The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: JessicaRed on February 26, 2013, 08:03:35 PM
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Hi all - just reading my way through MMM's entire archive. In "How to Make Money in the Stock Market" he noted how Canadians obviously have different investment options
In Canada, check out TD Waterhouse and their own series of funds, and let me know if you have any questions about what you find there – MMM has a Canadian Investments Expert Panel that can help us out.
I'm new to navigating the MMM forums - is there a big prior thread/area somewhere with this information? I've read how TD pretty much corners the market on index funds in Canada, but I think I also heard something about Vanguard options for Canadian investors.
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You can checkout this thread: https://forum.mrmoneymustache.com/investor-alley/confused-about-canadian-options-please-help!/msg34379/ (https://forum.mrmoneymustache.com/investor-alley/confused-about-canadian-options-please-help!/msg34379/)
It is likely already linked above, but this site is a good resource: http://canadiancouchpotato.com/
Vanguard does have an S&P 500 Index ETF in canada: VFV (but i haven't heard of them offering a mutual fund)
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Thank you!
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Vanguard has opened up shop in Canada, and I may be investing with them in the future.
However most big Canadian banks are incredibly stable and offer a range of no load index funds that you can start buying with a pre-authorized purchase plan at as little as $25 a month. RBC, TD, etc. The track funds track the same markers essentially, so the bank you're with isn't quite as important if you're getting into these kinds of funds.
If people have questions about Canadian investments I'll answer to the best of my ability. (I used to work for RBC in investments).
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The reason I said TD was because I remember reading an article saying they had the lowest management fees (if I have the term right). I'm still two years away from saving (planning/hoping to slaughter 70k of student debt in the next two years) but I've been wondering. If I manage to follow the MMM way of life, my savings would exceed my RRSP contribution limit so I'd need somewhere else to put it. I've got a TD Waterhouse account that my dad manages that I'm not going to touch for now, but I do want to be prepared for other options in case (god forbid) my dad suddenly couldn't manage those accounts.
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don't forget to max you TFSA there's another 25.5k's worth of saving space and it's growing at 5.5k/year right now so $36,500 more savings space in 2 years.
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The reason I said TD was because I remember reading an article saying they had the lowest management fees (if I have the term right). I'm still two years away from saving (planning/hoping to slaughter 70k of student debt in the next two years) but I've been wondering. If I manage to follow the MMM way of life, my savings would exceed my RRSP contribution limit so I'd need somewhere else to put it. I've got a TD Waterhouse account that my dad manages that I'm not going to touch for now, but I do want to be prepared for other options in case (god forbid) my dad suddenly couldn't manage those accounts.
Great questions.
Fees depend on what you're trying to do, but there's two to watch for.
One is the MER (Management Expense Ratio) - this is the percentage of profit the bank skims off the top. So if the mutual fund gets a 10% return in a year, and the MER is 1%, you'll only get 9%. This is once reason people recommend index funds - they are not actively managed and therefore the MER is usually less than 1%.
The MER on TD Canadian Index is 0.88 for example, whereas the highest MERs for other funds at TD are 2.89%. Quite a significant difference.
The other costs you need to look out for are transactional costs - the fees associated with buying/selling units of the fund. A 'no-load' fund is one where there is usually no such transactional costs.. although some still have a penalty if you sell within 30 days.. but this is unlikely to happen so you'd be in the clear.
For what you're talking about.. max out your RRSP contributions (remember this varies with your income, usually 18% of take home), then max out your TFSA as strider3700 mentioned.. you grow your investments in there tax free.
If you max out your RRSP & your TFSA (in which case congrats, I'd say about 2-5% of the population actually does this), then you'd have to buy a regular investment account in which you'd be taxed annually on the profits you make in there as income.
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Thank you so much for the additional explanations. How awesome would it be to max out both TFSA and RRSP!? I've got some money in my TFSA, but I think I will also leave that where it is for the time being.
Right now I'm just in that awkward, uncomfortable stage where the new knowledge of MMM lifestyle, the miracle of compounding interest etc is bumping up against the consequences of three years of not the most sensible financial decisions (my student line of credit did help in getting the education, but in all honesty there is NO WAY it should be as high as 75k...50k would be more reasonable). Also, I have no idea how the job prospects will be beyond next year (I start a ten month contract position in August - mandatory step for my profession).
My rough plan would be to pay back the loan really aggressively (hoping the job gods unite so that I can move home for 2014-2015) then use the TFSA and the Waterhouse account to cover the down payment on a small $200,000ish place in need of some DIY elbow grease. At that point I can then hopefully start the retirement savings. If the job prospects went well, I'd be starting somewhere around $75k, going to $105k in maybe 5-6 years.
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don't use the TFSA for a downpayment. INstead put the money in the RRSP for the tax deduction and then pull it using the new home buyers feature. Basically you get the tax deduction on the money then a little bit later (I think it's 3 months) you pull the money buy the house and have 10 years to pay it back into the RRSP. If you use the TFSA then you miss out on the tax deduction. Hell it even makes sense to move from your TFSA into the RRSP in advance of buying for this purpose.
Having said that there's a lot to be said about making more on your investments then the mortgage will be costing you in interest so I'm actually a fan of minimal down minimal payments and invest the difference. There's another thread on that around here somewhere.