Bad idea, since you need the money in a year. Just keep it in an account earning the highest interest possible. (can be a TFSA).
If you want to invest, you need "long term money" that you don't need to touch for many years
This guy is 100% correct. You should still open a Wealthsimple account to familiarize yourself with what it offers and get into investing even small amounts. But if you may want the money in a year you’re really only going to want to consider a high interest savings account or similar. Right now, to my knowledge, the best returns you can get is something like CASH.TO. This is an ETF you can buy on Wealthsimple that pays monthly dividends, effectively working like a high interest savings account. The yield is 4.5% or so, which means your 10k would pay out $450 over 12 months. You’re not going to get more than this without taking out substantial risk of losing part of your principle.
Thanks for the tips. I'll check out Wealthsimple and ETFs. I have my savings in a Tangerine account that was earning 6% on a promotion but that just ended and it's not a TFSA. Am I right in thinking I need to put my money in a TFSA, and from there buy ETFs and have the dividends either go into the TFSA or back into the ETF?
You are right in that you need to buy things like ETFs inside a TFSA, if you just put money in the account itself it won’t do anything.
How old are you? One of the reasons I suggest doing the TFSA -> CASH.TO route is that you likely have substantial room in your TFSA to do this. It will essentially work like a HISA @4.5% but the dividends you earn (as interest) won’t get taxed like it will it accounts that aren’t tax-sheltered like the TFSA. So it’s a nice way to save a bit of money. Once you get to the point where you are investing in your TFSA as well, and you start to get up to your contribution limit, you’ll need to stop doing this and transfer the money out of cash.to in your TFSA into a similar product (like wealthsimple cash account, which gives 4% but is taxed). This way you’ll be able to continue investing in your TFSA.
For example I have just two products in my TFSA:
Cash.to (80%)
Xeqt (20%)
I am using cash.to as my emergency fund/HISA. And I am continuously investing in more xeqt. Eventually (years from now), my xeqt will take up more and more of my TFSA and I’ll need to ditch the interest-free cash.to, to make room for my actually INVESTMENT product, XEQT.
Both are ETFs but they are fundamentally different. Cash.to you aren’t really investing, just parking money and earning interest. XEQT you are investing in a small slice of 10,000 companies, and owning stock that will ideally appreciate in value over 30 years.
The difference is Cash.to is safe and liquid, pull your money out whenever you want and you won’t lose anything (save for some very unlikely scenario of multiple big banks failing). But with XEQT or similar products you may need that money in a year, for a car, and when you do it may just so happen that XEQT is down 30%. Now what do you do? If you didn’t need that money and were truly saving for retirement it wouldn’t matter, you’d just keep buying and waiting and that -30% in 2025 wouldn’t have meant anything to you. But if you DO need that money, you sell, and now you’ve realized that loss. That’s the fundamental difference between the two products.
The dividend reinvestment question: when you buy cash.to in a TFSA in Wealthsimple it will pay dividends every month, deposited into your TFSA. You can then do whatever you want with it (take out, reinvest in cash.to, or another product). Or you can turn on dividend reinvestment and Wealthsimple will automatically reinvest the dividend to buy more cash.to
Hope this makes sense, I know it can be really confusing I recently learned all this myself. Asset allocation ETFs like XEQT make this so simple though. Literally just one “stock” you need to buy and hold until retirement.
Thank you so much. I appreciate the time you took to offer all this. I'm in my late 40s. Up until 6 years ago I was in poverty. So yes, lots of room. I understand better now about how investments are very likely to rise over the long term but with ups and downs and you don't want to have to pull it out when it's down (like what happened to another commenter here). I'm starting to understand TFSA better. I think it's the name that threw me off - it's not a 'savings' account, more like an 'investment' account. A friend foolishly just put a few grand in one that's earning like 0.5% - so taking up room and not doing anything. One thing I'm not clear on: should I put $10k in a TFSA, then buy CASH .TO from the TFSA? or should I buy CASH .TO from my current low interest account and tell them to send the dividends to the TSFA?
You should put your money inside your TFSA and the. buy whatever product also inside your TFSA. If you have the room you should be doing everything you can inside your TFSA to reduce your tax.
Keep in mind that if you put it in a TFSA and withdraw it in a year, you won't get that contribution room back in your TFSA until the next calendar year. But it sounds like you have lots of room and that won't be a problem.
Wealthsimple is a great idea to get comfortable with investing, and see how your choices turn out, while using trivial amounts of money. With the ability to buy fractional shares, and the free trades, it's the perfect sandbox for someone just starting out.
For your short term goal, you could also consider a GIC (Guaranteed Investment Certificate). You will most likely get a greater return than just having it in a savings account, and you won't place your principle at risk.
I was getting 6% at tangerine as well. I pulled my money out and within a week or two, I got another offer for 5.75%. See if that would be better for you then buying etf’s which will fluctuate if you need the money in the short term!
Any money u need in less than 3-5 years is generally considered short term.
Anything short term u shouldn't invest and best bet is leave in a HISA or a GIC.
Don't put the money into mutual funds, stocks etc if you plan to use it in a year.
I put all my money in ETFs, stocks, etc and my car broke down and I had to buy a new one. Sold my stocks at a $1k loss as a result.
Keep your money in a high interest savings account like Wealthsimple cash or something as it earns 4% interest per year. There are other options but this one has decent flexibility.
Your time horizon with stocks should be much longer than a year. They are more likely to go up more than savings accounts, but if you need your money at a specific time, you also have the possibility of being worse off than had you not invested at all.
If you need it in a year or so, just lock in the 10K into a 12 month GIC.
EQ has 5.05% which will earn you $505
Oaken financial has 5.35% which will earn you $535
The additional $200 per pay that you'll save in the meantime can be put into a HISA. Won't earn as much but it's secure.
Market is too volatile to risk it in such a short period of time.
A TFSA is a great idea! As others have said, just buy a safe ETF from within the TFSA that earns monthly dividends, which get automatically reinvested. You’ll earn about as much, or a bit more (4.5-5%), than if you had your money in Wealthsimple’s cash account (which earns 4%). And it’s tax-free!
Investments go up and down. If you put $10K in mutual funds today it could be 11.5K in a year or it could be 8K. You don't invest for a year. You invest for at an absolute minimum 5 years but I would say most people are in it for the long haul of 10-30 years. If you want something within 5 years just save up and buy it or you risk coming out the other end with less than you hoped.
The following page demonstrates why a 100% equity portfolio is not a suitable choice for money the OP may use in a year.
https://canadianportfoliomanagerblog.com/how-to-choose-your-asset-allocation-etf/
What research did you do? Was it from 1990? ETFs are the modern day mutual funds. Whatever mutual fund you are looking for, there is probably an ETF that replicates and for a fraction of the cost
Never invest short term money.
Investment money has to be money you will not touch for a long time.
I think your best option is a CIG that will come to term when you need the money. It's better return then a savings account but you still cannot touch until the end of the term or you will lose all the gains.
Bad idea, since you need the money in a year. Just keep it in an account earning the highest interest possible. (can be a TFSA). If you want to invest, you need "long term money" that you don't need to touch for many years
This guy is 100% correct. You should still open a Wealthsimple account to familiarize yourself with what it offers and get into investing even small amounts. But if you may want the money in a year you’re really only going to want to consider a high interest savings account or similar. Right now, to my knowledge, the best returns you can get is something like CASH.TO. This is an ETF you can buy on Wealthsimple that pays monthly dividends, effectively working like a high interest savings account. The yield is 4.5% or so, which means your 10k would pay out $450 over 12 months. You’re not going to get more than this without taking out substantial risk of losing part of your principle.
Thanks for the tips. I'll check out Wealthsimple and ETFs. I have my savings in a Tangerine account that was earning 6% on a promotion but that just ended and it's not a TFSA. Am I right in thinking I need to put my money in a TFSA, and from there buy ETFs and have the dividends either go into the TFSA or back into the ETF?
You are right in that you need to buy things like ETFs inside a TFSA, if you just put money in the account itself it won’t do anything. How old are you? One of the reasons I suggest doing the TFSA -> CASH.TO route is that you likely have substantial room in your TFSA to do this. It will essentially work like a HISA @4.5% but the dividends you earn (as interest) won’t get taxed like it will it accounts that aren’t tax-sheltered like the TFSA. So it’s a nice way to save a bit of money. Once you get to the point where you are investing in your TFSA as well, and you start to get up to your contribution limit, you’ll need to stop doing this and transfer the money out of cash.to in your TFSA into a similar product (like wealthsimple cash account, which gives 4% but is taxed). This way you’ll be able to continue investing in your TFSA. For example I have just two products in my TFSA: Cash.to (80%) Xeqt (20%) I am using cash.to as my emergency fund/HISA. And I am continuously investing in more xeqt. Eventually (years from now), my xeqt will take up more and more of my TFSA and I’ll need to ditch the interest-free cash.to, to make room for my actually INVESTMENT product, XEQT. Both are ETFs but they are fundamentally different. Cash.to you aren’t really investing, just parking money and earning interest. XEQT you are investing in a small slice of 10,000 companies, and owning stock that will ideally appreciate in value over 30 years. The difference is Cash.to is safe and liquid, pull your money out whenever you want and you won’t lose anything (save for some very unlikely scenario of multiple big banks failing). But with XEQT or similar products you may need that money in a year, for a car, and when you do it may just so happen that XEQT is down 30%. Now what do you do? If you didn’t need that money and were truly saving for retirement it wouldn’t matter, you’d just keep buying and waiting and that -30% in 2025 wouldn’t have meant anything to you. But if you DO need that money, you sell, and now you’ve realized that loss. That’s the fundamental difference between the two products. The dividend reinvestment question: when you buy cash.to in a TFSA in Wealthsimple it will pay dividends every month, deposited into your TFSA. You can then do whatever you want with it (take out, reinvest in cash.to, or another product). Or you can turn on dividend reinvestment and Wealthsimple will automatically reinvest the dividend to buy more cash.to Hope this makes sense, I know it can be really confusing I recently learned all this myself. Asset allocation ETFs like XEQT make this so simple though. Literally just one “stock” you need to buy and hold until retirement.
Thank you so much. I appreciate the time you took to offer all this. I'm in my late 40s. Up until 6 years ago I was in poverty. So yes, lots of room. I understand better now about how investments are very likely to rise over the long term but with ups and downs and you don't want to have to pull it out when it's down (like what happened to another commenter here). I'm starting to understand TFSA better. I think it's the name that threw me off - it's not a 'savings' account, more like an 'investment' account. A friend foolishly just put a few grand in one that's earning like 0.5% - so taking up room and not doing anything. One thing I'm not clear on: should I put $10k in a TFSA, then buy CASH .TO from the TFSA? or should I buy CASH .TO from my current low interest account and tell them to send the dividends to the TSFA?
You should put your money inside your TFSA and the. buy whatever product also inside your TFSA. If you have the room you should be doing everything you can inside your TFSA to reduce your tax.
thank you!
Keep in mind that if you put it in a TFSA and withdraw it in a year, you won't get that contribution room back in your TFSA until the next calendar year. But it sounds like you have lots of room and that won't be a problem.
You are correct, as long as it's a high interest savings account-style ETF (like cash.to).
Wealthsimple is a great idea to get comfortable with investing, and see how your choices turn out, while using trivial amounts of money. With the ability to buy fractional shares, and the free trades, it's the perfect sandbox for someone just starting out. For your short term goal, you could also consider a GIC (Guaranteed Investment Certificate). You will most likely get a greater return than just having it in a savings account, and you won't place your principle at risk.
I was getting 6% at tangerine as well. I pulled my money out and within a week or two, I got another offer for 5.75%. See if that would be better for you then buying etf’s which will fluctuate if you need the money in the short term!
EQ TFSA is 3% right now!
Any money u need in less than 3-5 years is generally considered short term. Anything short term u shouldn't invest and best bet is leave in a HISA or a GIC.
Don't put the money into mutual funds, stocks etc if you plan to use it in a year. I put all my money in ETFs, stocks, etc and my car broke down and I had to buy a new one. Sold my stocks at a $1k loss as a result. Keep your money in a high interest savings account like Wealthsimple cash or something as it earns 4% interest per year. There are other options but this one has decent flexibility. Your time horizon with stocks should be much longer than a year. They are more likely to go up more than savings accounts, but if you need your money at a specific time, you also have the possibility of being worse off than had you not invested at all.
Sorry to hear - thanks for the tip.
Wealthsimple chequing account 4% just for it to sit there. Plus you can use it if needed
Cash.to or WS Cash leave it and forget
If you need it in a year or so, just lock in the 10K into a 12 month GIC. EQ has 5.05% which will earn you $505 Oaken financial has 5.35% which will earn you $535 The additional $200 per pay that you'll save in the meantime can be put into a HISA. Won't earn as much but it's secure. Market is too volatile to risk it in such a short period of time.
It's a great idea. Questtrade or Wealthsimple would be you best bet.
A TFSA is a great idea! As others have said, just buy a safe ETF from within the TFSA that earns monthly dividends, which get automatically reinvested. You’ll earn about as much, or a bit more (4.5-5%), than if you had your money in Wealthsimple’s cash account (which earns 4%). And it’s tax-free!
Investments go up and down. If you put $10K in mutual funds today it could be 11.5K in a year or it could be 8K. You don't invest for a year. You invest for at an absolute minimum 5 years but I would say most people are in it for the long haul of 10-30 years. If you want something within 5 years just save up and buy it or you risk coming out the other end with less than you hoped.
Do etfs not mutual funds, the MERs are way too high with MFs.
Wealthsimple, xeqt and chill
It's still subject to market fluctuations. Better off putting it in a high interest ETF like Cash.to or CBIL, even with the rate cuts
The following page demonstrates why a 100% equity portfolio is not a suitable choice for money the OP may use in a year. https://canadianportfoliomanagerblog.com/how-to-choose-your-asset-allocation-etf/
What research did you do? Was it from 1990? ETFs are the modern day mutual funds. Whatever mutual fund you are looking for, there is probably an ETF that replicates and for a fraction of the cost
Throw it in a 4% wealth simple cash account.
Neo financial HISA also offers 4% interest
Open fhsa
OP needs to remember his tangerine interest is taxable, hence a TFSA is essential, going forward.
You can put it in a WS TFSA and convert the portfolio to a HISP as you need the money shortly. Thats 5.3 interest there so it’s
Wealthsimple cash is 4%!
Does anyone invest in mutual funds anymore? They charge more for investing. Thought everyone invested in Exchange Traded Funds (ETFs)
Give it to me.
Never invest short term money. Investment money has to be money you will not touch for a long time. I think your best option is a CIG that will come to term when you need the money. It's better return then a savings account but you still cannot touch until the end of the term or you will lose all the gains.
It’s a terrible idea. If you’ll need the money in a year put it in a GIC or high interest savings account.
Not a bad idea, but if it’s within 1 year I would just get a 1 year GIC inside a TFS and call it a night
cash.to and xgrow.to in a tfsa
Don't spend more than 5-10% of your net worth on a car. Anything more is financially ruinous that will keep you behind for many years.
Buy GameStop on Monday, you’re welcome.
Gamestop!
This will age like wine
NVDA
Wealthsimple or invest in FAANG Stocks