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Discussion Starter #1
I have a little bit of cash saved up and would like to make money on it instead of just sitting in the bank and getting 0.25%. After reading some books and using online calculators, I would like to know how realistic a 10% year after year is. I am 32 with 4 kids so I am not looking for anything risky. Just something conservative to grow. What is a realistic return one can expect?

Also, most of my cash is in US$. Most banks in canada will pay peanuts because its in US$. In the US some banks offer 2% in the money market accounts. 2nd is that CDIC does not insure US$. Taking those two into consideration, would you move your $$ accross the border? If so, would there be any legal/tax implications?

Thanks!
 

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Wouldn't we all love a risk free 10% return :D
There is no such thing, unless it's someone trying to scam your money.
You could get a better rate than .25%, some smaller institutions offer as much as 2%., but that's about as high as you can go . With some risk appetite you
might consider blue chip dividend paying stocks or preferred shares, otherwise you're out of luck.
As far as the US dollars I don't think it would be worth going throw all that
trouble to get 2%, but I'm not that familiar with US dollar accounts.
 

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Not a good time to be selling US for CAD; may want to wait until / if the rate ex drops again for a bit, but it may not. If you did wait and ex rates did drop, you could make your 10% compared to todays ex rate with no risk other than you may be waiting a while and this would be a 1 time gain though. ;)

Assuming you have your $ converted to CAD, the only way I know of to get 10% returns is to look at trusts or REITs, but of which are riskly from the range of options perspective. REITs are likely better positioned because they do not have to change their company payout structure by the end of the year like non REIT trusts do.

For example, one REIT that has been raised recently is D.UN, paying 10%+ yield, but again, there is risk in buying any stock, and these are not 'blue chip'.

I guess if the markets are working the way they are supposed to, higher return == higher risk in general, so that is just a fact of investing.

leslie or another more experienced investor may be able to correct me on my comments and / or provide more details than the high level blah blah that my current abilities allow. ;)
 

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Unfortunately conservative investor and 10% returns do not go together. Unless you can handle the ups and downs of the markets, you will be stuck investing in GICs, and they top out at about 3.25% for a 5 year rate these days. You may be able to average a 10% return over a number of years, but you would have to be prepared to live through some bad years (eg, 2008). By definition, a conservative investor does not want a 2008 scenario in his portfolio.
 

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NEVER, put money in a bank that is not CDIC insured.

You are not given an interest rate commensurate with the risk of lending money to a highly leveraged institution. I couldn't care less if it is the Royal Bank or what not. Royal Trust was the 6th largest bank in Canada just before it went bankrupt in 1992. Washington Mutual in the US had been around for over 100 years and was the largest savings and loan company in the United States.

If you have more than $100,000, think about opening a brokerage account that brokers deposits. Not only can you get a higher interest rate, but you can put 5 or 6, CDIC insured banks into one account, and a brokerage account has a CIPF guarantee of $1,000,000.

Good luck to you.
 

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I think the issue is decided by your reference to "a little bit of cash". Of course you want to make your saving 'work' for you, but that is not really the best attitude. When you strive for higher returns, you must also accept the possibility of loss. Statistical, historical averages mask that reality.

It is not the rate of return that matters when your savings are small. What matters FAR more is your additional savings. Discussion.

Even the most simple strategy of investing (passive indexing) does not guarantee returns. You must be reading in the papers all the moaning because US indexes have generated only 1% over the last decade. Your returns depend on your luck, your knowledge about investing, your willingness to devote time and effort, the economy , etc.
 

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All the casinos provide discounted food. A discounted lunch, if not a free one. :) But you pay in the end, which is the point of the saying, eh?
 

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One option is a high-yield bond fund.
PHN has one of the best, however, the MER is higher than others at 1.47%.
This fund has returned over 16% last year.
Note that high-yield is an euphemism for "junk bonds".
 

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Discussion Starter #12
Thanks for all the replies.

I was not planning on switching to Canadian $$. I want to leave in US$ and hope it will pick up one day to 2005-2006 highs. What worries me is that my money is sitting in US$ in canadian banks and is not CDIC insured because it's in a foreign currency.

Do I really have to bring it over to USA just to be FDIC insured? If I open up an account at TD Waterhouse canada for example, do they have 1,000,000 coverage?
 

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I was not planning on switching to Canadian $$. I want to leave in US$ and hope it will pick up one day to 2005-2006 highs. What worries me is that my money is sitting in US$ in canadian banks and is not CDIC insured because it's in a foreign currency.

Do I really have to bring it over to USA just to be FDIC insured? If I open up an account at TD Waterhouse canada for example, do they have 1,000,000 coverage?
How much are we talking about here?
You say you have a "little bit of cash"...little bit can be $100, $1,000 or $1M depending on who you are.
If it is in the lower thousands and not hundreds of thousands, I would say you are worrying too much about the currency conversion.
USD is not going to get significantly stronger than CAD like it was 6+ years ago anytime soon (unless epoch-changing events occur).
If you are a Canadian, living in Canada and plan to live/work in Canada for the next little while, I suggest keep things simple and convert the cash.

I remember myself many years ago moving from the UK to the US and bemoaning the conversion from GBP to USD and again several years ago moving from the US to Canada and trying to eke out the best possible conversion rate.
In the end, a few bps doesn't really matter unless we are talking about hundreds of thousands.
 

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dear mrormrs emseeyou

something unreal about this thread.

you have 500k in a mattress bank account & you are worried about the one-half of one per cent and the insurance.
?
ps mind telling us how a 32-year-old with 4 kids obtained half a million USD.
?
 

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Discussion Starter #17
By working hard and saving my money! Not blowing it on stupid stuff that most people do. Humble_pie you sound like a jealous *** with your last comment. Why would I like about my situation? This is exactly why i didn't want to give an amount in my original post.

What is the 1/2 percent I am arguing about? What about the insurance?

I thought this forum was to get info and help each other, not judge others because they have managed to save more money than you have.

To all the others, I really appreciate all the info/suggestions so far.
 

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we talking over 500k
If you are able to do this by 32 years of age, you should really tread carefully with this kind of money. You are in a position to set yourself up very well for the rest of your life. You may be risking too much in trying for a 10% annual gain long term.

If you had said 10% for a $5000 or even $50,000 portfolio, then fine - a downturn in the market is likely recoverable with your future earnings and savings. But one bad year against a 1/2 million portfolio will wipe you out for a long time, and derail any future plans you may have.

What are your goals?

As a simplified example, if you want to retire in 20 years, say with an annual contribution of $20000 / yr towards your portfolio, you could end up with $2 million for your retirement with just a 5% (compounded) annual gain. This is much more possible, and considerably less risky than trying for 10% long term. Again, we don't know your situation, but ask yourself: What are my targets/goals? What sort of timing am I looking at? How much can I regularly contribute? What are my future needs? This will help you construct a savings/investing plan that will serve your future needs without unnecessary risk.

Congratulations for such a remarkable savings at a young age....but be careful and don't put it on the line with one bad investment decision.
 

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Whether you can keep that much money in the US or not depends on your status in the US.
Are you a dual citizen or US Green Card holder?
Do you file US taxes?
If not, it may be problematic to keep that much cash in the US.
The post Patriot Act monitoring is very rigid and it's getting worse every day, but I'm sure you already know this.
Don't hold your breath waiting for pre-2005 exchange rates.
 

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Discussion Starter #20
Thanks tojo! This is exactly what I am trying to avoid. Making some dumb investment mistake and risk all I have worked hard for. In 2002 just shortly after we got married I had saved up about 70k and lost it all in the stock market. I was left with debt. It was very dumb on my part to have put everything in, but I guess it was an expensive tuition. I managed to get myself back up, by working 18-20 hour days, but now I am kind of burnt out. So I can't say for sure how much longer/more I can contribute.

My dream was to be able to make a 30k salary from my saving within the next 5 years and still being able to retire or die with a decent amount of cash to leave to my kids. I thought 10% was risky, but when I read this book by Robert Allen, I was amazed how much a difference it made from 6 to 10%.

It would be nice if I didn't have to work or If I can stop working full time and just take a little part time job fo 25-30 hours week. This will allow me to spend the time I want with my kids and wife.

So what is a realistic, safe %? 4-5%? After taxes, what are we left with since its interest income?

Feel free for anymore suggestion on what I can do to protect my family and at the same time increase the value of our savings

THANKS!
 
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