# Thanks to your feedback... I will invest! How much? Help with important details.



## youtoo (Apr 19, 2011)

In a previous thread, I asked to you guys what to do with my savings (50k in saved over 2 years.) I had two options in my mind (house or investing) and I got overwhelming clear feedback to not to go for a house right now. After that clear response I did my research and I'm relieved I didn't go for a house right now. I'm thankful for the feedback!

I never invested before, and I want to start by following the couch potato model, either using the TD e-series or ING Streetwise.

Here's the setup:

23k in a RRSP in ING
18k in a TFSA in ING
11k in a savings account in ING
I'm 30, so 30 years away from retirement
75k in salary before taxes

Possible goals:

Take a year off to kickstart a personal project (potentially become my own boss) (short-term)
Save for a year off traveling (mid-term)
Save for a house that is <300k, to save 80% of that money (5-10 years) (long-term)

When I started saving, my goal was simply to max out both RRSP and TFSA. *Now I realize that my money in my RRSP is locked away for now*; I don't have access to it in the short-term (unless I wanted to tap on it for a house.)

So I have two important questions at this point:


First of all, *how much of my money (and from which accounts) should I invest.*
Does it make sense at this point to keep maxing out RRSP every year? This is money I won't have access to it until I retire.

This is what I pieced together as a plan with my limited knowledge:

Invest all my RRSP money (23k) in a couch potato portfolio (will be locked away for a looong time)
Invest all my TFSA money in a couch potato portfolio (not to be withdrawn frivolously, but accessible in case of emergency) (max it up to 25k + 5.5k extra every year)
Rest of the money in my emergency savings account, accessible at all times.

Does this distribution sound good to you? *Am I risking to much by investing, potentially, 2/3 of my current savings? In that case, should I invest only my RRSP money?* Sounds a bit like a waste to not to invest the TFSA and don't take advantage of the tax-free profits.

Thanks!


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## doctrine (Sep 30, 2011)

It seems to me like you have the income to max your TFSA in relatively short order as well as invest substantially in your RRSP, so I would do both. Although it's "locked away", you can make yourself a $25k interest free loan paid back over 15 years with the home buyer's plan, and if you did stop working (for whatever reason) or have a few years of low income, then you would really be thankful you had that money. My RRSP and TFSAs are maxed and while I don't need that money now, it provides a lot of security and flexibility.

Try it for a year; if you can catch up on your TFSA and RRSP while maintaining or building your cash savings, you'll be on a very good track. There's no time like the present.


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## youtoo (Apr 19, 2011)

I guess option B is to not to invest at all right now, maybe just do a GIC laddering strategy with some of my savings.


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

Glad to hear you will not be buying a house at the present time.

I like your option B method but does it have to be all or nothing? I would tend to be careful with locking any more money in to your RRSP and continue maxing your TFSA. Use the RRSP for investing (since the money is locked in for a long time anyways) and perhaps use the TFSA for your plan B.

Regardless of which accounts you use to invest, go in slowly, a little at a time. I don't think it's a good idea to start investing everything right off the bat. There is lots to be learned first. Perhaps start with $1500 and see where you are in a year?

Remember not to invest every penny. You should always keep some cash on hand, whether kept in a TFSA, HISA or GIC, to protect you from emergencies.

Above all, don't be in a rush. These are major decisions.


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## smrtalec (Dec 16, 2010)

How I would do it:

Figure out how much I want to keep as cash/cashable GIC for emergency purpose only. Let's say 12K (~6mth expense). That will go in a non-registered account (ie. savings account) or partially in TFSA if it's not maxed out.
How much do I need for a year off to travel? Let's say 25K. If travelling within 3-5 yrs I would not do anything too risky with this money. Perhaps a GIC ladder or HISA. I would put this in the TFSA.
Potential saving goal of 240K for house. Since I won't touch this in long term, I would invest this in a couch potato portfolio in RRSP, until the maximum of 25K, the rest in TFSA/non-registered (in that order). For ~10 yr, I think the default allocation of 60 equity/40 fixed is ok.

If you want to start saving for retirement as well, then continue contributing to RRSP after 25K.

One possibility
12K in cash/cash GIC - non registered account
25K in GIC ladder/HISA - TFSA
13K in couch potato portfolio - RRSP (20 Cad eq/20% US eq/20% Int eq/40% bond or GIC or HISA)

Since you aren't traveling right away, you can adjust the the portion of travel/house fund as needed. Don't have to keep all the travel fund locked away.

My first attempt at "self-directed" investment (ie. not just putting chunk of money in a mutual fund or GIC) was putting 10K in a 25/25/25/25 couch potato (RRSP). It was a good starting point to get my feet wet.


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## youtoo (Apr 19, 2011)

It's been a month or more since my last post, but that's what it took me to do some more research, make some decisions and craft a more detailed plan:

1) RRSP: Open an account in TD Waterhouse for a basic RRSP and move my *25k RRSP there, to invest it Couch Potato-style for retirement.* I still have to find out if I can invest in phases (preferably) or in one chuck, but the point is that I will use my RRSP to invest)

1b) *Put $600/month into the RRSP*, plus tax returns yearly.

2) *TFSA: Put 10K into 5-year GIC laddering.*

2b) Max out my TFSA for a total of 26K by the end of 2014. (10K in GIC, 16K in cash)

3) *Keep around 10K in cash in ISA at all times.*


Does it sound sensible to you?

PS: I've been hesitating between ING streetwise funds (for max convenience) and TD e-series, but I finally decided to go to talk with a TD Waterhouse representative and open an account there, as a stepping stone to learn more about investing in the future (expand to a more complete Couch Potato portfolio)


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## Spudd (Oct 11, 2011)

Sounds like a solid plan. Since you will have fixed income in the form of GIC's, you probably don't want the bond part of the couch potato.


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## youtoo (Apr 19, 2011)

Spudd said:


> Sounds like a solid plan. Since you will have fixed income in the form of GIC's, you probably don't want the bond part of the couch potato.


Thanks. Yes, the whole thing about the bonds… Initially I though I would have 25-30% in bonds in the CP portfolio… but if now I get 10K in GIC outside the RRSP, does that mean that it balances out the overall risk of my full portfolio? Does it mean that my portfolio in my RRSP should be 100% stocks? Sounds scary...


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## Spudd (Oct 11, 2011)

Well, it depends if the money you have in GIC's is intended for retirement or for some nearer goal. If it's for retirement, then it would be about 1/3 of your overall portfolio in fixed income thanks to the GIC's, so you wouldn't need bonds. But if you plan to spend the GIC's on a house or car or something, then don't count it as part of your retirement portfolio. In that case you should have bonds. 

These are all just rules of thumb, you need to do whatever feels comfortable and right for you.


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