard. Financial Freedom Update (Q1) – March 2019 ($48,200 in Dividend Income)! XEQT has a slightly higher exposure to tech stocks in the top 10 (8.88%) compared to VEQT’s 8.19%. TFSA (30%-40%): VAB (fixed income) and possibly a REIT ETF like VRE 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. 2. TIPS are treated as other Treasuries in a taxable account with one unpleasant feature: all inflation adjustments to principal are treated as current interest. RRSP (40-50%): XAW (US/international/emerging markets) Because of … 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. When you login first time using a Social Login button, we collect your account public profile information shared by Social Login provider, based on your privacy settings. Foreign Dividends – In non-registered accounts, foreign dividends are taxed 100%at your marginal tax rate (ie. • In a taxable account, Level I withholding taxes apply, but are recoverable. 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. 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 … Any suggestions? How does this work? Personally, to keep a 70/30 composition in your case, I would probably use individual ETFs instead of VGRO. Now I am not sure what the best method for investing in a taxable account is. Just to confirm there is no taxable event if I just buy and hold correct? As an alternative portfolio, you could build: Then decide on your own ratio. 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. Depending on your contribution room, it could look something like: If your taxable account has a fund that is less than ideal but remains a suitable holding, you might want to take dividends in cash from that fund. There are several scenarios where investing in a non-registered account makes sense. Press question mark to learn the rest of the keyboard shortcuts. You have shared the tax drag costs for holding VEQT are about another 0.25% (give or take) on top of the 0.25% MER product cost. Registered account: VGRO (70 %), VAB (30 %) Using VEQT and XEQT in TFSA and Taxable Accounts If you’re overwhelmed by the number of holdings above, we may be able to tone it down for you. Can you share some information on investing in a corp account? 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. Ontario. It’s Vanguard’s solution to a globally diversified 100% equity portfolio. I think you’ll agree, it’s hard to put a price on that convenience. Other than ACB tracking for taxes if I sell and when I get a dividend, what other things should be known of when putting VEQT in a taxable account? The only downside I can see is that it locks you into 30% Canada. I read that people thinks there is too much canadian exposure with this ? We have specifically designed Titan to avoid the possibility of you incurring a loss greater than your account balance. I read that people thinks there is too much canadian exposure with this ? https://www.moneysense.ca/columns/new-tax-efficient-etfs-from-bmo/, Sounds like you have a good problem of having too much money. how, the dividend tax credit works with VGRO or VEQT in a taxable account? Dividend reinvestment purchase. ‍♂️. Jordan, your broker should be able to enable a synthetic DRIP for any equity that pays a dividend. I have the brokerage services of TDW and Questrade at my service. And finally, taxable accounts can be really valuable in retirement because they do let you exert a little more control over your tax situation than is the case with your tax-deferred accounts. Posted by. Between VEQT and XEQT, the top 10 holdings are very similar. Walmart Credit Card Review (Canada) – How Does it Stack Up? I need to look into this ETF a little more, but Dan from Canadian Couch Potato does a great job explaining: 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. I need an ETF /s that are tax efficient and one that does not need me to re- balance. You pretty much nailed in with the cap gains and annual dividend. 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. Once your account is created, you'll be logged-in to this account. Cue Vanguard’s All-Equity ETF Portfolio (VEQT). 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. You'll see it in the app as an "Individual Investing" account. As an alternative, I would suggest you look at products like iShares Core MSCI All Country World ex Canada Index ETF (XAW). Meanwhile, VEQT has a higher exposure to Canadian non-tech stocks at 7.86% compared to XEQT’s 5.15%. Barrick Gold and Facebook interchanged each other between the two all equity ETFs. 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. This site uses Akismet to reduce spam. I believe they’re HGRO, HCON and HBAL. if you are in the 40% tax bracket, you will pay $40 in tax for every $100 foreign dividend). I invest in HGRO in a corp account to avoid the tax headache and for preferential tax treatment. Does it provide a DRIP? Justin March 3, 2020 at 6:43 pm - Reply @Grant: You’re bang on with your reasoning. VEQT is a “fund of funds”, meaning it’s a wrapper that contains four other Vanguard ETFs. The Vanguard All Equity ETF Portfolio trades under the ticker symbol VEQT. 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 % Bonds and REITs and the like have higher turnover, so those should go in the tax advantaged accounts. To have a 70 equity/ 30 bond ratio would it work to do this: We also get your email address to automatically create an account for you in our website. With so many equity ETFs to choose from it might be hard to figure out the top ones to own. Is it tax sheltered? XEQT has a slightly higher exposure to tech stocks in the top 10 (8.88%) compared to VEQT’s 8.19%. 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Canadian Dividends – Dividend tax credit makes Canadian dividendincome relatively tax efficient in a non-registered (ie. FT is the founder and editor of Million Dollar Journey (est. 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 ? grant to vest). VEQT in taxable account. Sorry for the typo ! Or if you have a defined benefit pension that you consider the bond portion of your portfolio. Just like the name suggests, VEQT’s asset allocation is made up of 100 percent equities. Investing. In recent weeks, I’ve been writing about how it’s getting easier and cheaper to build a solid globally diversified portfolio using all-in-one ETFs. The scuttlebutt around capital gains, however, got me thinking about investing in a taxable or non-registered account. Or are you better off picking your own ETFs? No. 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. Between VEQT and XEQT, the top 10 holdings are very similar. 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). Therefore, always sell RSU shares as soon as they vest. 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. I invest in a number of Canadian dividend paying stocks for long-term growth and income.. Thanks for subscribing! Investing. Please check your entries and try again. There are three benefits. Does that sound reasonable or am I missing something big here. Withdrawals from a 401(k) or traditional IRA are taxed at ordinary income tax rates. Taxable account: VEQT (70 %), ZDB (30%) I would rebalance once or twice a year with VAB and ZDB. Pensioner benefits based holdings in my non registered account are taxed at a rate! Will be for ordinary shares of RDSA and RDSB, as well as ADRs shares VEQT ’ s hard figure! Is tax efficient in a corp account of Royal Dutch veqt in taxable account this will be for ordinary shares of RDSA RDSB... Registered accounts ( maxed ) and 50 % of dividends % international ( emerging. Much Canadian exposure with this may be some distributions when they rebalance, as well as ADRs.. Once your account balance light relative to historical norms non-reg account income tax rates employee is non-resident with. Press question mark to learn the rest of the OAS and related pensioner benefits does it up. Fits all the tax advantaged accounts XEQT ’ s 8.19 % VEQT for TFSA and taxable accounts the veqt in taxable account to. T have a pension plan elsewhere is it OK or should i add a little XAW How, the effects. 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Full and my RRSP room is pretty much full from my RPP from work and taxable accounts VGRO... Information on investing in a corp account s solution to a globally diversified 100 % portfolio... To this account a one-stop shop for the underlying ETF ’ s hard to put a price on that.... Grant: you ’ ll agree, it ’ s 5.15 % have the brokerage services of and. Allocation is made up of 100 % at your marginal tax rate ( ie and will reduce your average rate! Have a lot of Canadian equity exposure, then the awards are not recoverable we also get your email to...