Oct 152016


Be sure to read Part 1 before continuing

What to hold in a frozen investment account:

Remember that in your frozen account there is no rebalancing, no buying, no selling, no withdraw. You can take no action until you return to Canada and unfreeze. Good thing you are read this before you leave Canada and it’s not too late! Your ideal frozen funds should have these characteristics:

  • No dividends
  • No re-balancing required
  • Steady, reliable growth
  • Low fees
  • Allocations: 15% Canadian equity, 40% US equity,  25% International equity, and 20% bonds

If you are under thirty I’d normally suggest 10% in bonds, but since you can’t re-balance it’s best to give your slower growing bonds a head start. In a few years your entire portfolio will be higher(probably), but the bonds will have grown at a slower pace, reducing their share of the total. Ideally that 20% will be closer to 10% or 15% where it belongs. (and yes that will keep shrinking, but there’s really nothing we can do about it if your account is frozen for ten years or longer).

I’ve come up with two options: One single balanced fund, or a set of three or four stable ETFs. Amix of both will also work well:


Option 1: A Single Balanced Fund


     Difficulty: Easiest

If we ignore the specifics of the asset allocation I mentioned in the last section, we can buy a single solid balanced ETF and dump our whole sac of cash into it. Don’t be intimidated, you’re still diversifying because the fund includes different asset classes. Blackrock offers a range of these balanced ETFs. CBN for example invests in the total stock market and includes bonds. Seems like a no-brainer right? Well these balanced funds don’t satisfy some key criteria:

  1. They all pay dividends
  2. They have MERs over 0.6%.

Since we can’t purchase new shares, all those cash dividends will sit and collect dust, ruining all that beautiful compound interest. And I do mean ruining. Seriously don’t ignore this.

For example: Lets say you invested $10,000 in two stocks. One gives a 3% dividend and 4% capital gain. And the second gives a straight 7% capital gain. And let’s say you’re holding it in a frozen account where you can’t reinvest the dividends.  I did the math and after 5 years, the difference in total value is about $1,500, after ten years it’s nearly $4,500. That’s 45% of your initial investment!!! ALWAYS REINVEST YOUR DIVIDENDS.

Tangerine also offers tasty balanced index funds, but they may not allow you to keep your account when you break residency. (I don’t have an account with Tangerine so you’ll need to check yourself)


Option 2: Mixed ETFs


    Difficulty: Slightly less easy

In this option we’ll pick no more than four ETFs in an attempt to satisfy as many criteria as possible. The obvious first choice is my old friend the dividend-free Swap based ETF. Horizon has three solid choices:

  1. HXT – Canadian Equity 15%
  2. HXS – US Equity – 40%
  3. HBB – Bonds – 20%

But what about international equity? To my knowledge there are no international low-cost swap ETFs available to Canadians (If I’m wrong please please tell me so I can buy some). Unfortunately we are hooped and have to take the cash dividend ETFs. There are three good choices on the market:

  • XEF by Blackrock
  • VIU by Vanguard
  • ZEA by BMO

They virtually identical. The only loser is ZEA because it holds another BMO ETF within it instead of holding the underlying stocks directly (Thus you’ll lose some money on withholding taxes, don’t worry about the complexities, just remember holding stocks directly is always marginally better).

Pick any of them! But if you really want my opinion, lets say VIU.



Here are my recommended steps for leaving money in Canada:

  1. Determine if you are giving up residency. If yes:
  2. Ask your brokerage if you can keep your investment accounts. If yes:
  3. Set up your investments with either a single balanced fund or ETF mix that will reduce fees and dividends
  4. Report a “deemed disposition” on your next Canadian tax return based on the day you left the country
  5. Leave
  6. Enjoy your new international life! You made a fantastic life decision.
  7. Return to Canada
  8. “Reacquire” your taxable investments at their price the day you re-enter Canada.
  9. Profit!

Get ready for the world of cross-border taxes! Good luck!

Spam your friends:


  1. […] Click Here to continue to Part 2 on what to hold in a frozen account. […]

  2. Thank you for the post. It almost applies to my situation:
    I am leaving Canada for Europe. I don’t have any intention of returning to Canada in the future. I want to leave my investments (TFSA HISA, XIU, VWO, ZRE) in Canada for a while until the CAD/EUR exchange recovers some before moving the money out. I can wait 5 to 10 years if needed. I am thinking of selling the ETFs to buy SWAP based ETFs. I might also move a part of the cash to Europe.What is your advice?

    • I’m a big fan of the SWAP ETFs for eliminating dividends. Depending on your Canadian brokerage they might not let you re-invest your dividends (including DRIP), which will be a huge hit to your return for holdings like ZRE where you depend on dividends. Unfortunately there is no SWAP for REITs that I know of.

      More importantly you should figure out if your TFSA and RRSP will be recognized by your new European country/countries. You’re probably good with the RRSP but the TFSA is relatively new and many countries ignore the “tax-free” part of it. Unless you can confirm without a doubt that the country will recognize the TFSA it may be in your best interest to take the money with you and reinvest. Personally I would only leave my TFSA open if I knew without a doubt it would be recognized in my new country. For a while I thought I was moving to Europe, and in my research I found http://www.internaxx.com/ which offers international investing in multiple currencies, so maybe you don’t even need to convert your CAD.

      Also be aware that moving all this money around will complicate your taxes and you many need to hire help. Have fun in Europe!

  3. In our case, we sold off our TFSAs & moved our RRSPs to Questrade (love being able to buy one or two ETF shares at no charge with spare dividend change).

    For now our remaining non-registered account is HBB, HXT & HXS (but also looking at HXDM). We have non-resident accounts with Interactive Brokers LLC and Virtual Brokers that are good to go but we are holding off to look at Questrade who also supposedly support non-resident non-registered (just non-margin?) investing.

    It’s great to see someone trying to document some of this stuff. Moving to a country that doesn’t have a tax treaty with Canada isn’t that much bigger a deal.

    • It’s possible that Questrade supports non-margin taxable accounts for non-residents, although if you already have the accounts with the other guys you might as well stick with them. I only had the margin account and my TFSA, both of which I closed for the reasons I wrote about here. Totally agree with buying one or two ETF shares with dividend money!


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