Canadian Finance and Investing Thread - Paying More is our National Pastime

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Femtosecond: Aug 2, 2003

Scanning the thread it seems like Questrade is what a lot of people are using. I've been using TD Waterhouse forever because I bank at TD and I'm lazy. Is there any good reason that I should switch? Has anyone used both? TD just refreshed their site and the usability is much better.

The globe put out an article comparing all of them but it's pretty light on details http://www.theglobeandmail.com/globe-investor/online-broker-rankings/the-globe-and-mails-17th-annual-online-broker-ranking/article27571960/

# ¿ Apr 15, 2016 17:24

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# ¿ Apr 27, 2024 18:39

Femtosecond: Aug 2, 2003

Golluk posted:

Comes down to MER. Going with Couch potato portfolios, ETF MER are roughly %.15 to %.19. While e-series are 0.41% to 0.49%. I think e-series are just a bit easier on the side that it can be with your same bank (if your with TD), and there is a branch you can go into even if they say they aren't supposed to help you. That MER difference means on 50k invested, ETF might cost you $75 a year in fees. While e-series would be closer to $245. I really feel like TD should lower their MER on e-series to be a bit more competitive with ETF funds, but I suspect they'd rather just push high MER fee's on the ignorant.

Oh sorry I meant using TD Waterhouse just as a discount broker, using it in the same way as Questrade. In both cases the user would be buying some vanguard ETF. I'm wondering if there's any significant difference in usability or fees.

# ¿ Apr 15, 2016 21:01

Femtosecond: Aug 2, 2003

If I wanted to gamble on Britain staying in and there being a big rally tomorrow, what do you think would be the best + laziest way to bet on that? Maybe some Europe oriented ETF...? Any recommendations?

# ¿ Jun 23, 2016 16:32

Femtosecond: Aug 2, 2003

Lexicon posted:

http://www.williamhill.com/

it's raining today and I don't want to go down to the horse races.

# ¿ Jun 23, 2016 17:08

Femtosecond: Aug 2, 2003

Oh wait they've actually been taking Brexit bets.. hahah. Well at least in Britain. I don't see anything on this website.

quote:

�Brexit� Vote Already Has a Winner: The Gambling Industry
A single screen attracts Mr. Howe's interest: one showing the odds on the so-called Brexit. They have in recent days tilted heavily toward Britain sticking with the European Union. A bet of 9 pounds to remain (about $13.24) fetches a profit of only �2 (less than $3). By late afternoon, the odds slide even more, showing an 80 percent chance that voters will maintain Britain's place in the European Union.

Far from a curiosity, the gambling markets stand as a rare source of something approximating clarity in the face of Brexit-borne confusion, assuming they turn out to be right.

Political polls have generally shown a divided electorate. Until last week, when a member of Parliament who had advocated remaining in Europe was murdered, a vote to leave seemed marginally likely. Investors absorbed polls and sent markets on a wild plunge, selling the British pound and London stocks in anticipation of a Brexit. Then those markets jumped when the polls edged back toward remain.

All the while, gamblers held firm, signaling faith that economic concerns would ultimately triumph over the politics of identity. While the margin tightened for a while, the people voting with money concluded that the electorate would stick with Europe.

In much of the world, the prospect that Britain will really walk away from Europe has generated unease. The vote alone has unleashed troubling uncertainty through world markets as traders, businesses and policy makers struggle to anticipate what might happen.

But in one corner of the commercial world � the gambling industry � not knowing what will happen amounts to an exploitable asset. To bookmakers, uncertainty is the midwife of all wagers. Brexit presents the perfect swirl of unpredictable forces: a potentially grave geopolitical risk that has provoked fratricide in Britain's ruling Conservative Party, dominating news coverage. Everyone is paying attention. No one knows how it will end.

"The betting is just massive," says Mike Smithson, founder and editor of PoliticalBetting.com, a website that is something like a Bloomberg terminal for people who wager on political events. He characterizes the referendum as "the biggest political betting event of all time, anywhere."

On Tuesday and Wednesday alone, the Brexit vote attracted wagers worth more than �3 million ($4.4 million), most of it via online transactions, and three-fourths landing on remain, Mr. Smithson estimated.

This is the picture that confronts Mr. Howe, 44, a chef at a nearby pub, as he enters William Hill Wednesday afternoon, aiming to use Britain's referendum to earn some cash.

"I think it will be remain, but the odds are crap," he says.

Hoping for better odds, he resolves to wait before making a bet sometime in the next few hours. He might bet in accord with his heart � to leave � given the financial appeal. A bet for Britain to abandon Europe is offering the gratifying returns of the long shot, a profit of �3 (about $4.41) for a �1 bet (about $1.47).

"I like to mix it up," Mr. Howe says, recounting how he just managed to collect on a complex bet involving the European soccer championship: Germany won, Poland won, and Spain and Croatia both scored goals, combining to trigger his payout. "If there's no horse I like or football I like, then I'll put a tenner on leave."

William Hill, the largest bookmaker in Britain, assumes the industry will collectively count wagers reaching �20 million (more than $29 million) before the Brexit results are in, according to a spokesman, Graham Sharpe. The company is hopeful its own tally will eclipse the �3.25 million in wagers ($4.8 million) it saw during the last giant political referendum, the 2014 vote on whether Scotland should leave the United Kingdom. In that case, the polls had the race too close to call while the gambling markets got it right: Scotland stayed.

Lest one get the impression that Las Vegas ought to reserve dedicated space for the workings of British democracy, it is worth noting that these numbers are paltry compared to the behemoths of British gambling: soccer and horse-racing.

"I think it will be remain, but the odds are crap," he says.

Hoping for better odds, he resolves to wait before making a bet sometime in the next few hours. He might bet in accord with his heart � to leave � given the financial appeal. A bet for Britain to abandon Europe is offering the gratifying returns of the long shot, a profit of �3 (about $4.41) for a �1 bet (about $1.47).

"I like to mix it up," Mr. Howe says, recounting how he just managed to collect on a complex bet involving the European soccer championship: Germany won, Poland won, and Spain and Croatia both scored goals, combining to trigger his payout. "If there's no horse I like or football I like, then I'll put a tenner on leave."

William Hill, the largest bookmaker in Britain, assumes the industry will collectively count wagers reaching �20 million (more than $29 million) before the Brexit results are in, according to a spokesman, Graham Sharpe. The company is hopeful its own tally will eclipse the �3.25 million in wagers ($4.8 million) it saw during the last giant political referendum, the 2014 vote on whether Scotland should leave the United Kingdom. In that case, the polls had the race too close to call while the gambling markets got it right: Scotland stayed.

Lest one get the impression that Las Vegas ought to reserve dedicated space for the workings of British democracy, it is worth noting that these numbers are paltry compared to the behemoths of British gambling: soccer and horse-racing.

William Hill estimates that the bookmaking industry will rack up wagers of �500 million ($735 million) on the European Championships. A World Cup final alone tends to attract �200 million ($294 million) in wagers to William Hill's books.

Part of the reason betting on politics is so tiny compared to sports stems from a fact that may shock in this age of Trump-Clinton-Brexit-yakety-yak-saturation: There isn't enough politics to sate the bookmakers.

"In betting terms, there are relatively few events," Mr. Sharpe says.

While political betting may be a mere niche, it goes back centuries. As far back as 1503, Roman banking houses offered trades predicting who would emerge as the next pope from the papal conclave, according to Leighton Vaughan Williams, director of the betting research unit at Nottingham Business School in England. From the United States Civil War through 1940, Americans were placing bets on the presidential election on stock exchanges, a practice that consistently favored the eventual winner.

"People trading in the betting markets are looking at all the information that's available," Mr. Vaughan Williams says. "The polls are only one thing. The people who trade in the betting markets are looking at all the information."

Ironically, the glimpse of certainty emanating from the betting markets may be limiting the appeal of wagering on Brexit.

As Ingrid Sambade arrives at the William Hill shop Wednesday morning, she is eager to put her money where her heart is � with Europe. A Spaniard by birth, she makes her living cleaning homes.

"I'm in!" she says. "If they go out, they can't come back in, so the best thing is to stay in and everyone will be happy."

But Ms. Sambade, 69, is less happy when she calculates the skimpy winnings she will claim from a successful remain bet.

"It has terrible value for you," the man behind the counter tells her. He suggests she focus on more speculative questions, like the margin of victory and the size of turnout.

"I don't bet nothing," Ms. Sambade says. "It don't give you much."

Colin Hammond takes one look at the board and concurs.

"I think they'll stay, and there's no value in that bet," he says, before turning his attention to his traditional area for wagering. "I know more about football."

Ask for his opinion, and David Howe eagerly tells you how he hopes Britain will leave the European Union.

"We need to take control of our borders," he says.

But these sentiments are, at the moment, as valuable to him as his personal views on Her Majesty's latest hat. He is more keen to know how the rest of the British electorate is inclined so he can win some money.

Mr. Howe is standing inside a William Hill gambling shop near Westminster, home to the British Parliament. It is midday Wednesday, less than 24 hours before British voters will go to the polls to determine the political geography of Europe. Video roulette machines flicker behind him. Televisions above him beam in dog races from hither and yon.

# ¿ Jun 23, 2016 17:11

Femtosecond: Aug 2, 2003

I'm just half joking about the Brexit gamble. All of my investments are in US equities and I've been thinking that I should probably diversify and invest in other areas for months. The Brexit headlines this morning just reminded me of this.

# ¿ Jun 23, 2016 17:59

Femtosecond: Aug 2, 2003

Well I was so busy today that I didn't have the time to look into this at all before the market closed, so given how the brexit results are coming in, I guess I dodged a bullet lol.

This will severely impact all the worlds' markets though, not just Europe.

# ¿ Jun 24, 2016 04:42

Femtosecond: Aug 2, 2003

Is there any consensus on what is the best investing strategy once one has maxed out their RRSP/TFSA?

* Do nothing differently and just keep investing in a balanced ETF portfolio in a taxed account.

* Invest everything (or at least more heavily) in Canadian dividend yielding equities in order to take advantage of the dividend tax credit.

* Make a lump sum payment on a mortgage in order to pay that off faster

* Put the money under a mattress so that one has cash on hand to buy a house when (lol) the housing bubble bursts.

* Build truck equity

# ¿ Apr 16, 2017 01:25

Femtosecond: Aug 2, 2003

cowofwar posted:

Housing

Which of these two do you mean?

quote:

* Make a lump sum payment on a mortgage in order to pay that off faster

* Put the money under a mattress so that one has cash on hand to buy a house when (lol) the housing bubble bursts.

I live in Vancouver so that down payment is gonna take a while...(especially if it's for a detached house)

I guess there's another option:

* Buy a cheaper condo for investment purposes and become a landlord.

This is not super enticing to me at the moment because most condos in Vancouver strike me as very overvalued.

On the more 'truck equity' side of financial responsibility I could save up for a dramatically shorter amount of time and buy some relatively cheaper bare land in the interior or on an island and build a cabin.

# ¿ Apr 16, 2017 01:51

Femtosecond: Aug 2, 2003

mojo1701a posted:

Even most of the landlords we do taxes for in Hamilton generally don't make much money on rentals. In fact, between mortgage interest, property tax, repairs & maintenance, etc. etc., they usually lose money (at least it's a deduction). Even if you plan to sell it for a gain eventually, the annual ROI may not justify the amount of time and effort you have to put in to get it back.

The exception is if you hire family members (eg. children) who don't usually make a lot of money, and have them pay income at a lower rate.

Oh yeah I totally agree. Rents have gone up quite a bit in Vancouver in the last two years, but I still can't see how any landlord is covering their costs factoring everything you've already mentioned. I've been told that strata fees in BC are quite low in comparison to the USA and Ontario as well, as developers set them initially low as a marketing tactic. $200/300 monthly fees, even in a no frills building, aren't likely to be enough to fully cover the depreciation of various building components, so there's going to be special assessments at some point too.

Maybe there's some value to the concept as a form of diversification but that wouldn't matter as much until you're older.

Femtosecond fucked around with this message at 20:07 on Apr 16, 2017

# ¿ Apr 16, 2017 19:54

Femtosecond: Aug 2, 2003

Kalenn Istarion posted:

Strata fees are low I BC because depreciation reports aren't mandatory so EVERYTHING is FINE until it isn't and you get a $20,000 special assessment for roofing (or one building I visited that had one for $100,000). There are a few complexes that have realized this is stupid and now charge a real strata fee but many that haven't. As long as you know that this is a 'feature' of BC stratas and plan for it you will be fine.

Now at least depreciation reports are sort of required in that you have to have a AGM vote to NOT have a depreciation report done. Obviously if you're looking into buying into a building and you spot that on their AGM minutes then that's a huge red flag.

The problem remains though that in many of these buildings the fees were set artificially low. Now a strata has a report that suggests a few fee options, with the one that fully covers all depreciation likely well, well above what the building is currently paying in fees. Tacking on a substantial fee increase is an exhausting, uphill battle that's not really worth fighting at an AGM. It's a lot easier to accept the minimum recommendation of the depreciation report and try to increase fees by some tiny percent each year with the excuse of inflation and try to slowly crawl to where the fees should have been in the first place.

# ¿ Apr 17, 2017 17:02

Femtosecond: Aug 2, 2003

Cold on a Cob posted:

Not risky enough. Mortgage Investment Corporation

Seriously though, if you don't already own property it's worth considering once you get to the point of maxing out your TFSA and RRSP. I mean unless you're in one of the bubble markets.

Yeah if you think the government is never going to allow the housing market to collapse, and you're comfortable with the risk, a MIC could be a good idea. There is some thought that with the government introducing stricter lending rules in the new year, there will be more demand for secondary lending.

MIC dividends are treated as interest income so there's no tax advantages.

# ¿ Dec 21, 2017 21:08

Femtosecond: Aug 2, 2003

Is it just me or has TD.com had its style sheets broken for like... days now? There's got to be a problem on my end because you'd think it's crazy for a bank to just not fix this, and yet it seems like there's at least a few other people on twitter with the same issue.

# ¿ Apr 12, 2018 16:56

Femtosecond: Aug 2, 2003

I was thinking the other day about TFSAs, and if, in the case where you have non-registered investments and TFSA investments, if there is ever any scenario where it makes sense to withdrawl everything in the TFSA into cash, wait until you can contribute again, and move a bunch of your registered investments into the TFSA.

Of course when you move a registered investment into a TFSA you pay capital gains tax on this, so it seems like there'd be no point to doing this if the equity in the TFSA you were selling was the same as the equity you were moving into the TFSA. The same effect would be had if one just sold their unregistered equity. (eg. Huzzah I sold 100 shares of MSFT for a big tax free gain, now to move 100 shares of MSFT into my TFSA... oops I have to pay capital gains tax).

So the only scenario I can think where it makes sense is:

Your marginal tax rate is (temporarily?) low and you expect it to go higher in the future.

Say you're travelling around the world for a year and you're going to have near zero income. Would it make sense to clear out your TFSA, and then refill it from the sale of unregistered equities at a very low marginal tax rate?

Does this make any sense? Can anyone think of another situation? I mean other than "I need money now for a down payment on a house so I need to clear out my TFSA."

# ¿ Aug 11, 2018 20:46

Femtosecond: Aug 2, 2003

Has anyone ever contributed to their RRSP by transferring equities in kind from a USD un-registered account to a RRSP?

On TD you can transfer equities in kind, from un-registered to registered accounts, but weirdly (to me as a dummy anyway) not directly to a USD RRSP.

From TD Help:

quote:

Online-eligible Security Transfers
....

2. Contributions in-kind from non-registered accounts to the CAD component of a registered account only

A. e.g. From the CAD component of a Cash account to the CAD component of a RRSP account or from the USD component of a Cash account to the CAD component of a TFSA account etc.

B. Please note that if you are contributing a U.S. security to the CAD component of a registered account, once the transaction is completed, you may then use the Security Transfer tab to move the U.S. security into the USD component of the same registered account

3. From the CAD component of a registered account to the USD component of the same registered account or vice versa

A. e.g. From the CAD component of a RRSP account to the USD component of the same RRSP account or from the CAD component of a TFSA account to the USD component of a TFSA account, etc.

This makes me wonder what is going on on the forex side of things. What is going on in the bolded 2b? I recognize that when one moves an equity in kind to a registered account a deemed deposition occurs and there's potentially tax to be paid on a capital gain. Does there also occur a capital gain based around the foreign exchange?

Talking on the phone with the TD people I apparently just opened up a USD RRSP account, but after hanging up I'm confused about what is going on here.

Ideally I'd like to transfer an equity from my USD account to a USD RRSP account so that there is no concerns about foreign exchange at all, but when I think it over is it the case that any initial contribution to an RRSP has to be in CAD funds to start with?

# ¿ Feb 19, 2019 20:41

Femtosecond: Aug 2, 2003

Re: Emergency funds, perhaps some cashable or redeemable GIC in a TFSA could make sense? You can take money out of those without much issue too. How do those compare to a high interest savings account?

# ¿ Jun 5, 2019 20:36

Femtosecond: Aug 2, 2003

Bajaha posted:

There's also the uncertainty in the "happier" place actually being happier once you're there, and the less happy place might end up better than you expect. Take the money and bail later if it ends up being miserable.

Yeah great point. I had a job once that I didn't much care about that just took because it seemed convenient and the job market was ho hum at the time, but it turned out that everyone there was really awesome and I stayed there for three years.

# ¿ Jun 6, 2019 16:37

Femtosecond: Aug 2, 2003

Canada Debt Bubble x Canada Finance Post

Is there any way I can sell a bunch of equities in non-registered accounts for a down payment on a house and not have all that capital gain land in the same year? Seems like no?

Property in Vancouver is dropping in value to the point where it's getting a bit more enticing to buy something if something cheap came along (will the last bear left turn out the lights?), but with the amount of equities in non-registered accounts I'd need to sell, the tax bill would be big.

(I would not be touching my retirement RRSP account so no I'm not YOLO going all in on Vancouver housing)

# ¿ Aug 20, 2019 16:48

Femtosecond: Aug 2, 2003

BMan posted:

Empty your maxed-out TFSA (which you definitely have, right?) and sell your non-registered equities over the next few years to refill it? And I know you said you're not touching your RRSP, but consider the Home Buyers Plan if you're eligible for it (borrow 25K from your RRSP, same idea as with the TFSA).

Ok this was basically my plan but of course since Vancouver prices I'd need to dump some of my non-registered too. Ok I'll just have to brace for the tax bill. :negative:

# ¿ Aug 21, 2019 16:07

Femtosecond: Aug 2, 2003

If you're willing to bet that housing never implodes, you could invest in a good Mortgage Investment Company (ie. one that doesn't invest in Alberta or Sask).

# ¿ Nov 22, 2019 05:13

Femtosecond: Aug 2, 2003

Does writing covered calls in your TFSA/RRSP make sense?

Normally a potential downside of writing a covered call when the stock goes up to meet your strike price or beyond and your stock is sold at the strike price, you incur a capital gain that has tax implications. You may not want to incur such a taxable capital gain at this time.

If the stock is in an RRSP/TFSA then these potential tax implications are eliminated.

Now the only downside of your covered call being executed is that you potentially miss out on some gains, depending on how high above the strike price the stock is at. Not really that big of a deal IMO.

So given that you can never get dinged by accidentally, severely increasing your taxes, why not move a portion of your holdings into an equity with very high option premiums?

For example if you had enough money to buy 100 shares of SHOP, you could place a bet that the stock doesn't reach its 6 month high of ~US$1600 by mid Dec and be paid $2000 for that.

If you hosed up and incurred a capital gain on that 100 shares of SHOP because it does reach $1600, that would be uhhh a big tax event, but since it's in a TFSA/RRSP no big deal.

# ¿ Oct 11, 2021 18:19

Femtosecond: Aug 2, 2003

The big obvious flaw is um, what if the stock goes down? lol. So yeah this is obviously a bullish strategy where in the grand scheme of things you think the equity is going to go up in the long time horizon and you're happy holding the stock.

Also I used SHOP as an example, but there's surely some more affordable ones out there. I'm unsure I'd want to risk 100k+ to try to make $2000.

# ¿ Oct 11, 2021 18:35

Femtosecond: Aug 2, 2003

I googled for this and found this..

quote:

You can buy an option or you can write (sell) an option. RRSP investors can buy or sell call options, but call options can only be sold (written) if you already own the underlying shares in your RRSP (called a covered call option).

Option writing strategies that are deemed by the CRA to be speculative could be a problem. CRA could decide that an RRSP is carrying on a �business� and earning taxable �business income.�

�The CRA�s view is that the writing of a covered call option, whereby a registered plan sells a call option in respect of an underlying property which it already owns, does not result, in and of itself, in the registered plan being considered to be carrying on a business. In contrast, the writing of an uncovered call option, or the writing of a put option � may result in the registered plan being considered to be carrying on a business.�

https://financialpost.com/personal-finance/theres-more-to-the-rrsp-than-mutual-funds-and-etfs-but-you-have-to-tread-cautiously

# ¿ Oct 11, 2021 18:48

Femtosecond: Aug 2, 2003

Stop using your TFSA to frequently trade stocks � the CRA may see it as taxable business income
https://financialpost.com/personal-finance/stop-using-your-tfsa-to-frequently-trade-stocks-the-cra-may-see-it-as-business-income

quote:

The factors that the CRA looks at include: the frequency of the transaction; the duration of the holdings; the intention to acquire the securities for resale at a profit; the nature and quantity of the securities; and the time spent on the activity.

Some more details here

# ¿ Oct 11, 2021 18:52

Femtosecond: Aug 2, 2003

Saw this article a little while ago about how the ultra wealthy billionaire class are capable of paying no taxes.

quote:

Buy, Borrow, Die: How Rich Americans Live Off Their Paper Wealth

Rising stocks and rock-bottom interest rates have delivered a big perk to rich Americans: cheap loans that they can use to fund their lifestyles while minimizing their tax bills.

Banks say their wealthy clients are borrowing more than ever before, often using loans backed by their portfolios of stocks and bonds. Morgan Stanley wealth-management clients have $68.1 billion worth of securities-based and other nonmortgage loans outstanding, more than double five years earlier. Bank of America Corp. said it has $62.4 billion in securities-based loans, dwarfing its book of home-equity lines of credit.

The loans have special benefits beyond the flexible repayment terms and low interest rates on offer. They allow borrowers who need cash to avoid selling in a hot market. Startup founders can monetize their stakes without losing control of their companies. The very rich often use these loans as part of a �buy, borrow, die� strategy to avoid capital-gains taxes.

...

For borrowers, the calculation is clear: If an asset appreciates faster than the interest rate on the loan, they come out ahead. And under current law, investors and their heirs don�t pay income taxes unless their shares are sold. The assets may be subject to estate taxes, but heirs pay capital-gains taxes only when they sell and only on gains since the prior owner�s death. The more they can borrow, the longer they can hold appreciating assets. And the longer they hold, the bigger the tax savings.
...

That last bolded line is a detail of US tax policy that makes this an insanely effective way to pass down wealth to heirs indefinitely. It is not possible in Canada since there is deemed deposition on death; the capital gains are realized and must be paid on death.

Why am I posting this? Well the implications of the idea in application to mere hundredthousandaire mortals has been stuck in my head. If you google the phrase "buy, borrow, die" you do get a few blog articles unpacking how the middle class may do something similar, noting that while mere mortals probably don't have enormous piles of stock equity to put up as collateral to loans, the asset class that the middle class does have access to is real estate.

With the explosion in popularity of HELOCs in recent years, it seems possible to me that many Canadians are somewhat following this strategy perhaps without even much thinking about it.

Homeowners that want to do a renovation could sell $50,000 of equities to pay for it and pay $10k in taxes on that capital gain but they could instead borrow the $50k from their HELOC, and pay the sub 3% interest charge, which should be more than paid for by 5%+ gains on the $50k they've left in their investment account.

If they are contributing to their RRSP every year, they'll have some tax refund room. They could sell some equities over a few years to pay off that HELOC and leverage the tax refund space to not have to pay any tax out of pocket. Or perhaps they could invest their tax refund and simply continue paying HELOC interest forever knowing that the gains from their investments will more than compensate for their debt payments and principal.

This works so long as interest rates are low and stock market returns are high, which they have been all throughout our recent housing bubble. One can see the potential for things to go sideways here (lol). Though if things start to change, the homeowner can quickly liquidate some stock to bring their HELOC balance down to a manageable level.

So the above scenario seems workable enough that it's likely many Canadians are (unintentionally?) already doing this, but at a scale so low that it doesn't seem much comparable to what the billionaires are doing. Eventually one runs out of HELOC room. Unless I guess... you keep buying more and more homes to leverage for more and more HELOC room? Coincidentally buying multiple investment properties is also something that Canadians have been doing more and more.

Potentially it seems one can continue to buy more and more houses, max out HELOCs to fund lifestyle, have an enormous pile of equities, and die with enormous piles of debt having never paid any tax.

Perhaps there is some point at which a bank, looking at your pile of maxed out HELOCs, will no longer lend you money to buy another investment property, but I dunno, seems like banks are pretty happy to lend.

Unlike the USA, deemed deposition on death will ensure an enormous tax bill for one's heirs though similarly to the justification for the RRSP, the logic of delaying tax events until you're old and (probably?) have near zero income holds here.

Femtosecond fucked around with this message at 19:31 on Nov 29, 2021

# ¿ Nov 29, 2021 19:27

Femtosecond: Aug 2, 2003

whoa yea those margin rates are low. In contrast TD is 4.5%

# ¿ Dec 16, 2021 02:19

Femtosecond: Aug 2, 2003

quote:

Canadian dollar firms as oil prices move higher

The Canadian dollar strengthened against its U.S. counterpart on Tuesday as oil prices rose and investors awaited further clues on the pace of expected U.S. interest rate hikes.

Global stocks recovered some of their recent losses as investors bought back into riskier assets ahead of the appearance of U.S. Federal Reserve Chair Jerome Powell before the Senate Banking Committee.

The prospect of faster-than-expected Fed tightening has weighed on stocks over the past week.

The price of oil, one of Canada�s major exports, was supported by tight supply and hopes that rising coronavirus cases and the spread of the Omicron variant will not derail a global demand recovery.

U.S. crude oil futures rose 1.5 per cent to $79.37 a barrel, while the Canadian dollar was trading 0.3 per cent higher at 1.2642 to the greenback, or 79.10 U.S. cents. The currency traded in a range of 1.2630 to 1.2682.

Let's goooo petro dollar. Let's get to par! :getin:

Man if we get anywhere close to par I'm moving all my investment money to USD. I regret not doing so earlier waaay back when it was par years and years ago.

Even now at 80 cents it's seeming pretty compelling to move CAD to USD. I haven't done the math yet to see how to figure out when it's worth it.

# ¿ Jan 11, 2022 23:57

Femtosecond: Aug 2, 2003

Kind of an investing x housing question:

At what point could it make sense to take some portion of money out of your investment account and use it to pay down/refinance mortgage?

For a very long time the low interest rate environment and bull market made investing I think the obvious winner without much thought, but with interest rates rising and the market looking very choppy, it's not so clear and maybe the question now should involve a bit of back of the envelope math to figure out the right answer.

On one hand if one takes money out of the market at this moment they risk missing out on the upside when the bull market returns.

On the other hand, it is possible that the savings in cash flow from reducing the size of the mortgage and refinancing could exceed the gains from if the cash had been left in the market should the bear market continue. Additionally as interest rates rise, one might want that extra cash flow that comes with lower payments for peace of mind.

If the investment cash is in a TFSA then there's no tax implications from withdrawing it. There's penalties if one refinances, but not so if the mortgage has reached end of its term (this is the situation I'm in).

Just looking at TD's mortgage calculator right now, if I were to take $20k out of my TFSA and reduce the size of my loan by $20k, I'd save ~$100 a month on payments. So this is in a way converting that $20k into $1200 a year of extra cash flow that doesn't go to the bank ($6000 over the 5 year term of the mortgage).

If that $20k was left in the market, it's certainly not terribly clear if we're going to see a positive return this year, but I'd say the odds of positive return increase over the next four years.

A compound interest rate calculator I found online suggests that for 20k to grow to 26k over five years, I'd need a rate of return of 5.25%. So is the question of whether investing is better whether one wants to bet that the S&P500 returns on average more than 5.25% for the next five years?

I'm not sure what sort of math I should do to compare these concepts directly to see which comes ahead in return.

Femtosecond fucked around with this message at 01:09 on May 14, 2022

# ¿ May 14, 2022 01:06

Femtosecond: Aug 2, 2003

*looks at stock market* :dogstare:

Hey uh did you maybe lose money on an investment this year? This article might be worth a read.

I was well aware that one could apply losses to future gains, but I wasn't aware at all that you could apply it to preceding years.

quote:

Tax-loss selling can turn 2022 losses into 2023 gains

2022 is a year most stock market investors will want to put behind them. But there could be a silver lining in this year�s carnage for investors who dump their dogs before the year ends.

It�s called tax-loss selling and it brings an opportunity to use those equity market losses to recoup tax paid on capital gains in the past, or eliminate tax on capital gains in the future.

HOW TAX-LOSS SELLING WORKS

Tax-loss selling permits capital losses from equity investments to be applied against taxes paid on capital gains as far back as three years, or into the future indefinitely. Because half of capital gains in a non-registered trading account are taxed, half of capital losses can eliminate the taxes on capital gains dollar-for-dollar.

If you accumulated $10,000 in capital gains during last year�s market rally and claimed the required $5,000 as income, as an example, $10,000 in capital losses will get you a full refund.

If you haven�t paid tax on capital gains this year or the previous two years, those capital losses can be used to lower or eliminate tax on capital gains at any point in the future.

SEPARATING THE DOGS FROM THE SLEEPING GIANTS

Any qualified tax expert will tell you to never make investment decisions based solely on tax implications, and deciding what to sell for tax-loss selling is no different.

Even good stocks fall in a broad market dip and the last thing you want to do is dump a stock that is poised to take off. That�s why it�s important to formulate a strategy well before the end of the year. A qualified advisor can help separate the sleeping giants from the dogs.

One thing to keep in mind: U.S. equities have taken a far bigger hit than Canadian equities so far this year, but the U.S. dollar has strengthen considerably against the Canadian dollar. Losses can be tempered by selling U.S. dollar denominated equities and converting the cash to Canadian dollars.

BEWARE OF THE SUPERFICIAL LOSS RULE

As with any tax strategy, the Canada Revenue Agency (CRA) has strict rules when it comes to tax-loss selling.

The most important is called the superficial loss rule, which prohibits the repurchase of the same stock within 30 days of the tax-loss sale. The superficial loss rule applies to repurchases in any registered or non-registered account in the name of the account holder, and even the account holder�s spouse. If you want to repurchase the same stock you must wait at least 31 days from the sale.

USING A TFSA AND RRSP FOR MORE TAX SAVINGS

It�s important to note that tax-loss selling, or tax on capital gains does not apply to investments in registered accounts, including a registered retirement saving plan (RRSP) or a tax free savings account (TFSA).

The tax savings from tax-loss selling, however, can generate further tax savings by shifting the proceeds from a non-registered account to registered accounts.

While half of capital gains are taxed in a non-registered account, the tax on capital gains in a TFSA is zero. Capital gains in a RRSP are fully taxed when withdrawn in retirement, along with income and original contributions, but investors are permitted to deduct their contributions from their taxable income.

RRSP contributions made before March 1 can be deducted from 2022 income or carried forward to future years when your tax burden is heavier. With both the RRSP and TFSA, capital losses don�t apply from a tax perspective because capital gains are never directly taxed in the first place.

There are other specific rules set out by the CRA for tax loss selling and contributing to registered accounts, which must be followed, so consider speaking with a tax professional.

# ¿ Nov 24, 2022 04:59

Femtosecond: Aug 2, 2003

mila kunis posted:

- with interest rates rising, are GICs and savings accounts offering interest worth a drat?

I'm getting instagram ads for Vancity GICs of less than a year for like 4%+

# ¿ Dec 2, 2022 21:18

Femtosecond: Aug 2, 2003

A more detailed article about tax loss harvesting. As we're now in December, you only have a short while left to consider doing this to get losses applicable for the next tax season.

quote:

It�s tax-loss harvesting time again

I don�t have much use for falling leaves. My kids are long past the age of jumping into piles of the things, and I resent every second I spend raking and stuffing them (the leaves, not my kids) into paper bags to put at the curb.

But falling stock prices? They�re a lot more useful than falling leaves this time of year.

With stock markets slumping in 2022 amid inflation, rising interest rates and recession fears, many investors are sitting on paper losses. Fall is the perfect time to �harvest� these losses for tax purposes.

Here�s a guide to tax-loss harvesting � also known as tax-loss selling � and some tips for doing it without running afoul of the Canada Revenue Agency.

Why sell a stock at a loss?

Normally, people like to sell stocks for a profit. But if you sell a stock for a loss in a non-registered account, you can use that capital loss to offset any taxable capital gains you have. No capital gains this year? No problem. You can carry back your capital loss for up to three years, or forward indefinitely, to offset capital gains in other years and reduce your tax bill. Just remember that tax-loss selling only applies to non-registered accounts; it doesn�t work in registered accounts, which are not subject to capital gains tax.

Can I buy the stock back right away?

No. For the loss to count as a capital loss, you must wait at least 30 days before repurchasing the shares. If you jump the gun, the loss is considered a �superficial loss� and you can�t use it to offset capital gains. The 30-day restriction also applies to the period before you sell the shares. For example, if you own 100 shares of Shopify Inc. increase that you�re planning to sell for a tax loss, and you purchase an additional 100 shares less than 30 days before the sale so that you�ll maintain ownership of 100 shares after the sale, that�s also considered a superficial loss.

What if I repurchase the stock in my RRSP or TFSA?

Sorry, you can�t get around the 30-day restriction by repurchasing the shares immediately in a registered account. The same goes for any account controlled by your spouse, as that would also count as a superficial loss. The purpose of these rules is to prevent investors from selling for the sole purpose of claiming a tax loss while still maintaining ownership of the shares.

But what if I still like the stock?

If you�re worried that the stock price could rebound during the 30-day waiting period, you have a couple of options. You could simply hold on to your shares and forget about the tax loss. Or, you could sell the stock and immediately repurchase a similar, but not identical, security whose price has a strong correlation with the stock you just sold. For example, you could sell Bank of Nova Scotia for a tax loss and immediately purchase Canadian Imperial Bank of Commerce or even a bank stock exchange-traded fund. That way, you�ll still benefit if bank stocks rally. You could even sell one ETF and buy another ETF, but make sure the two ETFs don�t track the same index or you could trigger the superficial loss rule.

So what happens if I sell shares for a loss and buy them back before 30 days have passed?

Even though you can�t claim the loss in the current year, you still get a consolation prize: You are permitted to add the absolute value of the loss to the adjusted cost base of the shares you own. Doing so will reduce your capital gain, or increase your capital loss, when you eventually sell the shares. So the loss still has value, but it gets pushed down the road a bit.

Can I transfer a losing stock to my TFSA or RRSP and claim the loss?

Nope. You would still have control of the shares in that case, so you could not claim a capital loss. But if you transfer a stock with an unrealized capital gain to your TFSA (or other registered account), you�ll still have to pay capital gains tax. Nobody said life is fair.

What�s the tax-loss selling deadline?

You must sell your shares on or before Dec. 28 to claim the loss for the current tax year. That�s because stock trades take two business days to settle. If you wait until Dec. 29 to sell, your trade won�t settle until Jan. 3 because of weekends and holidays, and you won�t be able to use the tax loss this year.

Bottom line: It�s fine to put off raking leaves, but don�t wait until the last minute to harvest your tax losses or you could regret it.

# ¿ Dec 3, 2022 02:44

Femtosecond: Aug 2, 2003

As interest rates keep spiralling higher and higher we are entering some interesting times where the last decade of personal finance advice articles are not necessarily worth following anymore.

For years now there's been a lot of advice to load up your TFSA, then RRSP, then work on debt, since returns on the market could be expected to be better than the sub 3% interest rate on debt. At least this year this hasn't been the case!

Maybe some people don't agree with that logic, but I definitely feel I've read it again and again during the last years of our super low interest rate environment.

Just having a glance for an example and TD's HELOC interest rate is 5.95% and we can expect that to continue to creep up higher and higher.

At this point should people with debt going so far to be emptying their TFSA to avoid paying ~6%+ on their debts? I think it could make sense.

And then the newly debt free can start setting aside a bit of money from paycheques toward rebuilding that TFSA by adding new positions into a severely declined market.

# ¿ Dec 4, 2022 06:56

Femtosecond: Aug 2, 2003

I swear I was seeing these articles everywhere, but on a custom google search excluding 2022, which is surely not giving this advice this year I didn't find much from the Globe and Mail. Just this article from 2021 alluding to the fact that there def are some giving this advice, but dissuading people. Maybe the conservative Globe has never promoted this and it's always just been young FIRE bloggers or some poo poo, but I do think that even the Globe has suggested this in the past.

They certainly have an article up as of October 26 reiterating what I said in my earlier post, that you should definitely NOT do this right now. It also alludes to there previously being a lot of advice that borrowing to invest was a good idea.

quote:

The smart money is saying no to borrowing against home equity

Borrowing against your home equity to invest was the savviest move in personal finance until recently. Stocks were flying, and so was the housing market. Plus, you could borrow at rates that seemed trivial in comparison to projected rates of return.

The mindset that home equity must be exploited to generate economic gain persists, even as rising rates jack up the cost of carrying a home equity line of credit. A reader recently enquired about the $700,000 he has in his home. �Should I be using that equity to invest or for another purpose, such as purchasing another property?� he asks.

Answer: No, not now.

The Bank of Canada increased its overnight rate by one percentage point on Wednesday, a move that will be passed along in full to floating-rate debt like credit lines. The total increase in the overnight rate this year by the central bank amounts to 2.25 points, and more rate hikes are coming.

The cost of borrowing with a HELOC after the latest Bank of Canada move will typically be 5.2 per cent, plus or minus a bit. To make investing with a HELOC effective, you need to earn an after-tax return that beats your cost of borrowing.

Stocks are having a bad year, so you�re buying at better prices than six months ago. But there�s so much economic uncertainty to contend with today. A drop of 10 or 20 per cent in stocks is just as possible as similar gains. You�re dealing with similarly negative sentiments in real estate. High rates have already pulled back home prices from the February peak and more downside seems likely as rates soar.

It�s okay to leave your home equity untouched. That�s how we used to roll in Canada, before HELOCs became a wealth-building tool for many. Full credit to all who dipped into a HELOC and generated big returns in stocks or real estate. You exploited a moment in time.

We now live in a different time, where asset prices are falling and interest rates are rising. If we get to a point of low prices for stocks and property along with declining rates, borrowing to invest with a HELOC might make sense again.

My concern for casual investors is those with a "set and forget" mindset, perhaps in 2021 doing a maneuver like this and shutting their brain off and pretty much not looking too closely at their bank statements. They might not even realize yet that they're paying almost 6-7% in interest and no longer 4%.

# ¿ Dec 4, 2022 19:48

Femtosecond: Aug 2, 2003

Some kudos to the Globe here for at the very least throwing up a little tag saying "um this is old fyi be wary"

Femtosecond fucked around with this message at 19:58 on Dec 4, 2022

# ¿ Dec 4, 2022 19:51

Femtosecond: Aug 2, 2003

I'm trying to remember the argument some mortgage broker made to me about why the stress test was the cause of the housing crisis... Something like how it artificially forced everyone into the same "low price" product and there wasn't enough of it, so then the price went up? I forget it made no sense.

# ¿ Dec 5, 2022 04:05

Femtosecond: Aug 2, 2003

Sounds like Macklem pouring a bit of cold water on the whole "rate pause" idea

Bank of Canada might need to raise rates if companies keep raising prices, Macklem warns
High inflation provides camouflage for rising prices, warns central bank governor

https://www.cbc.ca/news/business/inflation-family-column-don-pittis-1.6750879

# ¿ Feb 23, 2023 00:22

Femtosecond: Aug 2, 2003

Came across this as a suggestion while looking at SHOP prices on the Apple stocks app and posting because I thought it was wild how lousy this advice is.

quote:

Help! I�m drowning in Shopify shares

I�m in my 30s and I own about $300,000 worth of Shopify Inc. shares, which I received as part of my compensation before I left the company in 2019. The shares have an unrealized capital gain of $210,000 and account for nearly 30 per cent of my portfolio, which is worth slightly more than $1-million. I�m wondering if I should reduce my Shopify position and put the money into low-cost index funds, but I also don�t want to bear the full capital gains tax, as my annual income is about $130,000 and my marginal tax rate in British Columbia is about 40 per cent. What�s the most tax-efficient way to do this? Do I have to wait until a gap year when I minimize my income?

I probably don�t need to tell you this, but you would have been better off trimming your Shopify position before the price plunged about 80 per cent from late 2021 to mid-2022. Nobody knew such a steep drop was coming, of course, but based on some back-of-the-envelope math, I�m guessing Shopify accounted for about 50 per cent your portfolio at one time. That�s far too much weight to give any stock, let alone a tech company with an outsized price-to-earnings multiple.

The silver lining is that you learned an important lesson about the benefits of diversification. With that in mind, let me offer a few comments to help you decide your best course of action.

First, having 30 per cent of your portfolio in a single stock is better than 50 per cent, but it�s still way too high for proper diversification. As a rough rule of thumb, I aim to allocate a maximum of about 5 per cent to each individual stock, but I allow some wiggle room for companies on the conservative end of the spectrum. For example, the largest holding in my personal portfolio is Fortis Inc., with a weighting of about 7 per cent. But as a regulated utility with a long history of increasing its dividend, it has a lower risk profile than a tech stock like Shopify.

Second, although your timing could have been better, it could also have been a lot worse. Shopify shares have more than doubled from their lows last fall, which makes this an opportune time to consider trimming your holdings. True, Shopify could continue to rise, in which case you might kick yourself later. But it could also head lower again. Since you don�t have a crystal ball, the only thing you can do is control your risk.

Third, although nobody likes paying taxes, keep in mind that capital gains qualify for a significant tax reduction relative to other sources of income. Specifically, only half of capital gains are added to your taxable income, which means � for someone in British Columbia earning $130,000 � the effective marginal tax rate on capital gains is 20.35 per cent. The effective capital gains tax rate increases in small increments as income rises, topping out at 26.75 per cent for someone with income of more than $240,716.

How much capital gains tax would you have to pay? Well, if you were to sell, say, two-thirds of your Shopify shares for $200,000, you would realize a capital gain of $140,000 (two-thirds of your total unrealized gain of $210,000). This would add $70,000 to your income, and increase your tax bill by about $30,000. All else being equal, your Shopify weighting would fall to about 10 per cent of your portfolio � still not ideal, but a big improvement over 30 per cent. I�m using round numbers for illustration purposes; try the detailed Canadian income tax calculator at TaxTips.ca to run some different scenarios.

However, there may be ways to reduce the tax hit. If you have capital losses in the current year, for example, you can use them to offset your capital gains. Many investors employ a strategy called tax-loss selling, in which they sell a losing stock specifically for this purpose. Just be careful not to repurchase the losing stock within 30 days of the sale, or the sale will be considered a �superficial loss� that cannot be claimed for tax purposes. You can also carry forward any unused net capital losses from previous years to reduce your capital gains. Net capital losses can also be carried back, but only up to three years.

Another possibility, as you mentioned, is to wait until a year when you expect to have reduced income. If you were planning to take a hiatus from work to travel, for example, that would be an ideal time to trigger capital gains as the tax hit would be reduced. The risk is that Shopify�s shares could fall in the meantime. Whether you decide to sell now or later, putting the proceeds into index funds makes sense, as it will enhance the diversification of your portfolio.

There are a lot of moving parts here, and your decision should take into account proper portfolio diversification, taxes and your comfort level with Shopify�s business outlook. Consider any capital gains tax the price you have to pay to achieve proper diversification for the many decades of investing ahead of you.

I mean nothing that wrong here I guess, but the author basically just reassures the person that the tax hit ain't so bad, while not offering them that many actionable ideas. The reminder that the gain can be used to offset a loss is the best suggestion here.

I don't think I'm a genius about this stuff at all, but I have plenty of ideas!

The absolute biggest, bizarre omission here is to neglect to mention the RRSP! This could reduce this person's taxable income, which leaves more room to sell their SHOP stock.

If this person has no saved up RRSP room, with their $130k salary they'll have $23,400 of RRSP room a year to play with. What they could do is transfer $23,400 of SHOP stock into their RRSP each year as a contribution, which will net them a refund of $10,158. They will pay a capital gain on that SHOP stock move, so assuming that 20% tax rate, they'll be taxed about $4680. That leaves $5478 of available credit they can use before they pay anything in tax. Working backward this means that they can sell an additional $27,390 of SHOP stock and still pay $0 in taxes. Only after this point will selling any equities yield a tax hit.

Now that $23.4k of SHOP stock sitting in the RRSP can be sold with no further tax hit and different more diversified equities can be bought and that will grow tax free.

So in summary by leveraging the RRSP this person can liquidate ~$50,000 SHOP stock each year and pay $0 tax. (I made an assumption here that their tax rate is at 20% but it probably would creep up higher as they sold some of this stock, but still)

So if this person wanted to get down to 5% SHOP and pay $0 in tax it will take them 5 years of doing this to get there. Maybe it's obvious but you'd think the columnist would say so, but not selling everything at once is a good way to limit the tax you pay!

Additionally, if you did want to sell a bunch at once, well you can use the RRSP deadline to your advantage here. You can do all this in February, and then after the March deadline everything resets and you can do it all again. So within a few months at the beginning of the year the person could unload $100,000 of SHOP stock and pay $0 tax.

It's wild to me that the Globe didn't mention any of this.

Femtosecond fucked around with this message at 08:07 on Jun 8, 2023

# ¿ Jun 8, 2023 08:03

Femtosecond: Aug 2, 2003

I'd be a bit surprised if this person was already maxing out their RRSP as 130k isn't that much, and they'd be saving 17.6% of their income, which is very good and aggressive savings! If this person has any other debts, such as say a brand new condo, it's more likely to me that they're barely saving anything into RRSP at all.

But yea at least this person can make some choices knowing that they have the potential to save ~$10k every year. They can do the math and figure out how much SHOP would have to drop for waiting to have not been worth it and they can make a choice around whether they think that's likely or not.

# ¿ Jun 8, 2023 18:17

Femtosecond: Aug 2, 2003

I'm looking around for a new software engineering job and boy there's not a lot out there right now. There's a almost no opportunities where I live in Vancouver, and a tiny few in Montreal. Sadly, remote seems to be becoming more rare and going away.

Due to the lack of local and remote roles I've been applying everywhere and actually have a bit of traction with a place in Texas (sadly not remote).

Haven't landed the job yet, and things could still fall apart, but it seems close enough to the possible end line that I should probably start to seriously evaluate whether moving there for a short period of time could make financial sense and the financial implications. The job market is that dire that I am considering this.

I feel like I've read here some people with some experience working in the USA (Subjunctive?) so thought I'd post here that I'm curious if anyone here has experience with working in the USA and still having some ties in Canada and what this all means for taxes, TFSA, RRSP etc. Anything one has to do?

A possible wrinkle here is that I do have some property in Vancouver and as a Housing Turbo Bull (lol) I'm a bit reluctant to sell it if I leave and I'd be curious about what happens if I hold onto it? Can I keep it as my "permanent residence" even if I'm living in the USA the whole time and renting it out? Or maybe better for tax reasons not to?

I actually don't think housing is going to go up that much more, but I'd more holding onto it out of a paranoia that I'd be wrong. I have some family that sold out of Vancouver and went elsewhere and now can't come back because everything exploded out of their price range. If I want to ever retire here and guarantee I have some stable secure tenure, it means holding onto a toehold of property in Vancouver just in case house prices lurch upward again.

# ¿ Nov 26, 2023 19:47

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# ¿ Apr 27, 2024 18:39

Femtosecond: Aug 2, 2003

If the USA freezes the assets of Canadians we have bigger problems than retirement.

# ¿ Mar 16, 2024 00:52

The Something Awful Forums > Discussion > Ask/Tell > Business, Finance, and Careers > Canadian Finance and Investing Thread - Paying More is our National Pastime

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