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Why investors should pay for all investment fees out of non-registered accounts – The Globe and Mail

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Paying investment fees from a non-registered account can provide ease of cash management over a portfolio and may be easier from an administrative perspective.

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The Department of Finance Canada’s recent letter to the Canada Revenue Agency (CRA) stating that paying investment fees for registered accounts out of non-registered accounts does not constitute a tax advantage is a big win for investors, who are now free to pay their investment costs from any source they choose.

There are various advantages for investors to pay all investment fees out of a non-registered account. At the core, though, investors will end up with more money, after taxes, if they pay all the investment fees for a tax-free savings account (TFSA) or registered retirement savings plan (RRSP) from assets held outside of those accounts.

So, how did this all come about? In 2016, the CRA announced at a tax conference that its position on paying investment fees for registered accounts from non-registered accounts constituted an unfair advantage. Furthermore, the CRA stated that as of 2018, any taxpayer who engaged in this activity would be subject to a special advantage tax equal to the amount of fees paid outside of the registered account. The implementation was then postponed a couple of times pending a review from the Department of Finance.

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Then, the Department of Finance sent a letter this past August recommending that the Income Tax Act be amended to reflect its finding that there is no advantage to paying registered fees outside of a registered account and that such a decision by a taxpayer may not necessarily be tax motivated. In effect, it means the CRA will not penalize a taxpayer for paying investment fees for a registered account from a non-registered account.

For financial advisors and investors, there are various benefits to taking this approach, which is a way to increase assets with no added risk.

For one, investors may have investments that are less liquid in the registered account. So, paying for investment fees from a non-registered account can provide ease of cash management over the portfolio. In addition, paying all investment fees out of one account rather than from multiple accounts may be easier from an administrative perspective.

The main advantage for investors, though, is that registered accounts have an ability for greater compounding of returns than non-registered accounts because of the registered accounts’ tax-deferred or tax-free nature. That was the CRA’s main issue with this practice.

As an example, let’s consider an investor who has $100,000 in a TFSA and $100,000 in a non-registered account. Each account incurs investment expenses of 1.5 per cent, or $1,500, annually.

Matthew Ardrey, vice-president and wealth advisor at TriDelta Financial Partners Inc. in Toronto

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If all expenses are taken from the non-registered account, it results in more assets growing tax-free within the TFSA, as they’re not impeded by investment costs. Furthermore, it helps the investor save taxes as the capital base in the non-registered account will be lower, which will result in lower taxes against the income within that account as well as lower taxes on the capital gains when the funds are withdrawn.

The strategy is similar for an RRSP, except that the income from the RRSP will be fully taxable when it’s withdrawn from an RRSP or from a registered retirement income fund (RRIF) once the investor reaches retirement. Thus, the investor reduces the capital in the non-registered account today in favour of a much larger payment from a RRIF in the future. Although that payment will be taxable, it will presumably be when the investor is retired and in a lower tax bracket. In addition, as inflation will erode the value of money, it’s preferable to pay $1 of taxes in the future than $1 of taxes today.

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Although the advantage in the TFSA is clear, the advantage for the RRSP will be dependent on many factors, such as an investor’s tax bracket now and in retirement, inflation and even potential changes in tax policy.

For investors, this may not be the top tax-saving strategy available, but they should take advantage of every opportunity to improve their returns and reduce their taxes – especially when it can be executed with a simple administrative change.

Matthew Ardrey is vice-president and wealth advisor at TriDelta Financial Partners Inc. in Toronto.

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How To Invest Money To Secure Your Family's Future – The Seeker

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How To Invest Money To Secure Your Family’s Future – The Seeker Newsmagazine Cornwall

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Elon Musk sold nearly $7 billion worth of Tesla stock—here’s how much money you’d have if you’d invested $1,000 in the company 10 years ago – CNBC

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Tesla CEO Elon Musk sold 7.92 million shares of the electric vehicle manufacturer worth about $6.88 billion between Aug. 5 and Aug. 9, according to a series of recent SEC filings.

As of Aug. 9, Tesla shares were valued at about $850 each at the close of trading. That price has fallen by a little over 9% since the close of trading on Aug. 4, when shares were $938 each, according to CNBC tracking.

As for how shareholders would fare longer-term, if you had invested $1,000 in Tesla one year ago, on Aug. 11, 2021, your investment would be up by about 23%, according to CNBC calculations, for a value of around $1,230, as of Aug. 10, 2022.

If you had invested $1,000 five years ago, on Aug. 11, 2017, your investment would be worth around $12,160.

And if you had invested $1,000 on Aug. 11, 2012 and given your investment a decade to grow, you’d have around $145,341 as of Aug. 10, 2022.

Musk’s latest sale comes despite his announcement earlier this year that there were “no further TSLA sales planned” after he sold about $8.4 billion worth of his company shares in April.

So what’s behind this latest move? The billionaire says it’s due to his ongoing legal battle with Twitter.

“In the (hopefully unlikely) event that Twitter forces this deal to close *and* some equity partners don’t come through, it is important to avoid an emergency sale of Tesla stock,” Musk tweeted, after replying yes to a question about if he was done selling shares.

Back in April, Musk announced his intention to buy the social media giant for $44 billion or about $54.20 per share. As of Aug. 10, Twitter shares were valued at about $44 each at the close of trading. A share of Twitter stock was valued at about $45 on April 14th when Musk made his announcement.

By July, however, the SpaceX CEO told Twitter that he wanted to cancel the deal. In a letter to the company, Musk’s lawyers claimed that Twitter failed to provide “information that would allow him ‘to make an independent assessment of the prevalence of fake or spam accounts on Twitter’s platform.'”

Twitter called Musk’s attempt to bail out of the deal a “model of hypocrisy” and said his claims “lack any merit,” according to a legal complaint filed by the company.

Although Musk is now pushing for a public debate with Twitter CEO Parag Agrawal, the head of the microblogging site said he plans to let the courts decide the fate of this deal, with a trial set to begin in October.

When it comes to the stock market, be sure to do your research before investing and remember that a stock’s past performance can’t be used to predict future earnings. An alternative option to investing in individual stocks is to invest in the S&P 500, a stock market index that tracks the stock performance of 500 large U.S. companies.

Although the S&P 500 shrank by nearly 6% compared to this same time period last year, the index has grown by 71.94% over the past five years and 198.58% over the past decade, according to CNBC calculations.

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Canada Pension Plan Investment Board loses 4.2% in Q1, net assets total $523B – Cornwall Seaway News

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TORONTO — Canada Pension Plan Investment Board says its fund, which includes the combination of the base CPP and additional CPP accounts, lost 4.2 per cent in its latest quarter.

CPPIB ended the quarter with net assets of $523 billion, compared to $539 billion at the end of the previous quarter.

The board says the $16 billion decrease in net assets for the quarter consisted of a net loss of $23 billion and $7 billion in net transfers from the Canada Pension Plan.

The board says the fund’s quarterly results were driven by losses in public equity strategies, due to the broad decline in global equity markets.

It also says investments in private equity, credit and real estate contributed modestly to the losses this quarter.

CPPIB CEO John Graham says he expects “turbulence” in the business and investment environment to persist throughout the fiscal year.

This report by The Canadian Press was first published Aug.11, 2022.

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