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  • Feb 23rd, 2020 3:06 am
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[OP]
Jr. Member
Apr 7, 2007
128 posts
22 upvotes
ontario

TFSA Account

Hi all,

Ive maxed out my TFSA held with a discount brokerage. Over the past few years I've been splitting the money in GICs. The return is pretty bad between 1 and 2%.

I have recently started looking at bonds. I didn't understand what the bond price is for? They range between 99 and 101 dollars. Is that the price to purchase the bond from the brokerage?

Alternatively I have been reading about bond ETFs such as vanguard's VAB or scotias ZAG. I have money outside of these accounts and I'm not really dependent on the TFSA monies but still I worked for it and don't want to loose it.

I should mention I have an RRSP that I like to take a lot more risk with. In the RRSP I have VGRO and XBAL. Since I won't be touching the RRSP for another 30 years I feel comfortable taking higher risk there.

I think I'm looking for some good options with the TFSA. I'm familiar with the Canadian couch potato and I'm considering the moderate risk protfolio.

Thanks for any replies.
2 replies
Newbie
May 21, 2019
16 posts
5 upvotes
Need some more details such as income, age, spouse, kids, pension at work etc. I wouldn't bother buying individual bonds.

If you are not going to touch your RRSP for 30yrs then what would make you touch your TFSA in the same amount of time? Whats your goal with the TFSA(retirement, savings, emergency fund?
Jr. Member
Dec 1, 2019
128 posts
106 upvotes
Individual bonds are initially set at nice number like $100 or $1000.

What you are actually doing when you buy one - is basically writing a loan to someone. It has an interest rate, and a term. When the Bank of Canada changes interest rates, the bond coupon rate and the price changes(caring about price changes only matter if you want to sell the bond to someone else, in this case it looks like you are buying a secondary bond). This is why some bonds are worth $99 and others $101 - the differences are made up with the smaller/bigger coupon payments.

Since individual bonds are basically loans, you need to do your research on who you are buying from/lending to.

Bond ETFs take the effort out of this as they buy a diversified mix of bonds.

In taxable accounts ZDB is better than ZAG since the payouts(coupons) are smaller due to holding discount bonds. Less interest income that is fully taxable at your marginal rate.

https://www.canadianportfoliomanagerblo ... -just-yet/

Putting the money in a HISA might be better - better interest rate, even after taxes, and you have CDIC insurance.

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