Consider subscribing to my newsletter if you’d like to receive my easy-to-use Expense and Net Worth Tracker spreadsheet. I use it every month!

Expenses

Last month was a somewhat expensive month for us. We had a few large out-of-the-ordinary expenses such as spending $850 on travel (which will take place next year), close to $1,000 on healthcare-related expenses, and $500 on gifts (Christmas shopping and etc.).

Most of our other expenses were quite muted, and our income for the month—largely thanks to us both being finished paying CPP and EI for the year—carried us to $6,000 in total savings.

Investments & Dividends

In October we made more progress towards maximizing our RRSPs. For my account, I managed to contribute just over $4,500. My wife also made sizable contributions of $1,600 to her RRSP. We have $9,500 and $7,700 space less in our respective RRSPs.

Last month we earned $708 in dividends, which is a little less than I expected considering we earned about the same amount last year.

In 2023 we’ve earned $7,000 in dividends which is already 43% more than last year’s $4,900. I’m hoping we can finish strong an come close to earning $8,000 in dividends in 2023.

Net Worth Change

In October, our net worth recovered somewhat, increasing to $831,500 from $827,900 in the previous month. That’s an increase of $3,600. This is still less than the all-time-high net worth of $841,200 that we reached in August of this year.

Our liquid net worth is also below $400,000 for another month, after suprassing it in August. I’m not sure how the rest of the year will go, but there’s a good chance we won’t be able to cross that threshold again until sometime in 2024.

Thanks for Reading

I recently updated a few articles that you may be interested in. This includes my post on how investment loans are costing me $500 each month and my Q1 New Year’s resolutions update. Consider giving those a read if you think they’ll help you on your financial journey!

Consider supporting my blog by sharing or joining me in using any of my recommended services:

• Join Tangerine using my Orange Code (46870461S1) to earn $50!
• Join Questrade using my referral code (336421347418465) to earn $25 to $250!
• Create your own website using Web Hosting Canada!
• Save online and earn credit card sign-up bonuses by using Great Canadian Rebates!

The post Net Worth Update: October 2023 appeared first on Another Loonie.

Consider subscribing to my newsletter if you’d like to receive my easy-to-use Expense and Net Worth Tracker spreadsheet. I use it every month!

Investment Contributions

Last month my wife and I both made our regular contributions to our registered investment accounts. In total, we managed to contribute $4,200 across all of our accounts. The bulk of those contributions were to my RRSP and my wife’s TFSA.

Thanks to her consistent contributions, she managed to max out her TFSA for 2023. My RRSP is also on the way to being maxed out by end of the upcoming RRSP season. This will help us earn a large tax refund come spring of 2024.

Our goal for 2023 to maximize my RRSP is well underway!

Investments & Dividends

Last month we earned $758 in dividends, which is consistent with the increases I’ve been seeing over the past year. It’s about 60% more than we earned in the same month last year.

October should be another good month for us when it comes to dividends. Can’t wait to see if we break the $1,000 mark.

Net Worth Change

In September, our net worth actually decreased to $827,900 from $841,200 in the previous month. That’s an decrease of $13,300!

This is all from the market performing quite badly in September. The overall market seems more pessimistic than it did earlier in the summer, and that’s reflected in our ETF portfolio declining.

Hopefully October will be a greener month!

Thanks for Reading

I recently updated a few articles that you may be interested in. This includes my post on how investment loans are costing me $500 each month and my Q1 New Year’s resolutions update. Consider giving those a read if you think they’ll help you on your financial journey!

Consider supporting my blog by sharing or joining me in using any of my recommended services:

• Join Tangerine using my Orange Code (46870461S1) to earn $50!
• Join Questrade using my referral code (336421347418465) to earn $25 to $250!
• Create your own website using Web Hosting Canada!
• Save online and earn credit card sign-up bonuses by using Great Canadian Rebates!

The post Net Worth Update: September 2023 appeared first on Another Loonie.

Welcome to my net worth update for August 2023! These numbers represent my wife and I’s net worth as of August 31st. Please check out our previous net worth update if you haven’t already!

Consider subscribing to my newsletter if you’d like to receive my easy-to-use Expense and Net Worth Tracker spreadsheet. I use it every month!

Savings & Expenses

August was another expensive month for us with almost $9,000 in total spending.

In a regular month, that would mean we only saved a few thousand dollars, but lucky for us August was a three paycheque month. As a result, our income was much higher than normal and we managed to save $9,600—wohoo!

In reviewing our expenses, you can see a few larger than normal items. Groceries, for one thing, was higher than it’s been all year. That’s thanks to some extra trips to Costco to buy a lot of those once-in-a-while items. We also took a trip to Trader Joes where we spent even more.

Another big item was home maintenance: I finished a few projects I had in the queue. There’s just one more small project left to pay for and that should be in September. I also spent $1,200 on replacing some computer parts.

Overall, we achieved a savings rate of 52%, which was completely on the back of those third paycheques we received.

Investment Contributions

We are getting pretty close to the end of the year, so I’ve started to track our contribution room to our RRSPs a little more religiously. So far we’ve contributed $51,860 to our registered investment accounts this year.

Much of the money I contributed to my RRSP and TFSA at the start of the year was left-over money from the previous year. That helped me maximize my TFSA March and earn a large tax refund in April.

Now that my wife is very close to maximizing her TFSA, we’re looking ahead to what we’ll do with freed up extra $1,000 a month. We’re planning on using it to add more to her RRSP, or to help contribute to my RRSP.

As you may know, our goal for 2023 is to maximize my RRSP, while keeping our TFSAs maxed as well.

Investments & Dividends

Last month we earned $122 in dividends, which is pretty typical for August, which is a very low earning month for us. Our only ETFs that paid out are XDG and XDIV—two monthly dividend ETFs that my wife enjoys.

Still, for the year we’ve already surpassed 2022 in terms of dividends received. Excluding leveraged investments, we received $4,881 in dividends in 2022 (by my latest count) and $5,406 so far in 2023.

At this rate, we should earn somewhere in the range of $7,500 to $8,500 in dividends in 2023.

Net Worth Change

In July, our net worth increased to $841,200 from $832,600 in the previous month. That’s an increase of $8,600!

Most of this increase came from savings of income. About $1,300 came from home equity paydown and another $1,200 came from mandatory pension contributions. Our ETF portfolio performed somewhat poorly in August, dragging down our net worth by $3,500.

On the plus side, our liquid net worth is solidly above the $400,000 mark, at $401,800. Hopefully we can stay above this and make some progress towards $500,000 liquid by the end of the year!

Thanks for Reading

I recently updated a few articles that you may be interested in. This includes my post on how investment loans are costing me $500 each month and my Q1 New Year’s resolutions update. Consider giving those a read if you think they’ll help you on your financial journey!

Consider supporting my blog by sharing or joining me in using any of my recommended services:

• Join Tangerine using my Orange Code (46870461S1) to earn $50!
• Join Questrade using my referral code (336421347418465) to earn $25 to $250!
• Create your own website using Web Hosting Canada!
• Save online and earn credit card sign-up bonuses by using Great Canadian Rebates!

The post Net Worth Update: August 2023 appeared first on Another Loonie.

Consider subscribing to my newsletter if you’d like to receive my easy-to-use Expense and Net Worth Tracker spreadsheet. I use it every month!

Savings & Expenses

After a few very expensive months, we managed to have a much more subdued July. That allowed us to save a cool $5,200!

However, we didn’t just sit on our butts all month. We did some local trips, which added up to $1,215 spent on travel when we add up hotel stays and activities.

We also spent a considerable amount of money on home maintenance: $950. This was to get some work done around the house that I had been planning on for a while. Expect to see another, larger expense next month for this category.

Overall, we achieved a savings rate of 45%—not bad, at all!

Investments & Dividends

Last month we earned $1,379 in dividends, which is a huge increase compared to the same month last year. Much of this came from our investment purchases over the past year, and a small portion came from some dividends paying in July when they should have paid in June.

These dividends all came from our diversified ETF holdings, including VCN, VIU, VUN, and VEE. These are my “core four” ETFs that I like to invest in.

Net Worth Change

In July, our net worth increased to $834,800 from $809,600 in the previous month. That’s an increase of $25,200!

About $14,000 of this increase came from stock market returns. Whereas $5,200 came from savings of income, and the rest came from mandatory pension contributions and home equity paydown.

Thanks for Reading

I recently updated a few articles that you may be interested in. This includes my post on how investment loans are costing me $500 each month and my Q1 New Year’s resolutions update. Consider giving those a read if you think they’ll help you on your financial journey!

Consider supporting my blog by sharing or joining me in using any of my recommended services:

• Join Tangerine using my Orange Code (46870461S1) to earn $50!
• Join Questrade using my referral code (336421347418465) to earn $25 to $250!
• Create your own website using Web Hosting Canada!
• Save online and earn credit card sign-up bonuses by using Great Canadian Rebates!

The post Net Worth Update: July 2023 appeared first on Another Loonie.

Consider subscribing to my newsletter if you’d like to receive my easy-to-use Expense and Net Worth Tracker spreadsheet. I use it every month!

Savings & Expenses

June was an incredibly expensive month for us. We finally got around to doing some of that travel we had budgeted for, and also had a small home maintenance project we needed to get done. These two categories of expenses contributed over $5,000 to our spending for the month—ouch!

On top of that, our dining out budget blew up to $1,260. It just goes to show how pricey keeping yourself fed can be when travelling.

We also spent an elevated amount on personal clothing, as well as gifts for friends and family during our travels.

With all that spending, we achieved a savings rate of 0%. In fact, it’s actually negative, since we spent around $100 more than we earned last month.

In the past this would have been hard to stomach. But looking back, we got a lot out of life in June. Not to mention we’ve made some (albiet modest) improvements to our home. So all in all I’m quite happy with June—as long as we can get back to saving soon!

Investments & Dividends

Last month we received $839 in dividends which is actually less than we received in June of 2022. I attribute this to at least one of our ETFs paying later than expected, or at least Questrade depositing it into my account later. I think this can happen if the month ends on a weekend.

Hopefully this just means July is even more better than last year than I forecasted it to be. We’ll see!

Net Worth Change

In June, our net worth increased to $809,600 from $795,600 in the previous month. That’s an increase of $14,000. Not too bad at all!

Most of this increase came from our stock market returns. For some reason, U.S. tech stocks and the market more broadly has been doing great lately, and this has pushed our net worth up despite some high spending months.

Now, let’s just hope we can get back into saving in July! I do have some more trips and fun activities planned, but nothing to the extend of what we did in June.

Thanks for Reading

I recently updated a few articles that you may be interested in. This includes my post on how investment loans are costing me $500 each month and my Q1 New Year’s resolutions update. Consider giving those a read if you think they’ll help you on your financial journey!

Consider supporting my blog by sharing or joining me in using any of my recommended services:

• Join Tangerine using my Orange Code (46870461S1) to earn $50!
• Join Questrade using my referral code (336421347418465) to earn $25 to $250!
• Create your own website using Web Hosting Canada!
• Save online and earn credit card sign-up bonuses by using Great Canadian Rebates!

The post Net Worth Update: June 2023 appeared first on Another Loonie.

Consider subscribing to my newsletter if you’d like to receive my easy-to-use Expense and Net Worth Tracker spreadsheet. I use it every month!

Summer is Here!

Well, at least at the time I’m writing this (mid June). May was an incredibly busy May month—both socially and with work. As a result, my blogging schedule has more or less gone out the window. Too bad, as I was on such a great streak of posting each week. The outlook for this summer isn’t looking too good either, with a lot of trips and family events planned.

In spite of that, I still got my numbers together and finally got to writing this blog post. And overall, May wasn’t a great month financially. Let’s dig into why.

Savings & Expenses

The top-line number for the month is $1,500, which is the amount we were able to save after our enourmous (to us, anyway) and growing property tax bill came due. Because of recent increases, our propery tax bill is getting dangerously close to $4,000—ouch.

On the plus side, our other spending was pretty low in May. If we hadn’t paid our property tax, we would have saved a cool $5,500.

Investments & Dividends

As I said previously, May has always been a very low dividend month for us. And this year was no different. In total we received just $115 in dividends. This came entirely from my wife’s XDIV and XDG ETFs.

I’m still looking forward to what June and July will bring. I’m hoping we can reach the $1,000 per month mark.

Net Worth Change

In May, our net worth decreased to $796,000 from $800,500 in the previous month. That’s an decline of $4,500.

This pretty much all came from our stock portfolio dipping over $8,000, which totally wiped out our savings, mortgage paydown, and pension contributions.

Oh well. Let’s wait and see what June has to offer!

Thanks for Reading

I recently updated a few articles that you may be interested in. This includes my post on how investment loans are costing me $500 each month and my Q1 New Year’s resolutions update. Consider giving those a read if you think they’ll help you on your financial journey!

Consider supporting my blog by sharing or joining me in using any of my recommended services:

• Join Tangerine using my Orange Code (46870461S1) to earn $50!
• Join Questrade using my referral code (336421347418465) to earn $25 to $250!
• Create your own website using Web Hosting Canada!
• Save online and earn credit card sign-up bonuses by using Great Canadian Rebates!

The post Net Worth Update: May 2023 appeared first on Another Loonie.

Consider subscribing to my newsletter if you’d like to receive my easy-to-use Expense and Net Worth Tracker spreadsheet. I use it every month!

Spring Is In The Air

After many months of miserable weather in “Raincouver”, it has finally started to look like spring. In fact, as I’m writing this, this week is shaping up to reach almost 30 degrees Celcius. This is a huge improvement over last year, where it rained and was cloudy well into June.

Now, that bodes well for my personal life—I’m excited to go eat out with friends and do some hiking—but it doesn’t bode to well for AnotherLoonie. Just seeing that forecast makes me a little worried about my New Year’s resolution to post every week. Let’s see how I manage, shall we!

Savings & Expenses

April was another great month for us savings-wise. The topline number is that we saved 50% of our net income. This is well above our 40% annual savings rate that I reported over the past two years—wohoo!

Best of all that excludes our huge tax refund. That’s right, we were happy to get our taxes submitted before the strike and received a $12,600 refund.

Most of this refund is from our RRSP contributions, with about $1,200 is from the interest deduction from my investment loans. I expect we’ll get an even larger refund next year if we manage to meet our RRSP contribution goals.

What helped us achieve this 50% savings rate is that we didn’t spend too much money in April. Dining out and coffee was a little elevated, but most other areas were under control.

And we didn’t have any huge, abnormal expenses last month. The only thing that came close was the $387 we spent on hobbies and activities and the $324 we spent on travel. Both of these categories were a mishmash of things, all towards future travel and fun activities.

Investments & Dividends

Last month we received $503 in dividends. That’s a 41% increase compared to April of 2022.

May is usually a very low dividend-earning month for us, so I’m not expecting much. If anything, we’ll get around $50 to $100—or maybe less if our dividends somehow show up late.

In either case, I’m really excited for June and July. Both months could potentially cross the $1,000 barrier, which I’d be very happy about.

Net Worth Change

In April, our net worth increased to $800,500, up from $770,500 in the previous month. That’s an increase of $30,000—in just one month! That makes April the best month of the year for us so far, even better to the $25,000 gain we saw in January.

Here’s where the increase came from:

• $1,400 in home equity pay-down
• $1,200 in mandatory pension contributions
• $18,000 in savings of income and tax refunds
• $9,500 in investment gains

That means we’ve increased our net worth by $79,600 so far in 2023. If we keep up this trend, we could grow our net worth by over $160,000 in 2023!

However, I really doubt that will happen. We have some big expenses coming up—like our property tax bill—which will weigh on our ability to save. Not to mention all the activities we have planned for this summer.

The stock market has also done really well so far in 2023, and so I think the later-half of the year could be more muted.

In either case, I’m happy to see how we’ve done so far this year. Let’s see what May has to offer!

Thanks for Reading

I recently updated a few articles that you may be interested in. This includes my post on how investment loans are costing me $500 each month and my Q1 New Year’s resolutions update. Consider giving those a read if you think they’ll help you on your financial journey!

Consider supporting my blog by sharing or joining me in using any of my recommended services:

• Join Tangerine using my Orange Code (46870461S1) to earn $50!
• Join Questrade using my referral code (336421347418465) to earn $25 to $250!
• Create your own website using Web Hosting Canada!
• Save online and earn credit card sign-up bonuses by using Great Canadian Rebates!

The post Net Worth Update: April 2023 appeared first on Another Loonie.

If you missed it, feel free to check out my last edition of monthly reads.

In this edition, I share my favourite TED Talk, a dividend update from one of my favourite bloggers, and an analysis of Canada’s real estate market. I hope you enjoy!

Mr. Money Mustache’s TED Talk

This TED talk from Mr. Money Mustache (Pete Adeney) is over 5 years old now, but the wisdom shared is just as relevant now as it was back then.

For those of you unfamiliar with Mr. Money Mustache, he’s had a huge influence on the FIRE (financial independence retire early) movement. His post on The Shockingly Simple Math Behind Early Retirement was a revelation for many. And since then, he has inspired so many people to get started on the path towards FIRE.

In this TED talk, Mr. Money Mustache uses humour and his own experiences to explain FIRE to a group who are mostly familiar with the topic. The result is quite fantastic, and serves as a great tool to introduce FIRE-curious people to what the movement is really about.

Rommel’s Massive TFSA Income

Another great blogger I enjoy is Rommel over at My Prudent Life. He’s a nurse located here, in Canada, but has lived and worked all over the world—the Philippines, Saudi Arabia, and England.

He’s been blogging as a hobby for a few years now and loves sharing how his dividend income has grown. In his latest update, he shared some astounding numbers. So far this year, he’s averaged over 20% year-over-year dividend growth in his and his wife’s TFSA portfolio.

That puts him on track to earn $11,500 in dividends in 2023—wow!

What I enjoy most about My Prudent Life is that it’s a great example of another Canadian who’s leveraging the power of dividends to help them reach financial independence. I highly recommend checking out his portfolio if you’re interested in dividends or looking to become a dividend growth investor.

Sticky Real Estate Prices

I’ve shared Liquid’s content a few times on my blog so far. I think the first time was in my December 2021 net worth update, when he compiled a list of insights from other investors in the personal finance blog community.

More recently, I really enjoyed his analysis of Canada’s real estate market. As you may know, Canada’s real estate prices are down between 13 and 15% over the past year (depending on how you measure). And many of us are just waiting for the next shoe to drop—I know I am!

But in Liquid’s recent post, he shares his theory for why Canada’s real estate prices haven’t fallen as much as people expected. He also created a great Youtube video diving deep into the topic:

I think Liquid is right on the money with his analysis. It’s a story about inventory, insane rents, and an overall strong job market that’s kept real estate afloat. If you want to get the full picture, I recommend checking out his video.

Thanks for Reading!

I hope you enjoyed this little look back at my favourite reads for the month of April. Was there anything great I missed? Any new blogs I should be following or YouTube channels to subscribe to? I’m always looking for recommendations, so don’t hesitate to drop them in the comments below.

As always, consider subscribing to the AnotherLoonie newsletter if you’d like to get a monthly email with my latest posts. And if you have any personal finance-related questions, submit them to me using this link.

Consider supporting my blog by sharing or joining me in using any of my recommended services:

• Join Tangerine using my Orange Code (46870461S1) to earn $50!
• Join Questrade using my referral code (336421347418465) to earn $25 to $250!
• Create your own website using Web Hosting Canada!
• Save online and earn credit card sign-up bonuses by using Great Canadian Rebates!

The post Monthly Reads: Back to Basics and Sticky Real Estate appeared first on Another Loonie.

• Fall Portfolio Deep Dive for 2022
• Portfolio Deep Dirve – My Top 30 Stocks

Our Investment Strategy

In my last portfolio deep dive, I summarized our investing strategy as follows:

My wife and I both prefer to invest using ETFs. For us, ETF investing provides inexpensive, low-cost diversification and market-average returns. Also, with ETF investing, it’s just so much easier to get invested, manage your accounts, and stay invested.

Why is it easier to stay invested? Well, that’s because ETF investing is boring.

Since we don’t hold individual stocks, we never check the news looking for anything that could impact our investments. We don’t research company fundamentals, and we don’t stress about business models our future outlooks. And except when making a purchase (or writing a blog post), we essentially never check how our holdings are doing.

Instead, we allocate that mental and emotional bandwidth to other areas of our life, which has served us well.

This summary certainly still rings true today. By keeping things on “autopilot” as much as possible, we’ve been able to focus on other areas of life that bring us more happiness or are simply more productive uses of time.

With that said, let’s dive in and review each of our investment accounts!

My TFSA

In 2021, I set a goal to maximize my wife and I’s TFSA accounts which we finally achieved in October of last year. Here’s what it took to achieve that goal. Note that I started 2020 with only $3,500 in my TFSA.

As you can see, I made consistent contributions to my TFSA for quite a long time—even before I started AnotherLoonie in June of 2021. Each month I tried to contribute $2,000. And in other months, I was able to take advantage of extra income I received, tax refunds, or excess savings to maximize it even quicker.

For this whole period, my TFSA holdings have been the same. I hold four tickers in my TFSA, including VCN, VIU, VEE and VUN. These are my “core four” and give me inexpensive diversification across the globe.

My RRSP

When starting AnotherLoonie I had $12,400 in my RRSP. Previously I had more, but I liquidated much of my RRSP to come up with the downpayment on our home.

Since I was focused on our TFSAs through 2021 and during most of 2022, I hadn’t contributed to my RRSP with any consistency. That has changed recently, with my current investing goal being to maximize my RRSP in 2023.

In my RRSP, I try to follow my “core four” portfolio, which includes VCN, VIU, VEE and VUN. The only difference is that I have some VTI that I purchased back when I had some excess USD sitting in my bank account.

I don’t plan on buying any more VTI in the near future. It’s too much of a hassle to convert from CAD to USD to make a purchase. Instead, I like to buy VUN more consistently and in smaller amounts that make converting to USD less worth it.

Wife’s TFSA

My wife started 2021 with quite a bit more money in her TFSA (about $17,000) thanks to having some leftover cash after buying our house. Since then, she’s been a consistent contributor and maximized it at the same time I maximized my TFSA last year.

At first, it was tough to get my wife excited about investing and saving for retirement. To help spark her interest, I encouraged her to pick some ETFs she was interested in. She ended up finding two great dividend ETFs that pay her monthly dividends: the iShares Core MSCI Canadian Quality Dividend Index ETF (XDIV) and the iShares Core MSCI Global Quality Dividend Index ETF (XDG).

Since then, she has added VCN (one of my “core four”) and XAW (the iShares Core MSCI All Country World ex Canada Index ETF) for some added diversification. Although there’s some duplication with these ETFs, she’s happy with her portfolio, and the sizable dividends she receives keeps her excited to invest.

Wife’s RRSP

My wife only opened an RRSP recently. After I received an unanticipated windfall last year, it made sense for her to open an RRSP so we could deploy some of our cash and receive a larger tax refund. Since then, she has made some modest contributions to this account.

In 2023 she doesn’t plan on contributing very much to her RRSP. Instead, she might help me maximize my RRSP by covering more of our household expenses or mortgage with her income.

Unlike our other registered accounts, her RRSP portfolio is very simple. She only holds XEQT (the iShares Core Equity ETF Portfolio). Currently, she has $25,300 in XEQT and is quite happy with its quarterly dividend.

Margin Account

Each of the above big contributions were composed of $5,000 in Tangerine LOC debt and $3,500 in margin debt. As of today, I hold $40,900 in VEQT and no other assets in this account. And yes, that means I’m down about $3,400 in this account (excluding dividends).

Each of the above big contributions were composed of $5,000 in Tangerine LOC debt, and $3,500 in margin debt. As of today, I hold $40,900 in VEQT and no other assets in this account.

I don’t plan on contributing any more to this account until after my RRSP is maximized. And even then, I may prioritize my Smith Maneuver account and paying down my mortgage over taking on more margin debt.

Smith Maneuver Account

I started this other account at Interactive Brokers after receiving a large home equity line of credit last spring. Like my margin account, I planned to purchase VEQT using debt—this time, financed by my new HELOC.

My sole investment in this account is VEQT which is worth $64,700.

As you may know, my leveraged investing strategy hasn’t been all sunshine and roses. Recently I shared how my investment loans were costing me more than $500 per month.

Overall Portfolio

I shared the details of my portfolio assets and debt in my recent year-end review. But in brief, as of my March net worth update, we hold $422,200 in ETF investments. $320,300 of these investments are owned outright, with the remaining $101,900 financed by investment loans.

In reviewing our total portfolio allocations, we are pretty close to VEQT, which holds 30% Canadian, 41% U.S., 21% international developed, and 8% in emerging markets assets.

Where we diverge is in our Canadian holdings. I’ve always thought investing 30% of your portfolio in Canada was too much, given we’re such a small economy and we only have a few major industries. So instead, we target around 20% Canadian and invest the leftovers in U.S., international developed, and emerging markets.

Looking ahead, I’ll try to keep these allocations consistent as we continue to make more contributions to our portfolio. I check my balance every time I contribute and purchase ETFs accordingly.

Thanks for Reading!

Thank you for checking out my latest portfolio deep dive. I hope you found this very interesting and can compare our strategy with your own. Do let me know what you think about our ETF investing strategy in the comments below.

I recently wrote a few articles that you may be interested in. This includes my guide comparing the TFSA to RRSP and my choice for the best dividend ETF in Canada. Consider giving those a read if you think they’ll help you on your financial journey!

As always, please consider following me on social media or signing up for my newsletter if you’d like to be notified periodically (less than once per month) with a list of my recent articles.

The post Spring Portfolio Deep Dive (2023) appeared first on Another Loonie.

What are Bonds?

You may have heard the term bond before but never fully understood it. Essentially, bonds are debt securities issued by governments or businesses when they want to raise money. When people talk about “government debt,” for example, they are usually talking about bonds issued by the government to fund the services it provides.

Investors can purchase bonds, typically on the secondary market, and receive income in the form of coupons. These coupons are agreed to by the issuer of the bond and can be close to 1% for low-risk bonds like those issued by governments and upwards of 10% or more for high-risk bonds issued by struggling corporations.

Bonds are priced based on the credit rating of the issuer and reflect prevailing interest rates. Rising rates tend to reduce the price of bonds, while falling interest rates will increase the price of bonds. In today’s environment, where rates are at multi-decade highs, bond issuers need to offer higher interests rate to ensure their bond is attractive to investors.

What Are Bond ETFs?

Bond ETFs are exchange-traded funds issued by companies like Vanguard, Blackrock, and many others, that purchase many different types of bonds. Investors can then buy shares in the bond ETF and receive their share of coupons paid by the underlying bonds that the fund holds.

Bond ETF Pros

Bond ETFs in Canada make it easy to earn income from a diversified portfolio of bonds. Purchasing a bond ETF is also much less expensive than selecting individual bonds for purchase. That’s because individual bonds have much larger trading spreads than common stock.

Canadian Bond ETFs also often have very low management expense ratios. This is especially true for large bond ETFs that follow a broad-market index. Bond ETFs with higher MERs tend to be actively managed or follow niche indexes or strategies.

Bond ETF Cons

The main downside of investing in a bond ETF is that the fund can experience large fluctuations in price. A good example is the past few years, where rising interest rates drastically reduced bond prices, causing bond ETFs to fall in price.

Technically, individual bonds you purchase would also experience these price swings, but you could always hold bonds to maturity to avoid realizing a loss.

Should You Invest in a Bond ETF?

For a long time, the 60/40 portfolio was the standard investment portfolio recommended to Canadians. It was a portfolio of 60% common stock and 40% bonds. This provided adequate growth while also helping to reduce year-over-year volatility.

These days, most people agree that young Canadians can invest less of their money into bonds or bond ETFs. But as you get older and closer to retirement, bond ETFs start to make a lot more sense.

At the end of the day, whether you should invest in bond ETFs is a question of risk. For conservative investors, both young and old, bond ETFs could be an excellent choice to weather market volatility while also earning income from their portfolios.

The Best Bond ETFs in Canada

Canada’s best bond ETFs each have a combination of medium to high yield, low management expense ratios, and excellent credit quality. In this list, I share my top 5 Canadian bond ETFs. Each of these funds are traded on the Toronto Stock Exchange and invests primarily in Canadian bonds.

HBB ETF Review

The first Canadian bond ETF to consider is the Horizons Canadian Select Universe Bond ETF (HBB). Established in 2014, HBB seeks to replicate the Solactive Canadian Select Universe Bond Index.

HBB invests in Canadian bonds with a minimum credit rating of BBB and primarily invests in high-quality AAA, AA or A bonds. It boasts a distribution yield of 2.54% and an MER of just 0.10%.

What’s unique about HBB is that it uses a total return swap contract to track the performance of its index. This has some advantages, such as HBB does not distribute taxable income to its unit holders. This can be advantageous for investors holding HBB in a taxable account. However, it does incur a 0.15% fee to execute this swap strategy, which can reduce the overall return of the fund.

VAB ETF Review

One of the most popular Canadian bond ETFs is the Vanguard Canadian Aggregate Bond Index ETF (VAB). This fund was started in 2011 and has attracted nearly $4 billion in assets.

Vanguard’s VAB seeks to track the Bloomberg Global Aggregate Canadian Float Adjusted Bond Index. This means it uses a passive strategy to invest in investment-grade bonds from across Canada.

What’s made VAB so popular is its combination of low MER, reasonably high yield, and excellent credit quality. Like other Vanguard funds, VAB is always trying to reduce its expense, and because of that, it boasts an MER of just 0.09%—tied for the lowest on this list. Its distribution yield is also excellent for a diversified bond fund at 3.55%.

XBB ETF Review

The first bond ETF from iShares on this list is the iShares Core Canadian Universe Bond Index ETF (XBB). XBB has been around for 1 year longer than VAB and coincidentally has more assets at over $4,780 million.

XBB has a low management expense ratio of just 0.10% and has a very high credit quality, investing 39% of its assets in AAA-rated bonds.

However, XBB loses marks for distribution yield. Today XBB yields only 3.01%, making it middle-of-the-pack compared to other popular Canadian bond ETFs. Like BMO’s Aggregate Bond Index ETF (ZAG), XBB seeks to replicate the FTSE Canada Universe Bond Index.

XSB ETF Review

The iShares Core Canadian Short Term Bond Index ETF (XSB) is another excellent choice for the best Canadian bond ETF. It tracks the FTSE Canada Short Term Overall Bond Index, which means it primarily invests in short-duration bonds. Overall, its average maturity is just 3 years.

This strategy has some upsides. Mainly the bond ETF lost a lot less value than its peers. In 2022 while other ETFs lost over 10%, XSB lost only 4%. That’s because bonds with a short maturity lose less value than bonds with a long maturity when interest rates rise.

The main downside for XSB is that because it has such a short maturity, it pays a low yield at just 2.48%. However, this has to be weighed against its overall strategy. In a rising rate environment, XSB will likely outperform bond ETFs that have longer maturities.

ZAG ETF Review

The BMO Aggregate Bond Index ETF (ZAG) is a top contender for the best Canadian bond ETF. It also has the largest assets under management at $6,279 million.

The Bank of Montreal’s ZAG has a high dividend yield of 3.56% and a low MER of 0.09%. That gives it both the highest distribution yield and lowest MER on this list.

It also has an excellent credit rating, having 89% of its assets invested in bonds with a rating of A or better. Its largest issuer is the federal government at 37% of assets, followed by Canada’s provincial governments at 34%.

Comparing the Best Bond ETFs in Canada

Canadian Bond ETF Fundamentals

Each of the best Canadian bond ETFs have an MER of around 0.10%. They also pay monthly distributions, making them ideal investments for those looking for cash flow.

The main difference between these bond ETFs is their yield. XSB has the lowest yield due to its short-term focus. You can see that its average maturity is just 3 years, while the other best bond ETFs in Canada have a maturity of around 7 years or more. XBB’s yield is probably the most disappointing, given it has an average maturity of 10 years.

Canadian Bond ETF Performance

Each bond ETF has performed poorly in the rising rate environment that took place in 2022 and that may continue this year in 2023. HBB was the worst performer, but only by a hair. That’s a good sign that its swap-based strategy is doing a good job replicating its index.

XSB has benefited from its short-term focus over the past two years, losing just 4.1% and 1.0%, respectively. However, in a falling interest rate environment, expect HBB, VAB, SBB and XAG to overperform due to their large portfolios of longer-maturity bonds.

Canadian Bond ETF Issuer

Each of the best bond ETFs in Canada primarily invests in federal and provincial bonds. XSB is the largest investor in federal bonds out of the five ETFs, with VAB having the most corporate bonds under management.

Canadian Bond ETF Credit Quality

Each bond ETF received full marks for credit quality. Each fund holds mostly AAA, AA or A-rated bonds, with only 10% or less allocated to BBB-rated bonds.

Canadian Bond ETF Maturity

VAB, XBB, and ZAG all have a similar distribution of bond maturity. Most of their bonds mature within the next 5 years, while equal amounts of bonds are due to mature within 10 years and subsequently within 30 years.

XSB stands out for having by far the lowest maturity. 99.5% of its bonds mature within 5 years. Breaking that down further, we can see that 29% of its bonds mature within 2 years, a further 28.6% mature within 3 years, and a further 42% mature within 5 years.

Common Canadian Bond ETF Comparisons

VAB vs ZAG

VAB vs ZAG is a tough decision. Both funds are excellent choices for the best Canadian bond ETF. Both VAB and ZAG share an MER of 0.09%, making them competitive on cost. They also both have a distribution yield of around 3.55%. These attributes have helped them attract over $10 billion in assets.

Over the past 5 years, their performance has been nearly identical, so the deciding factor probably comes down to personal preference. Investors already holding Vanguard ETFs will likely choose VAB for their Canadian bond ETF. While investors with an existing relationship with BMO will select BMO.

XBB vs XSB

XBB vs XSB comes down to whether you want a shorter or longer maturity fund. Like the other best bond ETFs in Canada, XBB has a maturity of 10 years. Contrast this with XSB, which has a maturity of just 3 years. If you want a lower-risk portfolio or expect rates to rise even more in 2023, XSB may be the better choice.

However, if you want an ETF that’s diversified into longer maturity bonds and want a higher distribution yield, XBB is the superior choice.

HBB vs VAB

When comparing HBB vs VAB, it’s clear that both ETFs have some attractive qualities. If you’re looking for a standard bond ETF that is low-cost and pays good income, VAB is the superior choice. But if you’re an investor looking to purchase their ETF in a taxable account, HBB may be more advantageous. That’s because HBB does not pay any taxable income. And since income from bonds is taxed as regular income, that can make HBB much more attractive in a taxable account.

Choosing the Best Canadian Bond ETF

Each of the best bond ETFs in Canada are competitive on price, having management expense ratios of around 0.10%. They are also both competitive on credit quality, with each fund primarily investing in government-issued bonds with ratings of A or higher.

The deciding factor may come down to the overall strategy of the bond ETF. For Canadians looking for a shorter-term bond ETF, iShares Core Canadian Short Term Bond Index ETF is the clear winner. It’s inexpensive, has an adequate distribution yield, and has an average maturity of just 3 years.

Of all the longer-maturity funds, the best Canadian bond ETF is VAB or ZAG. Both funds have comparable management expense ratios, distribution yields, credit quality, and average maturity. They even have almost identical performance over the past 5 years. Any investor looking for a Canadian bond ETF would do well in either of these two popular ETFs.

Thanks for Reading!

I hope you enjoyed my analysis of the best Canadian bond ETF. If you’re interested in learning about other great ETFs, check out my review of the best preferred share ETFs, the best dividend ETFs, and the best REIT ETFs for Canadians.

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