Talk:Simple index portfolios

Can you call this page "Simple index portfolios" instead? Thanks! --Quebec 12:46, 30 December 2014 (MST)

✅ --LadyGeek 13:00, 30 December 2014 (MST)

I worded the sections to be proactive, as this appears to be a step-by-step guide. --LadyGeek 15:17, 30 December 2014 (MST)

I'm more or less done with this page for now. Will work on "LadyGeek/Portfolio design and construction" this afternoon. --Quebec 08:34, 31 December 2014 (MST)

There's a new VXC competitor: iShares Core MSCI All Country World ex Canada (XAW). I think that the text that says "VXC currently has few competitors on the TSX" should be updated. -- Longinvest 11:22, 18 February 2015 (EST)
 * ✅ but don't hesitate to edit the page yourself next time!--Quebec 14:46, 18 February 2015 (MST)

Will this be replacing Simple portfolios?
Is the intention of this article to move into the Main article space and then redirect Simple portfolios to this article? If so, how is the case where the investor would rather use other fixed income vehicles such as Guaranteed Investment Certificates handled? Should balanced funds be covered somehow? --Peculiar Investor 08:28, 5 January 2015 (MST)
 * Yes the idea is to have this page replace Simple portfolios entirely. Simple portfolios, in general (including balanced funds and GICs) are covered in "portfolio design and construction". The latter page also mentions 3-4-5 funds indexed portfolios, but this topic treated in much more dettail here. There is no need to fully reproduce the "simple portfolio" section of "portfolio design and construction" in a distinct page, IMO.--Quebec 09:19, 5 January 2015 (MST)
 * Back at I noticed an inconsistency between the 3-4-5 fund sections and attempted to resolve by introducing sub-section headers for index fund and ETFs. In hindsight, as content has been added I've probably made the article too complex. Does it really matter if one builds a three-fund index portfolio with all index funds or all ETFs? Why not mix and match as appropriate? I'm now thinking the focus of each of the 3-4-5 sections should be detailing what to select. As such, I'd also question the detailed inclusion of who created the various flavours. Is it really relevant to an investor that in 2009 Rob Carrick created a three-ETF portfolio? --Peculiar Investor 13:29, 5 January 2015 (MST)
 * I agree. I've spent he last little while filling in the empty sub-sections (3 index funds, 5 index funds), but indeed the page is getting a bit long. I would really like to keep the 4 index funds as a distinct sub-section though, this is a very good option for many people, no need for a brokerage account, etc. (whereas the 3 index funds option does not actually exist and the 5 fund option with the CIBC Premium Class funds is for people who may have brokerage accounts anyway). "... is it really relevant to an investor that in 2009 Rob Carrick created..." - no, obviously, you can delete that as well. --Quebec 13:42, 5 January 2015 (MST)
 * ✅ Deleted the Carrick reference, but after reading the entire page again, I don't think there is that much else to easily eliminate. I quite like this page as it is, it feels complete. --Quebec 04:16, 9 January 2015 (MST)

I broke the above links to Simple portfolios, as the page will be deleted. --LadyGeek 18:28, 25 January 2015 (MST)

Moved into article namespace
Development and discussion seems to have reached a resting point and content is well enough developed, so was bold and moved into the main article namespace. Didn't rename to Simple portfolios, yet, as there is still some difference in content to be address, i.e. the non-indexed GIC type portfolios. Kudos to Quebec for the effort driving this article. --Peculiar Investor 12:02, 15 January 2015 (MST)
 * Good, but what about the other two related projects in the LadyGeek user pages, the improved "Portfolio design ..." and the new "Couch potato" page? Shouln't we move these two to the main space too? That would save us some work. If the improved "Portfolio design ..." is moved, then the need to maintain a separate "Simple portfolios" page will disappear: all the simple portfolios (including GICs, balanced funds, and the like) are included in the improved "Portfolio design ...", just like "complex portfolios" are. --Quebec 13:51, 15 January 2015 (MST)

Pie charts - LadyGeek can you produce some nice images?
LadyGeek, can you produce pretty pie charts for where it says "insert image here"? To save time, you could use the same image for the two versions of the 4-funds portolio (just delete the image title so that it does not say "ETF"). For the 5-funds portfolio, use could also use a single image, with no title, for the two versions. Thanks! --Quebec 13:30, 5 January 2015 (MST)
 * I have inserted the pie charts. In Google Sheets, it was easier to duplicate the sheet and modify the chart title. Then, simply resize (crop) and upload the image. The source file is listed under "External links". Each sheet contains the fund names, but are not shown in the chart. Send me a PM if you would like to edit the file directly. --LadyGeek 18:15, 5 January 2015 (MST)

3-4-5 fund sections and a change in strategy for these sections
When I read these sections from the point of view of a newcomer (i.e. my recently graduated children) trying to learn I get stuck on the various implementation details that seem a bit too complex. Shouldn't the focus of these sections be the decision process behind choosing a three or four or five fund portfolio, specifically the pros and cons of each? Due to the structure of these sections (see my mea-culpa above), the option to build a n-fund portfolio that mixes index funds and ETFs never gets covered, but I don't see any reason why that wouldn't be a viable strategy depending on the account size and frequency of contributions which could impact costs. It frequently gets mentioned on FWF to contribute to e-Funds (or equivalent) when small dollar amounts are involved and commissions to purchase ETFs would be too high. Once a sufficient amount is build up, then switch to ETFs to take advantage of lower MERs. If so, then maybe a link to Comparison of index mutual funds and ETFs would be in helpful. --Peculiar Investor 06:44, 9 January 2015 (MST)
 * yes, I see what you're saying. I suggest we create two entirely new sections, to be placed before the 3 fund portfolio and so on. First new section: "choosing between 3, 4 and 5 funds". Second new section: "index mutual funds vs ETFs". The latter would mostly refer to existing articles (ETFs, index funds), but you could mention the possibility of mixing index funds and ETFs. However, this possibility is not for beginners (more complexity). Also, I reckon that one of the main attraction of efunds (or competing index funds) for beginners is that investors do not need brokerage accounts to buy them (mutual funds account will do). After these two sections, the existing 3 funds, etc sections would remain as is (except for ideas that get discussed in the new sections). --Quebec 14:02, 9 January 2015 (MST)
 * The new "index mutual funds vs ETFs" section could also discuss US-listed vs. Canadian-listed ETFs, pros and cons, although this may be better placed in the ETF page (if not already there). --Quebec 14:06, 9 January 2015 (MST)
 * In the US, ETFs can only be purchased in whole shares, mutual funds can be purchased in fractional shares. See Bogleheads: Fractional shares. Is this true for Canadian shares? One of the main reasons that mutual funds (not ETFs) are in employer retirement plans is that the employee contributions can be done exactly (to the $0.01). This is not possible for an ETF. Some employer plans have special structures to permit fractional share trading, but this may not be widely done (I don't know).
 * If this distinction is true for Canadian shares, consider including a discussion. Please also update Comparison of index mutual funds and ETFs. --LadyGeek 19:30, 9 January 2015 (MST)

✅ I've grouped all the new stuff into "Choosing specific investment vehicles" and filled the sub-sections. These are drafts in need of improvement. --Quebec 09:48, 10 January 2015 (MST)
 * The more I think about and read the sections, I'm wondering if the wrong logic is being applied. Simple is being approached from the point of view of number of funds. As I read through the material and recall FWF discussions, maybe a better approach is based on account balance, starting from small and then what happens as assets grow. Investors with a small amount to invest can keep their costs lowest using TD e-series funds, which dictates a four fund portfolio. Although the MERs are higher than using ETFs, the savings comes from not paying commissions and being able to automatically reinvest distributions. Once account balances reach about $50,000 there are reduced cost commissions and waiving of annual fees in registered accounts at discount brokerages, which can make ETFs a more cost effective solution. FWF topics worth reviewing: Index Funds vs ETF's, Regular contribution threshold for ETF vs Index Mutual Fund, and Re: My Portfolio - Seeking advice, please help (2009 edition). Once an investor gets to the ETF stage, then they could examine the benefit of using a single ETF for the global equity class. Again this comes up on FWF, such as International diversification and rebalancing and International Equity ETF. I've only done a quick FWF search for topics, and I'm sure there are more than provide insight that might be helpful in developing the article. --Peculiar Investor 22:02, 11 January 2015 (MST)
 * I'll read some of these forum discussions for sure, but with free ETF purchases at Questrade (and possibly elsewhere?), an investor could start with $1000 (or whatever the minimum to open an account is) and buy the 3 ETFs of a 3 fund portfolio immediately. OTOH, if I was helping a newbie with limited funds (and no investing experience) become an index investor, I would 1st have him buy a tangerine balanced fund (well, any low-cost balanced fund would do, he can learn about indexing later). It's just one fund, no minimum, no rebalancing, easy to add small amounts, etc. Then after a few years of getting used to regular investing (same amount every month), maybe its time to switch to e-funds. Get used to rebalancing, learn about indexing vs active management, deal w/ the added complexity of 4 funds instead of one, see how the individual funds perform year after year (e.g. his Canadian stocks are down this year, but everything else is up, diversification works). Maybe hit a nice bear market, see how that feels (maybe his AA had too much stocks?). Then after some more years, if he's really, really keen, time to open a brokerage account and switch to ETFs. But maybe not. Americans are very lucky to have Vanguard index funds, so much easier than ETFs, and just as cheap. We must not forget that most people don't enjoy investing as much as we do! :-) --Quebec 16:58, 12 January 2015 (MST)
 * I've read all the threads mentioned. Mostly about the "using both" option, rather than ETFs alone vs. index funds alone. The "international" discussions are more about rebalancing within stocks than about how many funds (if you don't want to rebalance you can still use several funds and let then ride, or use a single world fund). The most useful sentence IMO is from Bylo, on the "using both" method: "Simplicity should win if complexity will risk lack of compliance. IOW a simple DCA program on autopilot is far more likely to succeed, even if the fees are higher, than a complex program that requires monthly decisions and actions." --Quebec 17:52, 12 January 2015 (MST)

Foreign exchange considerations
In an I added use Norbert's Gambit and brokerage sub-accounts to minimize forex to the Currency hedging section as a natural fit with the discussion of currency. It was subsequently moved into another section which I think is less consistent and seems out of place to me. I would suggest moving keeping all foreign exchange considerations together as a natural fit. Thoughts? --Peculiar Investor 06:50, 9 January 2015 (MST)
 * Suggest to create "foreign exchange considerations" as a new sub-section of one of the new proposed sections (see above). Then move all appropriate sentences there. --Quebec 14:05, 9 January 2015 (MST)
 * Included in Choosing specific investment vehicles --Quebec 09:49, 10 January 2015 (MST)

Index funds
One sentence that was deleted said that with index funds, transactions can be entered online "at any time". This was replaced by "during the day", but if the investor chooses, that be done at night too, or during the week end. Of course nothing will happen before say 4-5 p.m. on the next trading day, but there no need to access a computer during the trading day. Whereas with ETFs, it's a bit dangerous to enter a market order at night or during the week-end. --Quebec 16:55, 11 January 2015 (MST)
 * On the first point, the wording probably could still be improved. I think the essential point is orders are entered at some point and executed at end of day, subject to a cut-off time. On the second point I would disagree. The same danger exists for an index fund order entered on a Friday night which will be executed on the next business day's closing price, which becomes dangerous when the markets are volatile. A better approach might be to deal with the ETF order process within the ETF section. I would suggest that FWF consensus is to use limit orders for ETFs and only enter them while markets are open. If the central issue is whether the investor has the ability to enter orders during the trading trade due to outside restrictions (work rules or time spent on other activities) is this really within the scope of what this article is set out to achieve? --Peculiar Investor 17:21, 11 January 2015 (MST)

One other thing about the index funds vs. ETFs section is that it's long, in a long article. It's longer than the "Choosing the asset classes and allocation" section, but the latter is much more important than the choice of products (the Global Couch Potato returned 10.5% with e-funds, and 10.5% with ETFs. in 2014: link). Should we move some of the ETFs-index fund discussion to the respective pages (ETFs, index funds), to decrease the emphasis on products? --Quebec 17:08, 11 January 2015 (MST)
 * Generally I would agree, the bulk of the information about exchange-traded funds and index funds should be in their respective articles and linked into this article. That's the general approach to wikis. --Peculiar Investor 17:31, 11 January 2015 (MST)
 * ✅ Moved several paragraphs to exchange-traded funds and index funds. --Quebec 08:28, 13 January 2015 (MST)

Employer DC plans not covered
There seems to be no coverage of the situation where an employee is a member of a defined contribution pension plan and has then make the investment decisions based on the funds available within the plan. Typically the DC plan is operated by a third party and only a limited selection of funds is available. Should this be addressed and how? --Peculiar Investor 12:37, 20 January 2015 (MST)
 * This is a worthwhile topic for a future page, or maybe add that to "passive investing". Putting such a discussion here could make the page too long, IMO. Can't help on this topic, I'm only familiar with self-directed investing, and DB pensions. I have no ideas what DC plans are like, but presumably more and more workers will be offered those every year.--Quebec 14:24, 20 January 2015 (MST)
 * After doing a bit of reading I found out that simple index portfolios can be implemented in Defined contribution pension plans or group RRSPs if inexpensive index funds are available. Intro has been updated (one sentence, with two references). --Quebec 17:46, 31 January 2016 (MST)

Simplicity
The 'passive philosophy' section of this article shows the advantages of passively managing the portfolio (that's the 'index' in the article title). But why does it need to be 'simple' as well? We haven't really explained that: why is simplicity a good thing? Perhaps we could place some content, for example the Bogle quote, from User:Quebec/Simplicity versus complexity in a new short 'Simplicity' section here. --Quebec 07:21, 30 January 2016 (MST)
 * IF it helps and improves the article then just be bold and do it. --Peculiar Investor 08:10, 30 January 2016 (MST)
 * Here's the best argument in favor of simplicity that I read: Taylor Larimore's post Why I choose "The Majesty of Simplicity" for my signature on the Bogleheads --Longinvest 10:45, 30 January 2016 (EST)
 * Being bold, I've split the 'philosophy' section of the article into 1. simplicity and 2. passive. The 'simplicity' subsection is probably too long, and can be improved to lessen the use of quotes. Who's up to the task? :-) --Quebec 11:28, 30 January 2016 (MST)
 * For an article about simple, it is pretty complex. :-) --Peculiar Investor 13:14, 30 January 2016 (MST)