Another thing I learned when I went in for my yearly RESP Fun and Games was that to figure out Canada Learning Bond eligibility for my son, I had to open yet another RESP account (with TD) and that account had to be a GIC account.
First, go read about the Canada Learning Bond over at the HDSRC web site, to find out if you are actually eligible to apply for this grant. My son is born late enough to qualify and I receive the Family Allowance cheque (for now), and those are the two major criteria to be able to even apply for the grant.
Since I was at my TD branch attempting to extricate money from existing RESPs I decided to ask about the CLB for my son. Yes the rep had heard about this program, however, at TD there is yet another interesting wrinkle added to the equation (interesting because it is a wrinkle that causes me to get wrinkles, sort of recursive), I must open a separate RESP account and the account is a GIC only account.
TD’s view of the Canada Learning Bond is explained here, however, to get the CLB I had to open a separate Family Term RESP account, which only allows me to purchase GICs to get the CLB. Now I don’t really have a big issue with this (except that another 2 trees died printing out various forms to create the account), but I just have to wonder out loud why?
Was this a clever ploy by the rep I was dealing with it to have me open yet another account (and possibly get her a bonus)? Maybe, I don’t think so, this sounds hair brained enough to be a bank policy, but if anyone knows of a possible explanation as to why this was so, I would love to hear it.
Epilogue: No, the account showed my son had no Canada Learning Bond Eligibility, and now I have a GIC RESP account with zero balance.
One of the nice parts about writing this blog is I have met some folks who know a great deal more about Investing and Investment vehicles, and one of those is our friend Preet Banerjee. I met Preet through the Canadian Capitalist (for those who don’t know the story look at the N.C.F.B.A. links on my sidebar most of these members have dinner and discuss things every few months), and he has been kind enough to explain a great many things to me about investing and such.
The last time we met, I asked Preet if he might be doing a post on Bonds and how many folks think they are a “safe” investment and he promised me one was in the works and here it is: The ‘safe’ part of your portfolio could get you in trouble. If you have not read this article in the Globe, please go do so, especially if you are or are thinking of investing in Bonds and you are not advanced in the nature of Bonds.
Standard Smith & Wesson Handcuffs
This is not talking about the CSBs (Canada Savings Bonds) you grew up with, these are the Bonds that are in Bond Mutual Funds, or Bond ETFs, we are sort of in a perfect storm for these vehicles to lose their investors money (when in fact the investors think they are in a very safe place).
Interest rates are so darn low, that any small change (like a 1% change), can cause these funds to lose money. I won’t go into details, because I don’t think I am sophisticated enough to do the topic justice, but just understand that if you think your money is “safe” in a bond fund, you need to think again.
If you want safe and boring growth, GICs or CSBs are the choice of boring, milk toast, don’t want ulcers (or growth) investors, stick with those for now, if you want safe (and incredibly slow) growth.
If you want safety, make sure you know that it is safe.