(Reporting my findings)

There is quite some gap between 0%, 20%, and 40%, so if you feel like you should stay between two brackets, that's totally valid.

To mix a custom ratio, say 70% equity and 30% fixed-income you can either:

1. Balance in a ratio of 7:3 in an all-equity and a all-fixed-income. e.g. $7 of VEQT for each $3 of XQB/XBB/HBB. Or do your own fund mix.

2. Pick the two asset allocation funds that are closest to your desired ratio and form a linear combination of them. As long as the funds you mix have the same holdings, but in different proportions, you will produce a portfolio with a weighted average of their relative exposure. So, for 70/30, you would use your approach (3), and do 1:1 of XGRO and XBAL.

   If you wanted 75/25 instead, you would do 3:1 XGRO:XBAL. e.g.

   3/4 * XGRO + 1/4 XBAL = 0.75 * (80, 20) + 0.25 * (60, 40) = (75, 25)
   

   You could also pick mixed asset funds that have ratios that are further apart (e.g. VCIP and VGRO). From that perspective, XEQT and XQB are just the two ends of the spectrum.

With both options, you could place the equity-heavy side of the portfolio in a tax-reduced account, such as a TFSA.

In terms of tradeoffs:

• For (1), you might have to rebalance often. Equities tend to outperform bonds in the long run. And consider that you might find it emotionally difficult to rebalance if your bonds or equities do very badly (and then do well again), so timing might be key -- be prepared to make some hard decisions to rebalance.

  Some advantages of this approach come from the fact that having your asset classes separated brings some flexibility. You might be able to choose a fixed-income fund that doesn't generate too much dividend, or have all your equities in a TFSA or other tax-saving account. And it might save you some minute management fees (approx ~0.1%).

• For (2), the fund managers will keep each account in balance for you (independently, though). Your 80/20 fund should still perform better than the 60/40 in the long run, but their performance should be more similar than an all-equity vs all-fixed-income. So you shouldn't have to rebalance as much. This might mean fewer transactions, so fewer fees, fewer bid/ask spread penalties, and fewer transactions on which to record capital gains and losses.

References:

• https://canadiancouchpotato.com/2012/06/28/an-overview-of-commission-free-etfs/#comment-260481 (From Dan Bortolotti, portfolio manager at PWL capital)

(Reporting my findings)

There is quite some gap between 0%, 20%, and 40%, so if you feel like you should stay between two brackets, that's totally valid.

The other two approaches you give are also valid.

To mix a custom ratio, say 70% equity and 30% fixed-income you can either:

1. Balance in a ratio of 7:3 in an all-equity and a all-fixed-income. e.g. $7 of VEQT for each $3 of XQB/XBB/HBB. Or do your own fund mix. That’s valid. and is your approach (3)

2. Pick the two asset allocation funds that are closest to your desired ratio and form a linear combination of them. As long as the funds you mix have the same holdings, but in different proportions, you will produce a portfolio with a weighted average of their relative exposure. So, for 70/30, you would use your approach (2), and do 1:1 of XGRO and XBAL.

   If you wanted 75/25 instead, you would do 3:1 XGRO:XBAL. e.g.

   3/4 * XGRO + 1/4 XBAL = 0.75 * (80, 20) + 0.25 * (60, 40) = (75, 25)
   

   You could also pick mixed asset funds that have ratios that are further apart (e.g. VCIP and VGRO). From that perspective, XEQT and XQB are just the two ends of the spectrum.

With both options, you could place the equity-heavy side of the portfolio in a tax-reduced account, such as a TFSA.

In terms of tradeoffs:

• For (1), you might have to rebalance often. Equities tend to outperform bonds in the long run. And consider that you might find it emotionally difficult to rebalance if your bonds or equities do very badly (and then do well again), so timing might be key -- be prepared to make some hard decisions to rebalance.

  Some advantages of this approach come from the fact that having your asset classes separated brings some flexibility. You might be able to choose a fixed-income fund that doesn't generate too much dividend, or have all your equities in a TFSA or other tax-saving account. And it might save you some minute management fees (approx ~0.1%).

• For (2), the fund managers will keep each account in balance for you (independently, though). Your 80/20 fund should still perform better than the 60/40 in the long run, but their performance should be more similar than an all-equity vs all-fixed-income. So you shouldn't have to rebalance as much. This might mean fewer transactions, so fewer fees, fewer bid/ask spread penalties, and fewer transactions on which to record capital gains and losses.

References:

• https://canadiancouchpotato.com/2012/06/28/an-overview-of-commission-free-etfs/#comment-260481 (From Dan Bortolotti, portfolio manager at PWL capital)

(Reporting my findings)

There is quite some gap between 0%, 20%, and 40%, so if you feel like you should stay between two brackets, that's totally valid.

To mix a custom ratio, say 70% equity and 30% fixed-income you can either:

1. Balance in a ratio of 7:3 in an all-equity and a all-fixed-income. e.g. $7 of VEQT for each $3 of XQB/XBB/HBB. Or do your own fund mix.

2. Pick the two asset allocation funds that are closest to your desired ratio and form a linear combination of them. As long as the funds you mix have the same holdings, but in different proportions, you will produce a portfolio with a weighted average of their relative exposure. So, for 70/30, you would use your approach (3), and do 1:1 of XGRO and XBAL.

   If you wanted 75/25 instead, you would do 3:1 XGRO:XBAL. e.g.

   3/4 * XGRO + 1/4 XBAL = 0.75 * (80, 20) + 0.25 * (60, 40) = (75, 25)
   

   You could also pick mixed asset funds that have ratios that are further apart (e.g. VCIP and VGRO). From that perspective, XEQT and XQB are just the two ends of the spectrum.

With both options, you could place the equity-heavy side of the portfolio in a tax-reduced account, such as a TFSA.

In terms of tradeoffs:

• For (1), you might have to rebalance often. Equities tend to outperform bonds in the long run. And consider that you might find it emotionally difficult to rebalance if your bonds or equities do very badly (and then do well again), so timing might be key -- be prepared to make some hard decisions to rebalance.

  Some advantages of this approach come from the fact that having your asset classes separated brings some flexibility. You might be able to choose a fixed-income fund that doesn't generate too much dividend, or have all your equities in a TFSA or other tax-saving account. And it might save you some minute management fees (approx ~0.1%).

• For (2), the fund managers will keep each account in balance for you (independently, though). Your 80/20 fund should still perform better than the 60/40 in the long run, but their performance should be more similar than an all-equity vs all-fixed-income. So you shouldn't have to rebalance as much. This might mean fewer transaction fees, and fewer bid/ask spread penalties.

References:

• https://canadiancouchpotato.com/2012/06/28/an-overview-of-commission-free-etfs/#comment-260481 (From Dan Bortolotti, portfolio manager at PWL capital)

(Reporting my findings)

There is quite some gap between 0%, 20%, and 40%, so if you feel like you should stay between two brackets, that's totally valid.

To mix a custom ratio, say 70% equity and 30% fixed-income you can either:

1. Balance in a ratio of 7:3 in an all-equity and a all-fixed-income. e.g. $7 of VEQT for each $3 of XQB/XBB/HBB. Or do your own fund mix.

2. Pick the two asset allocation funds that are closest to your desired ratio and form a linear combination of them. As long as the funds you mix have the same holdings, but in different proportions, you will produce a portfolio with a weighted average of their relative exposure. So, for 70/30, you would use your approach (3), and do 1:1 of XGRO and XBAL.

   If you wanted 75/25 instead, you would do 3:1 XGRO:XBAL. e.g.

   3/4 * XGRO + 1/4 XBAL = 0.75 * (80, 20) + 0.25 * (60, 40) = (75, 25)
   

   You could also pick mixed asset funds that have ratios that are further apart (e.g. VCIP and VGRO). From that perspective, XEQT and XQB are just the two ends of the spectrum.

With both options, you could place the equity-heavy side of the portfolio in a tax-reduced account, such as a TFSA.

In terms of tradeoffs:

• For (1), you might have to rebalance often. Equities tend to outperform bonds in the long run. And consider that you might find it emotionally difficult to rebalance if your bonds or equities do very badly (and then do well again), so timing might be key -- be prepared to make some hard decisions to rebalance.

  Some advantages of this approach come from the fact that having your asset classes separated brings some flexibility. You might be able to choose a fixed-income fund that doesn't generate too much dividend, or have all your equities in a TFSA or other tax-saving account. And it might save you some minute management fees (approx ~0.1%).

• For (2), the fund managers will keep each account in balance for you (independently, though). Your 80/20 fund should still perform better than the 60/40 in the long run, but their performance should be more similar than an all-equity vs all-fixed-income. So you shouldn't have to rebalance as much. This might mean fewer transactions, so fewer fees, fewer bid/ask spread penalties, and fewer transactions on which to record capital gains and losses.

References:

• https://canadiancouchpotato.com/2012/06/28/an-overview-of-commission-free-etfs/#comment-260481 (From Dan Bortolotti, portfolio manager at PWL capital)