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Discussion Starter · #1 ·
Hello

I spoke before on how I will soon get 200k inheritance.

I have Wealth Simple Trade accounts (Personal) and a TFSA and RRSP in their Invest and Save section.

I want to know how to deal with the cash at the height of the market. I will start to contribute small amounts to the TFSA and the RRSP, but where should I park the money to earn higher interest rates than in the WS HISA @ 0.5% until the market correction occurs and prices come back to normal at which point I will increase my contributions to my ROBO and RRSP?


Any advice?
 

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How do you know if a market correction will occur? What if what's going on now is totally normal, and will just continue? Just beware that trying to "time the market" (wait for a correction) is problematic.

But some ideas for cash are various Manitoba credit unions at 1.1% interest, Canadian Tire Bank at 1.25%, or EQ Bank at 1.25%
 

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A few quotes have been around for a long time, as noted in https://www.myownadvisor.ca/the-best-time-to-invest-was-yesterday/ The best time to have invested was yesterday. The next best time is now.

As James has articulated, no one knows if this is simply the beginning, the middle, or nearing the crest of the bull market. I have seldom been successful in trying to time the market. If you feel you will have much anxiety about 'buyer's regret', dollar cost average every 3 months for the next year. That way you may catch some dips but chances are just as likely (or more so since the general trend of markets over time is up), you will pay higher prices a year from now.
 

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Discussion Starter · #4 ·
A few quotes have been around for a long time, as noted in https://www.myownadvisor.ca/the-best-time-to-invest-was-yesterday/ The best time to have invested was yesterday. The next best time is now.

As James has articulated, no one knows if this is simply the beginning, the middle, or nearing the crest of the bull market. I have seldom been successful in trying to time the market. If you feel you will have much anxiety about 'buyer's regret', dollar cost average every 3 months for the next year. That way you may catch some dips but chances are just as likely (or more so since the general trend of markets over time is up), you will pay higher prices a year from now.

But while I dollar cost average where should I have the majority principal? Just in a HISA paying 0.5% or would a bank money market fund for say 6 month intervals be a better option?
 

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Discussion Starter · #5 ·
How do you know if a market correction will occur? What if what's going on now is totally normal, and will just continue? Just beware that trying to "time the market" (wait for a correction) is problematic.

But some ideas for cash are various Manitoba credit unions at 1.1% interest, Canadian Tire Bank at 1.25%, or EQ Bank at 1.25%
Because they always occur. I don't know when, but it will. It's inevitable.
 

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Because they always occur. I don't know when, but it will. It's inevitable.
The same was said about the Toronto housing market since the early 2000s, if not the 90s.

I'm not saying that the market always goes up, but timing is kind of tricky. For example, what if the market keeps going up for the next 3 years before a correction occurs? Would you find that acceptable that you sit on the side-lines that long? Maybe you're right and the market will crash tomorrow, but who can really say?
 

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Discussion Starter · #7 ·
The same was said about the Toronto housing market since the early 2000s, if not the 90s.

I'm not saying that the market always goes up, but timing is kind of tricky. For example, what if the market keeps going up for the next 3 years before a correction occurs? Would you find that acceptable that you sit on the side-lines that long? Maybe you're right and the market will crash tomorrow, but who can really say?
I like AltaRed's recommendation of Dollar Cost Averaging every 3 months. However, this was not my question. My question was where should I park the majority of the money. a HISA paying 0.05% interest, a 6 month money market fund offered through one of the big five banks, GICS?

This was my question. Never claimed the market was about to crash, I just said it is at all-time highs.
 

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Why would you even bother to park it?

The rates are so low it's honestly just a nuisance. It's not even worth it to park it somewhere.

If I was doing this, I would probably just do half now, keep the other half in a savings account, wait and see how this inflation/COVID/money printer crap plays out for the next 6 months and then I would probably just do the second half.

I wouldn't worry about getting an interim return.
 

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For your registered accounts, to the extent you want to at least fund them, there is no choice but to pick the brokerage ISA for 0.2-0.25% interest. Don't worry about it. It is neither here nor there for up to a year's time. For your non-reg account, you can do as post #9 says. Put it in EQ Bank at 1.25%.

To put this in perspective, $100k @ 1.25% = $1250/yr or $100k @ 0.25% = $250/yr. It is a mosquito bite on an elephant's butt and not worthy of jumping through ANY hoops.

Added: To put this in perspective, the equity market can easily move 1% either way each day, which on a $200k invested sum is $2000 per day. On a 5% change over one month, the change in portfolio value would be $10,000. What I am trying to say is... the differences in interest earned pales in comparison. Don't lose sight of the forest for the trees.
 

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Discussion Starter · #12 ·
For your registered accounts, to the extent you want to at least fund them, there is no choice but to pick the brokerage ISA for 0.2-0.25% interest. Don't worry about it. It is neither here nor there for up to a year's time. For your non-reg account, you can do as post #9 says. Put it in EQ Bank at 1.25%.

To put this in perspective, $100k @ 1.25% = $1250/yr or $100k @ 0.25% = $250/yr. It is a mosquito bite on an elephant's butt and not worthy of jumping through ANY hoops.
Ok I will check out EQ bank and link it to wealth simple and periodically transfer funds to my TSFA and RRSP robos at Wealth Simple. 1.25% if better than WS's HISA at 0.5%
 

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For what it is worth - annual results for XIU over 20 years -

D-U-U-U-U-U-D-U-U-D-O-U-U-D-U-U-U-D-U-U
D = Down
U = Up
O = (almost) no change

Results for XBAL are very similar over its shorter life - with shallower dips and crests.

One more alternative for Chrysaphius - buy XBAL now - upgrade later when you are comfortable
- personal choice but so are all investment decisions.
Yes XBAL can/will go down but some people still recommend it for 30 years.

added - also XBAL or XCNS will probably generate more income than HISAs or and short term GICs.
 

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Keep it simple.
Decide what your "big" plan is then prepare your money accordingly.

If you want to hold some in cash for 6 months, then go ahead and put it in a GIC or HISA etc.

However your initial post suggested you think there is a crash coming and you're engaging in market timing (ie waiting for the correction and things to get to normal)
I personally don't agree with
1. Market timing,
a. the data shows we're not good at it.
b. The opportunity cost is typically too high.
c. Berkshire Hathaway is better at this than you, if you really want to time markets, just buy BRK stock.

2. The phrasing "correction" is misleading, as if the current situation is "wrong", and the new situation is "right". It's just normal volitility. You can't really predict it.

3. Waiting for normal. Things are normal, but they're not the same normal as before.
Right now we have historically low interest rates, we're likely to have them for some time. Maybe they'll be higher in a decade or two, but you would have lost out on a lot.

What I would do if I got a $200k inheritance today?
I would go to Canadian Couch Potato, and invest according to my risk tolerance at a discount brokerage.
If I'm nervous about the future, as you seem to be, I'd be on the lower risk tolerance side.


Myself I have some undecided funds, so I just dumped them in ZAG (Bond ETF) But most of my investments are in equities under a very aggressive allocation.
 

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I did not think we would bet a buying opportunity for cheaper stocks before the end of this year but that looks about to change today. All time highs and the new COVID spread will help today for sure with the markets opening quite a bit lower as per the futures.
 

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Maybe it's just me but if I had 200k that I wasn't expecting, I'd look at lower my debt first then whatever is left over, invest it. Might not be a popular choice but a choice if you're worried about investing in a 'all time high' market
 

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We don't know if this is an all-time high. We don't know if there will be a crash soon, or whether we'll continue to see growth for many years.

One possible idea is to come up with an asset allocation you will stick to regardless of market conditions. These portfolios are well diversified across different asset classes, not just stocks (I'm assuming that when you speak of "all-time highs" you're talking about stocks).

Research things like "The All Weather Portfolio" or "The Permanent Portfolio." They are designed to work in different economic "seasons." That way, you're not trying to time the markets.
 
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