U.S. stocks in TFSA
U.S. stocks in RRSP
Canadian stocks in RRSP
A. It’s great to hear we motivated you to start investing, Tawheeda. Stocks are a great way to build wealth for the long term, despite the short-run volatility. Tax plays a role in your portfolio construction and returns, so let me explain the implications.
Tax-free savings accounts (TFSAs) are mostly tax-free. When you buy and sell an investment for a profit, that is tax-free inside a TFSA, regardless of the type of investment.
One exception could be if you are day trading in your TFSA. If you are engaging in frequent trading activity, there is a risk your profits could become taxable as business income. For most long-term, buy-and-hold investors, this is not an issue…
Walter Schultz, who is in his 40s, lives in Kitchener, Ont., and through his employment as a technician at a lab, he has a deferred profit-sharing plan and an employee Registered Retirement Savings Plan (RRSP). For now, at least, he says that’s as much as he’s willing to invest towards his so-called golden years.
“I watched how the markets were tanking last spring and while you want to do the right thing, you don’t want to throw money down a rat hole,” says Schultz of his decision to hold off on individual contributions to his RRSP early in 2020.
On top of the effect COVID-19 was having on the market, he worried about the virus itself. “Without going into detail, I’m classified in the at-risk category when you do the screening for COVID,” he says. “Seeing how the economics of the world was going and as my life could be in jeopardy here, I thought ‘OK, it’s time to suspend putting that little bit extra that was being stashed away and not having access…
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You can compare high-interest rates in the table above or input your estimated account balance to compare the growth between HISAs, tax-free savings accounts, registered retirement savings plans and youth savings accounts…