Gyroscopic Investing

Canadian couch potato suggested the following for the Canadian version of PP.

12.5% iShares S&P/TSX Capped Composite Index Fund (XIC)
12.5% iShares MSCI World Index Fund (XWD)
25% BMO Long Federal Bond Index ETF (ZFL)
25% iShares Gold Trust (IGT)
25% any CDIC-insured investment savings account

I was wondering why I would buy bonds ETF instead of buying 30 year Canadian federal gov bonds from a big bank?
What do you think of using cdz (claymore canadian dividend stocks ETF) for a non-registered account instead of XIC for Canadian dividend tax credit?
XWD would be a better choice than VTI because it is in CAD, or IGT than GLD - No currency risk?

Thanks so much!

Hi Metta,
I'm also a Canadian trying to implement the PP for myself. Waiting for delivery of Harry's Book so i can read more into his strategy. In the meantime I've converted 50% of my PP into a HISA and 25% into ZFL as suggested. I guess i like that approach for it's diversity into 10 LTBs as opposed to 1 Bank LB. I also own some XLB on the LB side. When it comes to the equity side, i agree - I'll hold some CDZ, XDV along with XIC for my CDN exposure and XWD for the rest. I'll buy my IGT for Gold but will wait for an opportunity to make the switch. Still happy I have at this point converted 50% of my PP to this strategy but have so many stocks to sell to realize my position, will take me a while to get there. Good Luck!

As far as I know, Harry browne recommends buying individual government bonds instead of ETF.

the other thing is that Harry Browne recommends stock funds with the **least** amount of dividends, and that it be fully-invested (ie: it shouldn't hold too much cash).
I don't 100% understand his reasoning -- something to do with the divdends coming out of your pocket -- but he explains it in 'Fail-safe investing'.
It's possible I misunderstood what he was saying, but thought you should be aware.
Christina

Christina,

If I own a stock, I essentially own a piece of the corporation. If the corporation pays me a dividend, it is basically me paying myself because I own the stock in the first place. There is nothing wrong with shifting money from your right hand to your left hand, but when it comes to investing that movement (dividend payments) gets taxed.

You can safely ignore his advice if all of your stocks are in a tax deferred account, but if you are paying taxes then dividends are more of a burden than a benefit.

I would just buy a stock index and forgetaboutit. They don't pay abnormally high dividends and I think it is prudent to be tracking the actual market because the HBPP is based off of macro-economics. You want to be sure you are accurately representing the stock market.