Canadian Money Forum banner

1 - 18 of 18 Posts

·
Registered
Joined
·
11 Posts
Discussion Starter #1
Hi All,

New here but looks fun. Pondering a situation and looking for some thoughts. I have a mortgage (4% 1st pos HELOC @ 180k) and a couple TFSA's (@100k total) which I self direct (100% equities, mostly dividend, some tech). Given market conditions and general uncertainty over 2019, I'm thinking about putting my TFSA money into the HELOC to lock in 4% gains for 2019 and then rebuilding the TFSA thereafter (possibly including financing from the HELOC etc).

As I think about this, I think I'm trying to time the market which usually is a bad idea. That said, if you offered me guaranteed 4% in 2019, I might take it too ;-)

Anyone really bullish about 2019?

Tx
 

·
Registered
Joined
·
10,517 Posts
... I have a mortgage (4% 1st pos HELOC @ 180k) and a couple TFSA's (@100k total) which I self direct (100% equities, mostly dividend, some tech). Given market conditions and general uncertainty over 2019, I'm thinking about putting my TFSA money into the HELOC to lock in 4% gains for 2019 and then rebuilding the TFSA thereafter ...
I'm not clear what the situation is so here are some questions and thoughts.

Are you saying you have a mortgage plus a HeLoc that totals $180K? A paid off mortgage where the HeLoC is at $180k?

It does not appear that the TFSA total is enough to get rid of whatever is owed so a complete drain might not be all that advisable. Particularly if you do not have any emergency funds.
If there is a mortgage, unless it is coming due for renewal - there may be limits on how much of the mortgage can be paid off early.


... (possibly including financing from the HELOC etc).
Seems strange to cash in the TFSA to reduce the amount owing and then pump up what is owing again by using the HeLoC to rebuild the TFSA.


Cheers
 

·
Registered
Joined
·
915 Posts
No, I wouldn't cash out at during a period of weakness.

Another thing, investing is synonymous with uncertainty. You will never be given an "all clear" to invest. Risk and return are inversely related. Investors who wait for "more certainty" get smaller returns. People often confuse this for some type of wisdom, because they have psychological biases (loss aversion).
 

·
Registered
Joined
·
456 Posts
I think you have to answer a larger question: Are you comfortable using leverage in all markets -- good and bad?
If yes, stay the course. If no, eliminate the leverage -- and don't rebuild it when you think the markets are "safe." Odds are you'll be wrong.
 

·
Registered
Joined
·
2,186 Posts
No, I wouldn't cash out at during a period of weakness.

Another thing, investing is synonymous with uncertainty. You will never be given an "all clear" to invest. Risk and return are inversely related. Investors who wait for "more certainty" get smaller returns. People often confuse this for some type of wisdom, because they have psychological biases (loss aversion).
Your method should give you black & white parameters of when to buy & sell. The lower the risk often the greater the return. Buying @ high levels is more risky with less potential gain
 

·
Registered
Joined
·
11 Posts
Discussion Starter #7
Thanks for the feedback. Pretty sure it's a case of trying to time the market which I know doesn't work. At the same time, also looking at best potential for gains in 2019 and taking 100k off the HELOC (my only debt, no other mortgage) gets me 4% guaranteed which seems pretty solid based on market uncertainty.

Feel like -5% is more likely in 2019 ;-) . Am not risk averse, just looking to hedge. Have lots of other equity market exposure.

P
 

·
Registered
Joined
·
175 Posts
I have been thinking about this the same way.

Guaranteed 4% return by paying down the mortgage.

But, because of the upside in equities, I chose the middle ground. I pump money into my RRSP with pre-tax and after-tax income and use the tax refund to pay down my mortgage.

I'm also on significantly accelerated mortgage payments and I contribute to TFSAs with after tax cash...so it's kind of a hodge-podge right now...but my portfolio and mortgage balance both seem to be going in the right direction
 

·
Registered
Joined
·
2,186 Posts
Could also pay down mortgage faster get more RRSP room in future get more cash back in a future year. If your making more then your spending plus the interest charged your doing it right.
 

·
Registered
Joined
·
16 Posts
No, I wouldn't cash out at during a period of weakness.

Another thing, investing is synonymous with uncertainty. You will never be given an "all clear" to invest. Risk and return are inversely related. Investors who wait for "more certainty" get smaller returns. People often confuse this for some type of wisdom, because they have psychological biases (loss aversion).
Great post. You havent written anything novel, but the way you have described it is awesome.
 

·
Registered
Joined
·
11 Posts
Discussion Starter #11
Back to thinking on this again ;-) . TFSA(s) have about 105k in a mix of mostly Canadian Telecom, Financial, and some real estate (REIT) equities - mostly focused on dividends. HELOC sitting @ 129k and 4%. Wondering about locking in 4% on the 105k by paying down the LOC and more or less dollar cost averaging back into the TFSA's over the next 18 months or so. (have 50-60k in work stock coming due in march to kick start either)

Timing the markets remains hard and probably silly, but guaranteed 4% starting to look better and better ;-) . No right answer I know. I have over a 1M in other RRSP type investments which are primarily in ETFs/Funds and I wonder if putting this TFSA dough into cash isn't a good hedge.
 

·
Registered
Joined
·
62 Posts
trump tweeted yesterday talks with china are going well, if we get a nice 2% jump i'd lock in gains and pay down your 4% loan
 

·
Registered
Joined
·
138 Posts
I always like the idea of getting rid of all the debt. At that point you can rebuild wealth quite quickly with no debt. The only thing is from what I see quite a few people a few years down the road decide to sell there house and buy a more expensive one and then the cycle continues again. Just my thoughts...
 

·
Registered
Joined
·
1,688 Posts
Drain TFSA
As several others have said, paying down your debt is a sure return, compared to remaining invested, which has a risk, so I would favour knocking back the debt.

Probably not completely draining the TFSA though: No one has mentioned an emergency fund. I would recommend a cash emergency fund sized to cover a couple months of mortgage payments. It can be a HISA, and in your TFSA would be perfect.
 

·
Registered
Joined
·
2,122 Posts
Some of our best gains have been attributable to buying in a down market. Holding on during the down times, rather than the sell and run approach, has enhanced our retirement. Granted, it may have been a big gamble but then again life if one big gamble.
 

·
Registered
Joined
·
16,346 Posts
Personally I don't like debt, so if I was in that position I would definitely liquidate the investments and pay the debt.

Timing is also not bad for this; stock markets are practically at all time highs today (give or take a bit) as illustrated in this Canadian index chart.

The way I see it, you'd be selling at a high point. If you're tempted to sell, better to sell high than low, right?

Perfectly OK to also keep your investments, but only if you're comfortable with leveraged stock investing. Your approach of borrowing to buy stocks just amplifies the gains and losses.
 

·
Registered
Joined
·
11 Posts
Discussion Starter #17
Thanks Guys - I am very tempted to pull the trigger on this. Will update.

Of note, I didn't borrow to invest, it just has somewhat become that way I suppose. The HELOC is the last bit of my mortgage which I chose to put in a HELOC at a slightly higher rate than a traditional mortgage product just to give us flexibility in payment options (I expected to pay it down quickly which has so far been the case)

Cheers
 

·
Registered
Joined
·
11 Posts
Discussion Starter #18
Hindsight suggests this idea might have been a good one, though predicting pandemics is hard ;-)

As it turns out I decided to leave the $$ in the TFSA’s (which are now hedged a bit on composition from being pure equities at the start with some gold ETF’s and cash) but we focused our efforts on paying off the HELOC aggressively. Excited that we’re mortgage free this week and will look to finding the investment opportunity.

P
 
1 - 18 of 18 Posts
Top