The Millennial Optimist

Investing for Beginners – TFSA Accounts As a Canadian, there are many tax-exempt ways to begin investing like opening a TFSA account. Before we delve into the benefits of the TFSA, for those who live in the US, the TFSA is very similar to the Roth IRA as they are both Tax-Free accounts that allow you to accrue wealth without having to pay the government a cut of your profits through tax. You can also open a TFSA at any financial institution and you are now able to open an account online without ever needing to set foot in a bank. The TFSA (Tax-Free Savings Account) was created by the Canadian government in 2009 as a tax-exempt registered account that offered Canadians a special tax benefit on any money that was held in the account. Within your TFSA, you are allowed to hold anything – cash, GICs, mutual funds, ETFs, stocks and bonds – and any income that you earn from your investments are tax-free even if you withdraw the money. What this means is that the earnings (through capita...

Investing for Beginners – RESP Accounts Surprisingly enough, there are actually many ways to invest in Canada without needing to pay taxes on any capital gains or dividends that you may receive from your investments. Currently, there are three types of tax-sheltered investment accounts: RESPs (Registered Education Savings Plan), TFSAs (Tax-Free Savings Account) and RRSPs (Registered Retirement Savings Plan). We will begin with the RESP account and will explain both the TFSA and the RRSP in a separate blog post. The first thing we need to understand is that not all countries currently have what is referred to as an RESP account like Canada does so please check if you have a similar tax-sheltered investment account in your country or if you have the potential to open up a similarly-structure account. What is an RESP? Many years ago, the Canadian government was looking for a way to help Canadians invest more money for their children’s future and help educate the next generation. Alt...

Investing for Beginners – Mutual Funds The easiest way to think about investing in mutual funds is like purchasing a more expensive but actively managed Exchange-Traded Fund (ETF) with the hopes that the individual or team managing the fund will outperform the market and you will get a higher than expected return on your money. A mutual fund, similar to an ETF, is essentially a large pool of stocks and bonds that are grouped together in a single investment portfolio where – rather than purchasing each investment separately – you can purchase a share in the specific mutual fund and have the benefit of owning a small portion of all of the stocks and bonds currently held. By investing in a mutual fund, you receive your return when the stocks and/or bonds within your mutual fund generate dividends/interest payments and when the mutual fund sells an asset for a gain – meaning that it was purchased for less than it was sold - which creates a capital gain distribution from the fund to you...

Investing for Beginners – Exchange-Traded Funds (ETFs) Are you having trouble trying to pick a specific stock or bond that you think will do well in the future and provide a good return on your money? Are you finding it difficult to try and figure out if you will invest in healthcare or energy? These are all reasonable questions to be asking yourself! I understand how you are feeling, there are a lot of options to pick from and although some will provide a substantial benefit to your portfolio, others will bring it crashing down. So how do you pick the right one? Well, I have a solution for you! You don’t actually need to pick the “right” one, you can actually pick them all! An Exchange-Traded Fund (ETF) is an investment fund that gives you the opportunity to purchase a large pool of individual stocks and/or bonds in a single purchase. This means that you can purchase a single ETF and you can buy 1000’s of stocks without having to worry about picking the perfect one and reducing th...