Category Archives: Self Directed Investing

Maximize your TFSA First

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I believe most people should completely maximize their TFSA before they contribute to their personal RRSP.

The Exception: Work RRSPs Versus Personal RRSPs

There’s one exception. Some people’s work company pension plan is called a Group RRSP. Rather than having a defined contribution or defined benefit pension plan at work, they contribute money to an RRSP through their employer. The employer may also contribute to this same RRSP. I think employees should contribute to a Group RRSP if that is the only type of pension plan offered at work. In that case, the person should contribute to their work RRSP and then try to maximize their TFSA next, before starting a personal RRSP.

Maximizing a TFSA Doesn’t Require Much Money

As of January 2013, the most a person can contribute to a TFSA if he or she was 18 in 2009 is $25,500. (That does not include re-investing any money withdrawn from the TFSA in previous years.) Younger persons can contribute less.

Personally, I think everyone needs at least $25,000 in savings ready to help with regular living emergencies. If someone loses a job they may need savings to pay the bills until they find new work. Very few people find EI benefits are high enough to maintain their standard of living.

As of February 2014, the maximum a person can contribute if he or she was 18 in 2009 and lived in Canada the whole time since is $31 000. That’s still not much savings.

The savings are also intended to be a personal “reserve fund” for major expenses. For example, most homeowners will  need a new roof every 15-20 years. That means each year they should be saving some of the cost of that new roof. Many people also own cars. That means saving every year to be ready to buy one in 10-15 years when the current car wears out.

While saving for retirement is very important, I think it’s unnecessary to save in an RRSP when there is still room in a TFSA. Both allow investing in everything from cash and GICs, to bonds and bond funds, to shares and stock ETFs.

What Should I Do Once I Have Contributed my Maximum Allowable Amount to my TFSA?

Once a person’s TFSA is fully funded, it’s time to start an RRSP. How? I’ve written a series of posts on where to invest and in what, called Retirement Strategies. I invite you to read those articles and consider my approach.

Until you have more than $25,000 in savings I cannot personally see why you need to have an RRSP. (Disagree? Convince me with a quick comment!)

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Do you agree that people should top up their TFSA before they rev up their RRSP? Please share your experiences with a comment.

How to Sell a Mutual Fund in a BMO InvestorLine Account

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I’m not a big fan of mutual funds but I have a few old ones that I brought into our BMO InvestorLine account while rounding up all the bits and pieces of our RRSPs. This week I sold one of them as it was seriously underperforming although it had done reasonably well over the long term. Here’s how to sell a mutual fund you’ve been holding in a BMO InvestorLine account.

Selling any stock-based mutual fund, especially an index one like this, is a speculative venture.

You don’t know what price you’re selling it at until long after you make the sale. Since the underlying index (or stocks) can go up or down in the hours after the cutoff time, your profit (or loss) can be unexpectedly high or low. I think that’s part of what makes ETFs popular: you know exactly what price you’re agreeing to sell an ETF for before you make the sale.

To Sell an InvestorLine Mutual Fund

To receive today’s price submit the order before 2 p.m. ET.

  1. Sign in to the InvestorLine account that holds the mutual fund.
  2. From the Trading menu, select Mutual Funds.
  3. In the Fund Symbol field, type in the fund’s code.
    For example, type: PHN110
  4. In the Amount area, select
    • All; or
    • type the amount to redeem in dollars or units and select Dollars or Units from the drop-down list.
  5. In the Contact Phone # field, type your phone number.
  6. If desired, click on the Recent Closing Price button.
  7. Click on the Review Order button.

Review the description of your order to ensure it is accurate and complete.If it’s ok:

  1. In the Password field, enter your trading password.
  2. Click on the Submit Order button.
  3. Print or copy and save the Mutual Fund Order Confirmation including the Order Reference Number.

The next business day you will see the order has filled if you check the order status. The cash will not be in your account yet, though, and the mutual fund will still be listed under My Holdings.

The second morning after I made the sale (which was a Saturday morning) the cash was available in my account and the transaction history reported the volume and price of the sale of units. The mutual fund name and price was still reported under My Holdings, but the number of units held was reported as 0. I expect that listing will also be erased on the next business day.

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Did you sell any under-performing mutual funds in your InvestorLine account? Or perhaps sell one to crystallize a fabulous gain? Please share your experiences with a comment.