Cheers Splinky, I copied all your links into post #1, easier to find in another 8 years...
Last edited by: heckler on April 15, 2022, 7:03 p.m., edited 1 time in total.
How much do you know about financial independence?
Posted by: KenN in 2008
interesting thanks, i'll check that out. i've always thought rrsp's were a bit of a ripoff - altho the tax credit is nice
RRSPs are a very good way to shelter some of your income from taxation. The idea is to save, shelter the earnings, and when you retire you will be earning less so the amount you pull out of the RRSP will be taxed at a lower rate than when you were working.
However, the real problem is the "investment industry" that has sprouted up around RRSP investing. The "financial advisor" and mutual fund industry is pretty much set up to suck money out of your RRSPs. Mutual funds take staggering amounts of fees out of your rsp investment, so even when the fund makes money, most of it is taken off the top to pay the fund manger, the fund company and the financial advisor/goon who sold you the piece of crap. While there are ethical advisors and ethically managed funds, they are in the minority, and the industry has structured itself to discourage that kind of behaviour.
After losing money for years, I spent the time to read all of the prospectuses of the funds my "advisor" (sales dink) had sold me and was absolutely amazed at all the fees hidden in the funds. Sold the lot, fired the advisor and now 100% of my RSPs are self-directed through a trading account.
An excellent wake-up call is contained in this book:
http://www.amazon.ca/Naked-Investor-Revised-John-Reynolds/dp/0143055437
I strongly suggest every working Canadian should read it.
Kn.
Splinky
This is all from the first half, but it's all the info needed to get started on the HM maneuver. You'll have to read the thread from the start or paypal $20 to [email protected] for the answer.
I only have hundreds now.,. Please send a cheque for the difference.
Last edited by: heckler on April 16, 2022, 9:15 a.m., edited 1 time in total.
Posted by: heckler
Posted by: KenN in 2008
interesting thanks, i'll check that out. i've always thought rrsp's were a bit of a ripoff - altho the tax credit is nice
RRSPs are a very good way to shelter some of your income from taxation. The idea is to save, shelter the earnings, and when you retire you will be earning less so the amount you pull out of the RRSP will be taxed at a lower rate than when you were working.
However, the real problem is the "investment industry" that has sprouted up around RRSP investing. The "financial advisor" and mutual fund industry is pretty much set up to suck money out of your RRSPs. Mutual funds take staggering amounts of fees out of your rsp investment, so even when the fund makes money, most of it is taken off the top to pay the fund manger, the fund company and the financial advisor/goon who sold you the piece of crap. While there are ethical advisors and ethically managed funds, they are in the minority, and the industry has structured itself to discourage that kind of behaviour.
After losing money for years, I spent the time to read all of the prospectuses of the funds my "advisor" (sales dink) had sold me and was absolutely amazed at all the fees hidden in the funds. Sold the lot, fired the advisor and now 100% of my RSPs are self-directed through a trading account.
An excellent wake-up call is contained in this book:
http://www.amazon.ca/Naked-Investor-Revised-John-Reynolds/dp/0143055437
I strongly suggest every working Canadian should read it.
Kn.
Don't forget though is that it is super easy these days to do a self-directed RRSP to avoid those pitfalls Ken mentioned. Yes there is the potential disadvantage of higher taxes down the road when you have to start withdrawing RRSP contributions, but that means your investments have done really well so it's not necessarily a bad deal. And like I mentioned much earlier in this thread, with RRSP contributions now it means a reduction in your net income and a tax rebate, which can then be put into your TFSA to further boost your retirement savings. Everyone needs to figure out what works best for their situation, but I think RRSPs are one of the best way to go both short term and long term.
Perhaps another one for the recommended reading list: "The Wealthy Renter" by Alex Avery. Available from your local library (e-book available on overdrive).
It compares owning vs renting, busts a bunch of myths, and explains that one is not necessarily better or worse than the other from a financial point of view. I've noticed Canadians are obsessed by home ownership but most don't really understand the full financial mechanics behind it.
Posted by: syncro
Posted by: KenN
If you want to look at something interesting, check out NIF.UN, paying a very steady 16.6% dividend. They just came through a strike that killed the share price. They also may wrap up the business and sell assets before too much longer. But there's the rub: it's trading at a P/B of 0.5 - so yeah, market cap based on share price is about half the break up value of the company. Hmmmm.
Still holding that at a current dividend of about 1% ?
Not sure if I did a typo or autocorrect fucked me over yet again, but that should have been LIF.UN
Posted by: [email protected]
Perhaps another one for the recommended reading list: "The Wealthy Renter" by Alex Avery. Available from your local library (e-book available on overdrive).
It compares owning vs renting, busts a bunch of myths, and explains that one is not necessarily better or worse than the other from a financial point of view. I've noticed Canadians are obsessed by home ownership but most don't really understand the full financial mechanics behind it.
running a basement suite is good money and the costs piggy back on the home owner costs you were going to have anyway so it really doesnt cost anymore, but most people don't want the inconvienence
Last edited by: XXX_er on April 17, 2022, 11:23 a.m., edited 1 time in total.
Posted by: XXX_er
running a basement suite is good money and the costs piggy back on the home owner costs you were going to have anyway so it really doesnt cost anymore, but most people don't want the inconvienence
That can be good way to do it for someone who doesn't mind being a landlord. It comes with its own up and downsides and risks and rewards.
If I wanted to diversify my investments into real estate I would probably just buy a bunch of REITs and get the income without the hassle. But I'm fine with my total stock market index funds which already have appropriate exposure to real estate.
Last edited by: [email protected] on April 17, 2022, 3:23 p.m., edited 2 times in total.
yeah most people don't want the inconvenience but the money is nice
Have you guys ever done any tax loss harvesting?
I had a look at my accounts to see the carnage. In my non-registered account, US and Canadian are still solid in the green but international and bonds are in the red. I could potentially reduce the net unrealized gains by 40% and save on future taxes.
Never been in that situation before. My usual approach is to resist the urge to tinker and instead to keep things simple, stick with the plan and leave stuff untouched as much as possible.
The main complication I am aware of is that you need to avoid a superficial loss:
This article discusses some ways around this without being out of the market for 30 days:
https://www.advisor.ca/columnists_/frank-di-pietro/sidestepping-superficial-loss-rules/
I'd look at the value in terms of taxes you would not pay and then see if the time to conduct, track and report the sales are worth it.
Last edited by: Vikb on June 18, 2022, 3:09 p.m., edited 1 time in total.
Yes I know about the superficial loss rule, from what I understand it can be avoided by switching to an index fund that has similar market exposure but tracks a slightly different index.
Anyway, I looked into it a bit more and it no longer seemed worth the hassle once I realized that our marginal tax rate will most likely be very low once living off investment income at our level of spending.
Plug some numbers into https://www.taxtips.ca/calculators/canadian-tax/canadian-tax-calculator.htm and see how ridiculously low income from capital is taxed vs income from work.
Laziness is my default position when it comes to investing/financial management. I'm sure I am missing out on some wins, but I am also sure I am avoiding some losing moves. ;-)
It's called passive or couch potato investing for a reason! :)
Posted by: [email protected]
Yes I know about the superficial loss rule, from what I understand it can be avoided by switching to an index fund that has similar market exposure but tracks a slightly different index.
Haven't TLH myself, but it's on the radar, being in the red on VCN purchased this past year. Not deep enough yet to bother, only -$0.19 per share less than ACB.
https://www.taxtips.ca/glossary/adjusted-cost-base.htm
Also be aware across your and spouse accounts, that the same ETF you sell at a "loss" cannot be repurchased for 30 days (including an automatic dividend reinvestment you might have set up previously.) This is causing me to pause, as I have VCN in 4 accounts still.
Your post leads me to point out...
https://canadiancouchpotato.com/2010/03/05/put-your-assets-in-their-place/
especially as interest rates start rising, bonds to RSP, US to RSP, Canada to non-registered. Still slowly rebalancing my VCN out to non-reg.
Last edited by: heckler on June 19, 2022, 2:47 p.m., edited 1 time in total.
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