$20,000 cash...how to invest?
 

I have around $20k cash which I'm saving for a downpayment on a home which probably wont be purchased in the next 4 years or so. As I understand, the rate of inflation is higher than the interest rate paid by my bank so the value of my money will go down if left alone.

What i'm wondering is, where is a good place to start with investing my money? I've been trying to do as much reading as possible recently but I still feel like I don't know where to start. Stocks, bonds, mutual funds, TFSAs, RRSPs - all still pretty foreign to me.

Until this point, my idea of a good investment was purchasing something that would depreciate slower than I would have spent the money in the first place.

Any advice on where to start?

if you don't have any RRSP's currently. you should look into that. as putting the money will get you a lot back at tax time. plus then it's interest free gains. as of now you can pull 25k out of RRSP's for a downpayment. however it needs to be put back into RRSP over time.

depending on how much you make (which tax bracket) you should probbaly break up the 20k over a couple years going into the RRSP to get max back at tax time.

this is one option. if you make 40-50k you'd get about 7k back for free at tax time (over a couple years) but the downside is paying the 20k back into RRSP. I think over 15 years. which would be around $120/month

I would definitely second the RRSPs if you can put it in there for all the reasons Johny stated.

Read what he said, he's gonna need it in 4 years, not 15... RRSP is a bad idea most likely. Shove it into a GIC inside a TFSA. Don't touch stocks, don't touch mutual funds. Your window is too short to invest in those with your knowledge. He's not gradually withdrawing it, he needs a huge chunk to down his house.

No it's not. You can pull out your RRSPs at no penelty as a first time home buyer and it'll earn him money by getting him all his income tax back over the next 2-3 years which is a far higher yield then a short term investment will get him. (which he can add to his pile of money for the down payment in turn).

GIC/Money market fund inside an RRSP.

you can pull out in 4 years , buy house, and pay it back into RRSP at 110/mo.

Beer. 20k in beer will net you a large return in empties and the price of raw materials is always on the rise.
Aside from that brilliant advise I'd suggest talking to an investment banker.

i agree with everyone else about the RRSP, check your latest tax return to see what your contribution room is. Since you are saving for a home, you want to invest in something to retain your capital and perhaps stay away from the "growth" funds, as 4 years is not a very long time, i would do TFSA as well if u havent done that, as the gains u get are completely tax free, if u have money left over that, do the usual, GIC, fixed income, etc

it depends on your tax bracket....will rrsp really help you?
if not, i would put it in a TFSA and buy a high dividend yield stock
you get tax free dividends and probably a capital appreciation...when you take it out you do not have to pay tax on that...

honestly that's exactly what i am going to do in Jan 2011..
BCE, CIBC, BMO, RY are good blue chips with high dividend yield.

Too bad the high yields of income trusts are coming to an end in 2011 =(

maximize rrsp contributions first.then max out your tfsa. you should have $10000 contribution room if you havent opened one yet. with a 4 year time horizon your mostly going to have to stick to cash/gic/bonds. ING direct has a tfsa cash account yielding 2%. most of the big banks are only 1-1.5%. as for bonds i would stick with a bond fund xbb.to (universal bond fund) or if you want more risk reward go with corporates xcb.to (corporate bond fund).If you do want to experiment with stocks then i suggest the most blue chip slow moving stocks like JNJ (johnson and johnson) or PG (proctor and gamble)
I recommend allocation to be 20% stocks 30% cash 50% bonds

take ideas from this thread and run it by a financial advisor or personal banker first though(preferably someone you trust or already know).because your talking about slower moving/guaranteed investments, most of the work is going to be done by you. your going to have to continually contribute to the savings fund. who knows what the real estate market will be like in 4 years but you should take into consideration that prices can move up/down while you wait.

Best advice in the thread right there, though watch what you get yourself into with GIC`s, some of them are much better than others, with a prefered stock like the one posted above, you should be able to get 5-7% return on your money and half of it will be tax free thanks to TFSA.

It`s not a huge gain by any stretch, but it beats having your money collect dust, or seeing your RRSP`s take a hit, considering the volatility indexes have been rising, even tying up money in an RRSP right now may prove to be a poor financial decision.

My advice is to pick up a book, it`s called Money Road, by Garth Turner, and it wil really help you understand all the options available to you.

^ my downpayment money is in GIC's within RRSP's. short term cashable so I could access it anytime for a house. most are probbaly only 1% now though. mine were bought back at 4%

the RRSP is still a decent plan because asuming he has a decent job he'll get 6k+ back at tax time. now he has a 26k downpayment + tax free interest instead of a 20k downpayment + half tax free interest.

I'm in much the same boat; I Have the same amount of money saved for the purchase of a home but have decided to wait till next year; as my fiancé and I are getting married this year. The last time I was at the bank (Coast Capital) the teller suggested I start a TFSA. I looked into it and it has the same interest rate as my High-Interest Savings Account (1.350%)

So my question is other than the fact I won't have to pay taxes on the Interest earned what is the advantage of a TFSA?
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Once your money is inside your TFSA, open a GIC account and use the money inside the TFSA for GIC. Money earned from the GIC will not be taxed when you decide to withdraw it.

put it into a tfsa and buy stocks

make WAY more than 1.35%

TFSA at ING is 2% right now..

or you can buy Bell and earn ~5% on dividends and hopefully the SP will increase in value..

An investment banker won't even have time to talk to you with $20k.

If your time span is 4-5 years withdrawal without the threat of losing money, I would suggest buying the chinese currency and sitting on it. It can't get any lower than the current exchange rate especially with the global economy pestering China to unpeg the artificially low valuation. If you take into account that China will unpeg the currency and allow the free market to set the valuation it can only go up from the current level.

^ agreed..
and you don't have to pay tax on FX

...but you don't have to pay tax on your tfsa either

People's trust TFSA is at 3%. It's CDIC insured so ur money is safe.

I'd go into a mutual fund made only of short term cdn bonds (Fidelity CDN ST bond ... I believe Mackenzie has one too). Buy it front end zero ... it's 100% possible to get that done without question/negotiation. TFSA or RSP depending on whether you want to use the home buyer's plan or not and/or your level of income.

http://www.fidelity.ca/cs/Satellite/...xed_income/cif

Look at the history. You can't go wrong given a 4-year time horizon.

Buy silver. Trust me . Seriously
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put it into a no-load mutual fund, look for something that mimics whichever stock exchange you want - tsx, nasdaq, amex nyse etc.

you'll be sure your money will grow and anytime you turn on the news, tsx up 1.5 basis points etc will represent your fund being up as well.

little risk and easy to follow.

You want something riskier, find a mutual fund that invests solely in China (insert any developing economy).

While we're on this topic...where is everyone's preferred place to buy/sell your gold/silvers?

EBAY.

If you want to liquidate quickly however, VBCE. They have branches in vancouver & richmond.

If you want to buy large quantities, I reccomend golddealer.ca or silvergoldbull.com.