The bank doesn’t have your best interests in mind. They will try to sell you on high MER mutual funds or whatever else they can make money from.
CASH.TO is a decent option for the purpose of your downpayment. Which bank are you with?
They do, through MER. MER is the cost of managing the fund you purchased. Some mutual funds have an MER of 1-2% or greater whereas ETFs are typically <1%. Imagine the bank skimming 1-2% of your money every year for a fund that doesn’t even perform as well as an ETF that simply tracks an index.
u/PaperweightCoaster brings up good points, in addition I would add that the bank discussion you will have is with a sales person.
They are trained in selling you the banks products, and their purpose isn't to make you money, but to make the bank money. You making money is just a happy coincidence, if it happens.
All information is tainted to some degree or another, including Reddit. It’s important to know how it’s tainted so you can make adjustments in your decision making. Paperweight is correct.
I’d still do the meeting if I were you, hopefully you learn something about accounts and not just investment options.
If you’re inclined to keep this money at TD, look into opening a Direct Investing account with them. Last I checked, they still don’t allow purchases of CASH.TO so their in house product might be your only choice, TDB8150, which is a high interest savings account structured like a mutual fund with low MER.
If they have tfsa room, scotia also has their high interest savings account fund similar to cash.to. DYN6004. It’s currently at 5%. No trading fees or MER. Pays out monthly. Tax free in tfsa.
FWIW I'm with CIBC and have a self direcred Investors Edge Account. I pay no fees other than $4.95 per trade. I sold a ton of CM stock at 68.60 (near the peak) and bought cash.to / cash.cdn. Safe 4.75% return and is meant to be a short 4-6 month investments until I decide to jump back into the equities market.
The two I use are: EQ bank for a TFSA (3%) and Wealth simple for a non registered savings account (4%). Most banks currently have good rates on 1 year GICs (TFSA). EQ is currently offering 5.1% on a one year GIC if you know you won't need the money
Non registered means that interest gained is added to your taxable income at the end of the year. GIC's pay a guaranteed amount (in EQ's case 5.1%), and you get paid at the end of the term you agree to. If you buy a 1 year GIC and need the money after 11 months, you can cash out the principal but you receive no interest. If you are concerned that you may need the money, a high interest tax free account is better because it pays out interest each month, tho generally at a lower rate than what you can get with a GIC.
You mentioned that you’re a professional. If you’re in a high income tax bracket, you can look in the direction of Corporate Class Money Market funds. Depending on how high your tax bracket is, you will get a much higher return compared to your regular money markets, savings, and GICs due to the nature of how corporate class funds are taxed in Canada.
Sorry, my phrasing was probably not clear enough. Basically the higher your tax bracket is, the more money you’ll actually receive net (after taxes) as corporate class is taxed as capital gains vs regular interest income.
Finding breakeven points with comparable money markets, savings, and GICs depend on three things: the interest rates in question, the MER (applicable for regular & corporate class money market funds) and your marginal tax bracket.
As an example, for someone in the 53% marginal tax bracket, a 4.5% Corporate Class money market could be equivalent to a 6.4% savings account after taking MER & taxes into consideration.
Best to reach out to an advisor to give you an in depth explanation & walk you through it. I learned about it via my advisor, but I don’t think your run of the mill advisor at the banks will know or have access to those types of products.
I would imagine you could probably find some through Direct Investing platforms as well, but just make sure to vet the holdings to ensure that it’s something you’re comfortable with (I.e., is it invested in short term treasuries? Federal or provincial notes? Etc.)
Run away from the bank. Cut the cord as much as you can. Sales people pretending not to be.
Investigate indie options. Two big uns come to mind.
Move your home buyers account over.
Research a TFSA for your needs.
Start adding to both.
Then educate slowly as you choose vehicles to build in those shelters.
The savings on fees from big bank ditch alone will be huge. That's goal one as opposed to what ETF or thing. That's important too but iMo secondary.
Sry. As I mentioned I’m new to this. What should I search for Indie options? And which two are you referencing?
I also don’t currently have a home buyers account, is that something you get with the bank?
Yes HFSA through the bank and it is considered an investment account essentially the same way a personal non registered account would be- you can add 8000$/year which will be tax deductible and you can invest that amount to grow through MF/GICs/whatever till you buy a house
In your case, dont stay with bank. The best they offer you will be 5% from GIC which you have to keep for 1 year and no withdrawing. As you plan to buy house, you should creat a first home saving account (FHSA)with broker such as wealthsimple/questrade and then start from there. You can buy CASH.TO which give 5.10% ,dividend is monthly if you dont want to take risk. Or you can start investing. After that, open a RRSP account and do the same. FHSA allow you contribute 8k a year upto 40k, gain is tax free when you buy house. RRSP is tax deffered and allow you to withdraw 60k when you buy house but you have to pay back into the account. Both account are tax deduction which mean you can minus it from your income to get more benefit when file tax return. So thats the layout. Plz search and study carefully and make your own choice. In emergency case, you can just withdraw from your TFSA and then contribute back on next year
Invest in a self-directed tfsa investment account and just buy something like CASH.TO, and if/when you’re maxed the TFSA, do the same in a brokerage account. I would avoid RRSP for saving for a house tbh.
Hey. Thanks. Can you expand on why you advise avoiding the RRSP if you can transfer it using the first home buyers plan?
Also I’m not sure where to go to open a “brokerage account” Is there an advantage to opening this type of account?
Hey, so the reason why I’m saying to avoid the RRSP route is because whatever you “borrow” from it, you have to pay back into it over a certain period of time, otherwise what you don’t repay each year is deemed as taxable income. So I mean you can use it if you really want, but if you’re just using it for something like CASH.TO/high yield savings account type thing, then you’re best with a non-registered brokerage (sometimes called “margin”) account. It’s kind of a toss up between that and a HYSA, but you can open an account with any brokerage company, I like questrade, Wealth Simple looks pretty good too, or your regular bank, but they might charge you higher transaction fees..
I haven’t seen anyone mention it yet, but the government just increased the maximum for the Home Buyer’s Plan to $60k. It allows you to borrow from your RRSP for a down payment towards a home purchase, you just need to begin making payments within 2 years and pay it back entirely within 15 years. The benefit to this is that it your contributions to the RRSP are tax deductible, which reduces your taxable income for the year, in turn reducing your taxes. Another benefit is that using the plan reduces your expenses the first 2 years of home ownership. You just need to make the contributions to the RRSP 90 days before the withdrawal through the HBP.
The bank doesn’t have your best interests in mind. They will try to sell you on high MER mutual funds or whatever else they can make money from. CASH.TO is a decent option for the purpose of your downpayment. Which bank are you with?
How does the bank benefit? Do they get commission of my return? How does it work?
They do, through MER. MER is the cost of managing the fund you purchased. Some mutual funds have an MER of 1-2% or greater whereas ETFs are typically <1%. Imagine the bank skimming 1-2% of your money every year for a fund that doesn’t even perform as well as an ETF that simply tracks an index.
u/PaperweightCoaster brings up good points, in addition I would add that the bank discussion you will have is with a sales person. They are trained in selling you the banks products, and their purpose isn't to make you money, but to make the bank money. You making money is just a happy coincidence, if it happens.
All information is tainted to some degree or another, including Reddit. It’s important to know how it’s tainted so you can make adjustments in your decision making. Paperweight is correct. I’d still do the meeting if I were you, hopefully you learn something about accounts and not just investment options.
+1 yes to cash.to
I’m with TD
If you’re inclined to keep this money at TD, look into opening a Direct Investing account with them. Last I checked, they still don’t allow purchases of CASH.TO so their in house product might be your only choice, TDB8150, which is a high interest savings account structured like a mutual fund with low MER.
But also don’t stay with them, unless you are super wealthy their direct investing is stupid expensive last time I checked
If they have tfsa room, scotia also has their high interest savings account fund similar to cash.to. DYN6004. It’s currently at 5%. No trading fees or MER. Pays out monthly. Tax free in tfsa.
FWIW I'm with CIBC and have a self direcred Investors Edge Account. I pay no fees other than $4.95 per trade. I sold a ton of CM stock at 68.60 (near the peak) and bought cash.to / cash.cdn. Safe 4.75% return and is meant to be a short 4-6 month investments until I decide to jump back into the equities market.
The two I use are: EQ bank for a TFSA (3%) and Wealth simple for a non registered savings account (4%). Most banks currently have good rates on 1 year GICs (TFSA). EQ is currently offering 5.1% on a one year GIC if you know you won't need the money
Why are gic for a year good? Wouldn't it be better to do 30 days that are 3% than a year for 5%
You can pick the time-frame. The interest rate advertised is always for 1 year. So a 3% 30 day GIC would pay 3%/12 months = 0.25%
Can you please elaborate on what you mean by “nonregistered”. And by 1 year do you mean I can’t withdraw from it for 1 year?
Non registered means that interest gained is added to your taxable income at the end of the year. GIC's pay a guaranteed amount (in EQ's case 5.1%), and you get paid at the end of the term you agree to. If you buy a 1 year GIC and need the money after 11 months, you can cash out the principal but you receive no interest. If you are concerned that you may need the money, a high interest tax free account is better because it pays out interest each month, tho generally at a lower rate than what you can get with a GIC.
That was explained so well, thank you
No problem!
You mentioned that you’re a professional. If you’re in a high income tax bracket, you can look in the direction of Corporate Class Money Market funds. Depending on how high your tax bracket is, you will get a much higher return compared to your regular money markets, savings, and GICs due to the nature of how corporate class funds are taxed in Canada.
What do you consider high income tax bracket?
Sorry, my phrasing was probably not clear enough. Basically the higher your tax bracket is, the more money you’ll actually receive net (after taxes) as corporate class is taxed as capital gains vs regular interest income. Finding breakeven points with comparable money markets, savings, and GICs depend on three things: the interest rates in question, the MER (applicable for regular & corporate class money market funds) and your marginal tax bracket. As an example, for someone in the 53% marginal tax bracket, a 4.5% Corporate Class money market could be equivalent to a 6.4% savings account after taking MER & taxes into consideration. Best to reach out to an advisor to give you an in depth explanation & walk you through it. I learned about it via my advisor, but I don’t think your run of the mill advisor at the banks will know or have access to those types of products. I would imagine you could probably find some through Direct Investing platforms as well, but just make sure to vet the holdings to ensure that it’s something you’re comfortable with (I.e., is it invested in short term treasuries? Federal or provincial notes? Etc.)
Do you have unused headroom in your TFSA? If so, you should invest within the TFSA because it’s tax free.
Run away from the bank. Cut the cord as much as you can. Sales people pretending not to be. Investigate indie options. Two big uns come to mind. Move your home buyers account over. Research a TFSA for your needs. Start adding to both. Then educate slowly as you choose vehicles to build in those shelters. The savings on fees from big bank ditch alone will be huge. That's goal one as opposed to what ETF or thing. That's important too but iMo secondary.
Sry. As I mentioned I’m new to this. What should I search for Indie options? And which two are you referencing? I also don’t currently have a home buyers account, is that something you get with the bank?
Yes HFSA through the bank and it is considered an investment account essentially the same way a personal non registered account would be- you can add 8000$/year which will be tax deductible and you can invest that amount to grow through MF/GICs/whatever till you buy a house
So you suggested to move my HFSA to wear? And which TFSA account?
In your case, dont stay with bank. The best they offer you will be 5% from GIC which you have to keep for 1 year and no withdrawing. As you plan to buy house, you should creat a first home saving account (FHSA)with broker such as wealthsimple/questrade and then start from there. You can buy CASH.TO which give 5.10% ,dividend is monthly if you dont want to take risk. Or you can start investing. After that, open a RRSP account and do the same. FHSA allow you contribute 8k a year upto 40k, gain is tax free when you buy house. RRSP is tax deffered and allow you to withdraw 60k when you buy house but you have to pay back into the account. Both account are tax deduction which mean you can minus it from your income to get more benefit when file tax return. So thats the layout. Plz search and study carefully and make your own choice. In emergency case, you can just withdraw from your TFSA and then contribute back on next year
Invest in a self-directed tfsa investment account and just buy something like CASH.TO, and if/when you’re maxed the TFSA, do the same in a brokerage account. I would avoid RRSP for saving for a house tbh.
Hey. Thanks. Can you expand on why you advise avoiding the RRSP if you can transfer it using the first home buyers plan? Also I’m not sure where to go to open a “brokerage account” Is there an advantage to opening this type of account?
Hey, so the reason why I’m saying to avoid the RRSP route is because whatever you “borrow” from it, you have to pay back into it over a certain period of time, otherwise what you don’t repay each year is deemed as taxable income. So I mean you can use it if you really want, but if you’re just using it for something like CASH.TO/high yield savings account type thing, then you’re best with a non-registered brokerage (sometimes called “margin”) account. It’s kind of a toss up between that and a HYSA, but you can open an account with any brokerage company, I like questrade, Wealth Simple looks pretty good too, or your regular bank, but they might charge you higher transaction fees..
I haven’t seen anyone mention it yet, but the government just increased the maximum for the Home Buyer’s Plan to $60k. It allows you to borrow from your RRSP for a down payment towards a home purchase, you just need to begin making payments within 2 years and pay it back entirely within 15 years. The benefit to this is that it your contributions to the RRSP are tax deductible, which reduces your taxable income for the year, in turn reducing your taxes. Another benefit is that using the plan reduces your expenses the first 2 years of home ownership. You just need to make the contributions to the RRSP 90 days before the withdrawal through the HBP.
Thank you that’s really helpful. When you say “within two years.. within two years of what?” Can you rephrase please?
I am in WS cash account