Personal Finance

TFSA - Investing/Savings

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  • Feb 1st, 2014 4:01 pm
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Deal Fanatic
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Oct 8, 2006
5666 posts
656 upvotes
Toronto

TFSA - Investing/Savings

What do you with your TFSA? Currently mine are just in ING doing a small 1.4% interest.

Can you invest TFSA into mutual funds and such? I'm a beginner in all this stock stuff (lower then beginner probably). I have it maxed out right now.

Also how does your contribution room work if you can invest it.

say max room is 50K. You put in 50K. So your at the ceiling. Now your investments go up 10K then drop 5k then up 15K then drop 10K. Right now you are at 55K. You take it all out.

In the next year, is your contribution room now 70K (+yearly contribution room) or is it 55K (+yearly contribution room)?
5 replies
Newbie
Jan 27, 2014
27 posts
11 upvotes
You can invest in anything really, but you can not use margin. The answer is 55K + contribution.
Deal Expert
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Mar 1, 2008
19151 posts
9079 upvotes
Toronto, Ontario
I just opened one an hour ago at TD. It's a TD Mutual Funds TFSA. Didn't want to put it there and just collect interest which is less than inflation, so I chose one with some risk.
RFD is love. RFD is life.
Member
Aug 26, 2012
286 posts
81 upvotes
[QUOTE] say max room is 50K. You put in 50K. So your at the ceiling. Now your investments go up 10K then drop 5k then up 15K then drop 10K. Right now you are at 55K. You take it all out.[/QUOTE]
It's 55k.
But, if it becomes 40k, and you take it all out, your contribution becomes 40k (risk).

Read up on http://canadiancouchpotato.com/model-portfolios/ as a start
Sr. Member
Oct 14, 2012
954 posts
728 upvotes
Woodstock
The trick question is what are you saving in your TFSA for?
If you're saving for a home or a car or a trip, you may want the money pretty soon. If so, investing in stocks is not a great idea. If the market is down when you need your money you will have to sell and lose money.

If you're saving for 10+ years, and if you have the nerve to hold on when the market drops 25-50% and NOT SELL then you may want to invest some of your money in some stocks. I mean some not all! New investors always think they will be able to hold on for the ride when the market plunges but many of them are wrong. Only invest some of your money in the market and you won't be as likely to panic when all the TV and newspaper shows start screaming about how low it's going to go, for how long, and how the world is coming to an end.

You can read about "index" or "couch potato" investing on the Canadian Couch Potato's website.

For example, he recommends buying one of the ING Direct Streetwise funds in a TFSA if you don't have a lot of money and you don't want to get too fancy. I think it's the balanced fund, but if you search using the terms Canadian Couch Potato and Streetwise, it will find the article.

Many, many people expect the stock markets to drop at least 10% this year for at least a few months. Some expect it will drop more. You may want to "buy in" gradually over time, say, putting 1/10th of the amount you want to invest in the stock market in each month, rather than put the entire chunk in on one day (which could be the day before the market starts dropping like a stone for months on end.) If you do that, you may buy some when the markets are high, and some when the markets are low, and it will help even things out a bit.

If you will need your money pretty soon, you could consider GICs. They may offer a better rate than a cash account. Many GICs cannot be cashed until they mature, however, so be sure to read the details before you buy any.

Take your time. Read a bit. Think twice. Then when you have a plan you can take careful steps forward while you implement it.
Deal Fanatic
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Oct 8, 2006
5666 posts
656 upvotes
Toronto
Thanks all.

[QUOTE] But, if it becomes 40k, and you take it all out, your contribution becomes 40k (risk). [/QUOTE]

Wow that really sucks.. Didn't know your contribution room could 'technically' shrink =/.

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