# What to do with $1,000,000 in cash right now?



## plaza (Sep 16, 2010)

Hi,

I am a 43 year old IT Consultant. Married with kids and hoping to semi-retire in a few years or move to a small online business. Personal house is paid off, have a couple real estate properties generating about 50k/yr. I don't have any TFSA and my RRSP is very minimal (60k). I have a bit over a 100k personal and a million in cash sitting in my business bank account. I only generate about 75k/yr of business income right now.

I am totally cash right now. About a year ago, I moved over to Interactive Brokers because they were giving me 2%+ interest, but with the pandemic, I now get nothing or very close to it. I am pretty hesitant to put it in the stock market as we hit record highs and people are calling for a crash/correction.

Some of my wealthier clients, recommended I buy a Permanent Life insurance paid by the business in order to benefit from some tax free growth and death benefit and invest rest in GIC/Bonds and ETFs. MOst of the amount in my business is in USD so it's even harder to get any interest on it in canada.

What would you guys do with a million dollars right now as every day/year I am not earning, my money is worth less and less.


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## Money172375 (Jun 29, 2018)

plaza said:


> Hi,
> 
> I am a 43 year old IT Consultant. Married with kids and hoping to semi-retire in a few years or move to a small online business. Personal house is paid off, have a couple real estate properties generating about 50k/yr. I don't have any TFSA and my RRSP is very minimal (60k). I have a bit over a 100k personal and a million in cash sitting in my business bank account. I only generate about 75k/yr of business income right now.
> 
> ...


I would max out TFSA and RSP contributions. As for what to invest in.....what’s the purpose of the money, time frame, risk tolerance?


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## plaza (Sep 16, 2010)

I agree on TFSA, but I am not a true believer in RRSP (I dont want to start any arguments) 
Problem is it's all in my business, so I would have to withdraw as a dividend/salary just to put it in my TFSA/RRSP.

As for the purpose of the money...not sure yet. I wanted to buy more real estate but prices are crazy. All I know is that I want this money to start working for me now and build up sp I can have a nice amount to invest in other things, retire or leave my kids one day.


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## Gator13 (Jan 5, 2020)

Because it is your company, you could consider an IPP. Your income might be too low to justify it though, but might be worth investigating.


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## Tostig (Nov 18, 2020)

There are lots of people on Youtube who no longer have any confidence in the economy and are stacking gold and silver coins and bars.

If you're not so nervous, you may consider investing in collectables like artwork, or musical instruments, etc.

If you want real estate but turned off by the high prices, consider REITs. Beware of the LLP unless you hold them in a registered account.

If you're going to open a brokerage account, a financial adviser would probably tell you to invest in a well diversified portfolio of fixed income and equities depending on your risk tolerance.


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## james4beach (Nov 15, 2012)

I would think that you should try to get that money out of your business, or come up with a plan/schedule for doing that (I'm assuming it's a corporation).


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## Karlhungus (Oct 4, 2013)

plaza said:


> I agree on TFSA, but I am not a true believer in RRSP (I dont want to start any arguments)
> Problem is it's all in my business, so I would have to withdraw as a dividend/salary just to put it in my TFSA/RRSP.
> 
> As for the purpose of the money...not sure yet. I wanted to buy more real estate but prices are crazy. All I know is that I want this money to start working for me now and build up sp I can have a nice amount to invest in other things, retire or leave my kids one day.


You realize if you take it out and pay tax and then turn around and put it in an RRSP that you get the tax back right? Dont be so scared of taxes, I think it will bite you long term. Permanent life insurance policy just to save taxes is a bad idea IMO. 

Look at a long term chart of the stock market. Its almost always at a record high. It was at a record high when Trump took office (dow at 20k) and lots of "experts" said it was going to crash. Now its over 30k. If I were you, I would learn more about the stock market, understand the ups and downs, understand the standard deviations. $1,000,000 in a balanced and diversified portfolio would yield you 70k per year.


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## plaza (Sep 16, 2010)

james4beach said:


> I would think that you should try to get that money out of your business, or come up with a plan/schedule for doing that (I'm assuming it's a corporation).


yes the money Is in a corporation. This is why I was told to look into COLI ( Corporate owned life insurance) but I don’t know if it is truly a good product or just great on commission for the financial advisor.

open to ideas of you have any suggestions on how I should plan to get it out effectively over time.


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## james4beach (Nov 15, 2012)

plaza said:


> mues the money Is in a corporation. This is why I was told to look into COLI ( Corporate owned life insurance) but I don’t know if it is truly a good product or just great on commission for the financial advisor.
> 
> open to ideas of you have any suggestions on how I should plan to get it out effectively over time.


I don't know too much about these mechanics

I'm a consultant, kind of like what you're doing, but I don't have a corporation. My income is highly volatile and I usually have a good sense of whether I'm going to have a high or low income year. You could wait for a low income year and then collect more salary/dividends from the corp.

As I understand it, the retained earnings that have accumulated in your corp have experienced very low tax rates so far (corp tax rates). You haven't paid much in the way of taxes on consulting earnings, I don't think.

It just seems to me that *eventually*, you have to get the $ out of there. And if that means you pay tax on that income/dividends, so be it ... nobody in Canada has income without paying taxes on it so I don't see why the tax hit is a big deal.

There's no such thing as sheltering business profits in a corporation for a very long time, then getting it into your (personal) hands, without paying taxes.


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## Retiredguy (Jul 24, 2013)

Tostig said:


> If you're not so nervous, you may consider investing in collectables like artwork, or musical instruments, etc.


Yikes!


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## milhouse (Nov 16, 2016)

Take what I say with a grain of salt because I'm just commenting based on past conversations over beers with a couple of my friends that run their own small businesses. 

One friend did mention that he was going to use his business to fund a Permanant Life policy(?) for him. Not sure if he mentioned it was a COLI product like you mentioned. I can't recall the specifics but I recall I thinking how he explained it was logical.
I would suspect that while it would likely be a considered an expense/cost on the business side and a taxable benefit on the personal side, it would net out positive.
While Permanant Life insurance typically gets poopoo'ed on in most discussions, IMO, it's really situational dependent though those situations are few. For most wage slaves, you're typically wanting to max out your TFSA, RRSP, and RESP's first and then think about Permanant Life insurance as your next tax shelter. As a business owner, it's likely an efficient way to get cash value out of your business.
In addition to the death benefit, the cash value can provide some interesting options like borrowing against it for other investments or using it as a non-corelated retirement buffer asset, etc.

Disclosure: No I don't have permanant life insurance. Yes, I had an advisor in the early days that was constantly trying to sell me some form of participating whole life policy and kept telling him to stop trying to selling it to me. I currently have a buddy who sells life insurance who touts the possibilities.


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## Karlhungus (Oct 4, 2013)

milhouse said:


> Take what I say with a grain of salt because I'm just commenting based on past conversations over beers with a couple of my friends that run their own small businesses.
> 
> One friend did mention that he was going to use his business to fund a Permanant Life policy(?) for him. Not sure if he mentioned it was a COLI product like you mentioned. I can't recall the specifics but I recall I thinking how he explained it was logical.
> I would suspect that while it would likely be a considered an expense/cost on the business side and a taxable benefit on the personal side, it would net out positive.
> ...


So what is the benefit of the permanent life insurance? You seem to be saying that its poo poo'ed in discussions, yet an advisor was hounding to you buy but you said no because it was so bad?


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## milhouse (Nov 16, 2016)

It's a lot more money up front than term and you need to keep up with the premiums to prevent you policy from lapsing. When you are young, you may feel insecure about your job and finances or have other priorities to fund like paying down your mortgage asap. For those running a business, there's likely benefit as a means to extract dollars from your corporation. Most people would be best off max'ing out their tax-sheltered RRSP's, TFSA's, and RESP's first. And considering that stats typically indicate that most people don't max out their RRSP's and TFSA's, it's generally not optimal for most to consider a permanant life policy. 

Note that there are different types of permanant life insurance. Situational benefits include the investment strategy aspects as listed above, security in getting/having coverage vs developing a pre-existing condition that prevents you from getting coverage in the future, tax free growth of your cash value, etc.

For me, I wasn't interested in the Whole Life that was being pitched to me because (in no particular order):
I wanted to maximize my RRSP contributions and "free money" matching at work
I was next allocating all my extra savings to paying down my mortgage asap and then to the TFSA when it was introduced
Life insurance to me was just a cost for security and I didn't want to mix it with investments. I had the "buy term and invest the rest" mentality.
I didn't fully understand the potential investment benefits/strategies of using the cash value.


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## james4beach (Nov 15, 2012)

plaza said:


> Problem is it's all in my business, so I *would have to withdraw as a dividend/salary* just to put it in my TFSA/RRSP.


And I think the idea would be to take the money out of your business, and then make RRSP contributions to nullify the tax liability. It's not going to result in a tax bill.

If you only have 60K in your RRSP, I'm guessing you have ton of available contribution room. You should be able to move your corp $ into your RRSP without really taking any tax hit along the way. As @Karlhungus says. This is even better than what I thought earlier and wrote in my post above.

You can do anything you want inside the RRSP. Can even keep it all in GICs, if you really don't want any stocks.


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## Gator13 (Jan 5, 2020)

If you are considering transferring to a RRSP, as I mentioned above, it would be worth investigating the pros/cons of setting up an IPP (individual pension plan) for yourself.


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## Plugging Along (Jan 3, 2011)

plaza said:


> yes the money Is in a corporation. This is why I was told to look into COLI ( Corporate owned life insurance) but I don’t know if it is truly a good product or just great on commission for the financial advisor.
> 
> open to ideas of you have any suggestions on how I should plan to get it out effectively over time.


You have two different questions on this thread. You trying to figure out what is the best way to get money out of your corporation while minimizing taxes, and what to invest in.

We have a consulting firm too (incorporated). This is when a good accountant is worth their weight in gold From a tax standpoint point. Did you set up the company with your wife as a share holder ? What about the kids (depending on age). Does your wife work? What are your personal incomes? Does your family recieve in tax credits or other income related benefits? What does your corporate revenues look like over the years (stable or or volatile).

Depending on these answers, and a few more, you could work with your accountant to find ways to take out money via a combo of dividend and employment income, specific to your scenario. You can also leave the money in the corporation until you are ready to retire. Again, the combination depends on your specifics. 

in Terms of permanent insurance, it can be a good investment From a tax shelter standpoint, but as an investment, unless your investments amounts are higher, it may not make sense. Again, I had my accountant help me run the numbers, and for us, and product we were looking at, our accountant said when we hit the min $3 mil mark then consider buying a mil dollar policy. However, we were where you are now, and they didn’t think it made sense., that was also based on our over all profile.

Our advisors and accountant gave us good advice which is focus on good quality investments that meet our investment goals first, then taxes are secondary goal.

Question. Why do you not like RRSPs?


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## fplan (Feb 20, 2014)

james4beach said:


> And I think the idea would be to take the money out of your business, and then make RRSP contributions to nullify the tax liability. It's not going to result in a tax bill.
> 
> If you only have 60K in your RRSP, I'm guessing you have ton of available contribution room. You should be able to move your corp $ into your RRSP without really taking any tax hit along the way. As @Karlhungus says. This is even better than what I thought earlier and wrote in my post above.
> 
> You can do anything you want inside the RRSP. Can even keep it all in GICs, if you really don't want any stocks.


If the money is taken out of corporation as salary, Employee and Employer portion of CPP(around 6k ) has to be paid.. thats why OP takes divided..so contributions to RRSP is not possible. 

If he takes all the money at one go almost 40% will goto CRA.

No salary means no CPP in future .. IMO his 1M needs provide him income in future as well.

If I were him , I would do this:
900k gic @2% will give him 18k interest every year..take 50k dividend every year .. keep doing this for next 25-30yrs.. tax will be minimal..

Or 500k invest in divided etf @3% , 400k in gic @ 2% , that will generate about 23k .. take 50k per year divided 

Keep investing in TFSA till the corporation money runs out.. after he can withdraw from tfsa..


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## fplan (Feb 20, 2014)

fplan said:


> If the money is taken out of corporation as salary, Employee and Employer portion of CPP(around 6k ) has to be paid.. thats why OP takes divided..so contributions to RRSP is not possible.
> 
> If he takes all the money at one go almost 40% will goto CRA.
> 
> ...


If the money was in USD , In March usd to cad was at 1.40 and stocks were at very good prices.. you should have converted to CAD and invested at that time


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## plaza (Sep 16, 2010)

I talk to people in retirement that invested all their lives in RRSP, ,and now they are complaining that they are forced to withdraw, get clawed back on their pensions/supplements and since they still have some real estate revenues, they are paying more taxes now than when they were working. I am not sure if I will still have real estate by retirement or what income i will need, so I like to have the flexibility of taking the minimum income I need per year and not be forced to take a much larger amount which will result in giving it back in taxes. Maybe I am wrong on this??


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## plaza (Sep 16, 2010)

fplan said:


> If the money was in USD , In March usd to cad was at 1.40 and stocks were at very good prices.. you should have converted to CAD and invested at that time


I did convert a portion, but no one has a crystal ball and people were calling for a crash and USD to hit 1.60. Looking at it now, I wish I would of converted it all and invested in stocks....but no sense of crying now...but just making a plan for future


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## Karlhungus (Oct 4, 2013)

plaza said:


> I talk to people in retirement that invested all their lives in RRSP, ,and now they are complaining that they are forced to withdraw, get clawed back on their pensions/supplements and since they still have some real estate revenues, they are paying more taxes now than when they were working. I am not sure if I will still have real estate by retirement or what income i will need, so I like to have the flexibility of taking the minimum income I need per year and not be forced to take a much larger amount which will result in giving it back in taxes. Maybe I am wrong on this??


Its a good problem to have, when you have so much money in investments that you worry about the tax bill. Much better to be in that situation then have not invested, have much less money, yet you jump for joy that you are barely paying any tax. Its like the person who thinks working overtime will net them less money because of taxes. 

You need to do a bit of research yourself. Dont believe people in your social circle who spout off about stuff they do not know about. "pensions" do not get clawed back. CPP does not get clawed back. The only thing that gets clawed back in Old Age Security. And that claw back starts at close to 80k. If you are worried about that, again, its a good problem to have. Load up the TFSA, contribute to the RRSP and when the time comes to start withdrawing, think about hiring an advisor to best minimize your taxes. However, I cant see it being that difficult. How much money would you need to live on at that point? Say 80k. Take 60k out of TFSA, 20k out of RRSP and pay less then $1000 in tax. And thats not including CPP or OAS.


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## Karlhungus (Oct 4, 2013)

plaza said:


> I did convert a portion, but no one has a crystal ball and people were calling for a crash and USD to hit 1.60. Looking at it now, I wish I would of converted it all and invested in stocks....but no sense of crying now...but just making a plan for future


Yes, dont make the same mistake again. You can say I should have invested in stocks as they just keep climbing and climbing. 

As for taking money out of the Corp, I am not an accountant, but I have run my own business for 15+ years and had numerous talks with accountants. I have tried many ways to try and minimize taxes taking money out of my corp. Tried the dividends. There is no way. You will pay taxes one way or another. The best thing you can do is just take a salary, pay your taxes, build some RRSP room, pay your CPP and turn around and invest that money back into a TFSA or RRSP. 

There are little things you can do, like recently I have been doing more RRSP as I have 3 kids and investing through a RRSP has knocked down my taxable income so I receive more in Trudeau's kid bucks. But as for getting the money out of the corp, just pay your taxes and move on. Theres far too many people who hear from their neighbours uncles cousin that RRSP's are a bad idea (no evidence provided) and they spend a lifetime scared of something they have done 0 research on. In the meantime, it has cost them large amounts of money.


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## Plugging Along (Jan 3, 2011)

plaza said:


> I talk to people in retirement that invested all their lives in RRSP, ,and now they are complaining that they are forced to withdraw, get clawed back on their pensions/supplements and since they still have some real estate revenues, they are paying more taxes now than when they were working. I am not sure if I will still have real estate by retirement or what income i will need, so I like to have the flexibility of taking the minimum income I need per year and not be forced to take a much larger amount which will result in giving it back in taxes. Maybe I am wrong on this??


How close to financial situation and profile are they to you? I heard this all the time, and in some cases for my friends who have a full DB pension, RRSP make no sense. In Our case it makes sense, and I have real estate, and partial DB pension, and an IT corporation. It might not be a bad idea to have your accountant and financial loaner run some scenarios for your specific situation. We had our account help us figure out the best combo of dividends, and employment income considering CPP, EI and future benefits. She ran some numbers for us, and helped us understand what would happen under certain assumptions and break even points. We then had our financial planner run some scenarios. When we have major life event, we re-evaluate.

Our RRSP contributions for my spouse change depending on what is happening with his contracts and full time employment. (He goes back and forth). There are some years we intentially bring our income down more through RRSPs, even thought the tax deduction (from a bracket stand point]. To bring in larger benefits in other areas [CTB, child care deductions, EI payback, ect). 

Just suggesting this as it sounds like you may have a lot of options with a wife, kids, and corporation Also, you are planning early part time retirement. RRSPs can be great for that bridging.


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## Ukrainiandude (Aug 25, 2020)

Karlhungus said:


> Look at a long term chart of the stock market. Its almost always at a record high.


 Japanese investors from eighties and many European stock market investors would disagree. Investors from late nineties in American equities might disagree as well, it took them over a decade to break even.


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## Retiredguy (Jul 24, 2013)

For estate planning you're also likely a good candidate to have multiple wills. 

When I read your situation, I think very well done, you've put yourself and family in a very good financial position, but you seem to paralyzed with your cash and thinking. Worried about taxes, RE too high , equities too high, potential clawbacks happening 20 years from now, don't like RRSPs, nothing in TFSA! and imo at 43 holding a lot of cash and chasing low fixed income rates but wanting the money to grow. That you've got some investment RE is interesting (and would be interesting to know how that came about) but saying they generate 50K is just one number, meaningless without knowing the full details of those investments. What about your wife, TFSA, RRSP, or Spousal RRSP, RESP's for kids? I am not suggesting you post more here but I really question what you want.... is it just where to find the next place to get the highest fixed income rate available?


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## Karlhungus (Oct 4, 2013)

Ukrainiandude said:


> Japanese investors from eighties and many European stock market investors would disagree. Investors from late nineties in American equities might disagree as well, it took them over a decade to break even.


I guess you didnt look at a chart? Late 90's american equities were going up 20-30% per year


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## Ukrainiandude (Aug 25, 2020)

Karlhungus said:


> I guess you didnt look at a chart? Late 90's american equities were going up 20-30% per year


I did. Investors that bought into SPY in 1998-2000 only got even in 2011-2013
that is why it’s called lost decade. You were much better off having your money in saving account that time. No one knows what the next decade will look like for S&P 500, it could behave like Nikkei 225 from 1990 to 2011 in the environment of ultra low interest rates set by bank of Japan.


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## Karlhungus (Oct 4, 2013)

Ukrainiandude said:


> I did. Investors that bought into SPY in 1998-2000 only got even in 2011-2013
> that is why it’s called lost decade. You were much better off having your money in saving account that time. No one knows what the next decade will look like for S&P 500, it could behave like Nikkei 225 from 1990 to 2011 in the environment of ultra low interest rates set by bank of Japan.


1998-2013 the US market returned 7.95% CAGR...


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## Retiredguy (Jul 24, 2013)

Ukrainiandude said:


> I did. Investors that bought into SPY in 1998-2000 only got even in 2011-2013
> that is why it’s called lost decade. You were much better off having your money in saving account that time. No one knows what the next decade will look like for S&P 500, it could behave like Nikkei 225 from 1990 to 2011 in the environment of ultra low interest rates set by bank of Japan.


Doing nothing is always an option but very rarely a good option.


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## Covariance (Oct 20, 2020)

Good discussion on two topics. I will add a third. Maximize your purchasing power and significantly lower your operating cost in areas you need to spend in the months ahead. Look at everything you will consume for the next twelve months and determine how you can negotiate lower prices by either buying in bulk or committing spend. Your cash on cash impact of this can be rather significant and far greater than any interest income you might get.


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## Ukrainiandude (Aug 25, 2020)

Karlhungus said:


> 1998-2013 the US market returned 7.95% CAGR...


I see 0.48%
There’s the reason it’s called lost decade. And there’s no guarantee that the next one won’t.


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## Karlhungus (Oct 4, 2013)

Ukrainiandude said:


> I see 0.48%
> There’s the reason it’s called lost decade. And there’s no guarantee that the next one won’t.
> View attachment 21024


I mean, I dont really see the point of cherry picking the worst 10 year periods for the US market. Would it make any sense for me to cherry pick the best 10 year periods and claim that you should bank on 15% + every year? No. My original point stands. Look at a 100 year chart of the stock market, pretty much a straight line up.


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## MrMatt (Dec 21, 2011)

Ukrainiandude said:


> I see 0.48%
> There’s the reason it’s called lost decade. And there’s no guarantee that the next one won’t.


To be fair it's a whopping 2.5% with dividends reinvested


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## Ukrainiandude (Aug 25, 2020)

Karlhungus said:


> Look at a 100 year chart of the stock market, pretty much a straight line up.


Sure thing. Market always goes up. Until it doesn’t.


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## Karlhungus (Oct 4, 2013)

Ukrainiandude said:


> Sure thing. Market always goes up. Until it doesn’t.
> View attachment 21025


US market.


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## MrMatt (Dec 21, 2011)

Karlhungus said:


> US market.


What about Japans last 30 years of awesome performance?








Nikkei 225 Index - 67 Year Historical Chart


Interactive daily chart of Japan's Nikkei 225 stock market index back to 1949. Each data point represents the closing value for that trading day and is denominated in japanese yen (JPY). The current price is updated on an hourly basis with today's latest value.




www.macrotrends.net






Markets can stay depressed for long periods of time. Our insanely low interest rates aren't helping.


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## agent99 (Sep 11, 2013)

A million today may sound like a lot, but in order to safely earn the equivalent of your current $70k/yr you will need to have that million double in value by the time you retire in todays dollars. To do that you will likely need a balanced approach - at least 1/2 in equities and the other 1/2 in relatively fixed income that yields more than inflation rate. This not a good time for either!

Asking on a forum like this might be useful in getting some ideas, but as suggested above, you will need some professional advice on how best to go forward.


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## james4beach (Nov 15, 2012)

Curious @plaza and @Karlhungus , would you invest in a portfolio that has these results, based on standard index funds? The numbers are with a CAD base currency. Year 2020 isn't shown but it's around +10%

I've marked the only two negative years out of the last 40 years. This is how my entire net worth is invested.


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## Covariance (Oct 20, 2020)

agent99 said:


> A million today may sound like a lot, but in order to safely earn the equivalent of your current $70k/yr you will need to have that million double in value by the time you retire in todays dollars.


the formula to canculate a perpetual $70,000/year is PV=70,000/rate
rate is compound annual rate in decimal form. PV is the present value required today. For instance if we assume 5% rate and wish to generate 70,000 a year for ever then you need $1.4million today.


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## plaza (Sep 16, 2010)

Retiredguy said:


> For estate planning you're also likely a good candidate to have multiple wills.
> 
> When I read your situation, I think very well done, you've put yourself and family in a very good financial position, but you seem to paralyzed with your cash and thinking. Worried about taxes, RE too high , equities too high, potential clawbacks happening 20 years from now, don't like RRSPs, nothing in TFSA! and imo at 43 holding a lot of cash and chasing low fixed income rates but wanting the money to grow. That you've got some investment RE is interesting (and would be interesting to know how that came about) but saying they generate 50K is just one number, meaningless without knowing the full details of those investments. What about your wife, TFSA, RRSP, or Spousal RRSP, RESP's for kids? I am not suggesting you post more here but I really question what you want.... is it just where to find the next place to get the highest fixed income rate available?


Never said I don’t want to pay taxes or invest my money. What I said is I am earning hardly anything in my money now and worried to reinvest it in the market or RE because we are at all time highs.

I have over two million in equity on my real estate properties which I purchased over the past 15 years as I found an opportunity. Right now real estate here just does not make sense because the income does not cover expenses. So I am not looking to just dump money to say I own more properties and now have more headaches without any income.

just looking to make a plan for 2021 andthought I would ask here to get peoples opinion.

Happy new year to all!!


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## Jimmy (May 19, 2017)

posted in error


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## MrMatt (Dec 21, 2011)

plaza said:


> Never said I don’t want to pay taxes or invest my money. What I said is I am earning hardly anything in my money now and worried to reinvest it in the market or RE because we are at all time highs.
> 
> I have over two million in equity on my real estate properties which I purchased over the past 15 years as I found an opportunity. Right now real estate here just does not make sense because the income does not cover expenses. So I am not looking to just dump money to say I own more properties and now have more headaches without any income.
> 
> ...


Most important investing test is the pillow test.
If you can't sleep at night, it's not worth it.

There is nothing wrong with just dumping a significant amount into a bunch of Government of Canada bonds and insured GICS.
Sure you won't make a lot, but you won't lose any.


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## Karlhungus (Oct 4, 2013)

james4beach said:


> Curious @plaza and @Karlhungus , would you invest in a portfolio that has these results, based on standard index funds? The numbers are with a CAD base currency. Year 2020 isn't shown but it's around +10%
> 
> I've marked the only two negative years out of the last 40 years. This is how my entire net worth is invested.
> 
> View attachment 21027


Must be something other then index funds, otherwise you would have been negative in '08. Nice looking returns though. Ive done the following:
2014 - 8%
2015 - 3%
2016 - 13%
2017 - 9.5%
2018 - (4.79)% negative 
2019 - 20.85% 
2020 - havent calculated but looking like 10%+

During accumulation I go for maximum return. No fixed income, just TD Eseries. I dont mind down years if the good years are maximized.


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## Karlhungus (Oct 4, 2013)

MrMatt said:


> Most important investing test is the pillow test.
> If you can't sleep at night, it's not worth it.
> 
> There is nothing wrong with just dumping a significant amount into a bunch of Government of Canada bonds and insured GICS.
> Sure you won't make a lot, but you won't lose any.


Inflation will eat away at your money though. I agree with what you are saying about the pillow test, however, what I have found when talking with people about investing, is that their behaviour is based on their knowledge. The more you understand about the market, the more you are willing to risk. And not risk as in lose money, risk as in investing in stocks instead of GIC's.


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## james4beach (Nov 15, 2012)

Karlhungus said:


> Must be something other then index funds, otherwise you would have been negative in '08. Nice looking returns though. Ive done the following:


The table I posted was historical results from the Stingy Investor Asset Mixer, using:
50% All Canadian bonds
15% TSX Composite
15% S&P 500
20% Gold bullion

I've been doing this for a few years now and plan to stick with this asset allocation.


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## Karlhungus (Oct 4, 2013)

james4beach said:


> The table I posted was historical results from the Stingy Investor Asset Mixer, using:
> 50% All Canadian bonds
> 15% TSX Composite
> 15% S&P 500
> ...


With that much allocated bonds you might disappointed in future returns as the 30 year bond bull market is over and will probably only yield small returns going forward. Interest rates only really have one direction to go. But, we shall see


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## james4beach (Nov 15, 2012)

Karlhungus said:


> With that much allocated bonds you might disappointed in future returns as the 30 year bond bull market is over and will probably only yield small returns going forward. Interest rates only really have one direction to go. But, we shall see


Interest rates don't have "one direction to go". Rates could also go down, or even negative like Europe. We really have no idea where interest rates will go.

But I do agree that returns going forward will likely be very low, yes, at least for the next few years. However if interest rates rise (which I am praying for) then the bond fund returns will increase as well. These are long term investments and what happens in the next ~ 5 years really is of no interest to me. We have no idea what interest rates will be 5 or 10 years from now, and a bond fund simply adapts and gets whatever yields exist in fixed income.


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## Karlhungus (Oct 4, 2013)

james4beach said:


> Interest rates don't have "one direction to go". Rates could also go down, or even negative like Europe. We really have no idea where interest rates will go.
> 
> But I do agree that returns going forward will likely be very low, yes, at least for the next few years. However if interest rates rise (which I am praying for) then the bond fund returns will increase as well. These are long term investments and what happens in the next ~ 5 years really is of no interest to me. We have no idea what interest rates will be 5 or 10 years from now, and a bond fund simply adapts and gets whatever yields exist in fixed income.


I dont think you are correct when talking about interest rates. In a bond heavy portfolio, if you are looking for a better return, you want interest rates to continue to go down. When interest rates rise, bonds prices fall. They have an inverse relationship. Look at the chart you posted, the returns have been trending down.


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## james4beach (Nov 15, 2012)

Karlhungus said:


> I dont think you are correct when talking about interest rates. In a bond heavy portfolio, if you are looking for a better return, you want interest rates to continue to go down. When interest rates rise, bonds prices fall. They have an inverse relationship. Look at the chart you posted, the returns have been trending down.


For a single bond, yes, price is inverse to yield. A bond portfolio is a different beast because everything is rolling over and perpetually being reinvested. Think of a GIC ladder. The bond fund is really no different than a GIC ladder, except that prices are visible.

Rising interest rates are a benefit to both GIC ladders and bond funds, in the long term. In the short term there is of course volatility and potentially huge drops ... but I presume we are all long-term investors.

Bond funds are widely misunderstood and in fact, bond funds do OK when interest rates rise gradually over time.

Happy New Year


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## MrMatt (Dec 21, 2011)

Karlhungus said:


> Inflation will eat away at your money though. I agree with what you are saying about the pillow test, however, what I have found when talking with people about investing, is that their behaviour is based on their knowledge. The more you understand about the market, the more you are willing to risk. And not risk as in lose money, risk as in investing in stocks instead of GIC's.


Interesting
However I've known many people who purchased stuff they didn't understand, or had losses far larger than they expected and it was just horrible for them.

I'm not saying you should lock it all away in fixed income, but you should really think about risk tolerance, understand what it means and invest accordingly.
Also knowing what you're buying helps.

That's what kept me from losing money during the tech bubble, and had me hold off on Amazon for so long.
Watching people lose paper fortunes was quite a learning experience.


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## BruceWG (Dec 26, 2020)

fplan said:


> If the money was in USD , In March usd to cad was at 1.40 and stocks were at very good prices.. you should have converted to CAD and invested at that time


What I normally like about this forum (compared to typical Twitter/Facebook attacks) is the professionalism and respect. I hope it doesn't regress to telling people what they SHOULD HAVE done, There is a long list of things I should have done during the recent market plunge.


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## afulldeck (Mar 28, 2012)

Perhaps this might change your mind around investing when markets appear high.


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## plaza (Sep 16, 2010)

james4beach said:


> Curious @plaza and @Karlhungus , would you invest in a portfolio that has these results, based on standard index funds? The numbers are with a CAD base currency. Year 2020 isn't shown but it's around +10%
> 
> I've marked the only two negative years out of the last 40 years. This is how my entire net worth is invested.
> 
> View attachment 21027


Is that based on specific set of ETFs?


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## james4beach (Nov 15, 2012)

plaza said:


> Is that based on specific set of ETFs?


These results I posted were from the Stingy Investor asset mixer. Here's a table showing the portfolio construction, with the name of the ideal asset, and the matching ETF on the right. You also must rebalance annually.


*Portfolio weight**Stingy Investor asset name**Real-world ETF*50%All Canadian BondsXBB15%TSX CompositeXIC15%S&P 500ZSP20%GoldCGL.C

For example the 2020 result from the Stingy Investor asset mixer was 11.95% and if you invested in that ETF portfolio the result would have been 11.82% reflecting a reasonably small amount of ETF fees .... about 0.13% performance loss due to MER.

Personally I think it's a great portfolio, and it's how I invest my RRSP.

If you're considering it, now is a good time to buy, because both bonds and gold are down recently.

Here again is the historical performance ignoring fees:


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## bflannel (Apr 21, 2013)

I have a permanent life insurance plan inside a corporation. I am in year 5 or 6, and I like it. The guaranteed return of 4% could be handy if we got into a lost decade scenario, but ultimately I enjoy having the frequent payments, like a mortgage; it's the automated savings that help Canadians get 'rich'. I like that it's tax-advantaged, I like that it works for collateral, I like that its predictable growth in the companies asset column, I like that it can be accounted for as an expense, I like the idea of the company being paid the death benefit to avoid tax for your beneficiaries truly. Because I had/have a relatively chunky monthly payment for it, I made more sound business decisions like keeping other expenses low and the added hustle to find other business incomes.

A corp account with a mil in cash, while you have little to no invested (outside of real estate) assets personally, is insane.

.02 cents.


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