Can you lose all your money in a TFSA? + MORE Feb 3rd

Retailer’s stock jumps after friendly takeover announcement

Lowe’s will pay $24 per share for Rona’s common shares, more than double the stock’s closing on Tuesday

NEW YORK, N.Y. – The stock market has given up an early gain and is trading lower at mid-morning Wednesday as investors give a thumbs-down to a number of corporate earnings reports, including steep cutbacks at Yahoo. Chipotle Mexican Grill also plunged after saying an E. coli outbreak at its restaurants hurt sales more than anticipated.
KEEPING SCORE: The Dow Jones industrial average lost 62 points, or 0.4 per cent, to 16,094 as of 10 a.m. Eastern time. The Standard & Poor’s 500 index gave up 12 points, or 0.7 per cent, to 1,890 and the Nasdaq composite fell 48 points, or 1.1 per cent, to 4,468.
ENERGY RECHARGE: Crude oil prices recovered a little bit of ground after two days of steep losses. New York crude was up 56 cents at $30.44 a barrel while Brent crude, used to price international oils, rose 77 cents to $33.49 a barrel. The pickup in energy prices didn’t give much of a boost to the beaten-down energy sector, however.
EUROPE WANING TOO: Among the economic worries this week, added to the mix Wednesday were renewed fears over the slowdown in Europe…

Q: I never thought of the TFSA as an investment, because I use my RRSP to invest. I use my TFSA as a savings account but does that mean the money isn’t protected? Could I lose all that money?
—Maria Vasilescu, Kitchener, Ont.
A: If you hold cash or GICs in your Tax-Free Savings Account (TFSA), it is covered by the Canada Deposit Insurance Corporation for up to $100,000 in the event that your bank fails. If the money is invested in mutual funds, ETFs or stocks, it is not covered. But that isn’t the risk I would be worrying about. Instead, focus on what types of investments you hold, regardless of whether they are in your TFSA or your RRSP. If the purpose of the TFSA money is to save money, say for a new car or a house down payment, keep it in something really low-risk like GICs or cash. If the purpose is to invest long-term for your retirement, a diversified portfolio will move up and down over time, but it isn’t likely to go to zero. Unless, perhaps, a meteor hits planet earth and then we will all have bigger problems to worry about…

Last January, I overhauled my model portfolios to make them simpler. Some of the older options included small-cap stocks, preferred shares, and real estate investment trusts (REITs), but I switched to recommending a three-ETF portfolio covering only the core asset classes. While many readers welcomed the change, several others criticized the new streamlined portfolios as too simplistic. I still get emails from beginners who want to add more ETFs to my recommended model. Simplicity, it seems, is a hard sell.
In his recent book, A Wealth of Common Sense, asset manager Ben Carlson (who writes an excellent blog with the same title) reveals that he’s made the same discovery: investors resist simplicity. Yet Carlson believes it’s the right solution for most of us. “I’ve spent my entire career working in portfolio management,” he writes. “This experience has taught me that less is always more when making investment decisions. Simplicity trumps complexity. Conventional gives you much better odds than exotic…