# Need advice on cash preservation+near term house purchase investing strategy.



## Jorob199r (Sep 4, 2014)

Hi, I'm a 31 year old govt lawyer. My spouse and I are currently renting and looking to buy in 2016-2017 (when the new inner city community by an lrt station nearby is developed.) I currently have 270k in cash, 87k in RRSP, 44k in non registered, and 34k in a TFSA. I make 5.5k a month net,(whoops, I originally put 11k) after my work pension, cpp etc contributions. My spouse makes the same as me, but I'm leaving her income out of this discussion for the time being.

I don't want to miss out in this bull market, but I don't want to be greedy either. I'd like to pay cash for the planned 400-425kish house.

My RRSP account is purely a long term play. Mawer canadian equity and Mawer global small cap. See ya in 35-40 years.

I'd empty the other accounts to help pay for the house.

I'm currently thinking about putting the majority in ph&n bond D. It's a morningstar 5 star rated, recent award winner and pretty safe.

I'd also put about 25% in steadyhand income fund and mawer tax effective. They are both pretty conservative (especially steadyhand) with a bit of upside.

I'm a big fan of low fees. These funds all have low MERs. Does anyone have any advice for me? Am I crazy? Should I be shooting for a funds with higher upside? I have no interest in ETFs.

Thanks very much for any replies.


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## Janus (Oct 23, 2013)

I'm a equities guy, but yeah if you need the money for a house in a couple of years stay the heck away from the asset class. If you're not touching the RRSP keep it in equities, but the rest should be in relatively short term interest bearing instruments.


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## My Own Advisor (Sep 24, 2012)

Congrats on the great job.

Paying cash for your house is huge. 

I like the idea of the RRSP as a long-term plan, it should be, it's a registered retirement account 

Mawer have great products. If you want an "all-in-one" (b/c you don't want to deal with ETFs), then this one is as good as any:
http://www.mawer.com/mutual-funds/fund-profiles/mawer-balanced-fund/

Top Holdings



% Share

Mawer Canadian Bond Fund Series = 30.8%
Mawer U.S. Equity Fund Series = 21.3%
Mawer International Equity Fund Series = 16.4%
Mawer Canadian Equity Fund Series = 13.2%

If you want lower fees for a lazy portfolio, I think you're going to need to go with ETFs.

You are not crazy. 

Based on your great income, if you invest a few $k per month, have no mortgage and live modestly, you could be "retired" or at least work whenever you want in about 15 years. That's very good. 

Well done to date and good luck!


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

Interesting. Paying cash for a house is a great idea.

I am just curious, why are you interested in these funds but not ETFs? 

2-3 years is not a long horizon. Some might recommend not to invest the money in the markets at all, if you need it for a house.


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## Oldroe (Sep 18, 2009)

I think the only thing you need to do is sort out what you want in a house.

And get looking. If you find it scrap that cash idea and buy.


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## Jorob199r (Sep 4, 2014)

I understand that holding bonds in a non registered account is generally a bad idea, tax wise. Does that mean steadyhand income fund in a non registered account would be a bad move? I understand the bond class makes a difference. I mostly hold mawer tax effective there. I'd like to be cautious.


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## james4beach (Nov 15, 2012)

Money you put into stocks (including equity mutual funds) must be left alone for well over 10 years to have a strong expectation of positive returns. Your time horizon is simply unsuitable for stock investment, and I don't think any of the funds you mentioned are suitable for your plans. Time horizon mis-match.

Any amounts you want to use towards the house, approx 1-2 years away, should be kept in only the following things: savings accounts, 1 year GIC, or short-term bond fund.

Most bond funds are unsuitable as their average maturities are more like 10 years out, which makes them mis-matched to your time horizon. The only bond funds that are suitable are those with short maturities ("short term bonds"). Additionally, at current market interest rates, the short-term bond funds yield less than the GICs and even cash. So really the only sensible places to put the money are *high-interest savings accounts and 1 year GICs*.

Current rates are 1.55% for 1 year CDIC-insured GIC (Royal Bank, available through discount brokerage like TDDI) or at a credit union like Outlook Financial, it's 2.20% for 1 year non-CDIC GIC. If I was in your situation, I would probably divide the cash among:
- Outlook Financial cashable 1 year GIC @ 2.2%
- Some CDIC insured/big bank savings account (e.g. PC Financial = CIBC deposit) @ 1.3%

This gives you better yield than a short-term bond fund. Remember to keep your deposits under the CDIC limits, and diversify your money among institutions.


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## gardner (Feb 13, 2014)

HT/Oaken is still paying 2.4% for 1 year and 2.5 for 18 months. Not cashable.

The story on bonds in non-registered accounts is laid out here:
http://canadiancouchpotato.com/2013/03/06/why-gics-beat-bond-etfs-in-taxable-accounts/


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## Underworld (Aug 26, 2009)

I'm in a similar situation - saving for a rental property. We are a few months away from being ready. We just threw our money into a 1.25% TD product.

Just to play devils advocate - inflation somewhat erodes the cost of borrowing. Say for example in a fictitious and extreme inflation situation (but it helps elaborate my point), you take out a 100,000 mortgage and due to inflation the purchasing power of 100,000 buys you a bar of chocolate in 10 years time. Basically debt gets cheaper with inflation.

Mortgage rates are really really low right now. An alternative is to use the money to make more investments


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## lonewolf (Jun 12, 2012)

Jorob199r said:


> Hi, I'm a 31 year old govt lawyer. My spouse and I are currently renting and looking to buy in 2016-2017 (when the new inner city community by an lrt station nearby is developed.) I currently have 270k in cash, 87k in RRSP, 44k in non registered, and 34k in a TFSA.
> 
> .


Jorob

Unbelievable your going to make out like a bandit, Just make sure you wait to the second half of 2016 to give the deflationary crash enough time to drop those housing prices. Incase I don't get back to this thread in a few years I will tell you now job well done


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## RBull (Jan 20, 2013)

Congratulations on an impressive financial picture at such a young age. 

I like MOA's suggestion with Mawer if you're not interested in ETF's. With your government pension, debt avoidance, obvious savings penchant you're going to be set very well in the future.


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## Pluto (Sep 12, 2013)

I agree with Janus: stay away from stocks. 

You are feeling like you don't want to miss out on this bull market, but the Bull is aging and over valued. the Witch of Wall Street has a way of enticing people into stocks at the worst time. 

given your house purchase plans, and preservation of capital idea, put your money in short term bonds.


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