Q&A from Canadian Financial Summit (podcast)

Your questions from the Summit are answered here!

The biggest online personal finance conference in Canada is the Canadian Financial Summit, which was a few weeks ago. I was interviewed for 2 intriguing talks:

  1. How to Easily Outperform Investment Advisors & Robo-Advisors
  2. The High Risk of Bonds: Are Bonds Actually Safe Investments?

Here are my answers to the 27 listener questions:

Ed Rempel Q&A – Summit 2020 (podcast)

Here are the 27 questions:

Tax, Investing & Retirement

  1. At what earnings tax bracket should one consider investing more money into an RRSP vs a TFSA in order to reduce owing taxes? Is there a tool or a guide for this? Also, how would this answer differ if you have a spouse/children or non-working spouse?

2. How do you manage sequence of return risk for the first 7 years of retirement, when using a 100% equity allocation? Do you use a fixed-income equivalent to the cashflow needs for those years?

3. When taking money out in retirement, how do you decide between taking it out of your taxable account, vs your TFSA vs your RRSP?

4. If the bond run is truly done, what are the options for the Fixed Income allocation? Is it only high interest savings account, or are there other ETF options?

5. Can it be okay to have a mortgage in retirement? The common advice is to not have it, but with rates being low, there is a large opportunity cost when we could just invest the extra money instead.

6. For somebody that is close to retirement (in their 50s or 60s) with little retirement savings, should they focus on paying down their mortgage or invest?

7. For somebody that wants a safety component to their portfolio, should they be using a bond ETF, GICs, cash, or stocks that pay somewhat stable dividends?

8. For somebody that is nearing retirement and has a defined benefit pension that covers most or all their expenses, should they be very high in equities (ex. 80-100%)?

9. We received several questions about the bucketing strategy. For somebody that wants to do it, what are your thoughts on some good structures to use?

For example, a commonly suggested bucketing approach that we’ve seen is 1-2 years in cash/GICs, 3-5 in fixed income/dividend investments and the remaining in equity.

10. The next person asked: You mentioned that having bonds in your portfolio creates a performance drag. But, having bonds also lets you rebalance when stocks are low so that you are essentially buying them at a low point. Therefore, doesn’t it make sense to have some money in bonds to allow you to rebalance when markets are lower?

11. What is the adjusted cost base when investing and what are the consequences if you don’t track it correctly? How do you suggest we track it?

12. Are there ways that you know of to transfer RRSP money to TFSA without having to incur taxes? Aren’t there methods using insurance policies or setting up a mortgage investment corporation?

COVID-Related Investing Issues

13. COVID-19 has resulted in governments across the world increasing their spending to help citizens and businesses during these unprecedented times. With the very high level of governments debt that has resulted, what are the consequences that we individually investors should prepare for? How should we adjust our investing and financial planning for this?

14. We also got several questions from Canadians being worried about currencies falling, especially in the US. What are your thoughts on this and what actions (if any) should we take?

Smith Manoeuvre

15. Can you please explain the mechanics of the Smith Manoeuvre strategy, specifically the Smith/Snyder version?

16. How long can you keep investing using the Smith Manoeuvre once you’ve converted your mortgage? When can you (or should you) start drawing funds out of the personal pension plan you’ve built?

17. Can you do the Smith Manoeuvre by investing in things other than the stock market? (ex. real estate, private lending)

18. Are there any ETFs that you would suggest for the Smith Manoeuvre?

19. Can one be investing via the Smith Manoeuvre forever? Is it advisable to do so, if you could?

20. The Smith Manoeuvre Question: How do I service my HELOC if I have no dividends coming in?

21. The Smith Manoeuvre Question about “Debt Swap Accelerator”. The main idea is to use my already invested money that I have in non-registered or registered accounts to pay down my non-deductible readvanceable mortgage. Then reborrow the increased HELOC balance in order to invest in non-reg accounts. So the question is: can I be using “the same” money over and over again?

Other Questions

22. Is the tax credit advantage of a labour sponsored fund worth it, compared to the higher MER of the funds? In SK a labour sponsored maximum contribution is $5000/yr. It must stay invested for 8 years. The $5K rolling investment, is effectively $40K invested at the higher MERs. If the MER is 3.25% that’s $1300/yr. What is the bottom line tax savings of the 32% tax credit?

23. Is there any Ed Rempel “unconventional wisdom” about adding a child on an elder parent’s home property? Would doing so skip the cap gains exemption offered to the elder parent, passing the property to the child without utilizing the parents’ primary residence cap gains exemption?

24. I am 56, single and plan to retire this year. I have over $3 million, almost all in RRSP & LIRA. Clearly when I turn 72 and have to withdraw from my LIF and whatever is in my RIFF it will likely be in the highest or second highest tax bracket if I don’t touch it before then. I will also have all my OAS clawed back. How do I minimize my lifetime taxes?

25. What do I need to know about exchange rates and withholding tax?

26. If someone’s TFSA is maxed out, and they are already in the lowest tax bracket, should they just invest in their taxable account?

27. What would you recommend for someone that is sitting on a large chunk of cash (uninvested)?


Planning With Ed


Ed Rempel has helped thousands of Canadians become financially secure. He is a fee-for-service financial planner, tax  accountant, expert in many tax & investment strategies, and a popular and passionate blogger.

Ed has a unique understanding of how to be successful financially based on extensive real-life experience, having written nearly 1,000 comprehensive personal financial plans.

The “Planning with Ed” experience is about your life, not just money. Your Financial Plan is the GPS for your life.

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  1. Ed Rempel on March 22, 2021 at 8:53 PM

    Hi Denis,

    What are you trying to do with your portfolio?

    I can’t comment on any specific investment. In general, I see managed futures as a good fixed income alternative. Lower volality and correlation to the equity markets. Investors use them mostly as a diversifier.

    We are normally focused on the highest reliable long-term returns, so we don’t worry about market fluctuations. We define risk as the risk of getting a 25-year return less than 8%/year.

    For a conservative investor or shorter time horizon, market neutral hedge fund strategies are usually better than fixed income.

    With hedge funds, my focus is on finding the most skileed fund manager. Have you actually looked for a top market neutral hedge fund manager? My favorite one has an MER of 1.49% and an exceptionally skilled fund manager.


  2. Denis on March 18, 2021 at 2:09 PM

    Thanks for the reply Ed, to be clear I am not looking to capture the performance of a market neutral Long/Short hedge funds but specifically the aggregate pre-fee performance of the CTA Index to gain exposure to trend following. The trend following Managed futures space has earned a CAGR of about 5-7% pre-fees since early 2000s, but hedge fund fees have eaten up around 500 basis points of performance. There is 2 centuries of empirical evidence for trend following in the academic literature, and I think now this DBMF ETF might be compelling.

    The problem is even if I can identify a good market neutral hedge fund, I find the fees eat up 400-500 basis points of returns, which is why over the long run they tend not to carry well. If I can successful replicate for cheap the CTA Index performance, I start so far ahead of the 400-500 basis points that I can forego the extra potential alpha and still have good returns.

    The guys behind the DBMF ETF have been in this space for over a decade (mostly for family offices) and they are about the only providers of liquid alts where their clients have been very satisfied. The DBM They make a very compelling case for their approach here:

  3. Ed Rempel on March 17, 2021 at 11:48 PM

    Hi Denis,

    Market neutral hedge funds are a good alternative to bonds and fixed income. Very low corelation to equities and a decent potential return.

    Hedge funds are very complex and are based entirely on manager skill.

    I took the Certified Hedge Fund Specialist designation years ago with the highest mark in Canada. The key difference between equity investments and market neutral hedge funds is that equity market rise long-term, while market-neutral does not.

    The wisdm among hedge fund managers: Equity investing is 80% market and 20% skill. Hedge funds are 80% skill and 20% market.

    This is not the place for a low-fee ETF. I would rather have one real smart, skilled hedge fund manager, than a diverisified portfolio of average-skilled funds in the hedge fund world.

    One of our portfolio managers occassionally uses a market neutral hedge fund with an exceptionally skilled hedge fund manager.


  4. Denis on March 8, 2021 at 10:33 AM

    Great interview & questions, regarding market neutral hedge funds, have you heard of the DBMF ETF by Dynamic Beta Investments.
    It essentially tries to capture the pre-fee performance of the SocGen CTA Index minus its 0.85% MER.

    Dynamic Beta Investments has a good website explaining the approach of DBMF.

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