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Persona non grata posted:Every time a TFSA holder checks their statements and compares their TFSA with their non-sheltered accounts, they calculate how much they would make if all their investments were tax free. Man, that would be sweet. And just as Pavlov's dog's mouth watered when he heard the bell, middle class TFSA holders will be conditioned only to think of how much their chump change investments would gain if capital gains taxes were dropped entirely. That's a very interesting way to look at it, thank you!
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Jan 18, 2014 06:59
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n00b posted:30% Cdn Bond Index -- MER 0.50% I've been wondering about the risk associated with Bond index funds given all the chatter about QE tapering. It can't be good for Bond index funds, and it's just a question of when, not if. Does anyone have any thoughts on this? I am busy reducing my positions in this area, personally.
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Jan 18, 2014 16:51
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Saltin posted:I've been wondering about the risk associated with Bond index funds given all the chatter about QE tapering. It can't be good for Bond index funds, and it's just a question of when, not if. Right now the Canadian dollar and index are being shorted by a lot of people in anticipation of a further weakened economy, bubble pop and market crash. But you are more concerned about interest rates going up because? Is it because "it's the only direction left to go since they're so low"? Because people have been saying that for years and we could enter a deflationary period or a stagnation period for a few years which I think is more likely in Canada than growth. cowofwar fucked around with this message at 16:59 on Jan 18, 2014 |
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Jan 18, 2014 16:55
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tuyop posted:I don't understand how a tax-sheltered account limited to $5500/year is especially useful for the wealthy. Even if you only make $31 000 net, saving $460/month, or ~18% of your income, is probably doable in most cost-of-living areas if a person is motivated and educated. When I say wealthy, I am not talking super rich millionaires. With the total amount now up to 31K and the Harper government talking about eventually doubling the contribution room, it's getting to the point where you have to be fairly well off to max this out. Isn't the average income in this country somewhere around 50K? If it was doubled, how many average people could put 20%+ of their income into a TFSA every year? The average Canadian has a fairly low rate of tax anyway. I'm not saying the TFSA is a huge benefit to the wealthy, but I think it's getting to the point where it benefits the wealthy more than it does the average Canadian.
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Jan 18, 2014 18:08
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Kal Torak posted:Isn't the average income in this country somewhere around 50K? If it was doubled, how many average people could put 20%+ of their income into a TFSA every year? Could? I imagine everyone who is willing to be financially responsible & frugal... How many do? Well, you know.
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Jan 18, 2014 20:02
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Kal Torak posted:When I say wealthy, I am not talking super rich millionaires. Most Canadians are actually highly leveraged with consumer and mortgage debt. Their retirement savings, if any, are auto-contributions taken off their pay. Very few middle class Canadians can afford to make after tax contributions to additional retirement savings vehicles like RRSPs and TFSAs. They are relying on house appreciation to fund their retirement. So yes, if you have a spare $5000 a year or double that as a couple, you are wealthy.
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Jan 18, 2014 20:05
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cowofwar posted:Most Canadians are actually highly leveraged with consumer and mortgage debt. Their retirement savings, if any, are auto-contributions taken off their pay. Very few middle class Canadians can afford to make after tax contributions to additional retirement savings vehicles like RRSPs and TFSAs. They are relying on house appreciation to fund their retirement. It just depends on your definition of "afford". If you can't find at least 460/month to give future you a better life somehow, then I think the definition of "afford" that most of us in BFC work with implies that you can't afford your $2500 mortgage, or $300/month Starbucks habit, or second car payment. These are all staples of a modern Canadian "middle class" life while saving and financial acumen are not.
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Jan 18, 2014 20:27
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There's a part of me - the part that laughs at people falling on their asses and getting kicked in the balls - that can't wait for the real estate market to finally Honestly, thought, the TFSA is much more advantageous than the RRSP for "poor" people, who don't pay much taxes anyway. The issue is that we've reached a point where culturally people seem to think that only the rich ever save.
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Jan 18, 2014 20:37
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Don't blame individual people for their inability to save. It's an economic and sociocultural problem.
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Jan 18, 2014 20:57
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cowofwar posted:Sounds like you're trying to time your long term investments based on short term market speculation. I should be clear - I am invested heavily in the US as compared to Canada at the moment. It's a result of me believing about 2 years ago that the growth was in the US. The US markets have rewarded me well, especially this year. They have crushed Canadian returns. As a result I am modestly (as a percentage) invested in US bond index ETFs. They pay a tasty dividend, which is fine, but QE tapering is a concern and I was wondering what other people thought about that specifically. My own opinion is that it is not speculation that it'll happen, it's just a case of when and how much, which is an interesting conversation with real impacts. Saltin fucked around with this message at 21:23 on Jan 18, 2014 |
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Jan 18, 2014 21:16
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Saltin posted:I should be clear - I am invested heavily in the US as compared to Canada at the moment. It's a result of me believing about 2 years ago that the growth was in the US. The US markets have rewarded me well, especially this year. They have crushed Canadian returns. I've struggled a bit with this logic as well. I think ultimately a lot of the concern about QE is probably built into the underlying bond prices at this point. At the end of the day, all of this stuff is a fart in the wind viewed on a long enough time horizon - something like XBB has the vast, vast majority of its maturities in the 0-10 year timeframe. It's almost certainly for the best just to pick an allocation percentage and more or less forget about it between rebalances.
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Jan 18, 2014 21:36
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To an extent QE tapering is already priced in with bonds having been selling at a discount for the last year.
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Jan 18, 2014 21:53
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cowofwar posted:Don't blame individual people for their inability to save. It's an economic and sociocultural problem. North American culture is definitely toxic at times, and there have been legitimate economic issues for much of the past decade... but let's not entirely absolve personal responsibility here.
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Jan 19, 2014 00:00
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Lexicon posted:North American culture is definitely toxic at times, and there have been legitimate economic issues for much of the past decade... but let's not entirely absolve personal responsibility here. Otherwise it's naive and smells of just world fallacy. But it turns out that most poor people grew up poor and most non-poor people had a middle class childhood full of opportunities.
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Jan 19, 2014 02:45
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cowofwar posted:Someone who has learned financial skills, has had opportunities in life and hasn't grown up in a poor and indebted family can maybe be held to blame for making poor financial decisions. I agree that the poor shouldn't be held to account, considering without someone benevolently teaching them, the best they'll be exposed to are financial shysters and predators. The middle class though, the insanity I see from people who constantly complain about having no money, thinking that a $2/hr raise at work is going to somehow change that. Many of my peers won't switch from their chequing accounts at the big banks where they have to have $1000 in their chequing to have no fees (or just less fees), especially if you include how they "don't pay anything" while getting 0% interest and have to have ALL their investments (crappy mutual funds) there, because they're too lazy to change their pre-authorized payments. It's a good thing that my current workplace has a pension (which I am definitely opting out of, because compared to someone who knows how to optimize their tax-situation/etc, a pension is a bit hamfisted) because when you give someone a dollar, they spend a dollar. Until people realize that that is not a sustainable long term budget, any further financial education is pretty much pointless, sad to say. Perhaps for 5% of people, if you show them how investing into indexes with a low cost brokerage will make them a tremendous amount of money and not enrich the financial industry, they will try to save more, but for the other 95%, no point. They only have pennies to invest anyways. I think most of the "middle" class have given up, really. They're not unhappy enough with their savings and future to actually make changes, and so I don't really feel too much pity for them. I put middle class in quotations, because most of them are significantly less middle-class than the middle class of a generation ago. I consider myself middle class, but to most me and my family/upbringing would be very upper-middle or upper- because the average middle class now pays for college 100% by student loans (they don't open up RESPs for their kids and contribute as part of their budget when they are born like people used to- future planning, what's that??.)
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Jan 19, 2014 03:25
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^ Exactly right. Bad financial acumen is not a "poor people" thing.
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Jan 19, 2014 03:30
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Completely anecdotal, but I was very much in debt for many years, along with most other people I know. I don't know a single person that wouldn't say they were completely at fault themselves for not controlling their spending.
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Jan 19, 2014 04:09
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I'm dipping my toe into this investing thing, and I have a few basic questions; sorry if it's been covered before. I found an iShares ETF that I'd like to buy, but it is listed only on their American site, not the Canadian one. If I open a TD investment account would I be able to buy it, and does this mean I have to take exchange rates into account also? Does it matter if it's a TFSA? I only suggested TD because I've already got my chequing account with them and honestly I don't mind paying a little bit more for the convenience, but I'd also like to hear if there's a much better way to do this.
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Jan 19, 2014 12:04
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EstefanHarpero posted:I'm dipping my toe into this investing thing, and I have a few basic questions; sorry if it's been covered before. I found an iShares ETF that I'd like to buy, but it is listed only on their American site, not the Canadian one. If I open a TD investment account would I be able to buy it, and does this mean I have to take exchange rates into account also? Does it matter if it's a TFSA? Yes, you can easily buy a US-listed ETF with TD Direct Investing. You'll need US dollars to do so though - in general all these brokerages happily permit you to have a USD as well as CAD side of the account. If you're truly brand new to investing, I'd question your rationale though. Transacting in USD adds a whole other dimension of complexity (the necessity to convert currency cheaply, recording TFSA contributions at the appropriate conversion rate, etc). If you're only going to be investing in a USD market-linked ETF, you're likely far better to pick one that trades in Canadian dollars and holds those underlying US securities for you.
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Jan 20, 2014 02:58
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n00b posted:So, after much reading in this thread and elsewhere, earlier today I took the plunge and opened a TD e-series mutual funds account, with the goal of index funding my way to early retirement (or so I hope...) As I alluded earlier, it doesn't work this way. Suppose you owned $1000 of each of those funds on January 1st, and further suppose that there was zero growth or loss in each of them over a whole year (virtually impossible, but this is for illustrative purposes). You would end up with balances of $995, $996.70, $996.50, $994.90. Those subtraction amounts are the consequence of the MER for each fund - that's the fee TD takes for running the funds. So hopefully it's now clear that dropping a fund has no impact on your "total MER" - you'd simply be reducing your exposure to that thing (and the dollars paid in MER for just that fund). Given that international, i.e. "the world minus Canada and the USA", is a rather large part of the world's economy - it would be foolish, in my opinion, to not have some exposure to it for a long-term portfolio. n00b posted:Also, can someone explain to me the benefits of having a TFSA tied to the mutual funds? Right now I have it tied to my chequing account, but I understand that many people use their TFSA to offset their taxable income? I understand RRSPs and how they are useful, but TFSA still confuses me inspite of my efforts to understand it. Many people don't understand this, though it's conceptually quite simple. All investments, no matter the type/risk, are held in accounts. Sometimes, an account has special tax rules associated with it (most commonly the RRSP set of rules, or the TFSA set of rules). Conceptually - that's it. An account holds investments (or straight up cash as savings), and you can elect to have it be treated specially for tax purposes (or not at all, in the case of a non-registered account). So the rules are, roughly speaking: RRSP: Contribute pre-tax wage income, reduce your taxes in the earned year, but when you finally withdraw, distributions are treated as income (as if you earned them at a job). TFSA: Take your normal, earned cash (the same kind that shows up in your bank on payday). Buy investments or a GIC, or regular old savings. The income from this (dividends, or an appreciate of price - a stock rises in value for example) is not taxed. An account without those special designations is treated normally: 50% of capital gains are taxed as income, and dividends count as regular income (though Canadian dividends are treated more favourably than foreign). Make sense?
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Jan 20, 2014 03:17
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Lexicon, thank you! That is the best explanation of the TFSA that I've come across (seriously), I appreciate you taking the time to explain that. When I asked the bank about it when I was opening up the account, the advisor gave me some vague answer about it being a rather complicated option that had serious setbacks if you went over the contribution limit. I'll go back later this week and ask them to convert it from a non-registered mutual funds account to a TFSA one. I'll keep the International index too, it seems to make sense to diversify globally. Another really dumb question for other TD e-series users - how exactly do I keep my index spread at my desired allocations? Is it possible to just set up your % allocations across your indexes and dump lump sums into the account (ie. I transfer $1,000 into my mutual funds account and it automatically places 30% of that into my bonds index, 23.3% into my US index, etc...) or do I have to manually calculate how much I need to invest into each account?
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Jan 20, 2014 04:17
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n00b posted:Lexicon, thank you! That is the best explanation of the TFSA that I've come across (seriously), I appreciate you taking the time to explain that. When I asked the bank about it when I was opening up the account, the advisor gave me some vague answer about it being a rather complicated option that had serious setbacks if you went over the contribution limit. I'll go back later this week and ask them to convert it from a non-registered mutual funds account to a TFSA one. I'll keep the International index too, it seems to make sense to diversify globally. Awesome - good to hear. n00b posted:Another really dumb question for other TD e-series users - how exactly do I keep my index spread at my desired allocations? Is it possible to just set up your % allocations across your indexes and dump lump sums into the account (ie. I transfer $1,000 into my mutual funds account and it automatically places 30% of that into my bonds index, 23.3% into my US index, etc...) or do I have to manually calculate how much I need to invest into each account? You need to do two things to achieve this. 1) Assuming you're contributing regularly, your contribution amounts should roughly target your goal. So if you're goal is 30/23/23/23, you should contribute proportionally each week/month/quarter. 2) Once a year, you should rebalance - sell the stuff that's done well (take profits) and buy stuff that's cheap. You want to rebalance, by buying and selling as appropriate, so that your account is back at your target allocation. As for when to rebalance - I always recommend people to use their birthday. It's an unbiased date and an easy schedule that people can stick to. Set a reminder in your calendar (if you use Google Calendar, iCloud, etc) and take care of it around then every year.
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Jan 20, 2014 05:08
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Anyone here done a Norbert's Gambit with an interlisted stock like RY? What's the precise process? Do you need to wait for T+3 for the trade to settle before requesting journaling, or can that happen immediately? I've typically used DLR/DLR.U, but it has fairly low volume, and sometimes it takes a while for trades to accept. Someone earlier in the thread suggested that a bank stock will have a tighter bid/ask spread also, so I want to give it a try.
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Jan 20, 2014 17:28
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Lexicon posted:Anyone here done a Norbert's Gambit with an interlisted stock like RY? What's the precise process? Do you need to wait for T+3 for the trade to settle before requesting journaling, or can that happen immediately? Pretty sure you have to wait the 3 days. Would this work in registered accounts? I don't think you can short in registered accounts.
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Jan 20, 2014 18:05
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Kal Torak posted:Pretty sure you have to wait the 3 days. Would this work in registered accounts? I don't think you can short in registered accounts. I'd be doing it in a non-registered account. The three day wait is unfortunate if true, because that's an equity price risk. No point taking advantage of a small bid/ask spread if there's a [potentially non-trivial] variance in the price between T and T+3.
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Jan 20, 2014 18:14
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Lexicon posted:I'd be doing it in a non-registered account. How would there be a price risk? You're long and short the same amount of stock. According to the Canadian finance wiki, you have to wait until settlement: http://www.finiki.org/wiki/Norbert's_Gambit quote:If your broker's system requires you to use a short sale, you usually must request that the broker journal shares from the long side to cover the short on settlement date three business days later. This usually requires a phone call to the broker.
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Jan 20, 2014 18:25
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Kal Torak posted:How would there be a price risk? You're long and short the same amount of stock. Ah, I see. I typically do the DLR/DLR.U in one fell swoop on the phone, so I didn't realize you'd be simultaneously long and short like this.
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Jan 20, 2014 18:43
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My understanding is that there is no price risk but it may depend on how your broker does things. When I did this with TDW there wasn't, at least. It does take a few days for the trade to settle but you shouldn't be exposed to price risk during this time. The process (as I did it) is as follows: -Prepare an online buy order through for the desired amount of the interlisted stock on the TSX (hence, in Canadian dollars) that you want. I recommend TD/TD.TO. -Call up the phone trading desk at your broker, explain what you have set up, and tell them that you want them to: 1) journal the shares over to the corresponding interlisted stock on the NYSE as soon as the buy completes 2) place a sell order for all of the stocks as soon as the buy completes -Place the buy order online yourself (this should save you a phone commission) and let them do the rest. The journal+sell phase should take only a minute or so. -Withdraw your $ in a few days after the trade settles (because of the journalling) blah_blah fucked around with this message at 20:55 on Jan 20, 2014 |
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Jan 20, 2014 20:52
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blah_blah posted:My understanding is that there is no price risk but it may depend on how your broker does things. When I did this with TDW there wasn't, at least. It does take a few days for the trade to settle but you shouldn't be exposed to price risk during this time. Thanks. So just to be clear: you phone right after the purchase then? Not in 3 days time?
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Jan 21, 2014 01:50
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Lexicon posted:Thanks. So just to be clear: you phone right after the purchase then? Not in 3 days time? I think the optimal thing to do is prepare the buy order but not send it, call them and tell them what you want to do, confirm with them that everything works the way you expect, and then place the buy order online while keeping the guy on the phone, and let him handle the remaining steps of the transaction for you. From the time you place the buy order to him putting in the journal request and selling should only be a few minutes.
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Jan 21, 2014 02:08
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Sounds like a headache. Yet another advantage to IB where you can do a quick FX transaction at the spot rate for a measly $2 per trade.
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Jan 21, 2014 04:48
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Kal Torak posted:Sounds like a headache. Yet another advantage to IB where you can do a quick FX transaction at the spot rate for a measly $2 per trade. Interactive Brokers? First I've heard of this outfit. If it truly is spot conversions at $2 per trade, I'm surprised I've never heard any Canadian financial bloggers mention it. What's the catch?
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Jan 21, 2014 05:14
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Lexicon posted:Interactive Brokers? First I've heard of this outfit. The main catch is that there is a minimum monthly commission of 10 dollars, and they don't do registered accounts. They do have really cheap fx, and cheap commissions.
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Jan 21, 2014 05:20
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Lexicon posted:Interactive Brokers? First I've heard of this outfit. It truly is. Market conversions at .20 basis points ($2 minimum). So anything 100K and under is $2. https://www.interactivebrokers.com/en/index.php?f=commission&p=fx1 As spoof said, they don't have registered accounts. They charge you a minimum of $10 per month in commissions whether or not you trade. And you need 10K to open an account.
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Jan 21, 2014 05:25
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OK, I haven't overhauled my portfolio in a year and a half and its pretty messy: Roughly breaks down into: 52% Canadian 18% International Index 22% US Index 8% Cash I made the mistake (dumb and lazy) of not moving investments over to my TFSA last year and taking advantage of the tax-free growth, I might as well make my contribution for 2014 while I'm at it now. That'll allow me to move about 14% of my non-registered investments into my TFSA, but at the same time I'll be paying a bit of capital gains tax as well. The GIC matures in March of this year and was a 5-year locked in, but its looking like it'll realize with about a 30% gain. Upon maturity, I will move that money my self-directed RSP. The Blackrock Lifepath is my company RSP. Immediate (potential) problems that jump out at me + potential action plan: - 0% in fixed income... I was holding some e-series Canadian Bond Index (TDB909) (25% of my e-series holdings) but got rid of it and rebalanced into mostly US/INT last year, feeling very much like I got lucky and that it would be beneficial to have some risk mitigation -> hold more cash parked in HISA or build a 5-year GIC ladder - high exposure to Canadian markets -> hold less of the Canadian e-series and more of the US/INT since my work-based RSP and stocks are all in Canadian - large holdings of individual equities -> these should be moved into energy / financial / utilities ETFs rather than individual holdings to mitigate risk - should be using ETFs rather than e-series for the lower MER (>$50,000 rule is met) In terms of tax efficiency, my equities being held in tax-sheltered accounts -> does it make the most sense to move them into non-registered, and move my US/INT funds portion into my TFSA / RSP? This way I can make the most of the generous Canadian dividend credits. Anything else glaringly obvious that I'm missing? Pieces fucked around with this message at 06:02 on Jan 21, 2014 |
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Jan 21, 2014 05:46
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Kal Torak posted:It truly is. Market conversions at .20 basis points ($2 minimum). So anything 100K and under is $2. https://www.interactivebrokers.com/en/index.php?f=commission&p=fx1 Good deal; thanks for the heads up. I should use them as I get paid typically in USD.
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Jan 21, 2014 05:52
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Lexicon posted:Good deal; thanks for the heads up. I should use them as I get paid typically in USD. I'd recommend them for any trader. Their commissions are dirt cheap, they charge zero for option assignment/expiry (most firms charge minimum $25), interest is dirt cheap, and you don't need to open a separate forex account to do FX transactions. Great broker.
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Jan 21, 2014 05:57
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Pieces posted:I made the mistake (dumb and lazy) of not moving investments over to my TFSA last year and taking advantage of the tax-free growth, I might as well make my contribution for 2014 while I'm at it now. That'll allow me to move about 14% of my non-registered investments into my TFSA, but at the same time I'll be paying a bit of capital gains tax as well. Might be a good time to harvest a loss if you have any to offset the gain. Pieces posted:Immediate (potential) problems that jump out at me + potential action plan: Bonds remain mysterious to me, but IIRC there's a lot of research that suggests they can pretty nicely dampen the volatility of a portfolio. It's probably worth having a percentage, at least. I wouldn't even bother with a GIC myself: illiquid, tax-inefficient, and tiny yield. Pieces posted:- high exposure to Canadian markets -> hold less of the Canadian e-series and more of the US/INT since my work-based RSP and stocks are all in Canadian Yup, probably want to reduce Canadian, and get rid of the individual equities. At the very least swap the TD for a Canadian bank ETF. IMO, it's crazy risky to have individual equities like this. Pieces posted:In terms of tax efficiency, my equities being held in tax-sheltered accounts -> does it make the most sense to move them into non-registered, and move my US/INT funds portion into my TFSA / RSP? This way I can make the most of the generous Canadian dividend credits. Tax-efficiency is tricky. You need to balance your own personal beliefs, planning, and circumstances with the actual tax advantages. It's hard to comment without knowing more. You should always be maxing your TFSA, and arguably same with the RRSP - depending on your current marginal rate and retirement plans. Then everything else goes in non-registered, with usually Canadian equities first.
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Jan 22, 2014 00:12
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What's the skinny on indexed GICs? I must admit at first I thought they sounded pretty good. Guaranteed principal but far better upside, but the more I've been reading about them the less appealing they sound. Hidden fees, lovely interest tax rates, nebulous track record and performance which is certainly giving pause. http://www.investingforme.com/index-linked-gic http://www.rbcroyalbank.com/products/gic/marketsmart-suite.html Anyone here checked into them before?
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Jan 22, 2014 01:48
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slidebite posted:What's the skinny on indexed GICs?
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Jan 22, 2014 01:52
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