Author Topic: Question regarding Canadian unregistered account with Questrade  (Read 1370 times)

NorthernDreamer

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I am opening an unregistered ("margin") account with Questrade. I keep reading that I should first try to hold Canadian investments in this for "favourable tax treatment". Still trying to wrap my mind around this. I will be rebalancing, but I cannot only have Canadian investments in here or my AA will be skewed. My questions:

1. Will stocks traded on the TSX like SHOP.TO (Shopify), DOL.TO (Dollarama), and TD.TO receive those "favourable tax treatments"? I currently hold small amounts of them in my registered accounts, and I'm not sure if I should move them to my unregistered account so I can bulk up my registered accounts with VXC and VAB.

2. I am looking at holding VCN, VDY, and VXC in my unregistered account (plus possibly the stocks listed above). Any other recommendations? Critiques?

Thanks :)

RichMoose

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Re: Question regarding Canadian unregistered account with Questrade
« Reply #1 on: April 24, 2017, 05:26:37 PM »
The only significant favourable tax treatment relates to dividends. Eligible dividends from Canadian corporations are taxed at much lower rates than foreign dividends. To qualify the company has to be headquartered in Canada, pay income taxes in Canada, and a few other rules. So SHOP.TO, DOL.TO, and TD.TO would qualify although these companies don't all pay dividends.

Capital gains are taxed equally whether local or foreign.

I would definitely try to put your Canadian stock ETF (VCN/XIC/ZCN) allocation in your Cash/Margin account.

As for having ETFs with foreign stocks, you should consider using swap-based ETFs. HXS covers the S&P 500 and HXX covers the Eurostoxx 50 at low fees. You should also put bonds in your Cash/Margin account. HBB is super tax efficient and ZDB does a good job as well. Both are low fees.

Unless you earn a low taxable income, I would not aggressively pursue dividend investing (VDY) in your Cash/Margin account. Taxes can eat up the extra gains.

As for other critiques, here in Mustachian world we tend to lean towards simple, passive index investing. Often using 3-5 ETFs. Do you really need SHOP, DOL, and TD?

I'm not one to link dump, but I do talk about this on my blog in detail so check it out if you wish.

GreatLaker

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Re: Question regarding Canadian unregistered account with Questrade
« Reply #2 on: April 24, 2017, 05:49:08 PM »
This article from Finiki, the Canadian Financial Wiki answers your question in detail.
http://www.finiki.org/wiki/Tax-efficient_investing

NorthernDreamer

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Re: Question regarding Canadian unregistered account with Questrade
« Reply #3 on: April 25, 2017, 09:48:33 AM »
Thanks. I was going to keep bonds in my RRSP, and the rest of my VXC in my RRSP and TFSA. Maybe I don't really need to rebalance at all? Right now I have VAB, VCN and VXC in both my RRSP and TFSA.

RichMoose

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Re: Question regarding Canadian unregistered account with Questrade
« Reply #4 on: April 25, 2017, 10:57:06 AM »
Thanks. I was going to keep bonds in my RRSP, and the rest of my VXC in my RRSP and TFSA. Maybe I don't really need to rebalance at all? Right now I have VAB, VCN and VXC in both my RRSP and TFSA.

Yes exactly. Using foreign stock ETFs in Cash/margin accounts is only necessary if your Canadian allocation gets too big.