investing for Canadians

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chilagringa
Posts: 335
Joined: Sun Apr 24, 2011 7:19 pm

investing for Canadians

Post by chilagringa »

Trying to get all my ducks in a row before I head abroad again. I have read Andrew Hallam's two books, have done other research, and I think I have decide what sorts stock indexes and bond indexes I would like and in what combination. Now I'm trying to figure out where to put the money. I'm thinking TD Waterhouse, but does anyone have any input? I want somewhere established, that won't cause problems for me as an expat / non-tax resident.
IAMBOG
Posts: 388
Joined: Thu Jul 08, 2010 11:20 pm

Re: investing for Canadians

Post by IAMBOG »

DO you mean a non-resident TD Waterhouse account in Canada, or TD International in Luxembourg? I would be wary of using an account in Canada. It might be tax free now, but who knows what might happen in the future. I would go with TD International http://int.tddirectinvesting.com/ . Buy your funds through the Toronto Stock Exchange. It might be more expensive, but a while back I saw an article, and there is very little between the two in the long run.
chilagringa
Posts: 335
Joined: Sun Apr 24, 2011 7:19 pm

Re: investing for Canadians

Post by chilagringa »

Yeah I looked at the difference between those two. Maybe I haven't become so fully expatified that I'm ready to put all my money in another country. Kind of silly, I guess, considering I'm planning on making the IT thing permanent or at least indefinite. I am planning on going 40% bonds, would that make a difference at all?
IAMBOG
Posts: 388
Joined: Thu Jul 08, 2010 11:20 pm

Re: investing for Canadians

Post by IAMBOG »

You would be buying the same indexes (bonds or stocks, whatever you choose) off the same exchange. The only difference is the broker.
sand_fan
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Joined: Sat Feb 14, 2015 7:17 am

Re: investing for Canadians

Post by sand_fan »

Not necessarily, securities have to registered in a particular country to be sold there. Also be careful following generic, catch all advice and oversimplified asset allocations, authors write stuff to sell books and they don't know your personal situation. For example, did they tell you there is no assurance you will get back what you put Into a bond fund? Even though the fund or ETF consists of bonds, if rates go up, bonds go down in value. Since you don't own any individual bonds and because funds don't typically have maturity dates, you could walk away with less even if the portfolio is rated AAA. If you own individual bonds you don't have that problem because the bond has a maturity date or call date. Don't be cheap, many financial advisors can help you and they actually earn their fees.
IAMBOG
Posts: 388
Joined: Thu Jul 08, 2010 11:20 pm

Re: investing for Canadians

Post by IAMBOG »

I'm pretty sure we are talking about index bond funds, not individual bonds. Of course there are no guarantees. Just make sure your index funds are diversified as much as possible to capture the performance of the whole market. Split your money between bonds and stocks according to your taste for risk. Bonds go down, stocks go up, and vice versa, it helps to smooth out the bumps. Make sure you're not paying more than 0.5% for your funds and preferably closer to 0.2%. It's about keeping it simple, leaving the money for the long term, diversification, and keeping your costs to a minimum.

Very few financial advisors beat the market, and even if they do, they need to beat it by a margin that also covers their fees and the fees of any actively managed ETFs you may have, before it becomes worthwhile. Odds are, that won't happen.
sand_fan
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Joined: Sat Feb 14, 2015 7:17 am

Re: investing for Canadians

Post by sand_fan »

An advisor isn't there to beat the market, he/she is there to help someone reach their goals and good one can keep beginning investors from making naive mistakes. A book dispensing broad notions is dangerous to someones financial health. BTW, bonds and stock do not necessarily act inverse to each other; we are coming out of a long bond bull market (bonds going up) and the consensus is that central banks will tighten (because in most industrial countries rates are pretty close to zero) which will send rates up and bond prices down. We are also in around the 6th year of a stock bull market (stocks going up). What do one size fits all authors recommend in this environment?
IAMBOG
Posts: 388
Joined: Thu Jul 08, 2010 11:20 pm

Re: investing for Canadians

Post by IAMBOG »

What would they recommend? Long term regular savings into low cost well diversified funds, rebalancing once a year back to your original percentage allocation for each index. When you rebalance, you are always selling high and buying low. But most importantly, don't speculate.

Perhaps your advisor is one of the awesome ones in the 1%, but many of the others are leading naïve (usually young) investors into poor quality retirement funds and overpriced mutuals. This seems particularly true at international schools. I have fended off 'advisors' in my last two schools. Both advisors wanted to sell schemes from Friends Provident, Zurich International and others, which have extremely high cost, are inflexible, and difficult to escape from without being fleeced.

As teachers we are, on the whole, intelligent people. I would hope we could educate ourselves enough to take control of our own finances. I wouldn't advise anyone to plan the rest of their financial lives based on one book. But, I would advise people to read books by Burton Malkiel, Charles Ellis, John Bogle and Bill Schultheis (among others). Andrew Hallam is just the latest in a long line of index fund enthusiasts. He just happens to package it in such a way as to make it appealing and readable to international teachers and expats.
chilagringa
Posts: 335
Joined: Sun Apr 24, 2011 7:19 pm

Re: investing for Canadians

Post by chilagringa »

Maybe I should put half of my money where a financial adviser tells me and half in un-managed index funds and I will get back to you guys in 30 years to let you know who was right.
PsyGuy
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Response

Post by PsyGuy »

I also would recommend TD International over an TD account in Canada, it will likely complicate your tax situation with RC.
Bound wouldnt make a difference, you have three asset allocations stocks, bonds, and instruments (currency) the more risk the heavier your allocation into stocks, but stocks have higher returns. Instruments are generally "safe"
Assuming your buying actual bonds it doenst matter where you buy them from, as long as their valid they are going to be registered bonds, it wouldnt matter what exchange you bought them on.
Thee is almost no guarantee you will retain any value in an investment, thats why they are called investments. If you want guarantees put your money into savings instruments and vehicles.

"Helping you reach your goals" is word play for costs and expense. That help has a cost that the help than has to be superior enough to justify its expense.
FAs very rarely beat the market and YES they have to beat the market well enough to cover the expenses and costs. No FAs dont earn their money, there is nothing an FA can tell you that you cant find out yourself doing good research.

I agree with IAMBOG, too many FAs are sales guys trying to sell you on a front load funds with graphs and claims that "they can beat the market", no one can beat the market, and these portfolios have high expenses, and they are difficult to get out of. These products come with commissions to the FAs and they get their fee on the front end so they are paid no matter what happens.

That would be a very expensive experiment.
sand_fan
Posts: 15
Joined: Sat Feb 14, 2015 7:17 am

Re: investing for Canadians

Post by sand_fan »

Is that "instruments" as in a tool?
I think this thread illustrates how a skilled advisor can help an investor - lots of opinions that probably leave the OPs head spinning. Its like the folks who get their investment advice from CNBC, it ends up being noise. I have no idea what kind of advisors call on IS, but in order to make it work, it is likely they are selling insurance or annuity products, thus what is been described as huge back end charges (going from school to school would be expensive and time consuming). A quality advisor probably doesn't spend time prospecting teachers just starting out because they have to get paid by gathering assets (which doesn't always equal getting slammed in to bad products). Of course they would love to hear about the 403(b) you left behind that they hope you would roll over to them.

You can easily get good FREE advice from brokerages such as Charles Schwab or Fidelity (and others) because they are on salary and are able to show a wide range of products that include COMMISSION FREE ETFs and no load funds. If you want to avoid conflicts of interest get a fee only planner who has a fiduciary responsibility to their clients (look for FINRA Series 65 licenses). Series 7 reps only have to apply a test of appropriateness for an investment. A series 6 license holder is likely a load mutual fund peddler and not particularly well trained. If they just have insurance licenses, keep your hands on your wallet and your eyes open. Of course these licenses are for US reps, so it may not be any help for a Canadian. You can get some of the best trained advisors at large wirehouses such as Merrill and Morgan Stanley, but it is hard to get their attention with less than $250k. A way to backdoor your way in is to call a local branch manager and ask for a referral to a "rookie." Generally, they are hungry and need assets and may spend a surprising amount of time with you since they are building their client base and would love some referrals. Another good place to look is Edward Jones branches (I think they are in Canada, too) - they are very hands on and EJ is one of the most ethical firms you will find anywhere and they thrive on smaller accounts for people that want a "high touch" relationship (yes, they charge commissions). In short there is nothing sinister about someone earning a living providing quality financial advice and the points made in previous posts that were coherent do bring up some issues that do taint the industry.

Bottom line is conflicts of interest are all over the financial services business including advice dispensing authors who also have advisory businesses or get paid for speaking engagements.

Also, don't be afraid to spend $200 or so for a little time with someone qualified to give you advice on your tax situation. In the US that would be a CPA or EA and I would look for a similar designation in CA. If Tax Canada is like the IRS, you are largely on your own to figure it out until they let you know you did it wrong and commence to ruining your life. Financial advisors can't give tax advice (nor forum users). Everyones situation is too different and there are far too many variables.

There are plenty of ways to get where you want to go without getting fleeced.
PsyGuy
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Joined: Wed Oct 12, 2011 9:51 am
Location: Northern Europe

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Post by PsyGuy »

o its instrument as in a non-negotiable instrument like a COD 9Certificate of Deposit) very safe, federally guaranteed, you wont lose your money.

Its actually not expensive promoting and selling their products. The firms hire locals, send them through an online training, give them a power point and much like a . rep, doesnt need to understand the medicine very much, they push their product. Its very inexpensive for them.

Much of your licensing advice while appropriate from a US or Western perspective doesnt mean anything overseas. Its not hard for an English speaking foreigner to solicit clients with no licensing or training or anything. They just need some business cards and some nice space, (you can rent a part time "shared" office in Tokyo for 6000¥ a month, and do all the investments though an online brokerage in a lot of poorly regulated countries.

Yes there is something "sinister" as you put it, your giving advice without guarantee, warranty, etc. Doctors have malpractice insurance, teachers have liability insurance, and while advisers can have insurance through their firm, you arent going to get anything just because an investment didnt perform despite what an adviser said.

Yeah WAY too many conflicts of interest. Collateralized Debt Obligations were a HORRIBLE conflict of interest, or whatever investor trade talk is for "cash scam".

I would advise NOT spending $200 for a "little bit of time" witha tax adviser, ITs generally have it easy (sorry Canada). You certainly dont need to pay anyone anything, much less $200 to read the couple of pages it takes to apply for the foreign tax credit.
IAMBOG
Posts: 388
Joined: Thu Jul 08, 2010 11:20 pm

Re: investing for Canadians

Post by IAMBOG »

The point of investing is to get maximum profit with the minimum possible risk. I can achieve maximum profit by keeping my fees to a minimum, by paying less than 0.5% for index funds. I can minimize risk by diversifying across markets. I have shares (through index fund) in 2000 plus companies.

It is an advisor's job to at least keep up with the market they are investing in, in fact he has to beat that market year after year to cover his fee (salaried or not). If they can't do that, what is the point? The amount of advisors who consistently beat the market for, lets say, a period of 20 year is in the 1% range. So, picking an advisor becomes a 1 to 100 shot. Let's be generous and say it's 5%, so in becomes a 1 in 20 shot. It's a gamble, and I don't like ..

Charles Schwab and Fidelity don't offer free advice for nothing, they are peddling products. You may be able to resist the temptation to buy after your 'consultation', but many can't. Managed mutual funds are never free. Somebody has to pay for salaries for the management and the swanky offices in London / Tokyo / New York, and that person is you. The vast majority of advisors will not suggest index funds, because there in no money in it for them. And once again, if it managed, it someone with a crystal ball trying to predict the future.

So, compare this to a couch potato index fund portfolio. Let's say you start with 30% in a broad US index fund, 30% in a worldwide index fund and 40% in a bond fund (all charging less than 0.5%). You make the commitment to rebalance to this percentage at the end of each year (it doesn't matter when, just pick a random date). At the end of the year your US fund is 35%, your worldwide fund is 40% and your bonds are down to 25%. Preferably you would pump new savings in the bonds and US funds in order to bring back your original 30/30/40 balance. If you can't, you might sell some of the worldwide fund or maybe US to pour into the bond fund. No speculation involved, just sell the stuff that's gone up (sell high) to pay more money into the stuff that went down (buy low).

All investments have risks, just keep them to a minimum.
PsyGuy
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Joined: Wed Oct 12, 2011 9:51 am
Location: Northern Europe

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Post by PsyGuy »

I concur, advisers arent friends and they arent doctors are lawyers they are professionals whose job is to maximize your return on investment, and that investment includes their fees. If they cant perform better than than costs plus fees, then your investor is costing you money not making you money.
notyouraverageturd
Posts: 10
Joined: Sat Feb 21, 2015 8:36 pm

Re: investing for Canadians

Post by notyouraverageturd »

You can have a tax-free savings account as a non-resident in Canada, so long as you opened it before you became a non-resident. Don't know if this helps you or not, it was important for me!
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