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Discussion Starter #1
Hello all,

About a year ago I asked this forum for a little advice prioritizing my immediate financial goals. I received some helpful input, of which the net result told me to go away and kill all the student loans and car loans.

Well I am back and I am happy to say that all the outstanding debt is gone provincial and nation student loans as well as the car is paid in full.

This puts me at the starting line to the next phase of realizing my financial security.

I was hoping to hear some views about how you guys sequence your investing, in terms of TFSA, RRSP, taxable accounts and extra mortgage payments. I can increase my weekly payments by 25%, and make one lump sum 20% of principal payment per year.

I guess my questions are:

in what order do you invest in these?

ie I should max out TFSA, then RRSP and building up towards a lump sum paid off the mortgage towards the end of the year. (mortgage interest 3.8 % fixed 5 year).

what do you hold under the shelter of each account?

I currently hold $5000 of a couch potato in a TFSA, and have 18,000 in room for RRSP contribution. I would like my couch potato to be my main investment thrust. Obviously right now with it being inside the TFSA there is not too much growth room - so does it need to be moved outside or do you spread you couch potato's across TFSA,RRSP and taxable accounts as it grows ?


I would like to slowly over the next couple of years work my way towards holding no more than 10 stocks diversified across classes, built out of "play money" - probably no more than 5,000/year. As opportunities present themselves.
1-Recession resistant, 1-accidental high yield 1-financial, 1-energy, 1- tech, 1- spec, 1 retail, 1-gold, etc.
This should be best done with which account ? taxable as it will be only a small part of my strategy?

Am I being stupid in this thought - and that realistically I should just keep things simple and just increase the weekly payments by 25% and then save up the rest of the money for a lump sum against the principal once a year? As right now -30,000 of money available for investment will not come close to maxing out the 20% of principal allowed.

Lastly - are the above idea's are good, but for the fact that the market is so screwed right now money into the mortgage now is good but maybe keep some in cash so when the investing times are better - you will have something to enter the game with...

Thanks for you time !
 

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Well, I like to advise people to max out the TFSA first. Depending on your tax brackets and whatnot, the RRSP may be the more tax efficient account, but the TFSA is much more flexible if you need the money again, so it's a good one to start with.

As for whether you should invest for the long-term in the TFSA, or just get a savings account and withdraw at the end of the year to use your lump-sum payment privilege on the mortgage, that's up to your risk tolerance. If you decide to invest in equities, you'd be essentially borrowing against your house at 3.8% in the hopes of making more than that. If you can sleep well at night with that arrangement, then go for it; if not, plan to pay down the mortgage aggressively before you get serious about investing. There's no right or wrong answer there, and you can always do a bit of both - putting your savings from January through June into the TFSA for instance, then saving the rest up in a savings account to put a lump sum against the mortgage... Whatever suits your personality and situation!

I currently hold $5000 of a couch potato in a TFSA, and have 18,000 in room for RRSP contribution. I would like my couch potato to be my main investment thrust. Obviously right now with it being inside the TFSA there is not too much growth room - so does it need to be moved outside or do you spread you couch potato's across TFSA,RRSP and taxable accounts as it grows ?
You can spread the various components of your couch potato strategy around your different accounts, it's all your money so you don't need to try to partition off and diversify each account separately. With small amounts and TD's e-series funds it gets quite easy to have each account balanced on its own, but with ETFs it may make sense to try to limit the number of transactions and buy for instance your international equity fund in your TFSA, the US equity in your RRSP, and Canadian equity in your non-registered... Try to keep as much sheltered as you can though.

Edit: I almost forgot to say, congrats on killing the other debt!
 

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Solid plan, I would like to see a 6 month emergency fund.

Then we all need to do this laundry list tsfa,rrsp,mortgage lump sums, vacations/fun.

Take your time getting these set up, you will make mistakes just fix as you go and soon you will have everything running and working.
 

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I agree about maxing out the TFSAs, but personally I would divide my attention for the remaining money you can save/invest between your RRSP and your mortgage and not focus solely on paying down the mortgage.

I try to keep the amount of equity I have in the house roughly equal to the total amount I have invested in my retirement accounts, which makes me feel more diversified in terms of risk. I'm not fanatical about maintaining that balance; my retirement investments currently outweigh my home equity by about $50K, and that's fine with me.

The growth potential of my home's value feels more uncertain to me even than the growth potential of my retirement portfolio, so I spread my investments across both areas.
 

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Discussion Starter #6
Firstly, thank you all for your input, I really appreciate the help. I think I have refined the plan ...


Goal - 30,000 saved/year

22,000 TFSA/ ALLY HISA towards yearly lump sum
5000, couch potato into RRSP,
3000 stocks into RRSP - this is new to me and with the market in flux like it is I will have to expect the skool of hard knocks.

Based on one off lump sum against 3.8% mortgage is a very solid play right now, markets in flux, potato portion could increase over the next few years as market stabilizes. I am new to individual stock researching and picking. Reassess performance (see you all next year) !

I think I will go with the TFSA over the RRSP to begin with, as it has the benefit of being easier to draw on the money as required. After I max the TFSA out, I think I will open an Ally high interest savings account at 2% interest. As my RBC eSaving account is giving me 0.85% and I can see no benefit in being with this at all.

- Can anyone tell me if RBC will ding me a fee for transferring cash out of my RBC chequing and into the Ally account each month ? is this easily done with the web banking?

- being that i will draw down on the Ally and some of the TSFA account (minus the safety fund) every May to put the lump sum into the mortgage, what product do people see most suitable for the TFSA account?

Whilst I realize the couch potato is for the long haul I must confess to a little apprehension as to how the mutual funds will perform with any effect for the next two years. I am thinking that maybe I should move them out of the TFSA and put them under the shelter of the RRSP. As they are for the long haul and are a buy and hold proposition.

is there any kind of fee between moving the couch potato from the TFSA to the RRSP, is this easily done ?

RRSP will also hold the 3000/year in class diversified stock as mentioned in my first post - standby for incoming thread on that one !!!

I bought my mutuals through RBC Direct Investing. For someone making less than 10 trades a year, should I open an account with a discount brokerage when I come to enter the stock game, or is RBC DI fine?

Again - thanks !

comments welcome.
 
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