Asset shift

Before we moved back, our assets were split per the below chart:

Our home made up the majority of our equity (66%), then our Canada ETFs and Irish stocks (Mr. MH’s old work scheme) made up 11% each and our Irish ETF portfolio made up 7%. We kept a cash buffer to cover a few months of living expenses, making up 3% and our car made up 2%.

For now, our new asset breakdown looks like this:

79% of our equity is now made up of our Canadian ETF portfolio. 12% remains in our Irish stock account which we will start to sell off when we start to withdraw from the portfolio. 5% is the value of our car and 4% remains in cash as an emergency fund.

In terms of existing assets, I wasn’t going to sell them off and trigger a tax event unnecessarily so for now our portfolio will look a bit more complicated than it needs to be. Eventually, as we start to sell off funds when we start to withdraw, we will sell off the funds we no longer want to hold first and our portfolio will get simpler over time.

Detailed Canadian ETF Breakdown

Once we moved, we had to decide how to restructure our assets. I didn’t want to have assets in 2 countries as I didn’t want to have to keep filing taxes in both as well as to continue managing multiple investment accounts and portfolios. I’m a big fan of the keep-it-simple approach.

As mentioned in my last post, we decided we would rent instead of buy a new home for the time being and so we wouldn’t be needing any large sums any time soon and even if we do want to buy again, we’ve decided we’d like to save up and start again, leaving the rest of our assets invested to grow.

To start building out our new portfolio, I did up a budget, figuring out how much cash we would need to cover the next twelve months including the purchase of a new car and other setup costs. I also figured we needed to leave some cash in our Irish account as we had plans to travel to France, Portugal and Ireland within the next twelve months and there was no point converting the cash only to convert it back again a few months later. Once I knew how much we needed to leave out, we took the money from the sale of our Irish home, sold our Irish ETFs and moved the money to Canada. From there I took the opportunity to apply the knowledge I’ve acquired in investing so far and made up a new consolidated ETF portfolio.

Initially, I was just going to continue replicating the ETF portfolio I already had. It has performed well enough and has good diversification, but when it came to investing the largest sum of money I will probably ever invest at one time, I thought about all the other long-time FIRE bloggers that I follow. All of the American bloggers have said time and time again to just invest in VTSAX (Vanguard Total US Stock Market Fund) and block out the noise about anything else. J L Collins says he plans to never sell and just live off the dividends.

The bloggers I follow worked to reach their full FIRE number before retiring early but have way more now than they will ever need, partly because they never really stopped working. They just work how and when they want to work now, on things that they are passionate about. Working for money is optional for them but if you have the drive to reach FIRE, you are not going to be the kind of person to sit back and never earn money again. Looking at my investment portfolio and own journey to FIRE in this light gave me new perspective. I decided I would follow suit and take a bit more risk than I previously would have by investing in one ETF with exposure ONLY to the US stock market.

Consideration 1: VTSAX is not available in Canada. After some research, I found a very similar fund. This post gives a good comparison. In summary, if you buy VUN (Vanguard Total US Stock Market ETF), it’s made up of the same underlying stocks as VTSAX but it is purchased in Canadian Dollar. Unfortunately, the annual management fee is 4 times higher than if you were in the US (0.16 instead of 0.04) :(, I suspect this is due to currency conversion costs.

I could have converted my Canadian Dollar to US Dollar and bought VTI or VUS (other similar funds in USD) but that added more complexity, more currency hedge risks and would subject me to US withholding taxes which I’d have to track and claim back at tax time. Again, I’m all for the Keep It Simple approach which just means I’ll pay a slightly higher annual fee.

Consideration 2: Not all of this money is mine alone, some belongs to Mr. MH and so he had to agree with the latest shift. He bought his previous ETF portfolio after me and although his was made up of the same funds as mine, the timing meant that his portfolio dipped for much longer and his best-performing fund during the pandemic was VCE (Vanguard FTSE Canada Index). Because of this, he felt more comfortable keeping at least some of the portfolio invested in a Canadian stock market ETF.

This meant that our target portfolio allocation was going to look something like 95% VUN and 5% VCN (Vanguard FTSE Canada All Cap Index) – this is a newer, broader ETF than VCE.

I started off by investing the proceeds of our house first. I bought mostly VUN and a small amount of VCN per the plan. Then as we were moving over the proceeds from our Irish ETF portfolio my nerves started creeping in about how over-exposed to the US markets we were. I decided I wanted to build back in some regional diversity and looked for another fund or two to help round out my portfolio. As we add more money we will purchase the other funds to balance it out a bit more.

Previously our ETF portfolio was made up of 5 funds. Now I think I can get the diversification I’m comfortable with in 3.

Our new target is something like 80% US, 15% Developed Markets excluding US, 5% Emerging Markets

This should give us a weighted MER of 0.19%, estimated annual growth of 12.02% and estimated annual dividends of 1.58% (based on returns since inception per current fact sheets).

Our current portfolio including our Irish stocks currently looks quite disorganised but I’m ok with that as the estimated returns of the portfolio are slightly better than the above projections. Our current weighted MER is 0.18%, estimated annual returns are 12.28% and dividends of 1.37%.

Once you get to a certain level of funds, you can start to see really fun gains or really scary losses on a daily basis. This has been an interesting experience. Our life’s savings are literally all in the stock market. We signed up to an account which lets you consolidate all of your investment accounts into one dashboard with reports. So far our Canadian accounts have gone like this:

The blue line is contributions and the green line is value of investments. So in August, we lumped in our house proceeds and we saw a nice uptick, very shortly followed by a downturn which didn’t go below our initial contributions but was still a drop of 24,000$ in the span of a few weeks. Thankfully, this has now gone back up to above where it was at the previous peak but before you go putting large sums into investments, be sure you are committed to the buy and hold strategy as the smallest drop in your share price can result in big drops in your portfolio. If you sell when it dips, you are locking in your loss, but if you hold on for long enough it will recover.

The current year to date returns are coming in at 14.53% not including dividends.

Different accounts

Another thing I haven’t gone into yet are the different investment accounts available in Canada. As soon as we got back, we opened up a number of new accounts under each of our names in order to maximise our tax benefits. Below are the different accounts we currently hold in each of our names.

• Tax-Free Savings Account (TFSA)
• Register Retirement Savings Plan (RRSP)
• First Home Savings Account (FHSA)
• Margin Account

The TFSA gives you a certain amount of money you can invest per year tax free. This is after tax income but grows tax free and is tax free on withdrawal. Unfortunately for us, your contribution room stops growing once you are out of country so we only have a portion of the 88,000$ room other Canadians have. Still it’s a great account to have.

RRSP’s are similar to Irish pensions in that they are tax-deferral accounts with annual contribution limits where you contribute to them in your higher earning years to reduce your taxable income, the investments grow tax free until withdrawal, at which time you pay your marginal income tax rate. The benefit Canadian RRSPs have over Irish pensions is that you can easily open an account and manage the funds yourself and there is no minimum age for withdrawal.

FHSA’s are tax-free savings accounts to help people save for their first home. There are annual contribution limits up to a maximum of 40k, contributions are tax-deductible, growth is tax-free and withdrawal is tax-free. Contrary to what the name implies, if you have NOT owned your primary home in Canada in the last 4 calendar years, you are still eligible for an account. If you do not decide to buy a house in the end, you can roll the money into your RRSP without impacting your RRSP contribution limits. Your contribution room only starts growing once you open an account so even if you don’t intend on investing/saving for a home, it might be a good idea to open an account just in case you do in the next few years.

Margin accounts are your usual taxable after tax investment accounts.

As we’ve been out of country for 9 years, our contribution room in our TFSA and RRSPs are not as high as they could be but something is better than nothing. So for now, we have maxed out our TFSAs, RRSPs and FHSAs and lumped the rest in our Margin accounts. As I haven’t worked much this year, this may seem like a waste as I won’t have income tax to reduce but getting the money invested and allowing it to grow as soon as possible will outweigh the tax savings I would have made if I had spread it out over higher income earning years.

There is also a Registered Education Savings Plan (RESP) we may look into for our son but I’m not 100% sold on the benefits vs. restrictions. Should our son not go to third level education in Canada, your marginal income tax is charged on withdrawal PLUS a 12-20% withdrawal penalty. For now I’ll just keep investing in our other accounts and use those funds to pay for college if needs be.

As Forest Gump once said: That’s all I got to say about that.

Here is a look at our Christmas tree with all the “minimalist” gifts for our 16 month old son (I went a bit mad in the end especially considering his age). We celebrated early so we don’t have to lug all the gifts up to Mr. MH’s home place. Notice the sustainable (and cheap) wrapping paper: an old newspaper we got as junk mail, some ribbon from a gift we received, a reusable gift box and even a pillow case.

I wanted to take a moment and look back on the year and take stock of a few things.

I first started this blog back in Jan/Feb launching in March having no idea where it would go but it has led to so many unexpected and pleasant surprises.

Community

The biggest of all is the community and networking it has exposed me to. Through the blog, I met up with a local reader, with whom I have since started a local meetup for like minded individuals. The first meeting was just the 2 of us, then 7 people, then 10 people and now 35 members have joined (but have not yet all attended). We meetup once a month and each and every meeting has been enlightening and inspiring. I always come away with some nugget to consider and implement into my planning. I look forward to continuing these meetups in the new year and hope to see some of you there! You can join the meetups here if it’s of interest.

I’ve also joined a whatsapp group for the Dublin meetup and have had extremely insightful conversations on there as well. There are almost 100 members on that chat at this stage.

Through that group I heard about and attended pensions awareness week where I met some people in the pension and investment industry and the Irish FIRE podcast host which led to my interview on that podcast.

Comments on the blog have also been useful as I have had an engaged readership who correct me when I’m mistaken or help me to flesh out blog posts further so that they are more useful to a wider range of readers especially where I have left some questions unanswered. Some of my assumptions or research would have gone unchecked had I not put it out there for others to see.

It is so fulfilling to be part of an active community with shared interests, none of which I would have been exposed to had I not started the blog!

Blog Performance

The blog is slowly gaining traction, going from an average of 150 page views in the first 6 months to around 900 page views a month from September on, with November seeing 1,100 views by 400 visitors. I know this is small beans in the blogosphere but it’s growth I am happy with given I’ve only managed to get out 1-2 posts/month!

I am even starting to get traffic from firehub.eu (where I was recently featured in their weekly email digest), camfirefinance.com (an RSS feed of all FIRE related blog) and boards.ie (a popular Irish discussion forum).

I have lots of content floating around my head and lots of research still to do so looking forward to getting that out there, now that I’m getting a bit more sleep!

Portfolio Performance

You may have seen my Irish and Canadian portfolio posts when I first set them up but now it’s been a few months and I’m really pleased with the results.

Canadian ETFs

My Canadian portfolio which I started in Feb is currently at 12.84%, this would have been higher had I started in January as the biggest gains from the dip in December were made back by the time I had invested.

There were a few low points during the year where I was actually starting to lose money but I held my nerve and trusted in the statistics of the stock market historical performance.

Here is how the portfolio performed throughout the year.

Looking at my previous managed fund performance (with 2.49% in management fees regardless if the fund made or lost money), I only made 4.4%/year after fees and 2.59%/year once I took out my early redemption fees.

Needless to say I am much happier with the results of 12.84% for 11 months of performance.

Irish ETFs

My Irish portfolio had a rocky start, where the day after I invested in May I lost 5.3%, but again I held on and the markets have recovered. I am now at 8.8% to the good after only 7 months in the market.

This is still subject to exit taxes and not adjusted for inflation but still I’m pleased with the results considering what I would have gotten if that money was sitting in a bank account.

All that to say, it’s been a great year and I couldn’t have gotten here without you, the readers. Looking forward to what the next year will bring and getting to share it with all of you!

Thanks again for following and best wishes from our family to yours!