You inherit a tidy sum of money. What do you invest in?

[CivicBlues]

Originally Posted by BIG

I had a conversation with someone about 8 or 9 years ago. It was very brief because it was a random social event that was only an hour long. He was in his mid 30s and retired and now a money 'consultant' for fun. I've lost his contact info since. Anyway, I asked what he did to retire at such a young age. If my memory serves me right, he mentioned it had to do with him capitalizing on people's lack of ability to pay off their credit card debt. He wasn't a debt collector, but I can't remember the exact details of what he did. I asked how much he initially started with, and he said about $10,000. Our conversation was cut short. I emailed him for more info and he replied, but at the time I had a Shaw email account. Shortly after, I changed to Telus, and lost that email forever... oof.

Anyways, I was trying to google ways to 'capitalize on consumer debt' or something to that effect, but having no luck. It seems to always lead back to becoming a debt collector. Anyone have any idea what this guy may have been talking about?

The guy was a loan shark and probably was "connected" (i.e. gangster)

[BIG]

Originally Posted by CivicBlues

The guy was a loan shark and probably was "connected" (i.e. gangster)

I honestly don't think he was. Not that there is a typical 'look' a gangster has, but he was just a skinny white guy. A gangster would not show up to an hour long social/business engagement. I actually remembered his name and googled it, and wonder if this is him.

https://www.bcsc.bc.ca/News/News_Releases/2011/14_Financial_planner_pays_$15_000_and_is_disciplin ed_for_making_illegal_distributions/

Edit: If trying to read the link above, remove the gap in the word "disciplined". Don't know why that gap appears

[whitev70r]

Your $50K could have turned into $100K yesterday .. kind of like going to the casino.

Beyond Meat stock more than doubles on first day of trading
https://www.cbc.ca/news/business/bey...-ipo-1.5120032

[originalhypa]

Originally Posted by lowside67

Or if instead of paying your "money guy" to invest in some PIMCO fund, you could have just bought an ETF yourself of the S&P 500 and from January 1 2012 to December 31 2018 you would have realized an average return of 13.27% and your $50k would have been $115.5k. If we included data from Jan 1 2019 to today, it would be up another 17% on top of that.

If you are paying an investment advisor, and that's what he has recommended, you need to PM me and let me make a referral for you (I am not an advisor) - you are not getting your money's worth.

-Mark

Since I can cherry pick too, if you had invested in the Nasdaq composite you would have seen a return of 20.25% since 2012!!
Wow, I am also awesome at looking at charts of past performance.

Originally Posted by Gerbs

Maybe the PIMCO fund has a lower volatility than SPY. Either way, index funds are the way to go for most folks.

It is what they consider a "safe" investment. I could have gone all in, but instead I took a more conservative stance with my money. I don't know what lowside's deal is, but he sounds like one of those money guys who promises the world, then fucks off to Grand Cayman with your retirement fund.

Originally Posted by lowside67

I hope so given that it has a lower return, but in general if you have a long time horizon and can resist the urge to mess with your stuff, I'd prefer excess return over lower volatility.

-Mark

We should all come to your seminar!

[unit]

if you're young, you could invest in an education. that will pay off a lot more handsomely than 5% per year in etfs.

[Gerbs]

Originally Posted by originalhypa

It is what they consider a "safe" investment. I could have gone all in, but instead I took a more conservative stance with my money. I don't know what lowside's deal is, but he sounds like one of those money guys who promises the world, then fucks off to Grand Cayman with your retirement fund.

What lowside was telling you to do is index investing. It's to avoid fees from money managers while maximizing return with low risk compared to individual stock picking. It's self-directed so the only fees you pay are to the ETF Funds, which is 0.04% annually vs 1-2% at your fund.

[hchang]

Buy Boeing stocks after all the lawsuits start flooding out the gate.

[lowside67]

Originally Posted by originalhypa

Since I can cherry pick too, if you had invested in the Nasdaq composite you would have seen a return of 20.25% since 2012!!
Wow, I am also awesome at looking at charts of past performance.

It is what they consider a "safe" investment. I could have gone all in, but instead I took a more conservative stance with my money. I don't know what lowside's deal is, but he sounds like one of those money guys who promises the world, then fucks off to Grand Cayman with your retirement fund.

We should all come to your seminar!

Perhaps instead of spewing hate, you should just read more and talk less. I am neither selling anything nor seeking your money.

Let me break it down for you simply - the fund your "money guy" is recommending to you is a very basic "one size fits all" balanced fund solution. Those funds tend to underperform a total market ETF, which is exactly what yours did.

What I am saying is you should either pay a better "money guy" to give you quality advice about asset allocation that is not some bullshit single fund solution or you should do it yourself and skip the money you are paying your guy.

-Mark

[tiger_handheld]

25% canadian banks (rbc td, sunlife, etc)
25% consumer goods (johnson johnson, coke, etc.)
25% health care (mckesson, cvs, etc)
15% high profile tech (apple ,google, facebook)
10% utilities (telus, husky, etc)

[Liquid_o2]

Bumping this thread. Market conditions and global economy has changed quite a bit over the past 18 months.

Say you had $50k to $100k sitting around right now (not my money unfortunately). Zero debt. Mortgage rates are so low right now, probably doesn't make sense to put it all on the mortgage. Max out TFSA?

[lowside67]

With mortgage rates as low as they are, it doesn't make sense to put ANY of it on the mortgage.

If you have TFSA or RRSP contribution room available, that is a no brainer, although in which order and how much/when (in the RRSP case) is worth some analysis as it's quite individual.

If I was out of registered contribution room availability (including 2021 for both TFSA and RRSP), then I'd think long and hard about mortgage vs non-registered. In the long run, I am confident that the after-tax return in the market will outweigh the interest, but it's at least closer and if you are a risk-adverse person, you might sleep better paying down mortgage.

But if it's TFSA/RRSP versus pay down mortgage, it's a no brainer.

-Mark

EDIT - I see I posted this exact same thing on page 1 in May 2019, while this was true then, with how much lower mortgage rates are now, the answer is now even more obviously cut and dry than it was then.

[underscore]

edit: I'm an idiot, ignore all this.

When rates go up would you not be better off overall having paid off more of it now? ie you've got 500k left now, person A pays it off faster and B is paying as little as possible. In 5 years A has 400k left and B has 440k left. Rates go up to 10% and they both switch to paying as little as possible. A will pay off the 400k left + $514k in interest over the next 20 years. B will pay off the 440k left + $565k in interest.

B ends up paying $51k more overall by not paying off the $40k more early on, so you'd have to do pretty well with your other investments to cancel that out. Obviously this is all 100% dependent on what future interest rates will be, which we have no way of knowing.

[lowside67]

Your analysis doesn't really do the math correctly to fully compare the two options.

It is intuitive that if you choose to pay down your mortgage, the exact amount you save is: [amount you paid down] x [mortgage interest rate] x [X years you are analyzing].

If you take that same amount of money, and invest it in your TFSA, the amount you have after X years is:
[same amount] x [total return] x [X years].

If the total return on investment is higher than your mortgage rate, mathematically, the second calculation MUST be higher. Therefore, if in 5 years your mortgage is now 10%, you would be able to sell your TFSA, pay down the mortgage at that time, and you'd be further ahead because you'd have paid down more on that date than you would have saved by prepaying it up front.

-Mark

[donk.]

Blow my load on another condo and rent it out

13-19% yearly roi

[lowside67]

Originally Posted by donk.

Blow my load on another condo and rent it out

13-19% yearly roi

Please explain - how and where is that possible?

-Mark

[underscore]

Originally Posted by lowside67

Therefore, if in 5 years your mortgage is now 10%, you would be able to sell your TFSA, pay down the mortgage at that time, and you'd be further ahead because you'd have paid down more on that date than you would have saved by prepaying it up front.

-Mark

I completely derped and was only thinking of mortgage vs RRSP, completely forgetting about investments you can sell at any time.

[donk.]

Originally Posted by lowside67

Please explain - how and where is that possible?

-Mark

Bitcoin

[bobbinka]

wait... so if i had $1, then borrowed $1 million, made $20,001 on the stock market, and repaid the loan all on the same day.... my ROI would be 20,000%

[kobe tai]

Originally Posted by lowside67

With mortgage rates as low as they are, it doesn't make sense to put ANY of it on the mortgage.

If you have TFSA or RRSP contribution room available, that is a no brainer, although in which order and how much/when (in the RRSP case) is worth some analysis as it's quite individual.

If I was out of registered contribution room availability (including 2021 for both TFSA and RRSP), then I'd think long and hard about mortgage vs non-registered. In the long run, I am confident that the after-tax return in the market will outweigh the interest, but it's at least closer and if you are a risk-adverse person, you might sleep better paying down mortgage.

But if it's TFSA/RRSP versus pay down mortgage, it's a no brainer.

-Mark

EDIT - I see I posted this exact same thing on page 1 in May 2019, while this was true then, with how much lower mortgage rates are now, the answer is now even more obviously cut and dry than it was then.

Ok - I got a question for you... Let's say you inherit that amount and have no room in your TFSA, have room in your RRSP but also collect a pension (survivor's pension). If I max out my RRSP then I may not be able to collect old age security/CPP in the future correct? Would it make more sense to do a registered account at this time? If my income is not too large currently? Or should I just max out the RRSP and forget about collecting anything from the government later?

[lowside67]

Originally Posted by kobe tai

Ok - I got a question for you... Let's say you inherit that amount and have no room in your TFSA, have room in your RRSP but also collect a pension (survivor's pension). If I max out my RRSP then I may not be able to collect old age security/CPP in the future correct? Would it make more sense to do a registered account at this time? If my income is not too large currently? Or should I just max out the RRSP and forget about collecting anything from the government later?

Honestly, that's a specific enough question that it is worth talking to a professional who has all the facts in front of them to give you a personalized answer. I'm not totally clear if you are still working, or retired, and whether you collect the survivor's pension now.

I think you are working and collecting a survivor's pension now - if that's the case, your income level and therefore your tax rate, is probably relatively high. The way we generally look at RRSP contributions is less on whether you'll have OAS clawed back and more on what the difference in your marginal tax rate between today and when you are retired and having to draw out of your RRSP to fund lifestyle.

You only have to convert your RRSP to a RIF at age 71 and then from there you are only required to withdraw 5% per year. What that means is that unless you have created a very large RRSP, the chances of having all your OAS clawed back are quite low since I believe you need about $120k/year during retirement to have that clawed back fully.

Generally the tax benefits of using the RRSP efficiently and to its maximum are more than the value of the OAS you might give up in the worst case scenario. But I will reiterate, I think you should talk to a professional who has all the information for your specific needs as it sounds like there is some complexity that you might be able to take advantage of to improve your overall picture.

-Mark

[kobe tai]

Originally Posted by lowside67

Honestly, that's a specific enough question that it is worth talking to a professional who has all the facts in front of them to give you a personalized answer. I'm not totally clear if you are still working, or retired, and whether you collect the survivor's pension now.

I think you are working and collecting a survivor's pension now - if that's the case, your income level and therefore your tax rate, is probably relatively high. The way we generally look at RRSP contributions is less on whether you'll have OAS clawed back and more on what the difference in your marginal tax rate between today and when you are retired and having to draw out of your RRSP to fund lifestyle.

You only have to convert your RRSP to a RIF at age 71 and then from there you are only required to withdraw 5% per year. What that means is that unless you have created a very large RRSP, the chances of having all your OAS clawed back are quite low since I believe you need about $120k/year during retirement to have that clawed back fully.

Generally the tax benefits of using the RRSP efficiently and to its maximum are more than the value of the OAS you might give up in the worst case scenario. But I will reiterate, I think you should talk to a professional who has all the information for your specific needs as it sounds like there is some complexity that you might be able to take advantage of to improve your overall picture.

-Mark

Ahhh ok - I think that makes sense. What I was also weighing is since I have no spouse then if I die then my kids get the RRSP but will be taxed on the entire amount..

As far as my situation - I am working, single dad, in my 40s. I make about 50k salary + 20k pension income + 10 to 15k investment income. So maybe $80/85k per year.

I have about 100k to invest currently. TFSA room is maxed but have about that in my RRSP room.

[yameen]

my tfsa is maxed out and with the current market, i believe the % return will outweigh putting money into my mortgage. however, my question is, do you people try to max out your rrsps before putting money into a non-registered taxable account? I like having the luxury of withdrawing money from the cash account as opposed to having money locked into rrsps until retirement. but filing capital gains will also deduct a big chunk of what you earn whereas in rrsps you dont file your capital gains until you retire. another benefit of me buying rrsps is it will allow me to lower my tax bracket (which i dont even know what it is but i'm making $100-110k). what are peoples thoughts on this?

[Ulic Qel-Droma]

Build the TFSA up to 200k+ (when the returns start to become more pragmatically useful), and collect dividends/royalties from stocks (hopefully 5-6+%), and also sell ~monthly (have to calculate which premium you receive will be optimal time/payout ratio), to reduce your average cost on the stocks.

I think you could easily make 15-30% a year. And some cases 60%.

[lowside67]

Originally Posted by yameen

my tfsa is maxed out and with the current market, i believe the % return will outweigh putting money into my mortgage. however, my question is, do you people try to max out your rrsps before putting money into a non-registered taxable account? I like having the luxury of withdrawing money from the cash account as opposed to having money locked into rrsps until retirement. but filing capital gains will also deduct a big chunk of what you earn whereas in rrsps you dont file your capital gains until you retire. another benefit of me buying rrsps is it will allow me to lower my tax bracket (which i dont even know what it is but i'm making $100-110k). what are peoples thoughts on this?

In the long run, I cannot think of any rational reason for why you'd invest in a non-registered while you have RRSP availability. If you are withdrawing money for lifestyle though, you probably need to ask yourself whether it makes sense to invest that money in the first place and risk your principal on what might be a short time horizon.

If you have a big chunk to put in, you might consider not recognizing the entire RRSP contribution in one tax year since it can reduce your marginal tax rate quite a bit depending on your income level and the size of the contribution.

-Mark

[Gerbs]

Originally Posted by donk.

Blow my load on another condo and rent it out

13-19% yearly roi

I still wanna know which condo did you buy in Vancouver 2019 to 2021 that has 13 - 19% ROI lol.