Investment

[Seesus]

Guys, need some advise. I do have around 10K CAD that i am thinking best way of investing in a way where i can have the money grow, I will not be need access to these funds until about next 3 years . any suggestions as to what would be the best way to make this amount grow !?

thanks in advance.

 

[afransen]

What's your risk profile? What kind of downside risk would you be able to tolerate?

 

[kEiThZ]

Yeah, a lot depends on what kind of an investor you are. At this stage with a recovery cranking up, I am putting everything I have into energy, mining, precious metals, real estate and any sort of infrastructure company that I can afford to invest in.

 

[TOinTO]

Put the whole thing into a short position on Wal-Mart. They're goin' DOWN!

No seriously, If you may 'need' the money in three years, then you should be looking at some low risk investment. Maybe a short term bond ETF or GICs.
You may get 3-4 percent/year, but you're unlikely to lose money.

 

[Whoaccio]

I'd say just buy an index or two. At 10k you wont be able to get any meaningful diversification and wont have any luck trying to pick and choose individual winners and losers. If you don't need the money for 3 years or so, maybe look at some kind of back ended fund? It is impossible to really say what to do without knowing more.

Maybe look through here if anything catches your eye?

EDIT: Do NOT short WalMart.

 

[victor]

Phase I. Buy $9090 USD for $10000 CAD at current 1.1 USDCAD rate.
Phase II. Sell $9090 USD for $11800 CAD at future 1.3 USDCAD rate.
Phase III. Profit $1800 CAD. Enjoy it

 

[AKS]

Phase I. Buy $9090 USD for $10000 CAD at current 1.1 USDCAD rate.
Phase II. Sell $9090 USD for $11800 CAD at future 1.3 USDCAD rate.
Phase III. Profit $1800 CAD. Enjoy it

you forget to mention tax free ^^

 

[Whoaccio]

Ohh, dunno if you have already taken care of this, but make sure you make make the maximum annual contribution to your Tax Free Savings Account. If you haven't already done this it should be your first priority to set one up and make the maximum contribution (5k).

 

[AKS]

Ohh, dunno if you have already taken care of this, but make sure you make make the maximum annual contribution to your Tax Free Savings Account. If you haven't already done this it should be your first priority to set one up and make the maximum contribution (5k).

I find the TFS is basically useless. $5000 interest on 1% is $50 tax free. How much can they tax you on $50.

 

[Whoaccio]

^
Uhh, isn't that a bit low? Getting a one percent annual yield on investments is pretty god awful performance. You can buy a gov bond and get at least 4% guaranteed. Long term average annual equity returns tend to be about 6-7%, so you should probably start with that assumption.

The biggest impact on potential tax savings is how long you plan on holding the savings, which is an individual thing. In the case of Seesus, if he made the maximum annual contribution to his TFSA and held it for 3 years (assuming he is in the 40-80k tax band and an return of 6%/pa) he should get tax savings around 300$. Not Donald Trump, but worth taking advantage of none the less.

It tends to get better with age. If you start one when you are 20 and make the max contribution until you retire (say, 35 years and assume you retire in the 80-120k tax band) you could save about 160k in taxes which is hardly chump change. Contributing the maximum for another 5 years brings savings up to 260k, all thing being equal. That isn't totally accurate, it is probably wishful thinking to assume one can make 5k contributions annually without ever making a withdrawal for 40 years but it does have some illustrative value of how this has the potential to save money.

GC's TFSA calculator

 

[AKS]

I was basing the 1% on TSFA savings accounts.

 

[Hank]

A TFSA is basically just a tax-free barrier around $5,000 of your money per year; you can invest the money any way you want (well, not any way...there's a few restrictions like owning shares of a private corporation). Nothing's restricting you to a 1% return. The benefit of the plan is that you're not getting taxed on any income or capital gains on the money; the downside is that it's after-tax money, so you don't get the tax refund that you get by putting money into an RSP.

 

[Whoaccio]

Types of investments allowed in the TFSA

Generally, the types of investments that will be permitted in a TFSA are the same as in a registered retirement savings plan (RRSP).

This would include mutual funds, securities listed on a designated stock exchange, Guaranteed Investment Certificates (GICs), bonds, and certain shares of small business corporations.

You can contribute foreign funds to a TFSA. However, your financial institution will convert the funds to Canadian dollars when reporting this information to the CRA. Your contributions cannot exceed your annual contribution limit in Canadian dollars.

You can also make "in kind" contributions to your TFSA, as long as the property is a qualified investment. We will consider that you have disposed of the property for its fair market value (FMV) at the time of the contribution. If the FMV is more than the cost of the property, you will have to report the capital gain in your income tax return. However, if the cost is more than the FMV, the resulting capital loss cannot be claimed. The amount of the contribution will be equal to the FMV of the property.

 

[Seesus]

Phase I. Buy $9090 USD for $10000 CAD at current 1.1 USDCAD rate.
Phase II. Sell $9090 USD for $11800 CAD at future 1.3 USDCAD rate.
Phase III. Profit $1800 CAD. Enjoy it

Nice Idea, but what guarantees that US will rise to that level, wht if it went further down

 

[Seesus]

Put the whole thing into a short position on Wal-Mart. They're goin' DOWN!

No seriously, If you may 'need' the money in three years, then you should be looking at some low risk investment. Maybe a short term bond ETF or GICs.
You may get 3-4 percent/year, but you're unlikely to lose money.

I am leaning towards GIC too as i am not in a position to risk any penny out of this potential down payment for my future home. What would be the best GIC rates available for 3 years - would any one know ?

Are bonds also a good idea. Being as new as i can be to this - wondering what would be the best way to find info on bonds !?

Thanks to all for pitching in their thoughts anyways