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Welcome to the Canadian investing thread! This is not intended to replace the Investing and Retirement thread for Canadians; but rather, serve as a supplement with Canada-specific information. In other words, it'll be much of the same advice as the Investing megathread(s), coupled with additional Canada-specific tips on how to navigate the treacherous waters of our especially-rapacious banks and investment houses. Canada has some of the highest banking fees and mutual fund fees in the world, so there's not a great deal of point in investing well, only to have all the returns picked off by a terrible, high-MER fund. Also, RRSPs, TFSAs, and all that jazz. What's an MER? Glad you asked! Management-expense ratio. It's the portion of your holdings subtracted as a fee every year by the mutual fund or ETF issuer. If you're paying more than 1%, you're being absolutely ripped off. It should be a lot closer to 0.3-0.5%. The Investor's Group chucklefucks charge more like 2-3%. What the hell should I invest in? If you have debt, especially consumer debt, your main priority is to get rid of that. There's very little point investing for a best-case scenario 7% return when you're getting done for 20% on a credit card. You won't find many better uses of spare cash than paying off carried balances on a credit card. But that aside, investing newbies are often overwhelmed by the sheer volume of misinformation and clever marketing out there. The dirty secret of the industry, however, is that the vast majority of normal folks would be better served with a couch-potato strategy backed by very low-MER funds or ETFs. In very basic terms, rather than picking stocks or paying a silver-tongued Investor's Group salesman to pick them for you, you invest in funds that represent the entirety of the market, and then balance occasionally (to take profits where things have gone well, and to buy stuff that's gotten cheap). The exact country split, proportion of bonds, and frequency of rebalancing is all a matter of debate and personal choice, but this strategy has a lot of academic and historical basis. It's frequently said that active management (stock pickers) on average do not beat the index (and this is especially true once their considerable fees are subtracted). This is a really tiny overview of index investing - anyone new to this will want to do some proper research and not just take my word for it. How do I do it? For 5-figure and above amounts of money, you should buy ETFs. I like the ones from Vanguard Canada - they have super low MERs. If you're just starting out - weekly contributions to index mutual funds are hard to beat. The best are the TD eSeries mutual funds with MERs of 0.3% to 0.5%. TD makes this notoriously hard to sign up for... you can convert an existing mutual fund account to eSeries by signing up online. But don't mention it in the branch - they don't know what you're talking about and will try to steer you aside most likely. A youngish person who wants to save/invest and has some money to contribute weekly and no debt in my opinion has no better option than to throw $50-$100 a week into a couple of eSeries funds, rebalancing yearly, and otherwise forgetting about it until the fairly distant future. What bank / credit card should I use? I don't have too much to add here - others will. Personally, I use ING Thrive for all my chequing needs, TD eSeries for weekly index contributions, Questrade for ETF purchases, and the MBNA smart cash world credit card for basically all purchases. RRSPs and TFSAs Tread carefully. It is not axiomatically true that everyone should use RRSPs as a savings vehicle. I, for instance, don't... for reasons that are very case specific but we can get into if I'm compelled to justify my financial reasoning. TFSAs, on the other hand, are great - everyone should have one, but be careful on the contribution room. Everything I've said about indexing applies within the context of a TFSA. Housing Bubble? Not everyone agrees, but it should be fairly uncontroversial at this point to those who are both not-innumerate and not-selling real-estate-connected-products that Canada's housing market is looking awfully bubbly. Therefore, from an investing point of view, my advice at least is to stay the gently caress away. Opposing positions are welcome, but in either case, the discussion should generally be pertinent to investment, and not, say, the foibles of the CMHC. We have the housing bubble thread for that. Disclaimer: This is an internet comedy forum, not a chartered-accountancy. Configure your expectations and skepticism accordingly. No one here is provably a financial professional, and I'm explicitly not one. Use any information here as a starting point for your own research. Actual CAs / tax attorneys are necessary for serious personal financial decisions. Blah blah blah. Justified corrections and additional material will be added to the OP as provided. I'm just a dude that's read a bunch of books and blogs on this stuff. Lexicon fucked around with this message at 13:37 on Sep 13, 2013 |
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Sep 13, 2013 03:43
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Saving this first post for important follow-up or whatever.
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Sep 13, 2013 03:43
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Baronjutter - I agree entirely with rhazes here - having an advisor dude is almost certainly a sub-optimal approach, especially when we're only talking 40k each. You'd probably be better served investing 20-30 hours of research, and pretty quickly realizing you can cut out the middleman. But if you're happy, of course, there's no reason to change - just be aware that you *are* paying for this service, and likely quite substantially so. Rhazes - on the beat the market point - I don't have any good research to hand, but I've heard it expressed multiple times that the average advisor does not beat the index without even considering fees. It's just that hard to pick stocks due to the inherent stochastic nature of the markets. Still, I'm happy to err on the side of caution - will edit the OP.
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Sep 13, 2013 13:36
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Cultural Imperial posted:What the gently caress is up with all the loving heloc ads on cbc newsworld? It's absolutely disguising that a national broadcaster is in cahoots with such terrible financial products. I hear you. Problem is, these financial product companies have deep pockets because they are absurdly profitable. And the CBC really likes and needs money. In a sane world, the CBC wouldn't even have advertising (e.g. the BBC model of license fees), but at the very least, any advertising they do have should be agreed to be online socially useful stuff (so no cigarettes, no helocs, etc). Sadly, this is not a sane world.
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Sep 13, 2013 13:40
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JawKnee posted:What's the best TFSA to go with? Ally's used to have a pretty decent percentage a couple years back, but it's now 1.2% (which is still higher than TD's, where my chequing is). A tax-free-savings-account should primarily be used as a tax-free-investing-account (unless you have very exceptional circumstances like low cash flow due to a child on the way or a sick parent you're caring for or something). Inflation is around 2% a year. Sit and collect 1.2%, and you're not even keeping up with inflation. The money gets less valuable every year - and you're squandering a pretty nice tax saving opportunity on more serious investments. It's up to you - all this stuff is very overwhelming at the beginning - but you're almost certainly leaving money on the table here.
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Sep 13, 2013 13:48
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leaves of logic posted:Lexicon, I'm curious about why/how you're contributing weekly into your index funds, but rebalancing yearly. Isn't your cash just sitting idly in your account until you rebalance? Or do TFSAs that are setup for something like TD eSeries also get interest? I've already invested in some index funds, but I'm wondering what to do between rebalancing, like putting it into a good HISA such as People's Trust or maybe into GICs. I contribute weekly as a "savings" mechanism - the source of that money is basically out of my monthly earnings. I quite like dollar-cost averaging, which is why I contribute weekly as opposed to monthly or quarterly - and with eSeries, there's no transaction costs. My actual longer-term savings is held in ETFs. Come rebalancing time, I'll look at the mutual fund / ETF combination, and get stuff moved over to [lower-cost] but equivalent ETFs as appropriate. But that has transaction costs, so I do it infrequently. Does that make sense?
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Sep 13, 2013 15:05
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leaves of logic posted:So you're purchasing eSeries weekly, and come rebalancing time, selling some of those off and buying more into your ETFs? Precisely.
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Sep 13, 2013 15:17
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rhazes posted:Questrade has free ETF purchases (and I think every ETF is available) so a person could just go with that. However, that free ETF promotion could end at some point, not sure. True. Questrade's pricing is agressive and awesome... but I'm not too keen on the platform itself. I'm probably going to end up migrating off it at some point.
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Sep 13, 2013 15:57
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Here's your occasional reminder that we, as a nation, are loving poo poo at not being hopelessly indebted: http://www.vancouversun.com/business/Household+debt+afflicts+Canadians+soars+record+levels/8909016/story.html quote:OTTAWA — Canadian household debt climbed to a new high in the second quarter, turning around after creeping lower for two quarters, according to Statistics Canada.
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Sep 13, 2013 19:42
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^ great post. This part can't be emphasized enough:quote:If your marginal rate is high, and you think it will be low when you retire, contribute to an RRSP. One should understand the rules of an RRSP before diving in head first. Anyone making under 50k, especially with no TFSA, really should think twice about the wisdom of having one. It's also highly probable, in my opinion, that marginal rates will be quite a bit higher in future. As I said: tread carefully.
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Sep 14, 2013 05:27
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rhazes posted:I fully agree with thinking taxes going up. I don't disagree personally with an expanded welfare state, but reality is that someone's gotta pay Yeah. I think it's virtually guaranteed that income taxes need to rise fairly substantially in the next few decades. So many promises have been made by the state that simply cannot be kept under current financing: massive 25-odd year pension schemes for government workers and end-of-life healthcare for the boomers who are now hitting retirement in waves. Obviously, rules can and do change, but my TFSA is basically the foundation of my retirement plan. That said, on the RRSP/TFSA point - if your workplace offers you a matched contribution to your RRSP: TAKE IT. Never turn down free money.
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Sep 14, 2013 16:51
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rhazes posted:Well, I haven't used anything else so I have no issues with it.. ignorance is bliss I guess. what are your qualms? Honestly, I'm just a fussy nerd bastard when it comes to web stuff. There's also the issue that Questrade is not likely to be around long-term - like every other moderately disruptive banking initiative in Canada, they'll be subsumed into the big-5(6) beast eventually. Given my adherence to the couch-potato thing, I'd almost rather just have my assets parked at a single big bank, where everything's all in one place and will be forever more, and there's no pending hassle once the "purchase and shutdown" inevitably happens. Questrade is fantastic for day-trading though. Very low transaction costs. But I'm skeptical of the vast majority of day-traders being actually able to make significant money - might as well bet on horses.
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Sep 14, 2013 16:56
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^ Great points all around. I agree with basically everything you've said. All I have to add is that I've done Norbert's Gambit myself recently, and it worked out swimmingly. I calculated that on the particular day I did it, the savings rate versus the bank transfer was about $300 CAD on a $10k USD transfer. Transaction costs come off of that, of course, but still - it's a hell of an awesome way to convert large amounts of CAD/USD.
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Sep 15, 2013 03:47
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rhazes posted:There is nothing wrong with GICs. GICs are roughly equivalent to bonds (albeit illiquid), which are not a _GREAT_ return mind you, but risk free. I think GIC's are a pretty poo poo investment, honestly. For the hassle of setting one up, etc, I'd sooner just have a high-interest online savings account. Fun GIC fact: you need to pay the tax on "earnings" from a multi-year GIC each year, despite not actually receiving that money until the end of the term. rhazes posted:I think the main take-away difference when you want to compare the two is that bonds are very very terrible in taxable accounts, whereas GICs are more tax efficient when they aren't in a TFSA or RRSP. Why shouldn't bonds go into a taxable account? I'm not challenging you - I genuinely can't reason this out. I can't see a compelling reason not to. As for GICs, I disagree they are "more tax efficient" outside of a tax shelter. They produce interest income which is always taxed at your marginal (unlike dividend income, which you rightly point out belongs outside a tax-shelter). If you have a high wage or whatever, that would be a reason to ensure they are actually in a tax shelter - but personally, that's academic for me because I think they suck as an asset class.
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Sep 15, 2013 19:52
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acetcx posted:When I opened my TD e-Series account I walked into a TD branch and asked them to open a mutual fund account for me. Then I downloaded the account conversion form, filled it out, and mailed it in. It was actually pretty painless. Yeah - just go and open both flavours of bank mutual fund account. They'll make you go through the know-your-client song and dance... but just smile and nod. Once they are open, download the conversion forms and "convert" your new accounts to eSeries accounts. All that does is make the low-MER funds available... it's the exact same set of funds the bank dudes will sell you... just at a third the MER! If you don't use TD otherwise (I don't) you need a way of getting money in and out. I achieved this by opening a regular and TFSA "savings" account. It's pretty much nothing but a vehicle for injecting funds into my eSeries. I also got them to make me a direct deposit form for each account so I could EFT from ING Direct also.
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Sep 15, 2013 19:56
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Do you need to ask? The bank doesn't care about how comfortable your retirement is.
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Sep 25, 2013 17:24
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rt_hat posted:Years ago, when I started working at my first job related to my degree, I opened an RRSP account with TD CanadaTrust. The bank representative talked me into doing automatic 25$ monthly contributions to my RRSP. I was wondering why the rep would be concerned about that. Do they get some incentives from signing people up for that or was she trying to instill good savings habits ? Also, you're almost certainly paying a high MER for whatever fund they signed you up to. I'd convert that poo poo to e-series (see OP).
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Sep 25, 2013 17:46
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Squibbles posted:Any recommendations of which e-series fund to get? There's quite a few: Canadian couch potato recommends these ones, with an asset allocation suitable to your personal situation (i.e. bond vs equity percentage). These are the basic index funds that track large companies in proportion to their size - those other funds are basically managed fund shenanigans as far as I can tell. You want to avoid those if you buy into the wisdom of indexing. He has a post floating around where he specifically recommends the non-currency-hedged versions, for younger investors anyway. It's a nuanced and complicated argument though, so if anyone feels better suited to explain, I'm sure we'd all be all ears.
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Sep 25, 2013 18:59
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rhazes posted:My reason for weighting Canada lower is that Canada is only 4% of the global stock market cap Another reason to weight Canada low: we live here, and already have significant "Canadian risk" exposure. It's the same logic that follows from not investing* heavily in your own employer. (* outside of advantageous share purchase programs of course - because always take free money, but don't maintain significant holdings).
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Sep 25, 2013 19:04
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cowofwar posted:In that case definitely open a INGDirect.ca thrive chequing account. Switch your payroll over and they'll give you $100 free. Plus you can use the not-so-bad high interest savings accounts. ING Direct loving rules. Other than the Scotiabank-purchase sword-of-damocles, I don't understand why everyone doesn't use them. It's not like you need to keep your banking in one place - I use ING Direct for banking, MBNA & Chase Amazon credit cards, TD for e-series, Questrade for ETFs, and BMO for all my business banking. I'm a bit nuts though, admittedly.
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Sep 25, 2013 19:10
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reflex posted:How easy is it to transfer money cross-institution? The closest ING ABM is a 5min walk from work, but a 30min drive from home. If I need money on the weekend, the only real option I have is transferring cash to my TD account and using my TD debit card to withdraw that, right? That surely would take a couple business days? With ING, you can use all manner of credit unions, HSBC and National Bank ATMs for no cost. You can also set up multiple EFT linkages from $BANK to ING. You don't even need personalized cheques like their website says - you just go to $BANK and ask for a "direct deposit form with the bank's stamp on it". Mail that to ING, and they'll create an EFT link so you can transfer money in either direction (it does take 1-2 business days though). reflex posted:EDIT: How does ING make money? There surely is some bs cash grab somewhere in there, right? The same way every bank makes money - by borrowing at X% and lending out at (X + Y)%. They don't have a vast network of branches, replete with managers, and free coffee and plush green chairs - so that's why they can, at least in theory, offer such good rates/products. Sadly, the GFC, and the Scotiabank purchase makes the continuation of this less, rather than more, likely in future, but that was the original logic. Lexicon fucked around with this message at 19:43 on Sep 25, 2013 |
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Sep 25, 2013 19:40
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cowofwar posted:The idea that banks need to charge depositors for services is wrong and has led to people paying for their accounts. I may have made this point already, but my parents honestly thought this Canadian "service fee" concept was some elaborate joke on the part of the bank manager when the moved from the UK and were setting up accounts here. Only Canada could produce consumers so docile as to accept this as the status quo. It's virtually unheard of elsewhere that I'm aware of. Edit: Also, cowofwar, it seems that me and you are banking-philosophy soulmates 
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Sep 25, 2013 19:53
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FrozenVent posted:I think the US has similarly retarded banking fees, especially when it comes to overdraft. Yeah, overdraft on some US accounts can be criminally punitive. But it's pretty unusual to have monthly "service fees" like we do up here, or at least it was pre-GFC. It was never the norm anywhere except Canada prior to that.
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Sep 25, 2013 20:17
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Speaking of ING Direct, if people sign up for chequing accounts and deposit $100 using a current member's Orange Key, both members get $25. My Orange Key is 13965765S1 - feel free to use it, and others should post theirs too.
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Sep 25, 2013 20:23
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blah_blah posted:I'm looking at transferring about 200k (a little bit more) from CAD to USD. Is Norbert's Gambit the best way to do so (looks like I'd be paying the bid-ask spread of about 0.2% over the spot rate), or can I get competitive rates on a transaction of that size through TD Waterhouse/BMO InvestorLine/etc? Are companies like KnightbridgeFX a reasonable alternative in this amount range? I highly recommend Norbert's Gambit. I don't think there's a more efficient way to transfer USD <=> CAD. You'll get a rate virtually identical to the mid-market rate, and then only pay transaction costs ($10 * 2 at BMO, Waterhouse, etc since you'll have a portfolio value > $50k). The security pair DLR and DLR.U are good vehicles for this. It's a stable, USD-denominated ETF created precisely for this purpose. Good luck - just make sure you do your research properly before you execute.
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Sep 26, 2013 14:28
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HookShot posted:Ok cool... I don't have an RRSP because I'm stupid (and also because I didn't expect to come back to Canada when I left) so I should probably get onto that. I honestly don't have a clue what tax bracket I'm going to be in when I'm of retirement age though. Friendly reminder - "saving for retirement" and "having an RRSP" are closely related but not exactly the same concept. Everyone needs to save for retirement, in one form or another. Not everyone should use an RRSP to do so. I don't. Having a TFSA is a no-brainer, and anyone who doesn't is likely leaving money on the table. Not so for the RRSP.
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Sep 26, 2013 20:02
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FrozenVent posted:Plus the rich have a higher marginal tax rate so... It'd seem to me that TFSA would advantage lower income taxpayers more than RSRP. Yup. In my opinion, unless you're at a really, really substantial marginal tax rate, it's a mistake to 'save for retirement' within an RRSP. Doubly so if you're young. Everyone still needs some retirement game plan of course - but I don't think RRSP is the way to go outside of the very-high-income criterion.
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Oct 1, 2013 00:56
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slidebite posted:What is an "-e" series I've seen some posts here? Explained pretty thoroughly in the OP. Read that, then come back if you still have questions.
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Oct 1, 2013 21:44
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slidebite posted:I thought I did.. but looking at the TD site I think I understand it better. It's just the same drat mutual funds at a third of the cost. Classic price discrimination move.
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Oct 2, 2013 02:19
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cowofwar posted:INGDirect.ca is running a promotion (TFSA kick-start account). Not a bad plan I guess if you have money sitting around in cash anyway, but we're talking a gain of less than $40 here. I'm not sure it's worth the effort if it comes at the expense / delay of setting up a longer-termed investing strategy of which the TFSA is a part. Just my $0.02.
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Oct 2, 2013 19:21
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slidebite posted:Lets say someone comes into $100K-$200K. Won a prize on a lottery or something. So it's not enough money to retire on but certainly nothing to sneeze at, what would you do with it? Not to get all philosophical, but I would always approach questions of this nature with a view to increasing happiness. Buying "stuff" - cars or even property is usually not the right way to do this. For me, the point of money, en route to happiness, is to provide freedom and a secure baseline. So I'd probably invest in liquid things - indexing as outlined in the OP, and maybe a vacation 
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Oct 3, 2013 15:56
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Andrew Coyne (yes, yes, I know many people dislike him, though I don't really see why) wrote a pretty compelling piece on the argument in favour of index investing:quote:Think you know how to pick winning stocks? You don’t, so park your money in index funds http://business.financialpost.com/2013/10/02/andrew-coyne-etfs-stocks/
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Oct 3, 2013 18:59
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Kashwashwa posted:Has anyone looked into ACIC? http://www.acicinvestor.ca/ I don't know anything about them, but after 15 seconds on the website - I wouldn't touch it with a 10 foot pole.
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Oct 3, 2013 19:01
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slidebite posted:How big of a deal is it to move accounts over in kind from a brick and mortar brokerage like RBCDS to one of those online places with TD Waterhouse or Questrade? Like all things banking, it's going to be a hassle at best, but, especially if you've got a decent amount of assets to transfer, someone on the receiving institution will help you out and likely cover any RRSP transfer fees or what not. slidebite posted:Is it a huge exercise in frustration? This is largely our life savings we're talking about so it's kind of a big deal if there are issues. You really don't have anything to worry about - you might need to fill out a couple of forms, make the odd phone call, and then look at your accounts occasionally to check it's all been done correctly as the switchover happens... but it's not like your money's at risk of vanishing or something.
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Oct 4, 2013 14:46
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tuyop posted:And third, they fail to beat or match the market about 80% of the time. So, by going with actively-managed funds, you not only usually fail to match market performance, but you pay management expenses, commissions, and extra taxes for the privilege. It's actually pretty damning that all of this isn't more widely known. Entire industries and companies built on the premise that people are largely ignorant of these facts.
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Oct 5, 2013 23:50
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slidebite posted:I believe that assertion, but can someone point me in the direction of a legit study that shows that? My wife is skeptical of that and is leery of index funds. I think it is largely the unknown though. The internet is absolutely stuffed with sources on this. Reading Bernstein's The Four Pillars of Investing is how I was initially convinced. To start with, read that Andrew Coyne FP article I posted last page. You will not find a credible argument to the contrary. It's not even a controversial claim at this point (among people who aren't thoroughly invested in selling expensive mutual funds, that is).
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Oct 6, 2013 19:47
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Bleu posted:Here's a really funny anecdote that's currently going on about this: Warren Buffett made a bet with Protege Partners, a Wall Street hedge firm, that they could not beat the S&P 500 index fund from Vanguard with a fund that pools into their five finest hand-picked hedge funds (including, most likely, one hedge fund under their direct control). The last I read about it (from the 5-year mark), Buffett's single-index portfolio has returned 8.69% over five years, while the Protege hedge fund of funds is at 0.13%. Matt Taibbi called it "the sort of plain-vanilla investment that Warren Buffett used to publicly kick the rear end of Wall Street's cockiest hedge fund." Heh, that's awesome. I've filed that article away for future persuasive purposes 
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Oct 7, 2013 14:26
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It's not necessarily an indication of fraud... But there's a good chance. Gotta request those reports annually. I have a recurring reminder to do this. Good luck.
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Oct 7, 2013 19:08
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slidebite posted:So, I guess you bring up another point, who is a good online brokerage for opening accounts? I have no desire to go to Questrade, so is TD Direct the way to go? As long as you have > $50k in assets, TD Direct and BMO Investorline both have $9.95 trades. I use BMO, and I quite like them. They don't seem to care at all about me doing Norbert's Gambit (I've heard of other banks complaining to clients about doing this and telling them not to make a habit of it). TD is good because of the presence of e-Series - but you don't need a trading account for that necessarily. You can convert an existing TD Mutual Funds account over to e-Series, and do it entirely on the banking side. As a general point, I find BMO to be the least greedy and penny-pinching of the big 5. When I was researching business accounts for myself, they had by far the most reasonable terms. TD, by contrast, completely priced themselves out of the market for me (IIRC, it was something like $10 monthly for the 'privilege' of having a USD-denominated business savings account).
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Oct 7, 2013 19:30
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slidebite posted:Thanks. I take it BMO doesn't have access to those sweet TD -e funds? No, you must buy them within the context of either TD Direct Investing, or TD Mutual Funds (after going through the song-and-dance of 'converting' your account to e-Series). I have the latter for automated savings from my main [ING] chequing account, and that's my only relationship with TD.
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Oct 7, 2013 19:51
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