Q: My 28yr old son is looking to build a diversified ETF portfolio with 100% equity exposure with a bent towards growth given his long investment horizon. These will be spread across his TFSA, RRSP and Non-Registered accounts. Since he will be contributing smaller amounts on a regular basis a zero commission platform such as Wealthsimple is appealing. However, they charge 1.5% fee for all currency conversions making it only practical to hold Canadian traded ETF's. As a result he is considering the following:
ZSP 40%
XIC 25%
TEC 20%
VIU 10%
VEE 5%
ZSP + XIC + VIU + VEE together create a mix of ETFs that are globally diversified and very similar to the structure of XEQT/VEQT. Versus XEQT/VEQT This portfolio has a slightly lower weighted-average MER at 0.16% and also has 20% in TEC (in place of something like QQQ) which is more growth oriented. Here are how the sectors would be weighted with this portfolio:
Info 31%
Financial 15%
Cons Disc 11%
Industrial 9%
Healthcare 8%
Communica 7%
Cons Staples 5%
Energy 5%
Materials 4%
Utilities 2%
Real Estate 2%
These would be the top 10 holdings with this portfolio and these top 10 would account for 24% of holdings in this portfolio:
AAPL5.1% MSFT4.9% AMZN3.2% GOOGL1.8% FB1.7% GOOG1.7% TSLA1.5% SHOP1.4% RY1.2% NVDA1.2%
If this was you at 28, can you please comment on
- are the 5 ETFs he has chosen ones you would go with given his objectives, if not, what changes/substitutes would you make along with recommended % allocations?
- is his % allocation across the 5 appropriate or would you make changes? For example I thought there might be too much overlap between ZSP and TEC as they are both highly invested in AAPL, MSFT, AMZ and FB and he is looking at 60% going into these 2 ETF's. That may well be what you want at his age but I wonder if he is better served by reducing ZSP to 25% -30% and TEC to 15% and add the remaining 15-20% to CDZ or VGG (or something else?)
- given he will be making contributions to his TFSA, RRSP and Non-registered, which ETF would be best in which account and why?
Thanks for all your help,
Scott
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Asked by Scott on October 22, 2021