It Doesn’t Really Matter

platinum
My second ever rock concert was to watch the 80’s glam band Platinum Blonde perform at the Fire Fighters Club in Markham. Their big hit was called “It Doesn’t Really Matter”.  I find myself repeating that line in my mind when I’ve been asked some financial questions over the years.  The most common questions I get from students, former students, colleagues, family and friends that make me think “Platinum Blonde” include:
  1. Which Canadian etf should I buy – XIC, XIU and VCN (all Canadian low cost etfs)?
  2. How much should I save for retirement – 6%,10%, 15% or some other amount?
  3. How often should I rebalance my etfs- twice a year, once a year, or longer?
  4. When should I buy the etfs – all at once, or little bit throughout the year?
  5. Do I need to buy European, Japanese and emerging market etfs?
  6. Which discount broker should I use – big bank broker (eg. Scotia Itrade), or independent broker (Questrade)?
In my mind I’m thinking that these people asking these questions are already winning the investing game.  They’ve decided to take the time to learn how to DIY Invest.  They have decided not to become the suckers that the big banks, mutual fund companies and even financial advisors rely on to pay for their lifestyles.
If you are one of these folks, congratulations!!  The fact you are asking very specific questions on the nuts and bolts of DIY Investing means you are already 95% of the way there to retiring comfortably.
These questions listed here are the other 5% and that is why the answer to these questions typically is “It doesn’t  really matter”; just do what is easier for you and what improves the chances that you will continue to save 6-15% of your income in low cost etfs until you reach retirement age.
In any case, here are how I’d answer the questions:
  1. The difference between XIC, XIU, VCN is insignificant.  Buy one and stick with it.
  2. Save between 6% and 15% depending on your chicken index.
  3. Try to rebalance once per year, but if you forget, do it when you remember to.
  4. I’d buy my Canadian etf first when I have the money, then I’d buy my International etf when I have the next block of money, and then finally my Canadian bond etf.   3 purchases during the year; that’s it, no more trading.
  5. If you are more comfortable sticking only to Canadian and US stocks, that’s okay. I’ve seen analysis that adding non North American stocks to your portfolio has not significantly boosted returns since 1970.   Remember Warren Buffett will put all his money in the US broad market when he can no longer invest for himself.
  6. If you like the convenience of setting up a brokerage account with your personal bank, then do that.  You pay a little more each time to buy an etf, but since you won’t be trading and will make few purchases, the extra cost is not significant.

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