Personal Finance

Where/How would you invest $100,000 - $120,000?

  • Last Updated:
  • Jul 7th, 2013 9:53 pm

Poll: Where to invest $$$?

  • Total votes: 66. You have voted on this poll.
Real Estate
 
17
26%
Stocks
 
24
36%
High Interest Savings Account
 
10
15%
Mutual Funds
 
5
8%
GIC
 
3
5%
Other (Please include options in the thread)
 
7
11%
[OP]
Member
Mar 11, 2004
393 posts
96 upvotes
Ottawa

Where/How would you invest $100,000 - $120,000?

Hi fellow RFD,

I would like your honest opinion on where and how to invest this type of funds.

I have opened up the polls to get sufficient metrics.

Please provide other options in the thread.


Scenarios:

Short-term vs long-term options
Low Risk vs High Risk
Tax Savings
Tax Implications with CRA

Thank you.
25 replies
Deal Addict
Jun 6, 2007
1025 posts
138 upvotes
KINGSTON, Ontario
I would purchase equity exposure in $5,000 bi-weekly increments over the next 40-48 weeks.
[OP]
Member
Mar 11, 2004
393 posts
96 upvotes
Ottawa
Pardon my ignorance but what is equity exposure? Is this to acquire that amount or to distribute the amount to get a larger return on investment?
dgodsell wrote: I would purchase equity exposure in $5,000 bi-weekly increments over the next 40-48 weeks.
Deal Addict
Feb 15, 2013
2445 posts
558 upvotes
deluxster wrote: Hi fellow RFD,

I would like your honest opinion on where and how to invest this lump sum.

I have opened up the polls to get sufficient metrics.

Please provide other options in the thread.

Scenarios:

Short-term vs long-term options
Low Risk vs High Risk
Tax Savings
Tax Implications with CRA

Thank you.
Currently there is nothing worthwhile to invest in. Assets that I am familiar with are stocks and real estate; which I have been investing in for 16 years. Neither asset class show any advantage for me to be investing a lump sum at this time. However, different individuals with different abilities and temperaments may see things differently.
Deal Expert
Aug 2, 2001
16594 posts
6768 upvotes
deluxster wrote: Pardon my ignorance but what is equity exposure? Is this to acquire that amount or to distribute the amount to get a larger return on investment?
He is most likely referring to investing a percentage of your amount over a long period of time in order to take advantage of dollar-cost averaging. This will prevent you from "timing the market" (for good or, as typically happens, bad). For example if you invested $120K right now and the market is at a high your return may be lower than if you invest over the course of 6 months if the market returned 0% over that period because you took advantage of the "lows" in stock prices.

By equity exposure he is most likely referring to investing in equities (stock market).

If you are dealing with such a large sum of money it would be wise to contact a professional. That's a lot of money to be playing around with if your knowledge is limited. Perhaps consider using a portion of it as your "learning funds" while you leave the rest to a professional until you are comfortable with self-directed investing? A professional can also help you figure out risk tolerance, etc.
Deal Addict
Jun 6, 2007
1025 posts
138 upvotes
KINGSTON, Ontario
deluxster wrote: Pardon my ignorance but what is equity exposure? Is this to acquire that amount or to distribute the amount to get a larger return on investment?
Personally, I don't think an advisor is necessary. I believe such a decision is as likely to go wrong as to go right.

Like TK mentioned, I mean dollar cost averaging. If you just want to get this decision off your plate, I would use XIU, which is a mutual fund-like investment that gives you exposure to the 60 largest companies in Canada (e.g., Suncor, Royal Bank of Canada). XIU is the largest mutual fund-like investment in Canada; and not coincidentally, makes up some 70% of my portfolio.

If you want to use this investment as a learning opportunity, I would start a "fake money" account using one of the many practice account providers, rather than compartmentalizing some of the funds to "play" with.
Deal Fanatic
User avatar
Dec 14, 2010
6128 posts
7041 upvotes
deluxster wrote: Hi fellow RFD,

I would like your honest opinion on where and how to invest this lump sum.

I have opened up the polls to get sufficient metrics.

Please provide other options in the thread.


Scenarios:

Short-term vs long-term options
Low Risk vs High Risk
Tax Savings
Tax Implications with CRA

Thank you.
This is how I'm doing mine:

Short term: Trading options by selling monthly Iron Condors on SPX and buying strangles quaterly before earnings of volatile companies; Exploit volatility by buying XIV when VIX / VXV ratio is lower than 0.9 (and converting to cash when it's equal or over 0.9);

Long term: buying dividend stocks in Canadian and US markets, through a balanced portfoilio (each sector equally exposed, as opposed to XIU, that exposes few sectors as the majority). 1 to 3 stocks from leaders on those sectors. That includes stocks and income / royalty trusts.

High risk: Trading ones. I have 50% of my trading money on volatility play or monthly Iron Condors (usually they don't go together, as I only do IC when VIX is over 15), rest goes on quarterly plays. AMZN has been a winner on every trade for 4 years in a row. Rest needs to be looked at individually. I use optionslam.com for that.

Low risk: Stocks for investments, as long as fundamentals make sense. I consider low risk due to the long time frame for growth. I buy them at EMA(200) just to enjoy higher dividends. Dollar averaging (buying it biweekly) as suggested earlier is another alternative.

Tax savings: Trading results can be reported as capital gains if done every year consistently. You'd save on taxes if you'd trade from TFSA, but commissions might not be worth it. For investing, you could deposit the dividends / distributions on your RRSP to get some of the taxes back. If you're borrowing for investing, you can write off the interest too. But careful with trusts if you're doing leveraging, as their distribution affects tax deductibility.

Tax implication with CRA: Options trading can be reported as capital gains, as well as the volatility play. Canadian dividends are elegible for dividend tax credit. Foreign dividend stocks are fully taxed. In TFSA, they have withholding tax.

Rod
Deal Fanatic
User avatar
Jun 19, 2009
5971 posts
1788 upvotes
Scarborough
Can you explain the logic behind buying at 200 day EMA to enjoy higher dividends? I've always read about stocks crossing below that threshold but never understood the significance of it.
[OP]
Member
Mar 11, 2004
393 posts
96 upvotes
Ottawa
Thank you everyone for commenting so far. I am learning a lot. I hope to gain some valuable advice as well as make some big decisions in the next few weeks/months on how I am going to diversify this.
Deal Fanatic
User avatar
Dec 14, 2010
6128 posts
7041 upvotes
SkimGuy wrote: Can you explain the logic behind buying at 200 day EMA to enjoy higher dividends? I've always read about stocks crossing below that threshold but never understood the significance of it.
Dividends are a fixed amount of dollar paid regularly, regardless the price of the stock. For example, take CMG.TO. They pay $0.72 per year per stock. At today's price ($23.00), it yields 3.13% return. This payment is done independent of stock price. If I buy the shares when it hits EMA(200), at $20.28, it yields 3.55% return, because they pay the same $0.72 per share per year.

Example, let's say you want to invest $10K in CMG. At $23, you'd buy 434 shares and receive $312.48 in dividends / year (3.13% return).
If I wait and buy at EMA(200), which is $20.28, the same $10K buys 493 shares, which pays $354.96 in dividends / year (3.55% return).

It's just a way to not buy it too expensive, EMA(200) is what I consider a fair price. Most of my Canadian stocks are at EMA(200) now, so I'm not down on my portfolio yet (my average is lower than that, by using this method on previous years) - so it gives some buffer for correction, case you need to liquidate it soon (on the leveraging portfolio). This is a great way to add more. But I'm still waiting for CGX, SJ, CNR, PPL, IGM and CMG (Canadian portfolio) to come down to buy more. And waiting for most of US stocks on my portfolio to come down before adding more.

Rod
Deal Fanatic
User avatar
Jun 19, 2009
5971 posts
1788 upvotes
Scarborough
rodbarc wrote: Dividends are a fixed amount of dollar paid regularly, regardless the price of the stock. For example, take CMG.TO. They pay $0.72 per year per stock. At today's price ($23.00), it yields 3.13% return. This payment is done independent of stock price. If I buy the shares when it hits EMA(200), at $20.28, it yields 3.55% return, because they pay the same $0.72 per share per year.

Example, let's say you want to invest $10K in CMG. At $23, you'd buy 434 shares and receive $312.48 in dividends / year (3.13% return).
If I wait and buy at EMA(200), which is $20.28, the same $10K buys 493 shares, which pays $354.96 in dividends / year (3.55% return).

It's just a way to not buy it too expensive, EMA(200) is what I consider a fair price. Most of my Canadian stocks are at EMA(200) now, so I'm not down on my portfolio yet (my average is lower than that, by using this method on previous years) - so it gives some buffer for correction, case you need to liquidate it soon (on the leveraging portfolio). This is a great way to add more. But I'm still waiting for CGX, SJ, CNR, PPL, IGM and CMG (Canadian portfolio) to come down to buy more. And waiting for most of US stocks on my portfolio to come down before adding more.

Rod
Interesting. It sounds like the EMA 200 is just a general guideline to when you feel a stock is fairly valued?
[OP]
Member
Mar 11, 2004
393 posts
96 upvotes
Ottawa
Thank you very much for your outlook. It seems that you have been doing this for some time now. If you don't mind me asking how rewarding is your portfolio over the 5 year period ? It does seem like I need to know alot about trading before I step into this type of field. Is your major Business?
rodbarc wrote: This is how I'm doing mine:

Short term: Trading options by selling monthly Iron Condors on SPX and buying strangles quaterly before earnings of volatile companies; Exploit volatility by buying XIV when VIX / VXV ratio is lower than 0.9 (and converting to cash when it's equal or over 0.9);

Long term: buying dividend stocks in Canadian and US markets, through a balanced portfoilio (each sector equally exposed, as opposed to XIU, that exposes few sectors as the majority). 1 to 3 stocks from leaders on those sectors. That includes stocks and income / royalty trusts.

High risk: Trading ones. I have 50% of my trading money on volatility play or monthly Iron Condors (usually they don't go together, as I only do IC when VIX is over 15), rest goes on quarterly plays. AMZN has been a winner on every trade for 4 years in a row. Rest needs to be looked at individually. I use optionslam.com for that.

Low risk: Stocks for investments, as long as fundamentals make sense. I consider low risk due to the long time frame for growth. I buy them at EMA(200) just to enjoy higher dividends. Dollar averaging (buying it biweekly) as suggested earlier is another alternative.

Tax savings: Trading results can be reported as capital gains if done every year consistently. You'd save on taxes if you'd trade from TFSA, but commissions might not be worth it. For investing, you could deposit the dividends / distributions on your RRSP to get some of the taxes back. If you're borrowing for investing, you can write off the interest too. But careful with trusts if you're doing leveraging, as their distribution affects tax deductibility.

Tax implication with CRA: Options trading can be reported as capital gains, as well as the volatility play. Canadian dividends are elegible for dividend tax credit. Foreign dividend stocks are fully taxed. In TFSA, they have withholding tax.

Rod
Deal Addict
Feb 15, 2013
2445 posts
558 upvotes
“I don’t look to jump over 7-foot bars; I look around for 1-foot bars that I can step over.”

“The business schools reward difficult complex behavior more than simple behavior. But simple behavior is more effective.”

"Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.”

“For some reason, people take their cues from price action rather than from values. What doesn’t work is when you start doing things that you don’t understand or because they worked last week for somebody else. The dumbest reason in the world to buy a stock is because it is going up. You can’t buy what is popular and do well.”

“The important thing is to keep playing, to play against weak opponents and to play for big stakes.”

Top