[flayto]

Wondering what peoples' overall investment strategy is when it comes to investing in a TFSA.

I opened up a trading account through Questrade at the beginning of January and deposited the full $5000. My original intention was to invest conservatively (like buying periodically into an Index ETF), but the last few weeks I have thrown caution to the wind and used it as a sort of "play" account where I make somewhat calculated, speculative gambles on individual companies. Since nothing is ever taxed and commissions are 4.95 per trade, in my opinion the potential upside far outweighs the downside. I don't think I would ever invest the full $5000 in one stock, but maybe purchase in $1000 increments and sell on any up days, and buy on down days. Essentially use it as a day-trading account.

I started this strategy a few weeks ago with a small amount of shares in Tata Motors and ended up selling on Thursday for a nice $400 profit.

Just curious what others here are doing and your successes/failures with your strategy so far?

 

[seven3]

Everyone will obviously have their own preference. However, I think its important to remember that capital losses cannot be claimed in a TFSA.

Also, if you have "another $5k somewhere" earning interest, it's more tax efficient to flip things around and earn interest inside the TFSA. I recommend taking a holistic view of your assets/portfolio.

I do admit that trying to hit a home run in the TFSA is really tempting!

For me personally, I prefer to have my emergency cash in the TFSA, since that would have earned interest anyways...and just trade in a regular non-registered account.

 

[FrugalTrader]

Here are 4 potential TSFA strategies that I wrote about before, my favorite being creating an income fund as proceeds can be withdrawn tax free. Build the fund large enough, and you can potentially have a signifcant cash free income source during retirement.

 

[CheckingIn]

I locked my full contribution room into a GIC during the first week of January with BMO. I cannot wait for more contribution room as well! I'm a DRIPper, and I would like to put some of my Income Trusts that pays distributions into my TFSA.

 

[The_Number]

All of mine is in XSP.TO.

 

[Sampson]

My strategy is like MDJ's - I've got my highest yielding and most heavily taxed investments in there (2 CAD income trusts and a REIT).

My wife's will hold a bond ETF.

Eventually, I'd like to use it as a small cap trading account.

 

[Financial Highway]

I wrote about TFSA Strategies a while ago, I agree with MJD building a large enough tax free income vehicle with it. I mainly try to hold (interest paying and non-Canadian dividend payers)

 

[fephoo]

I am planning in using the TFSA for income generation also.

Unfortunately, I didn't really know what to do for this year and in november I put my $5000 tfsa money and my wife's $5000 into ING basic saving account TFSAs. I kind of regret...

Do you think it make sense to open a non-registered portfolio now (probably at questrade) using my current TFSA money from ING ? In this non-reg., I would buy income generating investments. Then next year, I would have a $10000 tfsa room and could use the non-reg. amount (is it possible to switch directly to TFSA or would I need to re-buy) + the rest in $ to hopefully fill the $10000 TFSA ?

 

[mfd]

Right now my TFSA's accounts are holding cash. Going foward I plan on using it for aggressive growth investing and as I near retirement I'll convert it all to some sort of 5 year bond/gic ladder.

 

[Preet]

I'm using my TFSA account as a pure gambling account. My RRSP represents the bulk of my long term savings and is mostly indexed with a comprehensive Investment Policy Statement - no thought involved there.

In the TFSA I've been very speculative using 200% and 300% leveraged ETFs for very short runs in and out of the market. So far that has consisted of putting in stink bids and once they fill, I put in a sell order for a 5-10% gain. So far they have worked out well this year. But the account has been cash for 75% of the time - only making those hail Mary's when the underlyings look really oversold/bought.

 

[DAvid]

Beginning of a GIC ladder.

DAvid

 

[ethos1]

I'm using my TFSA account as a pure gambling account.

I recently opened mine in March, I bought BMO.TO, then CC'd at $36 Jan 10. With the money from the option I bought more stock.

With 9-months to expiry and on the assumption my option contract is called, that I am able to collect the quarterly dividends along the way, then end result will be approx 16% over the time or 21% annualized

 

[Geron]

If you assume that the long-term gains of equities will probably be much larger than interest on cash, then doesn't it make sense to hold those in a TFSA instead of cash?

While cash interest may be taxed at your marginal rate, when you're only earning a hundred dollars, there isn't much tax to save. On the other hand, if your equities portfolio rises by five hundred dollars, you would save more tax in total, even if the tax rate is lower on capital gains.

 

[Knight Rider]

I opened a TFSA account at Scotia iTrade and plan to begin trading soon. I'm hoping to start off with some day / week trades, but no long-term holds yet.

 

[ethos1]

again, this is a TFSA related question

Gains or loss have no tax impact, but is interest on money borrowed to put into a TFSA account tax deductable?

 

[mfd]

again, this is a TFSA related question

Gains or loss have no tax impact, but is interest on money borrowed to put into a TFSA account tax deductable?

Nope it isn't.

 

[Patricia]

January 2009 the TFSA's were opened fully funded. For this year it's fixed rate term deposits. For 2010 I'm looking at an initial deposit in each account ( hubbie's and mine) then adding funds over the course of the year.Considering adding a high interest savings account to each TFSA and then decide what's the best investments for the money. Over time I'd like to move most of our interest bearing investments that we currently hold to the TFSA's. As with DAvid this is the start of laddering GIC's/term deposits.

 

[CJB]

If you assume that the long-term gains of equities will probably be much larger than interest on cash, then doesn't it make sense to hold those in a TFSA instead of cash?

While cash interest may be taxed at your marginal rate, when you're only earning a hundred dollars, there isn't much tax to save. On the other hand, if your equities portfolio rises by five hundred dollars, you would save more tax in total, even if the tax rate is lower on capital gains.

Agreed. This is the same argument as allocation outside of a TFSA but the TFSA changes things a bit. I think this has more to do with overall portfolio mix, time horizon and appetite for risk but I think it is a mistake to lock in with GICs now with terribly low yields and overlook blue chip stocks with comparatively high yields. Personally, if you are holding ANY interest bearing investments outside an RRSP it would be wise to move them into the sheltered environment of the TFSA.

 

[DrStan]

My TFSA and my wife's TFSA each hold 5K of REI.UN (RioCan). This provides a juicy dividend (9.2 % based on our purchase price) and is considered a long term hold for our portfolio. We are reinvesting dividends and will add another 5K each to this position early in 2010. We have actually doubly benefited by sheltering the income from this trust in the TFSA and selling the same position a few weeks earlier in a taxable account to trigger a capital loss. Our long term strategy, based on a conservative 5% annual return, should provide income of $15,000 per year, tax free and in 2009 dollars, starting 25 years from now at retirement.

 

[Preet]

My TFSA and my wife's TFSA each hold 5K of REI.UN (RioCan). This provides a juicy dividend (9.2 % based on our purchase price) and is considered a long term hold for our portfolio. We are reinvesting dividends and will add another 5K each to this position early in 2010. We have actually doubly benefited by sheltering the income from this trust in the TFSA and selling the same position a few weeks earlier in a taxable account to trigger a capital loss. Our long term strategy, based on a conservative 5% annual return, should provide income of $15,000 per year, tax free and in 2009 dollars, starting 25 years from now at retirement.

@DrStan - While I have not seen it specifically ruled on, I think your capital loss claim could be denied under the superficial loss rules. I know you cannot sell a security at a capital loss and then re-purchase the same security within 30 calendar days within an RRSP and claim the capital loss, and I imagine the same will hold true for a re-purchase in a TFSA.