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Budgeting Investing

Our Investment Portfolio Example and Spending

A lot has changed over the past 12-months. Mainly; Mrs. got pregnant, we started investing in cryptocurrencies, and planned for a long-term leave from work that will start really soon. In this update, we will share our latest portfolio strategies and our spending for the previous year.

We built our own investment portfolio but if you are looking for a more hands-off approach, we suggest Wealthsimple.

Given everything that is coming up soon and the slight changes in income that will follow, we beefed up our emergency fund and are holding most of our investments in non-restricted accounts to be able to withdraw if needed.

By holding most of our investible assets into TFSAs (Roth IRAs) we benefit from tax-free growth and do not have to pay any taxes on the dividends we receive. The best thing is that we can withdraw any amount at any time, tax- and penalty-free.

 

What does our investment portfolio look like?

Currently, we are each holding our targeted asset allocation and do not plan to withdraw anytime soon but still like to have the option.

For Mr., we try to keep a portfolio holding in 40% American stock market, 30% in the Canadian stock market, 25% in international equities, and 5% in bonds.

For Mrs., we try to keep a portfolio holding in 40% American stock market, 30% in the Canadian stock market, 25% in international equities, and 5% in bonds. Within these, we include small play money investments such as cryptocurrencies in our American allocation and more recently, a cannabis index fund in our Canadian allocation.

 

Below is a breakdown of my whole portfolio, as of February 25th, 2018:

VTI ♦ 28% of my total portfolio is invested in the Vanguard Total Market ETF. I did not contribute any more money to the U.S. Total Market since our last installment in the series so my allocation actually dropped from 31% to 28%. In addition, the American market has also dropped considerably this month so I am not surprised my allocation is lesser now.

VCN ♦ 22% of my total portfolio is invested in the Vanguard FTSE Canada All Cap Index ETF. This fund also dropped considerably since the beginning of the year. Both sides of the border got hit pretty bad lately but we are not worried about our long-term prospects. We are investing for decades to come and daily movements are the last of our worries.

VWO ♦ 13% of my total portfolio is invested in the Vanguard FTSE Emerging Markets ETF. This fund performed well in the past few months, keeping our allocation steady since our last installment.

ETH ♦ 6% of my total portfolio is invested in cryptocurrencies and tokens such as Litecoins and Etherium. I started investing in cryptocurrencies with only 3% of my portfolio but this quickly grew to 8% of my total asset allocation. Even after the large swings we saw in January, my crypto portfolio is up almost 200% since last November. It now constitutes 6% of my asset allocation.

&&& ♦ 6% of my total portfolio is invested in my Employee stock option. Since this is my current employer, I will not share the ticker symbol or name of this holding. I have set up an automatic investment plan with my employer and they offer a 50% match so I went for the maximum contribution allowed.

VBR ♦ 6% of my total portfolio is invested in the Vanguard Small-Cap Value ETF. This is a purchase I have made a bit more than a year ago to tilt my portfolio towards small-caps. It worked out great so far and even if it does fluctuate more than the S&P 500, for example, it does grow over the long-term. I have not made any new contributions to this fund since it has risen beyond my expectations and kept up with my desired asset allocation.

HMMJ5% of my total portfolio is invested in the Horizons Marijuana Life Sciences Index ETF. This fund seeks to replicate the performance of the North American Marijuana Index and provides exposure to the exciting marijuana industry starting in Canada. This fund goes against all our requirements for a good ETF; it holds very few stocks (only 28), it is sector-centric, it is speculative, and it has a high MER of 0.75%. However, it is the first exchange-traded fund in Canada to focus on the cannabis industry and seemed like a fun play to make. I do not recommend this as an investment and that is why I only invested 3% of my total portfolio in this gamble. It grew to 5% of my allocation within the past months but it stays a gamble.

BND ♦ 4% of my total portfolio is invested in the Vanguard Total Bond Market ETF. My views on bonds have not changed much and I am keeping this low allocation for the foreseeable future.

VGK ♦ 3% of my total portfolio is invested in the Vanguard FTSE Europe ETF. This fund has been performing great since I bought it and have no plans to sell anytime soon.

Investing with ETFVEA ♦ 3% of my total portfolio is invested in the Vanguard FTSE Developed Markets ETF. This is an international, developed world index fund very similar to VGK since so much of it (54%) is invested in European companies.

VRE ♦ 2% of my total portfolio is invested in the Vanguard FTSE Canadian Capped REIT Index ETF. I did not invest any more into this fund yet simply because of our current exposure to the residential real estate market but plan on increasing this allocation gradually. The American version of this ETF is symbol VNQ.

 

Our final asset allocation

I try to keep a strict asset allocation and rebalance my portfolio about once year. I always re-invest dividends and automate most of my investment contributions on each payday but any contributions I do manually gets invested in sort to rebalance my allocation.

 

Current Asset Allocation Desired Asset Allocation
  • 42% ♦  US Market
  • 35% ♦  Canadian Market
  • 19% ♦  International Market
  • 4%    ♦  Bonds
  • 40% ♦  US Market
  • 30% ♦  Canadian Market
  • 25% ♦  International Market
  • 5%    ♦  Bonds

 

In my current situation, I should either sell some of my Canadian holdings to reinvest into the International market or I should make a new contribution and put it all into the International market to stay in line with my desired asset allocation.

 

Mrs. Xyz investment portfolio

My wife has a very similar asset allocation as me and has kept it fairly simple. Ever since she started her investing journey, she has held four index funds with Vanguard (VTI, VCN, VWO, and BND).

  • 34% ♦ Vanguard Total Market ETF (VTI)
  • 32% ♦ Vanguard FTSE Canada All Cap Index ETF (VCN)
  • 11% ♦ Vanguard FTSE Emerging Markets ETF (VWO)
  • 4%    ♦ Vanguard Total Bond Market ETF (BND)

These still represent the majority of her holdings. However, she recently made a few plays which literally exploded and now represent a huge portion of her portfolio.

Instead of focusing only on the main cryptocurrencies like me, she explored many smaller, lesser-known, coins and token. She took a bigger gamble for, hopefully, bigger returns. In a few months, her small initial investment grew to a whopping 16% of her total asset allocation. She is still following it closely and thinking of rebalancing soon.

In addition, 3% of her portfolio is now invested in the Horizons Marijuana Life Sciences Index ETF.

 

Mrs. Xyz Current Asset Allocation Desired Asset Allocation
  • 50% ♦  US Market
  • 35% ♦  Canadian Market
  • 11% ♦  International Market
  • 4%    ♦  Bonds
  • 45% ♦  US Market
  • 40% ♦  Canadian Market
  • 10% ♦  International Market
  • 5% ♦  Bonds

If all of this sounds too complicated, we suggest Wealthsimple.

Start your automatic investment account today!

 

How much are we spending?

With today’s online tools such as Mint or Personal Capital, it is super simple to track our spending and tracking is the first step to a good financial plan. How can you improve if you do not know how you are doing?

Looking at our Big 3 categories, we are still spending most of our income on Housing, Food, and Transport. Controlling these is the key to financial freedom. Once you understand that cars are much more expensive than they seem to be, restaurants are a luxury and housing costs can make or break your savings, you are golden!

 

How to track your spending

 

What our spending looks like for the past 12 months (in Canadian $)

Home $21,758
Food & Dining $8,285
Auto & Transport $5,014
Shopping $3,297
Taxes $3,102
Bills & Utilities $2,590
Uncategorized $1,134
Health & Fitness $1,591
Pets $1,401
Travel $1,174
Business Services $558
Personal Care $450
Total $50,354

 

Let us go through these expenses one by one. To begin with, our total House spending includes the $21,758 (mortgage, renovations, and maintenance) and the annual property Taxes of $3,102. This brings our total housing costs to $24,860. Almost $2,000 less than the previous 12 months.

In our Food and Dining category, we roughly spent five thousand dollars on groceries and the rest on restaurants. We cook most of our meals at home and eat out roughly once per week.

 

Budget Planning

 

To continue, our Auto and Transport category includes the maintenance, gas, and repairs of our two cars and the subway tickets we sometimes purchase to skip traffic. Each car costs us about $2,500 per year, which is amazing considering that similar cars would end up costing us over $10,000 per year in payments alone if we bought them brand new!

Our spending on Shopping is pretty high, however, this also includes all store purchases we did as gifts. We bought a few things for the Baby off Amazon and bought a new laptop this year which bumped that figure a bit. Unfortunately, my new employer does not pay for my work clothes so I had to buy a few suits this year.

 

What is your yearly spending budget?

 

On the Bills side, we include our two cell phones, home internet, and electricity. Our heating is all electric so the utilities go up considerably in the winter. Last month, we switched Mrs. cell phone plan and saved $30 per month opting for a lower data plan and my contract ends this summer so both our plans should be much cheaper for the year to come.

The Uncategorized category includes all the smaller categories not represented here. (Entertainment, Education, ATM withdrawals, or any purchase that was not automatically categorized.) The good thing is that our entertainment expenses are pretty low; we pay $10 per month for Netflix and rarely go out for expensive activities. Most other expenses in this category were very small amounts.

The Health and Fitness category represents Mrs. yoga, pharmacy purchases, and Mrs. massages. That one is pretty straightforward.

Furthermore, Pets represents cat food and one large veterinary expense incurred this year.

For the Travel category, it gets really interesting. Not too long ago, we were spending almost $10,000 per year on travel but now that we started using travel rewards for flights and hotels, we were able to drop this ten-folds! The thousand dollars we spend this year represents taxes on rewards flights and a few hotels we could not find for free.

 

Travel for free

 

Under Business Services, only products and services purchased to run this blog are included. Finally, in the Personal Care category, we included hairdressers, salons, and spas for Mrs.

Even after all of this, we still had a good chunk of change leftover. We invested most of it following our desired asset allocation mentioned above and kept the rest to beef up our emergency fund. Our future income might slightly drop and we want to have enough saved up to cover that gap.

How about you? What is your Big 3 spending categories?

 

 

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