# What to do coming from Canadian Couch Potato with spare cash

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asked Dec 22, 2016 11:45 AM by

Hi Jin,

I just came across your site the other day and have been doing some reading. I've just become acquainted with investing this year. Before this year I didn't know anything at all, so I appreciate your different perspective to, say, the CCP.

Anyway, I've been in Canada two years, so I only have $15500 max TFSA (which will be$21000 in January). I maxed that out recently with an aggressive CCP allocation. So far things are going okay. I have another \$70,000 of cash just sitting and I'm not sure what to do. I don't like RRSP because it puts money in a place I can't access it as freely as I might want. I had thought about putting this in a Mawer Balanced Fund to add to throughout the year, but I might try your portfolio.

The one perk I see in the CCP model over MG is that I know Dan has thought of tax implications and has chosen funds accordingly. Have you thought about this? Particularly your portfolio in a TFSA vs your portfolio in a non-registered account.

What advice would you give? Thanks!

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answered Dec 23, 2016 10:57 AM by

Hi bob, welcome to my site.

Because of regulation, I can't give you specific advice on this site. That said, the model portfolios on this site come with a efficient tax allocation tool that takes in your individual circumstances, and tells you how best to allocate your money between RRSP, TFSA, etc.

Also, taxes are just one component out of many that affect future returns. They do figure in my thinking when I construct model portfolios, but they tend to take a back seat to considerations such as lowering risk and enhancing gross returns. That's because the impact of taxes tend to be smaller. Let me explain by way of example.

Suppose that a Canadian stocks ETF pays 2% per year in dividends. Let's also suppose that an equivalent U.S. ETF with the exact same risk and return characteristics also pays 2% per year in dividends. Because of the withholding tax, you'd pay 0.3% per year more in taxes for investing in the U.S. ETF. While 0.3% per year is meaningful, it's dwarfed by the advantages of investing in value investing ETFs. For example, CAPE, which is an ETF that figured in MoneyGeek's regular portfolios for several years, outperformed completely passive U.S. ETFs by 2% per year. That's why I spend more time thinking about value investing, than I do about taxes.

Hope that helps,

Jin

answered Nov 11, 2019 11:33 PM

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answered Dec 23, 2016 03:14 PM by

Jin,

I've been doing more research and realized I can move money out of an RRSP if I need to, I'll just pay tax on it. So I'm going to open an RRSP and gradually move my savings into that account (not sure whether to move just enough to lower my tax contribution, or to move as much as possible, but that's a tax issue and not for you to advise I suppose).

Anyway, I think I'll leave my TFSA as Couch Potato for now and then allocate the RRSP according to your portfolio. See any problems with that?

Thanks for you help!

In addition, I used your Tax Optimizer. It suggests to me: TFSA: Canadian and US stocks RRSP: Canadian stocks and bonds NRA: US stocks Leaving my TFSA as it is, does this mean I should allocate your portfolio as follows: RRSP: XSB.TO, ZPR.TO, and XEG.TO NRA: IVAL, QVAL, and BRK-B

( Dec 24, 2016 03:00 AM )edit

Hi bobz, please see the "Tax Efficient Portfolio Allocation" tab in the model portfolios page. That should answer your question. Also, I don't see a problem with leaving TFSA as Couch Potato and RRSP according to a MoneyGeek portfolio.

( Dec 25, 2016 05:01 PM )edit