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TFSAs benefit everyone, not just the so-called “rich”

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Canadian Tax-Free Savings Account concept word cloud

By Jonathan Chevreau

No surprise that the Broadbent Institute — a newish left-leaning think tank that counterbalances the rightish Fraser Institute — has concluded in its report Double Trouble that only the “rich” would benefit from the promised doubling of annual contribution limits for Tax-free Savings Accounts (TFSAs.)

You can read the Financial Post’s front page story by Garry Marr (aka @DustyWallet on Twitter) here and the Globe’s version here.

I was particularly interested in the CBC website’s coverage, and especially the almost 900 reader comments that have been piling on. For instance, one reader said:

What was the big surprise here? you need money to make it?

Or this:

The government doesn’t lose anything. The NDP lose votes. The TFSA is one of the few programs the average guy and gal can use. The NDP should be all over the TFSA and tell Canadians how they would make it better faster. This is really bad electioneering on their part. The NDP should be trying to convince the public TFSA were their idea.

Continue Reading…

Robo Advisors, A Personal Experience Part 1: Getting Started

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Aman Raina, Sage Investors

By Aman Raina, Sage Investors.com

Special to the Financial Independence Hub 

We’ve been hearing a lot of a new type of investing management model. A “Robo-Advisor”  is an online-oriented service that automatically selects and manages a portfolio that is conducive to an investor’s risk tolerance.

There has  been a lot of commentary about the prospects of this type of service gaining traction,  especially with younger people or those with minimal assets but who want to get exposure to the overall stock market without doing all the legwork.

Much of this revolves around offering investors more transparency as it pertains to costs as well as back-office efficiencies and back-office savings that investors can leverage. The robo-advisor investment ideology revolves around a passive investment strategy by utilizing low commission Exchange Traded Funds (ETFs) allocated across various asset classes and that are held for long periods of time. Periodically, the asset mix is automatically adjusted if certain percentage makeups become too high or too low. A wealth of research has shown that a passively managed portfolio of ETTs can outperform a portfolio of actively managed assets.

This is all well and good. Ultimately, what will drive this service is the performance of these algorithm-managed portfolios. Instead of writing about these services in theory, I thought I would put my money where my mouth is and actually invest some money with a Robo-Advisor service and blog about the whole experience. More importantly, I will track the performance and costs these services generate. Continue Reading…

The trouble with core-and-explore

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Robb Engen, Boomer & Echo

By Robb Engen, Boomer & Echo

Special to the Financial Independence Hub

We all know how the story goes: You get a hot stock tip from your uncle who works in the oil & gas industry, or from your brother-in-law who works in the tech space, or from your mortgage broker (who’s an idiot).

I’m sorry, but just stop right there. No, Tiger Mike’s Drilling Co. is NOT going to be the next Suncor, and Flappy Bird (or whatever the kids are playing these days) is definitely not going to be the next Facebook or Instagram. And your mortgage broker is still an idiot, no matter what his day-trading recommendation was this time. So why are you listening to him?

Many investors obsess over fees, trying to shave tenths or even hundredths of a percentage from their mutual fund or ETF expenses. But some investors are willing to throw away those benefits by trying (and failing) to hit a home run picking junior mining stocks on the Venture Exchange.

“Play money” doesn’t belong in your retirement plan

The problem with a core-and-explore approach is when investors view “explore” as play money to gamble on risky penny stocks or the next up-and-coming trend. Was it play money when you first decided to save instead of spend your hard-earned dollars? Why is it different now that the money is in your brokerage account?

Why take that kind of risk with your investments? If you feel like gambling, go to a casino. “Play money” does not belong in your retirement plan.

I get it – it can be fun to try and find the next Microsoft or Google from a list of up-and-comers. But the odds of that happening are overwhelmingly not in your favour.

There’s a reason why most “hot stock tip” stories end up as cautionary tales for investors. So why do we keep doing it?

Remember, you don’t need to swing for the fences when a base hit will do just fine.

In addition to running the Boomer & Echo website, Robb Engen is a fee-only financial planner. This article originally ran on his site [note the comments that follow it] and is republished here with his permission. 

Is the Retirement grass greener in the United States or Canada?

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Depositphotos_40901151_xsBy Jonathan Chevreau

The Financial Independence Hub attempts to be a North American portal running content that may interest readers on either side of the 49th parallel.

This isn’t always easy; sometimes we run blogs from people like Roger Wohlner, The Chicago Financial Planner and perforce the content (like this blog he adapted for the Hub) will be mostly US-specific: touching on topics like IRAs, 401(k)s, Roth IRAs and all the rest of it.

By the same token, our Canadian contributors often write about things like the TFSA or Tax Free Savings Account, which is the equivalent of America’s Roth IRAs and variants of same.

As fate would have it, the Financial Post (my former employer until 2012), asked me to contribute an article comparing the tax and retirement systems of the two countries. You can find it here under the headline Canada vs. the US: Whose Retirement grass is greener?

Findependence is legitimate cross-border topic

I was happy to take the assignment because I’ve been grappling with US/Canadian tax and retirement issues ever since I wrote the book that spawned this and other web sites. The original edition of my 2008 financial novel, Findependence Day, was meant to be a transborder financial love story, covering the tax and retirement topics of both countries through the eyes of characters residing in both countries.

My feeling was then and remains that when you get right down to it, the main lessons of Financial Independence are pretty similar in the two countries. Continue Reading…

The Growing Power of the TFSA

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Canadian Tax-Free Savings Account concept word cloud

By Jonathan Chevreau

The Financial Post has just published an online version of my piece, entitled The Rising Power of the TFSA. Are RRSPs even relevant any more? Click on the link to read the full article.

In a nutshell, of course RRSPs are still relevant for most of us, and we’d hate to discourage people from topping up their RRSPs before the imminent Mar. 2nd deadline this year. My point really is that while there are certain people who should not RRSP if they have only enough money to fund a Tax-Free Saving Account, it’s not quite the same in reverse.

I really can’t think of a reason why anyone age 18 or over, anyone approaching advanced old age, and the rest of us between those extremes, shouldn’t max out their TFSAs. It’s the gift that keeps on giving — tax-free income, that is. (An aside for any American readers: Canada’s TFSA is the equivalent of the Roth IRA).

patmckeoughWe have run several pieces on TFSAs here at the Hub, the most recent one being a joint collaboration between myself and TSI Network.ca’s Patrick McKeough. (TSI is one of his flagship newsletters, The Successful Investor).

In the piece 5 low-risk investments for your TFSA, Continue Reading…