Personal Finance

Opinions? TFSA savings Vs TFSA mutual fund couch potato style

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  • Oct 5th, 2012 8:27 am
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Member
Sep 24, 2010
291 posts
10 upvotes

Opinions? TFSA savings Vs TFSA mutual fund couch potato style

I now have 50% of my TFSA in a TD waterhouse e-series mutual funds in a couch potato portfolio and another 40% in my TFSA, just savings with TD (in case I have to withdraw from waterhouse then it is free to withdraw to TD TFSA savings).

Given that:

1) I do not need the money anytime soon but I would like to leave some liquidity.
2) not really a high risk taker (no trading from TFSA; for example with questrade)

Come next year,

a) Should I keep this ratio?
b) concentrate all TFSA funds into one account (be it mutual funds or savings account)

I keep going back and forth in my decision and could not come to a conclusion. I would go for mutual funds but so far I am at a loss of $300 or so out of 10k. And that is holding me back a little. Your opinions are much appreciated.
6 replies
Newbie
Sep 6, 2012
94 posts
19 upvotes
BEAUPORT
If you have need money in less then 6 years, get the ***** out of mutual funds
Member
Oct 25, 2010
499 posts
61 upvotes
So the question is really what's a better investment? A high interest savings account or a Couch Potato investment portfolio?

That's a matter of opinion, but personally I'm close to fully invested myself right now. This isn't money that I need for 10+ years, so if there is another dip it won't bother me.

Are you sure you at a $300 loss, by the way? You may not be looking at dividends.
Member
Oct 25, 2010
499 posts
61 upvotes
..sorry, one more thing: If you're just looking to consolidated you could go with an investment account (might need to be self-directed) and for the cash component buy something that mimics your savings account (you're not getting any great deal on that TFSA Savings account at 1%...).

Read this thread: http://forums.redflagdeals.com/where-do ... nt-987430/
Sr. Member
User avatar
Mar 13, 2012
865 posts
145 upvotes
Planet Earth
Chalif wrote: If you have need money in less then 6 years, get the ***** out of mutual funds
Before making such statements... Get informed on e-Series funds. OP specifically says "1) I do not need the money anytime soon but I would like to leave some liquidity."
If at first you don't succeed, destroy all evidence that you even tried.
Deal Fanatic
User avatar
Mar 24, 2004
8683 posts
573 upvotes
Toronto
Time horizon.

eSeries are liquid. A few clicks, and its converted to cash.

If expected to do so in 5-7 years, I'd say a balanced portfolio would suit your needs.

A question to ponder, if you wanted to convert to cash but the market went down; could you wait it out?
Member
May 2, 2012
291 posts
260 upvotes
Ottawa
Swknight,

A TFSA cash account (People's Trust or Canadian Direct financial pay 3% interest) is a good place for an emergency fund. You should keep that separate from investment accounts.

Channeling Steven Covey: "Put first things first." http://www.finiki.org/wiki/Creating_a_Financial_Plan

Any high interest debt? Pay that off first. It's an easy win, no-brainer way to get a "high return" in that you won't be paying 18% interest, you'll be paying 0%. (that just "earned" you 18% on your investments)

Next, maintain an emergency fund that's actual "cash", not an investment product with a fluctuating value. A cash TFSA paying 3% interest is a good place for that. The size of your emergency fund is a personal choice but "6 months of living expenses" would be a good start, more if you have any doubt about your employment status.

Don't keep your emergency fund in non-cash investments. Yes, you could sell them to generate cash. However, if the market is in a down cycle, you could be taking a hit. (buying high, selling low) Emergency funds exist so you won't have to sell assets.

After that, look at investments and the TD e-Series are an excellent choice for index fund investment, until your portfolio is large enough offset the costs incurred to purchase and rebalance ETFs. More on that: http://canadiancouchpotato.com/2012/07/ ... -and-etfs/

Ignore the market noise. That "loss of $300 or so out of 10k" isn't a loss unless you sell. Tomorrow (or next year) it could just as easily be a "profit" of $1,000.

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