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Advice for my little brother

14K views 36 replies 16 participants last post by  OntFA 
What's your specific question about sheltering e-funds in a TFSA?

The TFSA is a tax-free container, no matter what you put in it, be it stocks, bonds, money market funds, mutual funds or cash. The tax-free status comes from the kind of account (or "container") the TFSA is, not from anything you put into it.

My only other comment is that perhaps you might balance your desire to "not cripple" the growth potential in your bro's emergency fund account with a countervailing desire to not cripple his capacity to do things with the funds if he needs 'em because they've gone down in value. :cool:
 
Uh. Why would you have any more struggle in explaining ETF creation units than you would in explaining MF units?

I don't personally think that ETFs are conceptually more difficult to understand than are MFs and, in fact, I would probably argue that ETFs are intuitively more simple to understand.
 
Fair enough.

The two brokerages I worked in were fully stock and ETF houses; we didn't really deal in conventional MFs at all (except, for the most part, if a client brought them over with DSCs and it didn't make sense to dump them).

I guess I have often wondered how I would explain MFs. I always thought, does the FA give some version of "the managers worry about all of that"? Are MFs more popular *because* they don't require FAs to explain the structural complexities of ETFs?

I do think your example about comparing the ease of investing in conventional MFs with an advisor at a local branch with setting up an account at a discount brokerage is slightly misleading - only because I do not think the process is less complex with an advisor, there's just another person there helping you do it.

You could also argue, I think, that investing with an advisor brings its own set of complex, intimidating problems - mainly in determining who to trust and what metrics you should employ to know whether you should trust this person (and his or her advice) or some other person.

There are really important decisions for both DIY investors and those who invest with an advisor. I just think the decisions are different in the two cases - and, for DIY investors, the decision is much more about their own capacity for self-knowledge and self-education. If you trust that more than you fear sharing responsibility with an advisor, that's probably the way to go for you.
 
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