A simple option is with a margin account at a brokerage. Depending on the existing investments in the account, a brokerage will lend up to a certain percentage of the value to an investor, at a specified interest rate.
The amount of “maintenance excess” that needs to be kept in the account as collateral for borrowed securities generally ranges from 30% to 100% of the market value. Larger, established, blue-chip stocks may only have a 30% margin requirement, meaning up to $70 borrowed for every $100 invested.
Margin interest rates generally range from 5% to 10%, but can vary. The interest is tax-deductible when the borrowed money is being used to invest. If stocks fall, a margin account investor could have a “margin call” and need to deposit more funds, or sell stocks to reduce leverage.
Investment and RRSP loans
Investment loans with required monthly principal and interest payments are another option for borrowing to invest. RRSP loans are often at competitive interest rates as low as prime. Non-RRSP investment loans may be at prime plus 1% or more. Interest rates are reasonably competitive because some financial institutions are getting paid twice on the same transaction, earning interest on the loan and generating fees on the investments purchased.
Once again, an investment loan may generate tax deductions, but only for the interest portion of the payments, not the full principal and interest payments. Interest on money borrowed to invest in an RRSP or TFSA is not tax-deductible because the income being earned is not taxable income. Interest paid to earn taxable non-registered investment income (such as outside of a registered account) is tax-deductible.
Using a mortgage or line of credit to invest
Lines of credit or mortgages on real estate can be used to invest, and the interest can be tax-deductible as well. An important distinction is that it is the use of borrowed funds that determines tax deductibility. Borrowing money against a rental property does not make the interest automatically tax-deductible if the funds are used for a personal purpose. Borrowing money to invest in stocks, bonds, mutual funds, exchange-traded funds, a rental property, or a business are common criteria for interest deductibility.
Interest for funds used to finance an income property can be deducted on your tax return, including money borrowed against a personal-use property like a home or cottage, if the funds are used towards a down payment, renovation, or other costs for a rental property that earns rental income.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
