Investing Assets Held in a TFSA

[johnnyone1]

Seeking advice from you financial gurus on Terb.

I presently have $5000+ in a TD-Canada Trust TFSA and the balance will increase by $5000 per year for the forseeable future. The interest paid on this account by TD is pityful...less than 1%.

I've not, in the past, been much of an investor, so I know very little about it. But it does seem silly to just leave these funds to sit there and lose value to inflation year after year. I don't see myself needing the funds for at least another 10 years.

I'm not looking for anything with high risk, and my past experience with mutual funds tells me that most of the gains get siphoned off in fees, so I'm not looking to go that route either.

I've thought about bank stocks BMO, TD etc., as they've seemed to have faired pretty well over time.

QUESTIONS:

1. Based on the above, does anyone have any thoughts/advice on a no-to-low-risk investment strategy? Names of stocks, bonds etc.

2. TD's brokerage fees seem to be fairly high. Do I have to invest through them or can I use any broker I choose? Also, any lower-fee brokerage suggestions?

3. Any suggestions as to how this is done while remaining inside the TFSA boundaries.

Thanks -- J1

 

[watson101]

Suggest you open a discount broker account such as TD Greenline. Explore purchasing an ETF that matches your investment style. The ishare web site would be helpful to select for diversification, risk, % return history etc.

I would recomment XTR as a low risk, 5% dividend, pays monthly.
Set up a DRIP to re-invest the dividends automatically if you do not need the income. They also offer some bank ETF's.

 

[JodoKast]

I'm not sure it's possible to set up a dividend reinvestment plan on XTR as a good chunk of its holdings are bonds. Have you tried this?

I agree that the best strategy for a low risk tolerance investor is the use of simple ETFs. Vanguard recently (beginning of the year, I think) released a set of Canadian ETFs that have ultra-low fees. I own a bunch of their USD ETFs and they are great; ultra low fees and a variety that will only improve over time.

https://www.vanguardcanada.ca/individual/etfs.htm

A combination of these ETFs would probably be suitable for you depending upon your risk/return profile. With a 10 year time horizon, you may be able to tolerate more risk than you think. Avoid checking on a daily or weekly basis as this always freaks me out!

As to accounts, depending on whether or not you have a mortgage or other assets within a bank, you may be eligible to receive discounted fees. I personally use Questrade and have been for years. $5 bucks a trade? No one can really beat that.

 

[johnnyone1]

Thanks watson101 and JodoKast, a lot of info to sift through and absorb here.

I'm also delighted to be the recipient of the very first posts for both of you... welcome!

 

[msog87]

Seeking advice from you financial gurus on Terb.

I presently have $5000+ in a TD-Canada Trust TFSA and the balance will increase by $5000 per year for the forseeable future. The interest paid on this account by TD is pityful...less than 1%.

I've not, in the past, been much of an investor, so I know very little about it. But it does seem silly to just leave these funds to sit there and lose value to inflation year after year. I don't see myself needing the funds for at least another 10 years.

I'm not looking for anything with high risk, and my past experience with mutual funds tells me that most of the gains get siphoned off in fees, so I'm not looking to go that route either.

I've thought about bank stocks BMO, TD etc., as they've seemed to have faired pretty well over time.

QUESTIONS:

1. Based on the above, does anyone have any thoughts/advice on a no-to-low-risk investment strategy? Names of stocks, bonds etc.

2. TD's brokerage fees seem to be fairly high. Do I have to invest through them or can I use any broker I choose? Also, any lower-fee brokerage suggestions?

3. Any suggestions as to how this is done while remaining inside the TFSA boundaries.

Thanks -- J1

open up an account with the discount broker of your choice, i'm with questrade they have the lowest commission. now, what to do with your money depends on your risk tolerance and goals. I myself would put the money in stocks that are considered " high risk" growth stocks by the mainstream. a conservative approach would be for you to buy stock of quality multinational companies that pay a high dividend, you could also throw in a canadian bank like BMO. anither good option for you is to put it all in an oil company as they are always flush with cash. BONTERRA ENERGY pays 7% dividend a year and its paid monthly, plus the stock should appreciate over time. just understand if you are going for high dividend stable companies don;t expect much capital gains, bonterra energy is both its high growth and high dividend. now, put that 5k in a quality junior mining stock which are trading at bargain prices right now and you can have 50k in a few years from now no joke. to touch on canadian banks some more, they are the best in the world and are sound, pay a high dividend, but look at their chart in the past 5 years there is no growth, and when the EU and american financial system crashes canadian bank shares will be dragged lower as well the financial sector is the worst sector to be in right now for this reason whether your bank is good or not. plus you never know canadian banks health could suffer as well bc the worlds financial system has serious problems

 

[watson101]

Not all brokers will allow you to set up the DRIP on XTR, but it can be done at TD.

I would avoid holding any single company stocks as a new investor. You need diversification and low risk to build a position. Also do not let high dividends lure you in as it is often a sign of other problems in the financials.

Also remember that stocks held in a TFSA do not allow you to take advantage of tax losses.

 

[msog87]

Not all brokers will allow you to set up the DRIP on XTR, but it can be done at TD.

I would avoid holding any single company stocks as a new investor. You need diversification and low risk to build a position. Also do not let high dividends lure you in as it is often a sign of other problems in the financials.

Also remember that stocks held in a TFSA do not allow you to take advantage of tax losses.

diversification is when you don;t know what your doing. look at an index fund that tracks the tsx, its gone nowhere in 12 years while the crb index has multipled 5x or so. a large oil company isnt gonna run out of money anytime soon

 

[JodoKast]

I would not recommend that a new investor go out and purchase individual securities either. However, if you wish to throw the bulk of your savings into just a handful of stocks, that is your choice. All that a great company needs to do is make a bad decision or two and a seemingly great stock loses 50% of its value. Not all large oil companies are great investments but if you feel comfortable picking a single one, great!

Also putting 5K in a junior mining company seems VERY risky to me but to each their own I guess...

 

[danibbler]

diversification is when you don;t know what your doing. look at an index fund that tracks the tsx, its gone nowhere in 12 years while the crb index has multipled 5x or so. a large oil company isnt gonna run out of money anytime soon

Well, if you look at Bonterra, it's gone nowhere over the past five years too. And I would not touch a junior mining stock now because from what I can tell commodities such as metals are going down for the next little while although some would argue now is the time to strike.

For someone like the OP, it might be best to find a couple of good ETFs and, then, in a year or two branch out into more risky plays.

 

[msog87]

Well, if you look at Bonterra, it's gone nowhere over the past five years too. And I would not touch a junior mining stock now because from what I can tell commodities such as metals are going down for the next little while although some would argue now is the time to strike.

For someone like the OP, it might be best to find a couple of good ETFs and, then, in a year or two branch out into more risky plays.

oil hit 147 in 2008 thats why itll get back there eventually. the 5 year chart wasnt really a good example as 5 years ago there was a major peak in commodities followd by a large correction that ended in 2009. I only recommended that stock as a dividend play, for capital gains id go elsewhere as I believe there are better opportunities. unless you believe oil prices arnt in a bull market its a great play.

 

[msog87]

basically, the general stock market is in a longterm bear market, commodities are in a longterm bull market. this trend started in year 2000 and it still has avery long way to go

 

[danibbler]

oil hit 147 in 2008 thats why itll get back there eventually. the 5 year chart wasnt really a good example as 5 years ago there was a major peak in commodities followd by a large correction that ended in 2009. I only recommended that stock as a dividend play, for capital gains id go elsewhere as I believe there are better opportunities. unless you believe oil prices arnt in a bull market its a great play.

I also looked back at the 10 year chart for Bonterra and it was only then that it looked good. But, you'd have had to hold for 10 years.

And, I don't think oil prices are in a bull market. This new fracking technology over the past 2 years has been what can only be called a disruptive technology. It's crushed prices for natural gas and, by extension, it's crushed the price for uranium. Many nat gas companies are now piling on into oil and in a couple of years you will see oil prices headed downhill too.

 

[msog87]

I disagree, oil is in a bull market there hasnt been a large new elephant discovery in over 40 years, russia and saudi the 2 largest exporters are close to running at max capacity meanwhile demand is growing every year. what do you think is gonna happen once over 1 billion asians start driving cars etc. besides this, central banks are actively debasing currencies which causes commodity prices to rise we will see $200 oil in this decade. bonterra is a good buy right now however its off its lows as oil put in its yearly bottom a few weeks back. even if they stock price stays flat, in 10 years you'd make 70% return off the divdend its a no brainer if your a dividend investor. of course there are other companies as well

 

[danibbler]

I disagree, oil is in a bull market there hasnt been a large new elephant discovery in over 40 years, russia and saudi the 2 largest exporters are close to running at max capacity meanwhile demand is growing every year. what do you think is gonna happen once over 1 billion asians start driving cars etc. besides this, central banks are actively debasing currencies which causes commodity prices to rise we will see $200 oil in this decade. bonterra is a good buy right now however its off its lows as oil put in its yearly bottom a few weeks back. even if they stock price stays flat, in 10 years you'd make 70% return off the divdend its a no brainer if your a dividend investor. of course there are other companies as well

I don't think it's a case of whether or not there has been an elephant discovery. I've heard of companies now going back over the old fields and increasing yields. There are more discoveries on the close inshore in the Gulf of Mexico, there's more discoveries off the coast of Brazil and there's massive deposits supposedly in the South China Sea which if the Asians ever get their act together will produce a glut on the market.

You can say all you want about a billion Asians driving cars but that's not going to happen. Yes, the quality of life will improve but not to that great of an extent. A lot of people will still be on a subsistence level of existence much as they are now.

 

[danibbler]

As a quick followup, if you have a look at:

http://www.indexmundi.com/energy.aspx?region=xx&product=oil&graph=production

World oil production has increased in the past couple of years and that's even before all of those nat gas companies fleeing to oil production using fracking.

You have a slowing world economy (debatable) coupled with a new disruptive technology and I think that that's going to lead to lower oil prices over the next few years. Now, will oil hit $200? I don't know anything about debasing currencies and the effect on commodity prices so I can't really say but my gut instinct simply says that it would be a stretch.

 

[msog87]

I don't think it's a case of whether or not there has been an elephant discovery. I've heard of companies now going back over the old fields and increasing yields. There are more discoveries on the close inshore in the Gulf of Mexico, there's more discoveries off the coast of Brazil and there's massive deposits supposedly in the South China Sea which if the Asians ever get their act together will produce a glut on the market.

You can say all you want about a billion Asians driving cars but that's not going to happen. Yes, the quality of life will improve but not to that great of an extent. A lot of people will still be on a subsistence level of existence much as they are now.

largest growing middle class, well over a billion people from china and india alone. they are human, they want the same lifestyle as westerners do

 

[duang]

diversification is when you don;t know what your doing.

Love this kind of confidence! Ignorant little me has to diversify since my crystal ball is broken...

D.

 

[msog87]

Love this kind of confidence! Ignorant little me has to diversify since my crystal ball is broken...

D.

what you have to do is start following the economists that have good track records who know what they are talking about, are not about peddling propaganda and everything will make sense. diversification is what brain dead mutual fund dealers tell you who don;t know fuck all they just give out the same conventional advice as everyone else. its not easy to predict near term or short term market moves but you can look at the probability by looking at technicals, but its easy to predict longterm trends if you understand the fundamentals

 

[msog87]

govts around the world including ours are debasing currencies with negative interest rates so you need to invest in real assets that protect from inflation, and in companies that mine natural resources that are finite with growing demand

 

[msog87]

every investor now shouldbe preparing for a fresh round of money printing from the fed and ecb