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"High Interest" rates at discount brokers
February 3, 2015
2:41 am
Loonie
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Those of you who are interested in dealing with discount brokers may find this helpful. It appears to get updated regularly. There is no joy here though.sf-frown
http://www.canadiancapitalist......nt-brokers

February 3, 2015
6:04 am
xxxx
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These HISA accounts at discount brokers are good for parking money temporarily, but not for long term investing. Much better alternatives are available.

February 5, 2015
11:12 am
rhvic
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Considering that RBC Action DIrect currently pays me NOTHING in interest for my cash balances in any of my investment accounts, I plan to look into these. 1.0% is much better than nothing at all.

Alas, given the current volatility of the stock market, I find myself with more cash than usual as I am reluctant to commit to buying shares.

February 7, 2015
9:33 am
xxxx
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rhvic said

Alas, given the current volatility of the stock market, I find myself with more cash than usual as I am reluctant to commit to buying shares.

The correct investing strategy is to do regular monthly investing diversifying in quality stocks over a period of time (not putting all your cash in the market at one time) and you will come out ahead - averaging the ups and downs. I believe the Canadian banks will no doubt do very well in the year ahead and that regular 4% dividend every quarter is not hard to take.

February 9, 2015
10:31 am
Koogie
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Brian said
The correct investing strategy is to do regular monthly investing diversifying in quality stocks over a period of time (not putting all your cash in the market at one time)

"Correct" according to whom ? It certainly would be news to Vanguard:

https://pressroom.vanguard.com/content/nonindexed/7.23.2012_Dollar-cost_Averaging.pdf
"""In this paper, we compare the historical performance of dollar-cost
averaging (DCA) with lump-sum investing (LSI) across three markets:
the United States, the United Kingdom, and Australia. On average, we
find that an LSI approach has outperformed a DCA approach approximately
two-thirds of the time, even when results are adjusted for the higher
volatility of a stock/bond portfolio versus cash investments. This finding
is consistent with the fact that the returns of stocks and bonds exceeded
that of cash over our study period in each of these markets. """

February 9, 2015
2:11 pm
Loonie
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As with everything, I think it depends on your individual situation. There is no one-size-fits-all "correct" answer.

Interesting article from Vanguard. It refers, as does Brian, to the situation where one has a chunk of money available and has the option to put it all in now or dribble it in bit by bit.
The apparent result, according to Vanguard, is that you're usually better off to put it in all at the beginning. This is quite consistent with the oft-stated view that "it's not timing the market, it's time in the market" that counts.

On the other hand, there are situations where this doesn't work to the investor's advantage. The Vanguard research shows that a lump sum investment would bring superior returns about 2/3 of the time. But what about the other third? That is where DCA may have an advantage.

Vanguard allows for this possibility by saying "if the investor is primarily concerned with minimizing downside risk and potential feelings of regret (resulting from lump-sum investing immediately before a market downturn), then DCA may be of use."

It is unfortunate that Vanguard has chosen to cloak regret over lump sum investing which produces negative results in terms of an emotional concern, as if it is somehow a sign of limited intellectual integrity.

In fact, there are many situations when downside risk is a very legitimate concern. In times where markets are unstable, for example, you don't want to hit an upturn to invest all your money. Similarly, charts abound concerning the lifelong effects of buying into a downturn if you have just retired. Retirees, except the very wealthy, have no choice but to be concerned about downturn risk if they are in the markets.

Timing does always make a difference, one way or another. It's a question of what that difference is and how it relates to your circumstances, and how you choose to deal with it.

February 9, 2015
3:33 pm
xxxx
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I agree with Loonie's comments.

I did not mean to convey that DCA was the "only" "correct" approach to investing cash in whatever instruments. It is interesting to note that if you follow the Dow, S&P etc. - even if you had plunked your lump sum cash in the index at the highest level say just before the 2008 crash - you would still be far ahead today - so perhaps Vanguard's study has merit.

Yes, the expression "it's not timing the market, it's time in the market" is oft stated - but I do think that approach has some validity. But if you are age say 75 retired etc. etc. etc. etc. of course NO - "don't plunk all you cash into common equities". Of course there is no "correct" one approach for all. I am comfortable with my approach and it did take a number of years to get it right (for me) - I do believe in having some equities - particularly in these days of 0.50% govt bonds and 2% (and reducing) GICS.

February 10, 2015
10:19 am
Koogie
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Brian said
I did not mean to convey that DCA was the "only" "correct" approach to investing cash in whatever instruments.

Sorry but that is precisely what you stated in your post and I just wanted to make notice that that wasn't the "only" correct choice and in fact current wisdom says it might be the "lesser correct" of the two options.

February 11, 2015
1:01 am
Loonie
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Just so that people don't develop false hope, the ~4% dividends represent an annual total payout, not a quarterly one. I'm sure this is what Brian meant.

February 11, 2015
5:18 am
xxxx
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Obviously 4% per year at current market price!
e.g. BNS common shares
Price per share as per closing yesterday is $65.50
Indicated annual dividend $2.64 (which is paid quarterly i.e. 4 instalments per year which total $2.64)
Dividend yield = 4.03%
Trailing EPS $5.66 (EPS = earnings per share)
Source: Globe and Mail

Trust you find the above clear. But just to confuse you more, Loonie, for those who bought BNS shares a number of years ago at much less than $65.50, with dividends reinvested (or not) plus the capital gains, their return is WAY higher than 4%. Perhaps even 16% or more! sf-smile

February 12, 2015
10:20 am
Bill
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Agree, there is no one "correct" investing approach. Depends on your age too. Dow Jones average peaked in 1929 and didn't get back up to 1929 level until about 25 years later so DJIA index investors (if there had been any) would have netted zero for about 1/3 of their lifetimes. And don't get me started on real estate - a relative's family purchased the family farm in Ontario in the 1880's and the farm was sold for about the same amount in the 1950's (lost 90% of its value in the 1930's). Of course, we're much smarter than previous generations and history is irrelevant so those things can never happen again.............right?

February 12, 2015
2:32 pm
Loonie
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No kidding, Bill.

My family's farm was bought in the 1830s. In the 1950 and 1960s, when I was growing up, the family was STILL complaining about the high price they had had to pay through the Canada Company monopoly, a story that had never been forgotten. I have looked at the records in the provincial archives, and that farm was not paid off until well into the 20th C. Being a pioneer was a financial hardship as well as the problems of getting by on the land. Many people lost their farms in the Depressions of the 1890s and others.

Oh, yeah, we're much smarter now. Take, for instance, 2008, one of our wisest years...
Some people didn't live long enough to see an upside, and some never have anyway. And we're all still paying for this fiasco with bottomed-out interest rates and no end in sight. When in doubt, pass it on down.

I read recently that the British gov't has just refinanced some loans it has had kicking around since the 1700s. I think it's fair to say, after all this time, that they will never pay them off. The Brits are saddled with the interest, forever.
And they say ours is the best of all economic systems.
What a world!

February 14, 2015
9:22 am
Save2Retire@55
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Why the article doesn't mention anything about the best online brokers like Qtrade, Questrade, and even CIBC Investors Edge? The fees on all these three platforms are more reasonable than those mentioned. Also Questrade has no Fees for maintaining all kind of Registered accounts (with no minimum balance).

I am in the process of opening my account with them but so far liked them (except the lengthy process of opening the account).

February 14, 2015
10:14 am
kanaka
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Yas said

Why the article doesn't mention anything about the best online brokers like Qtrade, Questrade, and even CIBC Investors Edge? The fees on all these three platforms are more reasonable than those mentioned. Also Questrade has no Fees for maintaining all kind of Registered accounts (with no minimum balance).

I am in the process of opening my account with them but so far liked them (except the lengthy process of opening the account).

I have iTRADE and I checked for a few of them as per the first article mentioned and found they were listed as "no options" meaning you could not buy. I only have TFSAs with them and I removed all funds from my "non registered cash account" as they have fees. Something to keep in mind when shopping for a discount broker. At this time iTRADE has no fees for a TFSA account other than 24.99 per trade, fee for buying bonds and they also have a list of mutual funds and ETFS with no fees. If they were to invoke fees....would remove/transfer my funds out.

So what I am saying check to see if your discount brokerage offers the HISAs and what annual or quarterly fees does the brokerage charge.

February 14, 2015
1:46 pm
Norman1
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In Scotia iTRADE accounts, one can buy these two:

  1. DYN500: Hollis ISA (Series A)
  2. DYN1300: The Bank of Nova Scotia ISA (Series A)

The current rate sheet for them is at Scotiabank Advisor Deposit Services: Rates.

February 14, 2015
2:20 pm
kanaka
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Norman1 said

In Scotia iTRADE accounts, one can buy these two:

  1. DYN500: Hollis ISA (Series A)
  2. DYN1300: The Bank of Nova Scotia ISA (Series A)

The current rate sheet for them is at Scotiabank Advisor Deposit Services: Rates.

Make sense I guess if you don't want to move funds out of your brokerage. As I believe iTrade has a withdrawal fee. But only 1%?? I also recall when if first set up our TFSA accounts with Itrade we also set up a "non registered" cash account and then they put in either a quarterly or annual fee for the "non registered" account so we moved the few dollars over to our TFSA account. So for me the 1% HISA in my non registered account would be more than lost for the account fee.

February 14, 2015
2:25 pm
Norman1
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Loonie said
...

Interesting article from Vanguard. It refers, as does Brian, to the situation where one has a chunk of money available and has the option to put it all in now or dribble it in bit by bit.
The apparent result, according to Vanguard, is that you're usually better off to put it in all at the beginning. This is quite consistent with the oft-stated view that "it's not timing the market, it's time in the market" that counts.

On the other hand, there are situations where this doesn't work to the investor's advantage. The Vanguard research shows that a lump sum investment would bring superior returns about 2/3 of the time. But what about the other third? That is where DCA may have an advantage.

Vanguard allows for this possibility by saying "if the investor is primarily concerned with minimizing downside risk and potential feelings of regret (resulting from lump-sum investing immediately before a market downturn), then DCA may be of use."

It is unfortunate that Vanguard has chosen to cloak regret over lump sum investing which produces negative results in terms of an emotional concern, as if it is somehow a sign of limited intellectual integrity.

Vanguard's characterization is on the mark. The concern is really just emotional. When one buys a stock, sometimes its value does fall below one's cost afterwards temporarily. That is something stock investors learn to deal with.

What really matters is the value 10 years from now (the time horizon in the Vanguard article) and the dividends along the way.

The emotional ups and downs is one of the challenges of investing in stocks. Everyone understands that one should buy low and sell high to be successful. But, people who actually try to do that find that buying is emotionally harder to do when things look gloomy and prices are low.

In fact, there are many situations when downside risk is a very legitimate concern. In times where markets are unstable, for example, you don't want to hit an upturn to invest all your money. Similarly, charts abound concerning the lifelong effects of buying into a downturn if you have just retired. Retirees, except the very wealthy, have no choice but to be concerned about downturn risk if they are in the markets.

Timing does always make a difference, one way or another. It's a question of what that difference is and how it relates to your circumstances, and how you choose to deal with it.

I've seen those charts. They assume the retiree has been talked into investing the entire nest egg into the stock market and then use a systematic withdrawal plan to do monthly or quarterly payouts to live on. I think that's a really stupid idea driven more by sales commission than good advice.

One should not put money into the market that one can't leave in for years. It would be much better for the retiree to place the money for the next five years of living expenses into a GIC ladder with maturities that match the required monthly or quarterly payouts.

With five years of living expenses covered, the rest can be invested into the stock market. The retiree will have to sell but can sell at opportune times to try to keep five years of payouts in the GIC ladder. But, if markets are bad, the retiree wait a year or two.

February 14, 2015
2:38 pm
Norman1
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kanaka said

Norman1 said

In Scotia iTRADE accounts, one can buy these two:

  1. DYN500: Hollis ISA (Series A)
  2. DYN1300: The Bank of Nova Scotia ISA (Series A)

The current rate sheet for them is at Scotiabank Advisor Deposit Services: Rates.

Make sense I guess if you don't want to move funds out of your brokerage. As I believe iTrade has a withdrawal fee. But only 1%?? I also recall when if first set up our TFSA accounts with Itrade we also set up a "non registered" cash account and then they put in either a quarterly or annual fee for the "non registered" account so we moved the few dollars over to our TFSA account. So for me the 1% HISA in my non registered account would be more than lost for the account fee.

That's correct. Return is only 1% and only makes sense for parking modest amounts of cash in a registered account that are waiting to be invested.

The 1% early redemption fee doesn't apply to Scotiabank group mutual funds and ISA's:

3 Scotia iTRADE will charge an early redemption fee of 1% (minimum of $38.88) to your Scotia iTRADE account on the redemption or switch of all mutual funds, any other fund products and Investment Savings Accounts (other than Scotia Money Market Funds, Dynamic Funds and Scotia Mutual Funds) held for less than 90 days. Early redemption fees may also be charged by some mutual fund companies. Please refer to the prospectus of each fund for details. ....

February 14, 2015
4:05 pm
Norman1
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kanaka said

... I also recall when if first set up our TFSA accounts with Itrade we also set up a "non registered" cash account and then they put in either a quarterly or annual fee for the "non registered" account so we moved the few dollars over to our TFSA account.
....

My impression is that Scotia iTRADE is not very interested in clients with low activity and low assets:

  1. $25 per quarter low-activity fee on each non-registered account of clients with $10,000 or less across all accounts and no commission-generating trades on any accounts during the quarter.
  2. $100 per year on each RRSP/RIF/LIRA/LIF account of clients with $25,000 or less across all their accounts and fewer than 12 commissionable trades per year across all accounts.
February 14, 2015
4:29 pm
Loonie
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In response to Norman1's post #17, I can't bring myself to assume that there is anything magical about a time frame of 10 years. There is no guarantee that things will work out after 10 years.

It always makes me nervous when there are rules of thumb that are invoked as reliable. It's the role of the unanticipated that one has to worry most about. If everything always went according to plan, then it would be a no-brainer.
.

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