Here's a short article on portfolio allocation indicating my preferences in each account.
Where do we start?
Lets take a look at various investment instruments and their tax consequences:
* Canadian Dividends – Dividend tax credit makes Canadian dividend income very tax efficient in a taxable account.
* Foreign Dividends – In non-registered accounts, foreign dividends are taxed 100% at your marginal tax rate (ie. if you are in the 40% tax bracket, you will pay $40 in tax for every $100 interest). In TFSA’s, right now, it seems foreign dividends will face a withholding tax.
* Bonds/GICs/Money Market – In a taxable account, interest is taxed at 100%.
* Income Trusts – Income Trust distribution varies between capital gain, return of capital, interest and dividends. Due to the typically higher interest content, I keep my income trusts and REITs within a tax sheltered account like an RRSP or TFSA.
RRSP:
* Fixed Income/Bonds/GIC’s
* Foreign Equities
* Income Trusts
* REITs
TFSA
* Fixed Income/Bonds/GIC’s
* Income Trusts
* REITs
Non-Registered:
* Canadian equities