Is there a banker in house

[2014sportsterguy]

It's time for some to renew gic, when a gic is linked to the stock market,, should the principal guaranteed clause be in writing somewhere before we sign on dotted line.... Thanks for any help

I know banker says it is, should we see it somewhere in writing, don't mind loosing interest but another story to risk life savings.

[pierrelebel]

I never recommended GIC linked to the market but, if you are interested in such financial instrument, take a look at:

https://www.cibc.com/ca/structured-notes/market-linked-gics.html?WT.mc_id=ExtPAID_campG_E_GIC_MLGIC_...

All banks use similar wording (in writing)

"Market Linked GICs guarantee the repayment of your principal at maturity, in addition to potential interest payment(s) during the term or at maturity "

[2014sportsterguy]

OK thanks

[disisus]

I have a question for you Pierre.

I had stock that was going down so I sold it. They deposited the money into my checking account. This stock was purchased thru the company I work for on payday. For every 3 shares I bought they bought me one. So it's unlikely that I lost money on this since the average stock price for the year was 10% more than I sold it for.

Here's my question:

I see 3 options on what to do with this money.

1. Pay off any debts and then invest the difference either into a TFSA or an RRSP ( yes, I have the RRSP room )

2. Invest the entire amount into an RRSP ( yes, I have the room )

3. Invest the entire amount into a TFSA ( yes, I have the room )

There are various options on both the TFSA and RRSP's. All guaranteed with interest rates depending on the number of months, redeemable and non-redeemable, some pay interest daily, monthly, annually and variable, etc.

If that's not enough info let me know.

[pierrelebel]

A quick answer:

1) Pay off any debts and then invest the difference into a TFSA

Why?

a) Interest paid on debt is not tax deductible. 

b) Income earned in a TFSA is never taxable (*).

Why not use RRSP?  Because when money comes off RRSP - and it must by age 71 - the proceeds will be fully taxable.  Furthermore, those proceeds may affect other income such as OAS.  In addition, we have seen many instances where proceeds from RRSP (either directly or through RRIF) bump the tax rate to the next level.  One can avoid those eventual problems by sticking with TFSA.

(*) there are many forms of investments possible in a TFSA. Many variables that cannot and should not be discussed in an open forum: age, current income, planned retirement income, estate planning, marital status, risk tolerance, etc...

[disisus]

Thank you very much Pierre.

My first instincts were to do exactly what you suggested.

Les

[valve37]

What, you're giving up that 6+% - $1.70 dividend! Trust you've found something better. 

[pierrelebel]

Valve - Ten years ago, MBT was trading at $50, five years ago at $34, today it trades at $27

While the 6.2% (tax advantaged) dividend yield looks good, few people enjoy losing nearly half their capital in ten years on a stock, any stock.  The dividend does not make up for the capital loss.

Speculating in stocks is not for everyone.

[valve37]

You're making a lot of assumptions. I was told some time ago there was a sale at the high. At 1 freebe for every 3  they tend to accunulate over time!

[disisus]

You're right Valve. I did sell at a high of $52. And paid off what was left of our mortgage.

I contribute every payday the maximum allowed. I didn't cancel that so I'm still buying.

But every once in a while I sell. I've done ok so far.

[valve37]

Good stuff Les, did the same thing with BCE, paid off handsomely over the years.