Yes, agreed... although for many, they only see the increases and don't take into consideration inflation or taxation.bylo wrote: ↑Nov 2nd, 2017 12:17 pmI don't disagree with the general points you've made above, especially since they echo what I just said upthread
However I take issue about how many people "here putting the BULK of their growth portfolio in a HISA," especially the "growth" qualifier which strikes me as a kind of non sequitur. If the bulk of their assets are in an HISA then, by definition, it's not a growth portfolio I doubt many people are confused on that distinction.
It's reminds me of that friend who looks at the condo that they purchased for $250,000 looks at their $180,000 mortgage and think they are earning a $100,000 windfall if they can sell it for $280,000. In reality, they don't include the $60,000 downpayment ( not part of the investment ) $15,000 in transactional fees and other hidden costs.
Some great points. Thanks for sharing. And yes... and totally agree about GICs. It's a bit more work, but HISAs make way more sense for the GIC crowd. However, your points to lend themselves well to my original point, that if you're playing around with $300,000+ in HISAs you likely have the bulk of your wealth elsewhere ( equities, pensions, fixed income, portfolio ).Some more points:
1. Many (most?) people who think they can handle investment risks like market volatility do so having never actually experienced it. Then the first time there's a correction, let alone a crash like 2008, or the 2000 Internet bubble burst, or the 1987 crash, etc. usually panic and sell--at the worst possible time. Suddenly they realize that their previously-held swagger was just hubris. IMO there's no other way to determine one's risk tolerance but to live through a major crash. Some of those who do and who learn from it, vow to steer clear of equities in the future. Whether that's rational or not is immaterial. It's their money. It's also their good night's sleep.
2. There are many people who don't need to invest in equities at all. Between pensions, CPP/OAS and their portfolio of GICs, they have more than enough to live on, including provision for emergencies, without having to take any equity risk. Consider a retired couple with $2M in GICs. Even at 2% interest there's $40k income in addition to perhaps $30k in CPP/OAS, not to mention private pension plans. Why should they want to invest in equities when they don't need to?
3. These days even 5-year GICs pay around 2%. (Yes some pay more, but others, especially the big-5 banks pay even less.) With interest rates set to rise (at least according to the experts) I suspect many people are hesitant to lock in for 5 years at such low rates, especially when they can wait it out for 3 months AND earn 50% higher rates, e.g. 2.75% (TING) or 3% (Simplii.) In this situation they're holding large amounts in HISAs, not out of ignorance or inertia, but rather deliberately to earn higher-than-GIC rates as well as in the expectation of rising rates. Moreover with all the HISA players competing with promo rates on HISAs it's likely this situation will continue well into 2018. My contention is that in this climate holding HISAs at promo rates at TING and Simplii is more rational than buying 5-year GICs at 1.8% from their owners BNS and CIBC.
Is there anyone here using HISAs as the BULK of their wealth, though? That's what I was initially curious about. Interesting conversation, all.
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