Welcome to the Money Bag, where I will answer questions and address reader comments on a wide range of money-related topics, myths, and perceptions about money. No question is off-limits, so reach out to me in the comments section or email me about any money topic that’s on your mind.
This edition of the Money Bag answers your questions about creating retirement income from an asset allocation ETF, resources for beginners to learn about money, a comparison of all stock ETFs, and which credit card to use for your revenge journey.
First up is Paul, who wants to know how to generate retirement income by owning an ETF with a single asset allocation. Take it away, Paul:
Create retirement income with asset allocation ETFs
“Hello Robb. I like the idea of the total return approach to retirement income generation. Do you think this is possible with a one-fund approach like Vanguard’s VBAL?”
Hi Paul, I think this is a really useful solution for retirees. Many of my retired customers will keep VBAL (or XBAL) in their RRSP/RRIF. My only suggestion is to also open a high-yield savings RSP (EQ Bank has one) and park next year’s required withdrawals in that account while keeping the rest of your RRSP invested in the all-in-one ETF.
Consider keeping about 10% of the total value in this RSP savings account and the rest in VBAL. In effect, this means your total wealth mix is 10% cash, 36% bonds, and 54% stocks. Each year when you spent your RRSP cash you would sell some VBAL units and put the money into your RSP savings account and do it all over again.
This is a new take on a brilliant old idea shared by Canadian couch potato Dan Bortolotti many years ago, before the introduction of single-fund ETFs for asset allocation. Because the asset allocation ETF rebalances automatically, there is no need to manually rebalance each year other than to sell a few ETF units and transfer the money to your RSP savings account for next year’s withdrawal needs.
Money resources for beginners
Next up is Mindy, who is looking for funds to share with her daughter to get her on the right foot:
“Dear Robb, I have been a regular reader of your blog for many years and have great respect for your financial wisdom. My 22-year-old daughter asked if I could suggest a book for her. Of course I recommended your blog. I was wondering, do you have a collection of your blog posts that would be appropriate for someone like her—a concise yet broad enough collection of articles for young adults who are relative beginners?”
Hi Mindy, Thanks for that – I’m flattered that you suggested my blog, but other than the occasional post like this beginner’s investing guide, I’m concerned that my writing is usually aimed at a mature audience. We need to meet people where they are and find resources that are more appropriate to our age and stage of life.
I would first ask your daughter what is her favorite way to consume your content?
For videos, I recommend Preet Banerjee’s YouTube channel and Ben Felix’s Common Sense Investing channel.
They also have podcasts that are excellent: Preet’s Mostly Money and Ben’s Rational Reminder. I also really enjoy Ramit Sethi’s podcast I Will Teach You To Be Rich.
On Instagram, see Mixed Up Money, Ellyce Fulmore and Bridget Casey for more relevant lifestyle and financial content. I also think that Daniel Foch has very good views on housing and real estate.
I’m not on TikTok but from what I’ve seen I would avoid most of the personal finance advice you would find there!
As for books, I really enjoyed Robert Brown’s Wealthing Like Rabbits, and Mixed Up Money’s Alyssa Davies has some great beginner’s books too.
*Added Reboot Your Portfolio by Dan Bortolotti to the recommended books list thanks to a reader suggestion in the comments section.
I also think Andrew Hallam’s Millionaire Teacher is an excellent book with lots of great lessons on saving, investing and living well.
Blogs unfortunately seem to be disappearing as content creators move to these other platforms.
All stock ETFs
Here’s Tim who wants to invest in an all-equity ETF and wants to know if one stands out from the rest.
“Good morning Mr. Engen, among these ETFs – VEQT, XEQT, ZEQT and HGRO – does one stand out or are they comparable to each other? I am 40 and looking to invest in my TFSA, RRSP and unregistered accounts for the long term.”
Hi Tim, there is no meaningful difference between VEQT, XEQT and ZEQT. I invest in VEQT myself but that’s because it came out first and I have an affinity for Vanguard and how they pioneered index funds and helped investors.
This excellent asset allocation ETFs video is worth your time and gives you a good comparison. It might also give you a sober second thought about using all stocks versus a more conservative fund:
HGRO is a slightly different animal. It doesn’t invest directly in the underlying stocks — instead, it uses what’s called a “swap” where another financial institution holds the stocks, so HGRO shareholders aren’t burdened with annual taxable income. This is only really beneficial if you have a taxable (unregistered) account, but it also comes with some risks.
I would stick with one of the first three (Vanguard, iShares or BMO) and use the same account for all your accounts for the sake of simplicity.
Which credit card for traveling abroad?
Finally, Shawna asked about some missing details from my revenge trip post – namely what card I actually used when traveling abroad.
“Hi Robb, I hope you had a great summer! I have two follow-up questions about your European vacation:
1. What payment method do you use when traveling in Europe; Cash or credit card?
2. Which credit card works best to minimize fees and exchange rates? Curious to hear your thoughts.”
Hi Shawna, great questions! I used the Scotia Passport Visa Infinite card in Italy and the UK. There are no foreign currency conversion fees, and what I liked was that I received an email with the total cost converted to Canadian dollars immediately after a transaction. As I was tracking a loose budget during our stay abroad I found this really helped to track expenses and keep us in check. Otherwise, it’s difficult to do the conversions in your head all the time.
I’ve used the credit card for pretty much every transaction except for a few gift stalls in Italy and a very expensive taxi ride to Rome airport when I couldn’t get an Uber. We brought $200 in cash for our trip to the UK and returned with $200 in cash…
Don’t think about it. A credit card with no FX surcharge plus about $100-$200 in local currency should have you covered, depending on how long you’re there.
Do you have a money-related question for me? Hit me in the comments below or email me.