Author Topic: Newbie Canadian investor looking for advice  (Read 4714 times)

batbatmanne

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Newbie Canadian investor looking for advice
« on: July 15, 2014, 01:15:25 PM »
Hey guys I have recently been researching how to become financially independent and I am glad to have stumbled into this community. I have just recently graduated university with a bachelor of arts and I have ~$4500 worth of student loan that I need to pay off once I have to start paying interest on it. I also just recently opened an investment account with tangerine (equity growth portfolio) and I put $4500 in that account. This essentially comprises my net worth at the moment. One thing that concerns me is that the account is non-registered which I believe means it is not an RRSP nor a TFSA. I am somewhat new to these concepts and I would like some help.

Given that have such a small investment and I am in the lowest tax bracket (I work for minimum wage and don't anticipate a significant increase in income any time soon), how would you recommend I proceed? Should I try to move my money to be sheltered in one of these kinds of accounts or should I wait until I accumulate a larger sum/income? Also, at what point do you think I should look to move my money into my own managed portfolio (assuming I become more educated on how to do this)?

daverobev

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Re: Newbie Canadian investor looking for advice
« Reply #1 on: July 15, 2014, 06:47:51 PM »
Have a read of CanadianCouchPotato.

For $4.5k put it all into a TFSA. You get 5.5k per year now (not sure how old you are but contrib room starts when you're 18).

Lowest tax bracket favours the TFSA assuming you'll be in a higher bracket sometime.

If you sell and rebuy in a TFSA you'll need to pay capital gains on any gain but cannot claim any loss.

Good luck, good on you starting young. You can be done in 10 years - if you want to be!

strider3700

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Re: Newbie Canadian investor looking for advice
« Reply #2 on: July 16, 2014, 02:38:27 AM »
check your fees on that tangerine account.  they're owned by scotia and scotia itrade burned me with a yearly account maintenance fee.  I've since moved everything to questrade where I'm basically doing the couch potato portfolio.

Kaspian

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Re: Newbie Canadian investor looking for advice
« Reply #3 on: July 24, 2014, 12:57:36 PM »
I agree.  Canadian Couch Potato has everything you need.  Not only that, but I believe Dan may be the smartest Canadian financial guy ever.  Anything you need is on that site--just use searches.

AssetGrinder

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Re: Newbie Canadian investor looking for advice
« Reply #4 on: July 25, 2014, 12:22:02 AM »
First max out your TFSA as its bar none the best starting point to invest for us Canadians and in some cases RRSPs may suit you better. With 4500 a good index or value fund ETF is your best option allowing you to capture many companies with one trade. Most important thing to do starting out is to get educated. Learn more about finance and the investing world. Dont trust anyone with your money. make your own informed and educated choices. Do your own research and analysis. Remember mutual fund salesmen and the banks advisers are not looking out for your best interest.

Good Luck!

Goldielocks

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Re: Newbie Canadian investor looking for advice
« Reply #5 on: July 25, 2014, 12:36:59 AM »
I agree.  Canadian Couch Potato has everything you need.  Not only that, but I believe Dan may be the smartest Canadian financial guy ever.  Anything you need is on that site--just use searches.

+1. I switched to CDN couch potato 18 months ago and it makes it all so much easier.  No horrible financial planners either.


After ensuring you get all employer matching...

Here is the general CDN tax rule..

When income is low, max out TSFA first.  When high (over 25% marginal tax), max out rrsps until your net taxable income is under $35k or so..

If you have lots of money, max out both.  MMM style is to always max out both..

You can use RRSP to balance out high/low income years... Put $ in during very high years (over $70k, say) to get the tax rebate at a high %.. and with draw it when at a lower bracket (30k), even if just reinvested on a  tsfa.  You will pay a much lower tax rate the withdrawl year.  You get to shelter yourself from taxes on the high year and pay lower on the lean year.  The only downside is loss of available room in RRSP, but you get the tax benefit early,so not a real loss.

Good luck!
« Last Edit: July 25, 2014, 12:39:52 AM by goldielocks »

Shooter_D

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Re: Newbie Canadian investor looking for advice
« Reply #6 on: August 09, 2014, 06:54:14 AM »

Have a read of CanadianCouchPotato.

For $4.5k put it all into a TFSA. You get 5.5k per year now (not sure how old you are but contrib room starts when you're 18).

Lowest tax bracket favours the TFSA assuming you'll be in a higher bracket sometime.

If you sell and rebuy in a TFSA you'll need to pay capital gains on any gain but cannot claim any loss.

Good luck, good on you starting young. You can be done in 10 years - if you want to be!

My understanding is that the TFSA is completely tax free, including any capital gains. From the Canadian gov website:

Your contributions to a TFSA are not deductible for income tax purposes but the investment income, including capital gains, earned in your TFSA is not taxed, even when withdrawn.




Sent from my iPhone using Tapatalk

Gerard

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Re: Newbie Canadian investor looking for advice
« Reply #7 on: September 02, 2014, 04:37:49 PM »
If you sell and rebuy in a TFSA you'll need to pay capital gains on any gain but cannot claim any loss.
My understanding is that the TFSA is completely tax free, including any capital gains.

Shooter, I think daverobev means "If you sell (your current stuff), and (then) re-buy in a TFSA, you'll need to pay capital gains."

Oh, those commas!

daverobev

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Re: Newbie Canadian investor looking for advice
« Reply #8 on: September 02, 2014, 05:50:02 PM »
If you sell and rebuy in a TFSA you'll need to pay capital gains on any gain but cannot claim any loss.
My understanding is that the TFSA is completely tax free, including any capital gains.

Shooter, I think daverobev means "If you sell (your current stuff), and (then) re-buy in a TFSA, you'll need to pay capital gains."

Oh, those commas!

Yes; though it's not commas, just omitted words!

If you sell your unregistered funds and rebuy them within a TFSA you'll need to pay cap gains if you have any, but cannot claim losses.

Sometimes I tablet. Because on toilet, har har.

(This post is brought to you by my laptop, on the couch, phew!)

Stasher

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Re: Newbie Canadian investor looking for advice
« Reply #9 on: September 02, 2014, 07:12:38 PM »
I agree.  Canadian Couch Potato has everything you need.  Not only that, but I believe Dan may be the smartest Canadian financial guy ever.  Anything you need is on that site--just use searches.

+1. I switched to CDN couch potato 18 months ago and it makes it all so much easier.  No horrible financial planners either.


After ensuring you get all employer matching...

Here is the general CDN tax rule..

When income is low, max out TSFA first.  When high (over 25% marginal tax), max out rrsps until your net taxable income is under $35k or so..

If you have lots of money, max out both.  MMM style is to always max out both..

You can use RRSP to balance out high/low income years... Put $ in during very high years (over $70k, say) to get the tax rebate at a high %.. and with draw it when at a lower bracket (30k), even if just reinvested on a  tsfa.  You will pay a much lower tax rate the withdrawl year.  You get to shelter yourself from taxes on the high year and pay lower on the lean year.  The only downside is loss of available room in RRSP, but you get the tax benefit early,so not a real loss.

Good luck!

GoldieLocks nailed it right there!! Great advice and knowing when to invest into which vehicle is important.
I started out on the full CouchPotaoto setup originally but then tailored it down to the following after reading JCollins and MMM. Start with a CND index as these funds often have $1000 minimums some times and work your way up as you reach the minimum cash values to open.

I have a regular Scotia TFSA and hold funds US index and CND index only
- 1.0% MER fees so I'm pulling out in December and putting into my RRSP for 2014 calender year as I have a huge RRSP limit and high tax bracket. Then I'm free to invest the full amount drawn out in December 2014 back in January 2015 without penalty. Im doing this so I can open a iTrade TFSA and enjoy the lower MER fees . I use the TFSA as my emergency fund incubator LOL I have 35,000 in my TFSA right now thanks to growth and with next years bump of $5500 I can invest $40,500 instead of the base amount of $37,000 that it will be. The real beauty of a TFSA that others touched on here.

I have a Scotia iTrade RRSP and hold ETFS
 - here is where I hold Dan's breakdown but ditched the bonds
 - I have VCN (vanguard canada index) VUN (vanguard us index) and ZRE (BMO Reit) , all have .15% MER fees I believe

Keep asking on the forums here as there are so many smart people and  best part is people want to help, not sell you something to make money off you. I am also learning so take what I have to say here with a grain of salt and if anyone else can add to my words please do so.

Best of Luck Batbatmanne , this is the start and only you can steer it down the right path but at least make the decision to at least move forward. every month and year puts you that much closer.
« Last Edit: September 02, 2014, 07:28:18 PM by Stasher »