Most Canadians at some point wish to receive tax advantaged returns on their investment. For example, in BC you can receive about $75,000 in dividend income untaxed. This has to be from Canadian companies, though, so if 90% of your holdings are US companies, you do not get this benefit. If on the other hand you are buying Canadian companies trading on the US exchange, you may be playing a fair bit of currency risk, though you will benefit from Canadian dividend credits.

DAvid

I could not understand ‘cashing holdings in better performing currencies first’.

IF you have holdings in Euros, Cdn$, US$, Yen, etc., and the US$ is low and the Euro high, you could choose to sell your Euro denominated holdings first, and wait for the currency markets to balance before selling your US$ denominated holdings.

Trades within a currency do not matter, as there is no conversion.

DAvid

I have a similiar portfolio as you do and the same issues with currency risk. The major differences between our two portolios is that a have a position in US small caps. The way I reduce my total exposure to US$ is to make sure my fixed income investments are in CAN$. This way my total portfolion is ‘only’ 40% US$.

Canada Equity – 20%
XIC – 20%

Canada Fixed Income – 20%
XSB – 5%
XRB – 5%
XRE – 10%

US Equity – 30%
VIT – 20%
VBB – 5%
VRB – 5%

International – 30%
VEA – 20%
VOW – 10%

Any thoughts on my second question i.e. investment based on global market capitalization that would lead to 90% of equity investment in USD?

David, can you please help me understand your below statement?
“It strikes me that in a widely diversified portfolio, a lessening of one currency’s value could mean cashing holdings in better performing currencies first.”

I could not understand ‘cashing holdings in better performing currencies first’.

Thanks again for your help,
JP

Just my $0.02

DAvid

I need help on the following questions. As I could not determine where I can post them, I am posting them here.

Q1. I am 34 years old and am planning to have the following ETFs for my equity portion of the retirement portfolio. The 3 ETFs (VTI, VEA, VWO) are in USD and are 70% of the equity portfolio. The key benefit is that MER is low (.12-.25%). But USD crashed recently against major currencies by 10-15% including CDN. Should I replace VEA/VWO with say XIN that is in CDN but has 0.49% MER? The USD crash wipes out MER difference for say 30 years (.3 per year)

Equity Portfolio
CDN Equity 30% – XIC (CDN)
US Equity 40% – VTI (USD)
International Equity 20% – VEA (USD)
Emerging Mkt Equity 10% – VWO (USD)

2. Should I tune my portfolio based on Global Market Capitalization as suggested by Efficient Market/Investing intelligently in the links below? This would increase my USD holdings further to 90% of my equity portfolio

Equity portion of portfolio based on Market Capitalization Percentage
CAN (XIC) 10%
USA (VTI) 41%
Europe (VGK) 26.5%
Pacific (VPL) 14%
Emerging (VWO) 8.5%

http://www.efficientmarket.ca/article/Global_ETF_2
http://www.investingintelligently.com/2007/04/15/my-new-passive-index-etf-portfolio/

Thanks for your help in advance,
JP

I put my money in cash instead of stock market.

Canadian equities have saved me so far but it’s only a matter of time before it goes down big time… Anyway, 2008 is a year to forget and we must start planning on 2009 already :-D

My next move will certainly to buy more financials :-D!

Price had been stuck in the same range since May and I also figured that banks would be dumping their holdings to offset the pain they were feeling from the credit crunch.