# Newbie wanting advice about money and TFSA



## habibi (Jan 26, 2012)

So I'm a 21 year old Canadian with about 17k in my TFSA currently. I have no idea about anything investing, other than that I'm with RBC and I have 12k invested Canadian dividend funds and US Index. And the other 5k is invested in just a normal RBC savings for TFSA.

With a new year, I have another 5k to deposit into my TFSA and I've decided that I should probably learn more about how to smartly invest my money and if I'm really getting the most out of what I have placed in RBC. I read about using TFSA to invest in stocks and ETFs as a better way to make use of the TFSA, and with potentially better returns. Should I switch my money out of RBC TFSA and into an online trading place like qtrade? If so, how do I do that?

At the moment I make a steady income since I'm on a coop job, but soon I'll return to school and my income will return to zero. Right now I'm looking for some opinions on what to do with my money and how I should go about learning about how to manage it properly. 

Thanks!


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## Montrealer (Sep 13, 2010)

What do you want to know exactly? 

You are 21 and have a decent amount in savings, my advice to you before you go back to school is:

- Work part time while in school for pocket money
- Invest your savings in a TFSA or safe Mutual Fund/GIC
- Make sure all of your debt is paid off before you return to school

Good luck!


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## the-royal-mail (Dec 11, 2009)

Welcome.

I would suggest you have some very costly years ahead of you. Best bet would be not to lock the money in to anything (such as an RRSP) and that you understand your money won't grow very much in 1-2 years unless you happen to be really lucky. Most people are not that lucky. Don't think you will be any different.

I also don't think you should fuss with brokerages at this stage of your life.

As far as managing money, I'm glad you said that because frankly that would be a much better use of your time and money at this point than investing. Managing money is a very basic life skill that everyone should have. So far you seem to be doing ok, but you will find that school expenses can have quite an impact on even the best savings plan.

Don't rush into anything.


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## habibi (Jan 26, 2012)

well one of my questions right now is what to really do with my TFSA to maximize that I don't get taxed on it. Should I switch it out to invest in non-managed funds so I don't pay management expenses?


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## Cal (Jun 17, 2009)

That would be my personal preference, I would pick a few of the regulars, a bank, energy, telecom....and collect the dividends. Don't hold any US equities inside your TFSA, and you will have no tax issues.


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## the-royal-mail (Dec 11, 2009)

Ignore the post above (along with all other posts from that user ID) as spam.

In response to the OP's question, I would recommend leaving the balance in cash since you will probably need the money in the next couple of years right? Investing for such a short term seems kind of pointless to me. Max out the TFSA and leave it as a cash balance. There's no harm in that and you get 1-2% depending on what banks are paying for interest.


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## Koala (Jan 27, 2012)

You probably want the money available to you. I would say to go with a high interest savings account. Don't use RBC though, the interest rate is fairly low. Go with something like Ally or Canadian Tire.


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## habibi (Jan 26, 2012)

Well I actually don't think I'll be needed the money in the next couple years, so I feel fairly confident with using whatever I have in my TFSA to get a bit risky and try making some money.


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## MrMatt (Dec 21, 2011)

habibi said:


> Well I actually don't think I'll be needed the money in the next couple years, so I feel fairly confident with using whatever I have in my TFSA to get a bit risky and try making some money.


Write a basic financial plan so you will know when you'll need the money. Those years tend to fly by.


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## Sherlock (Apr 18, 2010)

the-royal-mail said:


> Ignore the post above (along with all other posts from that user ID) as spam.


It's inappropriate to call another user's well-meaning post as spam just because you disagree with it.


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## indexxx (Oct 31, 2011)

You can open an RBC Direct Investing TFSA and transfer that current $5000 into it, saving any transfer fees that you might incur by moving it to QT. Then get it to work for you- it's not even going to beat inflation sitting in the current account! Index funds are great for a TFSA (and one thing you mention is "so I don't get taxed on it"- there is NEVER any tax on earnings in a TFSA, because you are contributing with after-tax dollars; meaning, you have already paid the taxes on that money, so the gov't allows you to grow it completely tax free; you could hit some magic stock that makes you ten million dollars in a TFSA and Revenue Canada won't take a dime).

With your new $5000 contribution room, I would then open a new account with a Questrade for the cheap transaction fees- $4.95 trades are fine in my book!

One thing some people seem to have missed here is that you can access that money very easily, with no penalties. Think of it as a growth savings account; need some money, sell some positions. You will get the contribution room back the next year. Also, you can assign the value of your TFSA as collateral for a line of credit at the bank, so you can have instant, low-interest money available without losing the compounding of your investments.

Also, time has shown that equities outperform everything else in the long term. Buy some good growth stocks. (I hold pipelines like Atlas, techs like 8x8 and Apple, etc ...)

I'd highly recommend picking up a copy of the new edition of The Wealthy Barber- Dave Chilton gives great advice and it's a fun read. You'll learn more than most people will ever know (or need) from this one book. Also look at some of the books out there specifically on TFSAs- Gordon Pape has written one or two on the subject; check your local library.


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## OhGreatGuru (May 24, 2009)

I would not encourage someone who admittedly knows nothing about investing _(I have no idea about anything investing...")_ to jump into an on-line brokerage account.

Time to self-educate first. There are several other threads on investment books, but a complete neophyte might start with:

- Personal Finance for Canadians for Dummies, 4th ed. (2006) Eric Tyson & Tony Martin

- Investing for Canadians for Dummies, 3rd ed. Eric Tyson & Tony Martin
For the more advanced investor, but has a chapter on mutual funds.

- Stock Investing for Canadians for Dummies. Andrew Dagys & Paul Mladjenovic

- Money Management for Canadians All-in-One Desk Reference for Dummies, 2nd Ed. Andrew Bell, Andrew Dagys & Paul Mladjenovic; Tony Inannou w. Heather Ball; Margaret Kerr & JoAnn Kurtz; John Lawrence Reynolds; Kathleen Sindell. Seems to be a compilation of material from some of the other books.


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