As I mentioned one of the common themes I hear from folks when I attempt to chat with them about how they are saving for their future, is the Tyranny of Choice, and the mental gridlock all of these possible choices can cause for some folks.

I do get lots of questions about, “… what in your opinion is the best vehicle for investing?”, and the easiest answers are:

  • Can you be more specific?
  • It depends on what your goals are, what are your goals?
  • Why does my opinion matter to you?
On this Holy Weekend What is the True Faith of Investing?

hat is the True Faith of Investing?

Note I never answered the question? My advice is usually to go learn some stuff and decide for yourself, since I never feel too comfortable telling people what to do with their money.

As an example, you want to open an RRSP, what do you do? First you find out whether you can put money into an RRSP (do you have RRSP space), then you look into the various RRSP savings vehicles out there. If you are a TD Bank customer, you can set up:

  • A TD Mutual Fund RRSP Account
  • A TD GIC RRSP Account
  • A TD Waterhouse ¬†self-directed RRSP account
  • I am sure a plethora of other things

Notice, what vehicle you can choose ends up being dictated depending on which savings vehicle you try to use (i.e. if you choose a TD Mutual Fund RRSP account, you can buy TD Mutual Funds (and not all of them either)), so the advice here is try to keep as many options open, and set up as flexible an account as possible. In my case I set up a TD Waterhouse Self-Directed RRSP account (but if you bank with BMO you can set up a Nesbitt Burns account, and with other banks you can use their brokerage house, or even some of the on-line brokerage firms).

Self-Directed RRSP accounts are more flexible and more expensive administratively (for the account) (usually), so you need to figure out what makes you comfortable. The other thing with Self-Directed accounts is the SELF-DIRECTED part of it, you are going to make the trades and such in the account. If you don’t feel safe doing this, then maybe you need a full service brokerage house?

As you can see in the past few paragraphs, I haven’t really even touched on the title of this post: which is the better choice ETFs, Mutual Funds, Index Funds, etc., and you know why? It’s nearly the last decision you make you have to set all this stuff up first.

Don’t worry about deciding, worry about getting started on getting the infrastructure in place. You’ll have time to finally decide what you want to buy, but you will need to do a lot of groundwork first.

It took me about 3 weeks to get my Self-Directed RRSP in place and running (so that I could actually make a trade), anybody got it set up and flying sooner?

 

 

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Canada Learning Bond Eligibility and TD RESP

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.

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Bonds are not a Safe Haven Right Now

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.

Handcuffs

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.

 

 

 

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