# What to do with $1 million now?



## jargey3000 (Jan 25, 2011)

Deleted


----------



## Letran (Apr 7, 2014)

Give it to ME!!!

Sorry can't resist


----------



## Letran (Apr 7, 2014)

Funny I've just been looking into this also.

I spoke with Scotia Private Client group and RBC private banking, and will speak with TD Wealth Management when account manager comes back. For your investible assets of this size they can give you a few options

Self-directed which is what of course you are doing now. They also have set management fees for .09 which will get you a dedicated CFA with a max clientele of 150 or less. You can review the suggested asset mix and their track record on similar asset mix as you prefer as guided by you. This way you could be involve in managing as much or as little as you want at the same time keeping your cost low


----------



## Jungle (Feb 17, 2010)

Couch potato portfolio with a higher fixed income portion. Do a combo of short, long term bond and gic. Split the rest evenly between cad, us and int index funds.


----------



## james4beach (Nov 15, 2012)

jargey3000 said:


> What I'd LIKE to do with it is find a nice, simple "set it & forget it" place to park this amount for the say the next 5-6 years, that could conceivably generate about 5% to 7% tax-efficient income a year. Suggestions welcome! Thanks


You and everyone else  Congrats on your situation, that's great.

You will have to diversify it. Do NOT put all your eggs in one basket, meaning it can't all be at one institution or brokerage.

You indicate a time frame of *5 to 6 years*. That is far too short for the stock market; everyone agrees that equity based investments have to stay invested for at least 10 years (and probably more like 20 year time frame) to exhibit strong returns. In shorter periods, like the one you indicate, it's a crap shoot. Anything can happen.

People might tell you that you should put it into dividend paying stocks with high yields but again I will stress that those are equity exposures and 5-6 years is an inappropriate timeframe for equities.

You are NOT going to get 5% to 7% income a year. You could only get that if you take equity risk. And once you take equity risk, you have to be aware that the market could do anything random and you might face tremendous losses, as 5-6 years is not long enough to give high assurance of positive returns. You are basically gambling your money on such a short time frame.

Personally I think that in the time frame you indicated, you must do fixed income, and in that case you're going to get about 2% yield at most. Even 2% is hard to come by these days, thanks to the Bank of Canada's war on savers.


----------



## james4beach (Nov 15, 2012)

If you go to see a "planner" they will probably try to get you into a monthly income fund of some sort. Beware of this advice.

Ask them what is the equity % of the income fund. Ask them the low grade bond exposure too. And ask them if 5-6 years is an appropriate time period for that equity investment. (They may lie and say "yes")


----------



## OptsyEagle (Nov 29, 2009)

jargey3000 said:


> What I'd LIKE to do with it is find a nice, simple "set it & forget it" place to park this amount for the say the next 5-6 years, that could conceivably generate about 5% to 7% tax-efficient income a year. Suggestions welcome! Thanks


Not asking for much are you. When you find that, make sure you report back and let us in on it.

Anyway, will this be generating all your income or do you also have pensions and/or other income sources?


----------



## blin10 (Jun 27, 2011)

to get 5-7% yield you have to be exposed to some volatility, there is no free lunch


----------



## 1980z28 (Mar 4, 2010)

jargey3000 said:


> I'm 62, married, 2 grown, married kids; own house & virtually debt-free. I've dibbled & dabbled in investing on my own (no paid advisors, did a lot of reading & watching over the years ...). I'm getting a little tired of dibbling & dabbling, so I've liquidated just about $1 million & it's sitting in several hi-int. bank accounts right now. What I'd LIKE to do with it is find a nice, simple "set it & forget it" place to park this amount for the say the next 5-6 years, that could conceivably generate about 5% to 7% tax-efficient income a year. Suggestions welcome! Thanks


Nice situation to be in

Do you need income from it,if so how much

Could invest in bonds of all sorts,

Get a fee only planner


----------



## leeder (Jan 28, 2012)

Index funds/ETFs are probably ideal. 7% is probably the annual average of an all equity portfolio over a 10-year period. If you aim for a balanced portfolio of about 50% equity indices (Canada, US, EAFE), and 50% international, you can probably generate an average of 5% annual over a 10-year period. There's research out there to show what the performance is based on historical figures; I'm using rough estimates. OP did not indicate anything about being risk averse, so I assume he's willing to take equity risk. In terms of tax efficiency, maximize the non-taxable accounts before investing in the taxable. Aim to have interest bearing investments in your non-taxable account, and hold ROC generating investments in the non-taxable account to reduce headaches when you prepare your taxes.


----------



## larry81 (Nov 22, 2010)

Letran said:


> I spoke with Scotia Private Client group and RBC private banking, and will speak with TD Wealth Management when account manager comes back. For your investible assets of this size they can give you a few options


I suggest you avoid them, behind the smokes and mirror its just a way to transfer wealth from your pockets to the banks pockets. I still track the performance of the "private funds" that was proposed to me few years ago, my pure-indexing ETF's baskets beat them all except, a 25M AUM bonds index which has a +0.20% performance gain.

A basket of 3-4-5 ETF's is all you need.


----------



## Fraser19 (Aug 23, 2013)

Put it all on 15 black. 

I have no real insight, but it is real inspiring to see posts like this. Keep up the good work!


----------



## james4beach (Nov 15, 2012)

I think the OP and their significant other should sit down and make a firm decision about how much risk they're willing to expose this cash to.

All these ideas about using ETFs are really saying you should take equity risk. Do you really want to do that? Are you prepared to accept the risk of, say, a -50% decline in your $1 million? Going heavy into low grade/junk bonds poses similar risks... definitely risk of loss. In the extreme case (junk bonds) the risk of loss is quite similar to equities.

I would advocate playing it safe. Don't get greedy in the home stretch.


----------



## GreatLaker (Mar 23, 2014)

larry81 said:


> I suggest you avoid them, behind the smokes and mirror its just a way to transfer wealth from your pockets to the banks pockets.


+1 larry81
Going to private wealth managers saying you have $1M will just get someone marked as a "whale". A fee only financial planner is worth it to help understanding taxes, how much to contribute to various taxable, tax-deferred and tax-exempt registered accounts, avoiding too much OAS clawback, which accounts to withdraw from and when, when to start a RIF, when to take CPP etc. But the main goal of all too many investment advisors is to turn their clients' retirement money into their own retirement money, a couple of % at a time.

Buffet & S&P500 vs the Hedge Funds


----------



## lonewolf (Jun 12, 2012)

james4beach said:


> You and everyone else  Congrats on your situation, that's great.
> 
> You will have to diversify it. Do NOT put all your eggs in one basket, meaning it can't all be at one institution or brokerage.
> 
> ...


7 continents diversify with every major currency of each continent as well as some gold & silver, use credit unions over banks don't hold all wealth in Canadian institutions.


----------



## My Own Advisor (Sep 24, 2012)

Congrats on your success!! I hope to get there someday, $1 M in invested assets.

Like others, including leeder, I think a mix of low-cost indexed funds is good. I would also add a few income-oriented funds as well (e.g., XEI).

For example:
CDN equity 25% = VCN + XEI
US equity 25% = VTI + VGG
International 10% = VXUS
Bonds 40% = XSB or VSB

There is likely a better mix but this is just off the top.


----------



## hboy43 (May 10, 2009)

james4beach said:


> You indicate a time frame of *5 to 6 years*. That is far too short for the stock market; everyone agrees that equity based investments have to stay invested for at least 10 years (and probably more like 20 year time frame) to exhibit strong returns. In shorter periods, like the one you indicate, it's a crap shoot. Anything can happen.


Everyone does not agree. Stop talking for me.

hboy43


----------



## yyz (Aug 11, 2013)

^ 
Exactly
So James,someone who started investing in say 2009-now say 5- 6 years, is that still far to short of a time frame?Your statement does not support your argument there does it?


----------



## Letran (Apr 7, 2014)

yyz said:


> ^
> Exactly
> So James,someone who started investing in say 2009-now say 5- 6 years, is that still far to short of a time frame?Your statement does not support your argument there does it?


im not sure what hboy43 is saying but to comment on yyz

James statement is quite clear and supports what he is saying.
having ONLY 5-6 years in your horizon BEFORE you needing to live on your investments is short for equity trading. Stock COULD be volatile that in any given year, month or a day your capital could suffer a loss of -20 or even -50%. if out of that 5 - 6 years you only have 1-2 years remaining before the you have to pull it out then it might not be long enough for you to recover. Having a 10-20year in time horizon will allow you to ride the waves of the market before you put in a more stable investments when your time horizon gets shorter. Hope that is clear


----------



## yyz (Aug 11, 2013)

I know exactly what he was saying thanks.Nobody ,even the OP (who hasn't posted since) said he needed all the money in 5 years did he? I'm sure that is probably when he may need to start drawing money out but not need the whole amount.Thus he would probably have more than a 5-6 year horizon.

I think we all know James is a GIC bull and doesn't like stocks.


----------



## gimme_divies (Feb 12, 2011)

Not enough information provided by the OP as to what kind of accounts the funds are in right now (RRSP, non-REG), whether the 5-7% income requirement is to satisfy income needs, or is simply a desired RoR, and whether the time 5-6 year investment horizon will result in liquidation of the portfolio or simply a gradual draw-down.

Barring some of the variables, I think the best option would be to allocate a significant portion (at least 50%) to a dividend growth porfolio of 10-20 blue chip stocks with the intention of holding essentially forever. Obviously this strategy is out the window if most of the funds are needed at once in 5-6 years time, but if if is simply the INCOME that is needed, then simply focus on quality dividend stocks (BCE.to, FTS.to, PG, ABT, etc..) and then you need not worry about some volatility in the equity market. You can easily obtain a 3-3.5% yield on cost with annual dividend growth of 7-10% which will easily outpace inflation. Within 5-6 years, your 3-3.5% yield on cost is probably approaching 4.5-5%, and you will never NEED to touch that capital. Also, while it's not guaranteed, there is still a great chance of capital appreciation on top of the dividends to provide that 5-7% total return, if not more, and with very moderate risk.


----------



## dime (Jun 20, 2013)

Congrats on reaching this stage. 

There's quite a few equities yielding over 4%. And if you consider the dividend gross up for tax treatment it's more tax efficient than fixed income yield. 

There's greater risk with equities of capital loss so you need to diversify, and need to be ready to hold for the longer term. ETF's help immensely with diversification.

Personally I think it's good to buy at regular intervals over time rather than going all in (as I'm still bit wary of hitting market peak like I did in 2008)

You might want to look closer at the XEI iShares Core S&P/TSX Composite High Dividend Index ETF which holds 75 stocks and has a low MER of 0.2%

A good site for the 'set and forget' approach to investing is the canadiancouchpotato.com model portfolios. 


Also make sure you've maxed out your TFSA contributions for you and your partner. That's a great place to get some tax sheltered fixed income yield.


----------



## My Own Advisor (Sep 24, 2012)

Just be careful about XEI, when looking at MER, XEI is about 0.61%. iShares is sneaky b/c they post the management fee, that's not the same thing.

XEI is a good income-oriented product. Or, you can just own all CDN banks, pipelines, telcos and major REITs and get 4-5% yield and no fees. 

This is in line with what gimmie_divies wrote above. I am biased because I follow this approach as well. Own 20+ blue chip stocks and index everything else for diversification. This way, you get income (from NA, TD, RY, BNS, IPL, T, BCE, etc.), planned forever holds, AND you don't have to worry about the volatility over time since stocks go up, go down, come back, fall, and rise again over time.

I can appreciate nothing is guaranteed when it comes to individual stocks but this is why you own a bunch of them, to diversify and reduce risk across industries and countries.


----------



## piano mom (Jan 18, 2012)

lonewolf said:


> 7 continents diversify with every major currency of each continent as well as some gold & silver, use credit unions over banks don't hold all wealth in Canadian institutions.


"You will have to diversify it. Do NOT put all your eggs in one basket, meaning it can't all be at one institution or brokerage"

We have over $1 mil invested within BMO Investorline, self directed. My husband thinks that it is more convenient to manage the portfolio this way. Is there really risk this way? How so?


----------



## piano mom (Jan 18, 2012)

I know any financial institution under CDIC is insured for up to $100k for each account. We have set up 8 different accounts i.e. rrsp, resp, tfsa etc. Does this mean that we will have at least $800k guaranteed in case of bank failure?


----------



## james4beach (Nov 15, 2012)

yyz said:


> I know exactly what he was saying thanks.Nobody ,even the OP (who hasn't posted since) said he needed all the money in 5 years did he? I'm sure that is probably when he may need to start drawing money out but not need the whole amount.Thus he would probably have more than a 5-6 year horizon.


I assumed from his text that his entire horizon was only 5-6 years. The OP wrote: " find a nice, simple "set it & forget it" place to park this amount for the say the next 5-6 years "

Perhaps I misunderstood. I thought that meant he's looking to cash it out within that period (i.e. buy now, sell in 6 years). It did not sound like he's describing a 20 year investment horizon, but perhaps that's an available option to him.


----------



## piano mom (Jan 18, 2012)

Found the answer I'm looking for in this thread. 

http://canadianmoneyforum.com/showt...e-as-a-company?p=212926&viewfull=1#post212926


----------



## GreatLaker (Mar 23, 2014)

piano mom said:


> I know any financial institution under CDIC is insured for up to $100k for each account. We have set up 8 different accounts i.e. rrsp, resp, tfsa etc. Does this mean that we will have at least $800k guaranteed in case of bank failure?


piano mom there is an interactive infographic on what CDIC covers here:
http://www.cdic.ca/Coverage/Infographic/Pages/default.aspx


----------



## dime (Jun 20, 2013)

My Own Advisor said:


> Just be careful about XEI, when looking at MER, XEI is about 0.61%. iShares is sneaky b/c they post the management fee, that's not the same thing.


Agreed thanks for pointing that out. Thats quite misleading! 

I like how Vanguard's fees are often far less. . . VDY is almost half the MER at .34 with a 3.5% trailing yield. Holds 75 equities.


----------



## piano mom (Jan 18, 2012)

Thanks greatlaker. I later found out that CDIC doesn't cover stocks and MF but CIPF does. I just didn't understand why james4beach discouraged from investing with one single brokerage firm.


----------



## AMABILE (Apr 3, 2009)

I have several 100k GIC"s each with different companies
billed to my BMO INVESTORLINE account
aren't I covered ?


----------



## AltaRed (Jun 8, 2009)

AMABILE said:


> I have several 100k GIC"s each with different companies
> billed to my BMO INVESTORLINE account
> aren't I covered ?


Yes, you are provided each GIC is from a CDIC member institution such as RBC bank, Royal Trust, etc. CIPF insurance covering brokers is a different thing. That coverage protects your account assets against failure of the brokerage itself, malfeasance, broker fraud, etc. CIPF coverage does not protect against market failure of an investment though.


----------



## AltaRed (Jun 8, 2009)

piano mom said:


> Thanks greatlaker. I later found out that CDIC doesn't cover stocks and MF but CIPF does. I just didn't understand why james4beach discouraged from investing with one single brokerage firm.


CIPF does not protect against any specific investment per my last post. It protects against account fraud, etc. by the broker. James is overly conservative. No reason why not to have all your business with one brokerage, especially if it is u der $1 million. For financial assets over $1 million, you might want to split between brokerages to stay within the $1 million threshold.

One other point about brokerage accounts. Most, if not all, brokerages hold your assets in trust (as indicated by the word segregated) on your account statements. That means your account assets are held separately from the brokerage's assets/business and not part of any creditor claim if the brokerage goes bankrupt.


----------



## piano mom (Jan 18, 2012)

Thanks Altared for the clarification. I trust my husband with the investing but sometimes, I come here to learn and challenge him just to keep him on his toes


----------



## Xoron (Jun 22, 2010)

AltaRed said:


> CIPF does not protect against any specific investment per my last post. It protects against account fraud, etc. by the broker. James is overly conservative. No reason why not to have all your business with one brokerage, especially if it is u der $1 million. For financial assets over $1 million, you might want to split between brokerages to stay within the $1 million threshold.
> 
> One other point about brokerage accounts. Most, if not all, brokerages hold your assets in trust (as indicated by the word segregated) on your account statements. That means your account assets are held separately from the brokerage's assets/business and not part of any creditor claim if the brokerage goes bankrupt.


And it's 1M per qualified account.

EX:
Wife's RRSP: 600k
Husbands RRSP: 600k

All of it is protected. Both are individual accounts, with 1M each. If your brokerage goes under, the CIPF would work to help you transfer to another brokerage, up to 1M per "account"


----------



## Underworld (Aug 26, 2009)

If you've got a million cash - you don't need advice


----------



## webber22 (Mar 6, 2011)

The CIPF website says 

" .... in book-based systems, most customer assets will likely be available to be returned.
If you do have a shortfall after the trustee’s distribution, you will have a claim against CIPF, 
but it is unlikely that the amount will exceed $1 million"

But if you have over a million you should split it between brokerages since one of your trustees could turn out to be Bernie Madoff Jr Trust :upset:


----------



## AltaRed (Jun 8, 2009)

Which is exactly what has been discussed, has it not? Or as clarified, $1 million per account.

That said, there is little risk with the big 5 bank brokerages due to reputational damage. I would not have an issue having several million with one of the big 5. Anyone else.......not a a chance.


----------



## My Own Advisor (Sep 24, 2012)

I agree AR. I just need to save the $1 M first 

Good reminder it's $1 M per qualified account, each RRSP account, each TFSA account, each non-registered account...

"You and your husband will each have $1 million coverage on your RRSP accounts since they are defined to be Separate Accounts by CIPF.

Assuming you have a 50 per cent interest in the joint account, each of you would include $1 million in your General Account.

In summary, your husband has $1 million RRSP account coverage and $1 million General Account coverage, and you have $1 million RRSP account coverage and $1 million for General Account coverage."
http://www.cipf.ca/public/FAQ/Coverage/CoverageLimits.aspx


----------



## GreatLaker (Mar 23, 2014)

The FAQ indicates TFSAs are included in the general account, not insured separately. Not that I have anywhere near $1 million in my TFSA. :smilet-digitalpoint

"Are Tax-Free Savings Accounts (TFSAs) held in a customer's accounts at an IIROC Dealer Member covered by CIPF?
Yes. A TFSA account is considered part of a customer's general account for the purposes of CIPF coverage. Therefore, a TFSA will be combined with other general accounts eligible for $1 million coverage."


----------

