Comments on: Location, Location, Location: Where to put portfolio components?

By: Mark in Nepean

Mark in Nepean — Wed, 29 Jul 2009 01:21:02 +0000

DGI – I couldn’t agree with you more…

Dividend paying stocks in an RSP, until no more room; Dividend-paying stocks outside an RSP and re-invest the distributions time and time again…

That’s my plan.

By: Ice cream on a stick

Ice cream on a stick — Sat, 18 Jul 2009 21:50:02 +0000

Now, assuming that all other conditions are equal (say 7% growth for all classes, the same marginal tax rate, the same withholding tax abroad etc.) it would be interesting to rate all the combination of “class x holding”. We have 6 classes x 3 holdings = 18 lines (sorted from best to worst).

I am not sure they can be really compared, but I think this exercise will bring us to understanding of avoiding foreign content all together, regardless of the holding. With the foreign content we pay withholding tax regardless of anything, including further taxation in Canada. Therefore if two stocks, Canadian and International, both produce 7% total growth (all kinds of it: dividends, capital gain etc.), would not you be better with the Canadian one anyway, as the International will be taxed in another country?

By: Intelligent Speculator | Financial Ramblings

Intelligent Speculator | Financial Ramblings — Sat, 18 Jul 2009 11:01:03 +0000

[...] -A good article by Canadian Capitalist about which types of investments should go into which account! [...]

By: Giveaway Announcement- New Blogroll – Weekly Update | Financial Highway

Fri, 17 Jul 2009 09:02:38 +0000

[...] Canadian Capitalist points out how to allocate each asset class between RRSP, TFSA and Non-Registered accounts. [...]

By: Jordan

Jordan — Thu, 16 Jul 2009 00:47:22 +0000

@CC

The way I see it if you’ve got 10+ years it’s worth using, especially an in-trust account since realistically you could use it for anything, even a lump sum mortgage payd own just before the kids turn 18 and take over.

Even if you only plan to make the minimum RESP contribution needed for the match that amount could still be part of the overall allocation which is much more tax efficient then having Bonds, REITs or foreign stocks spilling over into a taxable account.

@ Jon D.

CC wrote up an article about my tip here to keep your kid’s CCTB and UCCB in a separate account:

http://www.canadiancapitalist.com/quick-tip-invest-cctb-or-ucb-payments-in-your-childs-name/

By: Chris B

Chris B — Wed, 15 Jul 2009 20:43:01 +0000

Depending on your province and income, are there not cases where the after-tax value is actually higher due to the dividend tax credit? In such cases, would it not be preferable to hold such investments in a taxable account and save your TFSA and RRSP room for other securities.

By: Kannucker

Kannucker — Wed, 15 Jul 2009 18:23:03 +0000

If you are worried about capital gains on the eventual payouts from your RRSP – buy an annuity rather than a RIFF. You can set up an annuity that pays you in return of capital which is not taxable. Make it joint with your partner. If you outlive the annuity so what. You got the full amount back (less management fees) tax free .
No one has commented on the wonderful world of closed – end investment trusts available here in Canada.
Many of their payouts are in the form of capital gains or return of capital. Many sell at a discount to book value.
There are a couple of web sites that will provide you with listings .
90% of my income is return of captial and not taxable. I have a capital loss pool to offset these payouts when they
are eventually sold. I works for me.
You would not hear this from any of the other contributors to this article – most are financial planners trying to justify their existence and fatten their wallets.
” Don’t be sheep . people hate sheep, people eat sheep.”

By: Dividend Growth Investor

Dividend Growth Investor — Wed, 15 Jul 2009 18:09:19 +0000

Buy any quality dividend stocks you can get your hands on . Then place them in the best tax efficient account for you and dimply reinvest distributions until you need to start making withrawals..

Back to work now

By: Chris

Chris — Wed, 15 Jul 2009 17:39:14 +0000

The message here seems to be that in an ideal world you should hold all investments in a tax sheltered account. Of course, in an ideal world we would have unlimited contribution room in those tax sheltered accounts!

Because I have a pension plan, and only earn a modest income, my RSP space is severely limited. I’d like to see opinions on the best place to hold different asset classes assuming that the tax deferred accounts have limited space.

And here is a big question: Once the tax-deferred accounts are filled, should your asset allocation change? For example, should you increase Can equity to take advantage of the special tax treatment?

@CC, one thing you might do to make the table a little more clear is to include a row at the top to show the meaning of the columns. For example, they could be scored “Best, neutral, worst” or something along those lines. Also, I wonder how useful it is to divide Foreign dividend stocks from non-dividend stocks. For example, all of my US holdings are in an index fund tracking the S&P 500, so I can’t really divide dividend and non-dividend payers into separate accounts.

By: Canadian Capitalist

Canadian Capitalist — Wed, 15 Jul 2009 15:55:38 +0000

@Jordan: I left out education savings intentionally because the time horizon and asset allocation of the account is very different from retirement savings. Also, our retirement savings is the primary goal and while we plan to contribute enough to RESPs to get the max. grant and manage it prudently, that’s all the kids are going to get. The rest they’ll have to make up with co-op terms, part-time work etc.

@badcaleb: It depends. If there is going to be frequent turnover (which is likely with non-dividend paying growth stocks), a RRSP is still likely to be the best location because tax sheltering allows profits to compound over time.

@Henry: Can you pl. elaborate on what’s confusing?