The Frugal Canadian

A frugal spender seeks to find new ways to save money and increase her net worth.

Saturday, December 31, 2005

Adding US Exposure to my Portfolio

Last month I decided to add some US exposure to my portfolio and was searching for a suitable investment.

I decided to put ~ $6000 into Vanguard Value Vipers (VTV). It will provide instant diversification on the US large cap value stocks. I also looked at the iUnits S&P 500 C$ Index Fund(XSP.TO) and the iShares S&P 500 Value Index Fund (IVE)

The iUnits ETF seeks to match the S&P 500 and is hedged to Canadian dollars which I'm not overly concerned with. It also primarily invests in the iShares fund. Because of this, its management fees are higher and performance lags both VTV and IVE.

IVE vs VTV has a slightly higher MER at 0.18% vs 0.11% and while the two securities are pretty close in terms of returns over the past 2 years, I decided to go with VTV.

I'm not expecting much difference in performance between the 2 securities over the long term, but the slightly lower MER and the lower current market price $57.17(VTV) vs. $65.05 make it more attractive for myself.

2006 Goals

Happy New Year to everyone and I hope you're all enjoying your holidays.

It's been 3 months since I started my 25K Challenge and I'm quite pleased with my progress. I've increased my net worth by $5,600 in just three months and I must admit that the savings progress has become somewhat addictive. The more I save, the more I want to continue to save as I watch my funds grow.

I thought since the New Year was approaching I should develop some new goals for myself.

My 2006 goals are:

- Continue to save $2000 per month to meet my 25K challenge

- My salary increase(yet to be determined) will be directed to 50% RRSP savings and 50% to a wedding fund(Yay - I got engaged over the holidays!)

- When I think I need groceries, wait 2-3 days and use up items in the cupboards and fridge and cut down waste on produce and fresh foods (I am horrible at this!)

- Complete full evaluation of my portfolio quarterly to determine if it needs rebalancing and ensure it's achieving an appropriate return

- Put a significant effort into my tax preparation business that I run on the side. In the past couple of years, I haven't marketed this as heavily as I could have. At an average of $75 per tax return, it can really add some additional income

- Seek lower insurance rates by raising deductibles on my car

- Get VOIP set up. I generally don't make that many long distance calls, but because I only have a cell phone, they are very expensive.

December Savings Update

This month wasn't pretty when I looked at the allocation of how I spent my money this month, specifically in food and entertainment costs.

Fortunately, due to a mileage reimbursement from work I was able to stay on track and saved $2121 this month.

With holiday parties, my entertainment costs were up. Also contributing to the large spending were my recreation sports team registration fees of $155 which covers me until the end of April. I'm also out of pocket $80 for one team member which hasn't paid me his fees yet. When I take out these fees my entertainment costs are down to $330 which is still excessive but understandable with the holiday season.

I also purchased a piece of furniture this month to give me some much needed storage in my apartment which contributed to the high household items this month.

Wednesday, December 28, 2005

Free Coupons Arrived Today

A friend of mine recommended as a good site for coupons on household items. Last week I visited the site and my coupons arrived today.

The process took about 2 minutes; I just selected the coupons I wanted, entered in my mailing address and clicked the submit button.The coupons are mostly from name brand suppliers - Proctor and Gamble, Nestle, Heinz, Gerber and S.C. Johnson and range from frozen pizza, laundry detergent, baby food and cosmetic items.

The coupons range from $0.50 to $2.00 off and have a 3 month expiry date. My only disappointment is that I had selected a $1.00 Noxema coupon, but did not receive it. When I checked back on the website, the coupon no longer exists.

The coupons rotate from month to month so it's a good idea to check it out monthly. Since you can use them also with items on sale, I'm hoping it puts a small dent in my monthly grocery budget.

Saturday, December 17, 2005

Free $10 gift card for Sears Credit Card signup

I was doing some last minute holiday shopping and got a free $10 gift card from Sears today. All that was required was signing up for a free Sears credit card and paying for my purchase with the Sears Card. The whole process took about 5 minutes and now I have an extra little gift to pass on.

I didn't think I would qualify since a year ago, Sears had a similar promotion where if you signed up for their free card you would get 10% off your purchase. Once I had signed up last time, I immediately cancelled the card after I had paid the purchase off. The only condition for me to be eligible on the current promotion was that I didn't have an active account for one year. I apparently made the cutoff by 2 weeks.

I'll cancel the credit card again this time so I'll be eligible for future promotions.

Thursday, December 08, 2005

ING Opening Bonus

In the US, a lot of banks offer promotions giving away
free money if you sign up an account. I haven't found a
bank in Canada doing this, until now. ING direct offering $13 free if you sign up with them. The only condition is you deposit $100 minimum. I'm sending my cheque tomorrow.

Monday, December 05, 2005

Low Management Expense Ratios

I wanted to see how my management fees on my TD mutual funds compared to the TD's e-Series funds. I found that I can cut my fees in half.

TD funds Current


Cdn Bond Index 0.91%

Cdn Equity Index Pure 0.88%

Cdn Equity 2.25%

US Equity 2.47%

Searching through the funds wasn't an easy task and I found for some funds such as the Canadian Bond Index fund, there were 4 almost identical funds all with differing management fees ranging from 0.48% to 1.07%. I examined both the portfolio performance as well as the holdings and the differences amounting to less than 0.2% in favour of the e-Series.

My obvious choice is to sell my existing funds and switch to the e-Series. Since all the funds are held in my RRSP, I won't be facing taxes on my dispositions.

A listing of all the available e-Series funds can be found here:

Sunday, December 04, 2005

Portfolio Rebalancing

As I mentioned in my last post, I'm sitting on some excess cash and need to invest it for a higher return than the 2.3% it's currently earning. I decided to look at my portfolio and determine how much rebalancing I need to do.

I was quite alarmed when I looked at my portfolio. Over the past year, I dumped a few poor performing expensive mutual funds in favour of some stocks which have been performing well over the past year. It left with me with almost 90% exposure to the Canadian markets. Most of the run-up in my cash holdings have been the result of my savings over the past couple of months.

It's clear that I have way too much cash and need some foreign exposure. For now I've narrowed my focus and will put my excess cash into US equity - preferably large cap. I'm looking at some index funds, ETFs and a few stocks, but am leaning toward ETFs for their instant diversification with low MERs. I also need to re-evaluate my remaining funds since the funds recently went through a reorganization. Canadian Capitalist mentioned TD efunds and I think these may be a good fit for what I want.

The main criteria I'm looking for are:
1. If ETF or index fund, low MER - specifically, less than 1%
2. If stock, 2-3% yield; if income trust 5-8% yield. I'm a strong proponent of cash yields, whether it's dividends or trust/fund distributions.

November 2005 Update

Early Christmas spending blew my budget this month, however on a year to date basis I'm still on track with a savings rate of 46%

I also purchased a leather jacket for myself which took up nearly half of my clothing budget for the year. It is an item that I've been wanting for many years now and because I needed a new winter coat this year, I decided to finally break down and get a good long term jacket.

Next month I should stay on track but it will be tight with the holidays. While I have nearly finished all of my Christmas shopping, I'm expecting high entertainment costs because of the holiday season.

I'm now sitting on investable cash of $7000. It's in my PC Financial account currently earning 2.3% per month. My plan for the next month is to find a better alternative for this.