This is the time of year that everyone should be planning on making their Tax-Free Savings Account contributions. For 2024, the limit has been increased from $6,500 to $7,000.
I suggest that you contribute as early in the year as you can to gain more tax sheltered protection for any income or growth your investment may have.
The name of this tax sheltered account is a bit misleading to some. Many people think that they put money into it and just think of it as a savings account like your bank account. This is not true. Any investments, like for your Registered Retirement Savings Plan (RRSP), can be bought or transferred from your non-registered investment account into your TFSA. Funds inside a TFSA can be used to invest in stocks, bonds, mutual funds, GICs, etc.
The decision on what to invest in requires more thought than what most people think.
Do I keep it “safe” and buy a GIC? Do I shelter the dividend yield that I get from a stock? Do I buy a mutual fund and reinvest the income and let it sit for the long term?
These are some of the questions you should ask yourself.
Initially we think, “I should protect the income from an investment inside the tax shelter.” Then, we often buy or transfer in a higher paying stock such as a bank, utility or telecom company. What may not come across our radar of choices is investing in solid U.S. companies. Any dividends that are paid from a U.S. company into an account other than one deemed for retirement purposes is subject to a non-resident withholding tax. We hear the word “tax” and that may be the deterrent from buying in our TFSA. When you take a more in depth and closer look, the dividend yield on US stocks is comparatively low versus Canadian stocks.
To clarify, if you have on file with your TFSA provider a W8-BEN showing you are a resident of Canada the non-residency withholding tax is reduced from 25% to 15%.
It sounds like a lot, but if the dividend amount is US$1.84 as it is presently for Coca-Cola Company, the amount of tax deducted is $0.276. In the grand scheme of things, it is not that much. Often U.S. stocks are more appealing for their price appreciation than for their yield.
I have clients who have contributed the lifetime maximum of $95,000 to their TFSAs, and their accounts are now worth a couple of hundred thousand dollars. It hasn’t mattered that it has come from price growth rather than dividend income. Bottom line for this account is the overall value.
For this year’s TFSA contribution, consider investing in a good name brand blue chip U.S.-listed company. Over the long term, you may experience significant growth that is tax sheltered. When you take those juicy capital gains out eventually, they are not taxed like they are if they are held in your RSP.
Just a thought. Feel free to leave a comment on this article on how you’ve been investing the funds within your TFSA.
Nancy Woods is Portfolio Manager and Senior Investment Adviser with RBC Dominion Securities Inc. Visit her blog, “Nancy’s Notes,” at nancywoods.com or send her your question to asknancy@rbc.com
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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
