ReportWire

Tag: invest

  • How often should you rebalance?

    [ad_1]

    But markets do not stand still. Over time, some asset classes outperform while others lag. Stocks may surge ahead during a bull market. Bonds may stabilize the portfolio during downturns. As those returns compound at different rates, the asset mix begins to drift from your original allocations. 

    An 80% equity portfolio can quietly become 85% or 90% equities after a strong rally. A rough year for stocks can tilt you further into fixed income than you intended. Performance swings, good or bad, can push your portfolio away from the risk profile you originally chose. 

    At some point, the mix no longer reflects your original plan. So, should you step in and rebalance?

    You might look to large ETF providers for guidance. The answers are not always clear. The Vanguard Growth ETF Portfolio (VGRO), for example, states that its 80% stock and 20% bond portfolio may be rebalanced at the discretion of the sub-advisor. That leaves plenty of room for interpretation.

    Others are more prescriptive. The Hamilton Enhanced Mixed Asset ETF (MIX) uses 1.25x leverage on a 60% S&P 500, 20% Treasury, and 20% gold allocation. Hamilton specifies that it rebalances automatically if weights drift 2% from their targets. That is a tight band and implies frequent turnover.

    But you are not running a fund with institutional constraints or leverage targets. You are managing your own portfolio. For most DIY investors, a simpler approach works better. Rather than reacting to every small market move, sticking to a consistent, time-based rebalancing schedule can reduce complexity and prevent decision fatigue. 

    In today’s column, we will look at why you should rebalance, how different time-based approaches have historically behaved, and why consistency often matters more than perfect timing.

    Why rebalance your portfolio at all?

    Rebalancing is the process of selling assets that have grown beyond their target weight and buying those that have fallen below it, such that you restore your portfolio to its intended allocation.

    Article Continues Below Advertisement


    When you combine assets that are not perfectly correlated and periodically rebalance them back to target weights, you create what is referred to as a rebalancing premium. The underlying explanation has to do with how returns compound. 

    The arithmetic return is the simple average of yearly or periodic returns. It treats each period independently. The geometric return is the compounded growth rate of your money over time. It shows what you actually earn after gains and losses build on each other.

    The arithmetic average of returns does not reflect the true investor experience. Investors live with the geometric return, which accounts for the effects of compounding and the impact of volatility. 

    Large swings in portfolio value widen the gap between arithmetic and geometric returns. By blending assets with different correlations and rebalancing them, overall volatility can be reduced. That narrows that gap and improves the compounding outcome. A simple back test illustrates this effect. 

    Source: testfolio.io

    From April 2007 through February 2026, U.S. stocks returned 10.5% annualized. U.S. bonds returned 3.16% annualized. If you simply averaged those two numbers, you get 6.83%.

    Now consider a portfolio that held 50% U.S. stocks and 50% U.S. bonds and rebalanced once per year. That portfolio returned 7.25% annualized over the same period. The difference between 7.25% and 6.83% of 0.42% per year reflects the benefit of combining and rebalancing the two asset classes rather than simply averaging their stand-alone returns.

    The improvement also shows up in risk-adjusted terms. The all-stock portfolio delivered a Sharpe ratio of 0.53. Bonds delivered 0.35. The 50-50 portfolio, rebalanced annually, achieved a Sharpe ratio of 0.62. Even though its raw return was lower than 100% stocks, it generated more return per unit of risk taken.

    [ad_2]

    Tony Dong, MSc, CETF

    Source link

  • What happens when you inherit an IRA or 401(k)?

    [ad_1]

    Spousal beneficiary

    When a spouse inherits an IRA or 401(k), they can take over the account as an inherited account or transfer the account into their own IRA or 401(k) on a tax-deferred basis. 

    IRA and 401(k) accounts generally have required minimum distributions (RMDs) beginning at age 73. These are subject to US withholding tax for a Canadian resident, and Canada taxes the withdrawal with a credit for the US tax already withheld. 

    A US citizen living in Canada must report their worldwide income on both a Canadian and US tax return. 

    Non-spouse beneficiary

    When a non-spouse beneficiary inherits, the account value is not subject to immediate tax. This differs from the taxation of an RRSP, DC pension, or other Canadian retirement accounts for non-spouse beneficiaries. These Canadian retirement accounts are generally fully taxable to the estate of the deceased. 

    Instead, taxes are payable on subsequent withdrawals from the inherited IRA or 401(k). This can provide an opportunity for tax deferral, as well as a potential decrease in the tax rate payable. A deceased Canadian taxpayer with a high income in the year of death may pay over 50% tax on their tax deferred retirement accounts. A non-spouse beneficiary with a low or moderate income may pay a significantly lower rate of tax. 

    There is a 10-year rule that allows withdrawals to be taken over up to 10 years following the account holder’s death. In the meantime, the account remains tax deferred in the US and Canada. 

    US withholding tax

    Withholding tax on US retirement account distributions to non-residents is typically 30%; however, a Canadian beneficiary can submit Form W-8BEN – Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding to the financial institution. This will allow them to withhold the lower 15% rate. 

    This is important because Canada will only allow a foreign tax credit for the 15% treaty rate. If a higher rate is withheld, a beneficiary may need to file a US tax return to get a refund from the Internal Revenue Service. 

    Article Continues Below Advertisement


    Inherited Roth IRAs

    A Roth IRA is like a Canadian tax-free savings account (TFSA). A spouse beneficiary can take over the account or transfer it to their own Roth IRA.

    Roth IRAs are generally tax-free in the US and can also have tax-free status in Canada; however, an account holder must file an election with the Canada Revenue Agency (CRA) to maintain the tax-free Canadian status and ensure no new contributions are made. 

    A non-spouse inheriting has the same CRA election requirement, but has a different tax-free status opportunity. There is a 10-year rule for non-spouse beneficiaries, allowing only a limited tax-free growth period. 

    Roth IRA withdrawals are tax-free in the US and Canada. 

    Exceptions

    Disabled or chronically ill non-spouse beneficiaries may be exempt from the 10-year rule.

    The 10-year clock does not start ticking for minor beneficiaries until they attain the age of majority. 

    Summary

    IRA and 401(k) accounts work a little differently from Canadian RRSP, DC pension, and TFSA accounts on death. These US counterparts offer more favourable tax reduction opportunities.

    If you expect to leave a US account as an inheritance, or you are inheriting one of these accounts, it is important to understand the rules. They may impact how you draw down your assets in retirement and how you structure your estate.

    [ad_2]

    Jason Heath, CFP

    Source link

  • Old-school financial advice that no longer applies

    [ad_1]

    As younger Canadians continue to face high housing costs, slowing wage growth and other challenges, age-old financial adages have become outdated, forcing a rethink of what smart money management looks like today. Here are some common rules of thumb for money management that financial advisers say need re-examining.

    Housing should only take up a third of your budget

    “If you’re trying to stick to this rule, you can only afford to buy a home that’s $500,000, which is well below the average across the country, and it doesn’t go very far in most major cities,” said Jason Nicola, certified financial planner at Vancouver-based Nicola Wealth. He cites research that shows just how much things have changed from previous generations.

    The home price-to-income ratio has steadily grown over the past several decades. Data shows that in the early 1980s, the home price-to-income ratio was about two to three. Now, the ratio sits closer to six or seven.  

    The home affordability challenge remains even after accounting for today’s lower interest rates. With mortgage rates of about 4.5% today, a young couple with $100,000 in gross income would have to spend at least 45% of their after-tax income just to cover monthly mortgage payments, let alone pay for property taxes, insurance, and maintenance, said Nicola.

    Though he doesn’t recommend it, he said it’s not uncommon to see some households spend up to 50% of their monthly income on housing costs. “I think it’s just the uncomfortable reality for a lot of people,” he said.

    Savings will grow with the power of compound interest

    Setting cash aside in a savings account may have benefited significantly from compound interest in the ’80s when rates ranged between 10% and 15%. But with “high-interest” savings accounts currently typically offering rates of 2% to 4%, experts say money should be invested rather than left sitting as cash.

    “Perhaps interest rates, the amount that you could receive has changed, but the power of compounding has not changed,” said Aldo Lopez-Gil, a financial adviser at Edward Jones based in Toronto.  He explains that given lower interest rates today, compounding growth is best seen in other savings vehicles like the tax-free savings account or first home savings account.

    Compare the best TFSA rates in Canada

    “I think there’s a gap in terms of education and understanding as to what investments can be put into a TFSA,” said Lopez-Gil. “In my experience, it’s a completely underutilized account by Canadians.”

    Article Continues Below Advertisement


    Nicola agreed that there is still power in the compounding of returns over time, even though interest rates are lower now. That’s why he discourages keeping a three- to six-month emergency fund in a traditional savings account. 

    “Sure, it’s a great idea and it’s a really nice thing to have that gives you comfort. I just don’t think it’s a hard and fast rule,” he said. “[Very few] of my clients are going to have six months of spending just sitting in cash not earning any interest.”

    Start saving early for retirement

    While previous generations focused on paying down debt as quickly as possible and saving what remained, this approach may be unnecessary for young Canadians today.

    “People early in their careers are often in lower tax brackets, so an RRSP might not make much sense,” said Ainsley Mackie, portfolio manager with Verecan Capital Management. “Not all debt is bad debt. It doesn’t have to be rushed to pay it off,” she said. In fact, Mackie advised that having some debt and making regular payments will help build credit, a “super important goal” if you’re going to apply for a mortgage later.

    Invest your money or pay off debt?

    A comprehensive guide for Canadians

    She cautions against high-interest loans for recreational items like ATVs and snowmobiles—common “toys” in her town of Nelson, B.C., where rates on such loans can hover around 21%.

    Lopez-Gil thinks the current widespread perception of how much we need in retirement is overly emphasized. “I don’t think there’s a universal withdrawal rate that everybody could use,” he said. “The 4% rule has been talked about for decades [but] it does vary by person and their desired lifestyle.”

    Instead, he suggests young Canadians invest in themselves and their future earnings. “RESPs used to be a bit more restricted in terms of what you can use it for, but that has started to really open up,” he said.

    This advice comes as career paths for young Canadians look very different than they did for previous generations. 

    [ad_2]

    The Canadian Press

    Source link

  • Guaranteed returns: Achieva GICs, a hidden gem of RRSP season – MoneySense

    [ad_1]

    That’s where guaranteed investment certificates (GICs) can quietly shine. When used strategically, GICs can provide balance, certainty, and tax efficiency within an RRSP. And when those RRSP GICs come from a credit-union-backed financial institution offering highly competitive rates, like Achieva Financial, they can be a key building block in your retirement strategy instead of just a supporting piece. RRSP GICs offer a way to reduce your taxes today while adding predictability to your long-term retirement plan.

    Maximize your investment mix, balance your risk.

    Discussions about investing often focus on maximizing returns. Mutual funds and exchange-traded funds (ETFs) naturally dominate, especially earlier in an investor’s journey. But while higher-risk growth assets are important, relying on them too heavily can expose your portfolio to more volatility than you might be comfortable with.

    Investor behaviour reflects this tendency. A Fair Canada Investor Survey found that more than 80% of investors purchase higher-risk investments like mutual funds and ETFs, but far fewer (only 31%) look to low-risk options like GICs. In other words, many Canadians prioritize growth potential, even when it comes with greater volatility.

    What is often missed is the value of certainty. Guaranteed returns can provide stability, predictability, and peace of mind—and this matters when you need to protect your capital.

    How GICs add stability and predictability

    A GIC is a low-risk investment that offers a fixed rate of return over a set period of time. GICs are available from banks, trust companies, and credit unions, including online divisions like Achieva Financial, including credit unions and their online divisions, like Achieva Financial, which is part of Manitoba-based Cambrian Credit Union. 

    Unlike market-based investments such as ETFs and mutual funds, GICs protect your principal while delivering a guaranteed return. This makes them especially good options for RRSP investors who value stability alongside growth. Achieva Financial offers among the highest GIC rates in Canada, including a 2-year RRSP GIC currently paying 3.80%, allowing investors to lock in returns with confidence. All deposits are guaranteed without limit by the Deposit Guarantee Corporation of Manitoba.

    GICs are typically available with terms ranging from one to five years. While longer terms often offer higher rates, this offers a good opportunity to strategically “ladder” GICs. When you spread your RRSP GICs across different terms, some of your savings mature each year. This gives you steady access to your money, helps you adjust to changing interest rates, and makes retirement income planning more predictable.

    What to look for in an RRSP GIC during contribution season

    If you’re considering RRSP GICs ahead of the March 2, 2026 contribution deadline, a few key factors can help guide your decision:

    Article Continues Below Advertisement


    • Term selection and laddering: Rather than choosing a single term, consider building a GIC ladder with staggered maturities. Achieva Financial’s range of RRSP GIC terms makes it easier to align guaranteed investments with your retirement timeline while maintaining flexibility.
    • Competitive fixed rates: Fixed-rate RRSP GICs provide predictability, which is important when planning for retirement. Achieva’s RRSP GICs offer competitive rates, including a 2-year term at 3.80%, helping investors balance certainty with strong returns.
    • Deposit protection: Protection matters, especially for guaranteed investments. As part of Manitoba’s credit union system, Achieva Financial deposits are guaranteed without limit by the Deposit Guarantee Corporation of Manitoba.

    Once GICs are part of your RRSP, their role will naturally evolve over time.

    Early in your career, when retirement is still years (or decades) away, your portfolio may lean heavily into mutual funds or ETFs with a smaller allocation to GICs. That said, GICs can still play an important role for younger investors with a lower risk tolerance, whether due to discomfort with market volatility or a shorter-term goal like saving for a first home. As retirement approaches, you may want to gradually shift towards investments with guaranteed returns that reduce volatility and protect the savings you’ve accumulated.

    This gradual transition can help preserve the progress you’ve made, without removing growth from the equation. 

    The bottom line

    GICs aren’t just a conservative choice, they’re a strategic one. Within an RRSP, they combine tax efficiency with guaranteed rate of return, making them particularly valuable as retirement gets closer and priorities begin to shift. They can also make sense earlier on, particularly for younger investors who prefer certainty over volatility or are working toward shorter-term goals within their registered plan. 

    With competitive rates like Achieva Financial’s 2-year RRSP GIC at 3.80%, term options suited to laddering, and deposits guaranteed without limit by the Deposit Guarantee Corporation of Manitoba, Achieva’s RRSP GICs help create a steady, worry-free approach to planning for retirement. Combining GICs with higher-risk investments is a common way to build a balanced portfolio that will serve you through your golden years.

    As the March 2 RRSP deadline approaches, this may be the ideal time to revisit how Achieva RRSP GICs can fit into your long-term plan—and whether your RRSP asset mix could benefit from more certainty.

    Get free MoneySense financial tips, news & advice in your inbox.

    Read more about investing:



    About Jessica Gibson


    About Jessica Gibson

    Jessica Gibson is a personal finance writer with over a decade of experience in online publishing. She enjoys helping readers make informed decisions about credit cards, insurance, and debt management.

    [ad_2]

    Jessica Gibson

    Source link

  • Gen Z Canadians face job losses—but time is on their side – MoneySense

    [ad_1]

    Young people face many of the same job challenges as older workers, plus some extra ones, like limited work experience. Still, they have one major advantage: time. Younger people have more years to save and invest. If you’re Gen Z and trying to improve your financial future in a shaky economy, starting now can make a big difference. 

    Economic outlook for Gen Z Canadians

    Gen Z includes people born between 1997 and 2012, which closely matches the 15–24 age group used by Statistics Canada. Here’s a snapshot of their financial situation.

    High cost of living

    Rising prices affect everyone. Inflation, high rent costs, and expensive groceries are putting pressure on young Canadians, just like older ones.

    Unemployment

    More than 50,000 young people claimed EI in one year alone. This number doesn’t include gig workers, contractors, part-time workers, or others who don’t qualify for EI. That means the real number of unemployed young people is likely higher.

    Employment

    Even those who are working are struggling. Many hold two or more jobs to keep up with costs. A KOHO survey found that Gen Z’s average monthly income is just $1,083. Nearly half (49%) expect to take on more work in the next year, and 70% say they feel financially unstable or only somewhat stable.

    Debt

    Younger Canadians generally have less debt than older groups, but the average is still close to $8,500 per person. That’s an increase of 3.84% from the year before, according to Equifax.

    Savings and investments

    Gen Z doesn’t have much left over to save. The KOHO study found that end-of-month balances averaged just $9 to $16. Still, savings among this group grew by 23% year over year. That effort to save and invest, even with tight finances, is a positive sign for the future.

    Gen Z’s long time horizon

    When it comes to saving and investing, how long your money stays invested matters just as much as how much you put in. The longer your money sits in an account or investment, the more interest it can earn. This is called a time horizon.

    Article Continues Below Advertisement


    The magic of compound interest

    Compound interest means earning interest on both your original money and the interest it has already earned. For example, here’s what happens if you invest $100 at a 2% interest rate:

    Starting amount Interest earned Ending amount
    Month 1 $100 $2 $102
    Month 2 $102 $2.04 $104.04
    Month 3 $104.04 $2.08 $106.12
    Month 4 $106.12 $2.12 $108.24
    Month 5 $108.24 $2.16 $110.40

    Savings accounts and GICs are examples of investments that earn compound interest. 

    Stock market fluctuations

    Stocks work differently because their value goes up and down. They’re riskier, but they can also offer higher returns. Having a long time horizon gives your investments more time to recover after market drops.

    Tools for young Canadian investors and savers

    Most people benefit from having different types of savings and investments for different goals. Here are some common options for young Canadians.

    Unregistered accounts: HISAs and GICs

    Unregistered accounts don’t have limits on deposits or withdrawals. They work like regular savings or chequing accounts.

    A high-interest savings account (HISA) is good for emergency savings because you can access your money anytime. A guaranteed investment certificate (GIC) locks your money in for a set period, which can work well for medium-term goals.

    These options are low risk because they guarantee your original money plus interest. The downside is lower returns compared to riskier investments.

    Compare the best HISAs rates in Canada

    Registered accounts: RRSPs, TFSAs, and FHSAs

    Registered accounts offer tax benefits that help Canadians save and invest more effectively.

    [ad_2]

    Keph Senett

    Source link

  • A practical guide to investing at every life stage – MoneySense

    [ad_1]

    As your financial needs change from early career to mid-life to pre-retirement to retirement itself, so, too, should the way you approach your investments.

    Setting foundations and leaning into growth

    Even though retirement is likely decades away, getting started with investing when you’re in your 20s or early 30s is one of the best money moves you can make. You’re likely embarking on your career, so you’ll have a steady source of income. But more importantly, you’ve got decades to go until you’ll need to access your retirement funds, which gives you more leeway to weather ups and downs in the market. 

    In this stage, you should consider not only setting up your retirement funds, but also about setting aside money that you may need in the medium term, whether you’re saving for a house or car, or planning for a family.

    Investing focus: Diversify and grow

    If you invest early, even with modest contributions, you’ll have a major advantage over people who wait: time. 

    For your retirement fund, you can get started with an equity-focused mutual fund or exchange-traded fund (ETF). Both options may give you access to a broad swath of the stock market without having to actually buy individual stocks. You can start small and set up pre-authorized contributions that can help your investment grow over time. (At Tangerine, these are called Automatic Purchases, which can be set up for any of their 13 investment portfolios.)

    For investments that you expect to use within the next 6–10 years, consider a more conservative approach, with funds that lean more heavily on predictable income such as bonds or GICs, which offer regular interest income and return your initial investment if held to maturity.which offer regular interest income and return your initial investment if held to maturity. These are considered less risky than stocks, though the stock market has historically performed better over time.

    Accounts to consider: TFSAs & RRSPs

    As a young adult, you might want investments that offer flexibility and tax-free growth. Take a look at a TFSA to get started. You can contribute up to the federally mandated annual limit (which accumulates each year) and have access to your funds if you need to withdraw them at any point. (Note, however, that if you store something like a GIC in your TFSA, you will still need to wait for the maturity date to access your money.)

    The registered retirement savings plan (RRSP, also called an RSP) is the other big one to consider. As the name suggests, it’s designed to be used in retirement. Like the TFSA, there are annual contribution limits. Like the TFSA, there are annual contribution limits. What’s different here is that your contributions are tax-deductible, meaning they can reduce the amount you pay in income taxes today. Instead, you’ll pay tax on the money when you withdraw it, likely in retirement when you will likely be in a lower tax bracket. 

    Article Continues Below Advertisement


    Both TFSAs and RRSPs can hold a variety of savings and investing vehicles, including mutual funds, ETFs, stocks, bonds or savings accounts. You can set up and manage your portfolio yourself or have an advisor/portfolio manager handle it for a fee, adjusting as you see fit over time.

    Balancing career and family

    By the time you’re in your 30s and 40s, your income may have risen, but you may also have taken on more debt and may even be caring for older relatives. At this point, you’ve got competing priorities: saving for retirement, putting down money on housing or paying down a mortgage, and supporting family.

    Because of these demands, you may be a bit more risk-averse with your investments than you were in your 20s. Instead of taking chances on investments with large growth potential, you might favour moderate-risk investments with steady returns or even an additional source of income, such as bond interest or stock dividends.

    Your investing focus: Balance

    Your primary goal during this stage of life may be maintaining your portfolio’s growth while starting to reduce risk. Instead of relying primarily on high-growth (and higher-risk) investments, consider introducing more moderate-risk options, balancing out your stock portfolio with bonds, money market funds, and other less volatile investments. 

    In other words, you may want to adjust your mindset from chasing returns to balancing your portfolio.

    Accounts and programs to consider: RRSP & FHSA

    You may already have an RRSP that you’re contributing to (perhaps in addition to a TFSA). During this stage of your life, consider prioritizing your contributions so the account becomes the backbone of your retirement savings. This means contributing the maximum amount allowed each year if you’re able.

    If you’re also at the point where you’re buying a home, look into a first home savings account (FHSA). This registered savings account allows you to contribute up to $8,000 per year to a maximum lifetime limit of $40,000. Your contributions are tax-deductible and eligible withdrawals are tax-free, giving you a nice lump sum towards a down payment.

    What about the Home Buyers’ Plan?
    The Home Buyers’ Plan allows you to withdraw funds from your RRSP, up to a maximum of $60,000 tax free, if you’re a first-time homebuyer or haven’t purchased or owned a property in the last four years. This can be a useful strategy if timing, eligibility, or cash-flow constraints make the FHSA less practical, or when you already have money sitting in an RRSP.

    Shifting towards stability and income planning

    As you enter your 50s and 60s, retirement is likely on the horizon. You may be thinking more about protecting your investments and trying to figure out how your savings will translate to actual income once you retire. At the same time, you may also be in your peak earning years, so protecting your money from taxes is still important.

    [ad_2]

    Jessica Gibson

    Source link

  • Buffer ETFs vs. market-linked GICs: Which is better? – MoneySense

    [ad_1]

    Bank advisors know this rhythm well. If you have cash sitting idle, there is a good chance you have received a call inviting you to review your financial plan or come into a branch. The objective is usually the same: get that cash invested into one of the bank’s in-house products. 

    For older clients, or those flagged through the know-your-client process as having a lower risk tolerance, the conversation often shifts toward market-linked guaranteed investment certificates (GICs). These products are typically presented as a way to participate in stock market gains while keeping your principal protected.

    That pitch has worked for decades. But in 2026, market-linked GICs are no longer the only way to get that type of payoff. Exchange-traded funds (ETFs) have entered the same territory with products commonly called buffer ETFs. Like market-linked GICs, buffer ETFs are designed to limit downside risk while offering some participation in market gains.

    As a retail investor, it is reasonable to be cautious here. Added complexity often comes with higher costs, more fine print, and a steep learning curve. When investors own products they do not fully understand, it becomes harder to stay invested through normal market ups and downs, regardless of how the product is designed to work.

    Here is what you need to know about buffer ETFs and market-linked GICs in 2026. That includes the key trade-offs, the costs that are easy to overlook, and my honest take on whether either option makes sense for risk-averse investors, beginners and veterans alike.

    How market-linked GICs work

    A market-linked GIC’s principal is protected if you hold the investment to maturity, and it is typically eligible for Canada Deposit Insurance Corporation (CDIC) coverage, subject to the usual limits. The difference shows up in how your return is calculated.

    Instead of earning a fixed interest rate for the full term, the return on a market-linked GIC depends on the performance of a specific market benchmark. That benchmark could be a stock index or another predefined group of securities. If the benchmark performs well, your return increases. If it performs poorly, your return falls back to a guaranteed minimum.

    To see how this works in practice, consider the market growth GICs offered by TD Bank. One option is linked to a basket of major Canadian banks and is available in three-year and five-year terms in most registered accounts.

    Article Continues Below Advertisement


    Source: TD, January 2026

    For the three-year version, the guaranteed minimum return is 3.5%. For the five-year version, the guaranteed minimum return is 8%. If the linked bank basket performs poorly, that minimum is what you receive at maturity. You cannot lose money as long as you hold the GIC to the end of the term.

    However, the upside participation is capped. Over three years, the maximum cumulative return is 18%. Over five years, the maximum cumulative return is 32%. Importantly, these figures are not annualized. They represent the total return over the entire life of the investment.

    The fine print matters here. TD discloses that the 8% minimum return over five years works out to about 1.55% per year. The same logic applies to the maximum return. A 32% total return over five years sounds attractive, but once translated into an annualized figure, it looks far more modest.

    Source: TD, January 2026

    This structure highlights the core trade-off. You are free of downside risk, but you also give up a large portion of the upside. If the underlying market performs exceptionally well, the return above the cap does not accrue to you. 

    That leads to the obvious question of incentives. Banks earn fees for structuring and distributing these products. This is part of the reason market-linked GICs can be attractive for issuers even when they appear conservative on the surface.

    Another common issue is investor misunderstanding. Many people confuse cumulative returns with annualized returns and assume the headline numbers are yearly figures; others assume the maximum return is what they are likely to receive, when in reality it is simply the upper boundary. Actual outcomes can land anywhere between the guaranteed minimum and the cap, depending entirely on how the underlying benchmark performs over the term. 

    [ad_2]

    Tony Dong, MSc, CETF

    Source link

  • A simple guide to investing your first $500 – MoneySense

    [ad_1]

    When you have a limited budget, every dollar has to work harder. The margin for error is slimmer, and the overwhelming number of financial products, from ETFs to individual stocks, can lead to analysis paralysis. Experts say there is no bulletproof way to stock pick in the early stages. Instead, focus on structure, simplicity, and consistency.

    Pick the right home for your money

    Before browsing the stock market, young investors need to decide where their money will live. There are a number of options including the tax-free savings account (TFSA), registered retirement savings plan (RRSP), first home savings account (FHSA), or an unregistered account. 

    Compare the best TFSA rates in Canada

    Diandra Camilleri, associate portfolio manager at Verecan Capital Management Inc., noted that many young Canadians rush to buy a product without considering the tax implications or accessibility of the account they are using. “Asset location, which is about deciding which accounts hold which investments, is often framed as a tax decision, yet it also affects how accessible your money is and what it can realistically do for you over time,” said Camilleri.

    She warned that investors often reach their thirties and forties only to realize they’ve been saving in the wrong vehicle. Whether it is a TFSA for flexibility or an RRSP for long-term growth, getting advice on the “where” you should put your money is just as vital as the “what.”

    Keep it simple with one ETF

    Once the account is open, how should a beginner deploy a lump sum of $500 or $1,000?

    Robert Gill, a portfolio manager at Fairbank Investment Management, said simplicity is paramount. While his firm generally favours other investment strategies for larger portfolios, he notes that a small capital base presents a practical exception for using exchange-traded funds (ETFs).

    “With a limited amount to invest, allocating capital across multiple ETFs may introduce unnecessary complexity and excessive diversification,” Gill said. “One broad-based ETF is typically sufficient to provide the diversification and growth potential a new investor requires.”

    Gill suggests focusing on those tracking the TSX, S&P 500, or MSCI World, rather than niche sectors. This allows a young investor to participate in the growth of top-tier companies without the fees and complexity of managing a multi-asset portfolio.

    Article Continues Below Advertisement


    Build a core, then add carefully

    Shane Obata, portfolio manager at Middlefield, echoes Gill’s belief of building a broad, diversified global equity base as a stable foundation. Once you’ve done that, he suggests you consider a slightly more active, prudent approach, called a “core and satellite” strategy. “You can layer in specific thematic investments that you believe have long-term durability … to capture higher growth potential,” said Obata.

    However, he advises caution when buying passive indices for complex sectors, such as technology. In fast-moving industries, a passive index forces investors to own the “losers” alongside the “winners,” exposing them to unnecessary risk.

    A popular option for beginners is the “all-in-one” asset allocation ETF, which holds global stocks and bonds. While convenient, Obata warned they can be a “one-size-fits-most” solution that lack flexibility in response to market conditions. “By bundling everything together, investors lose some flexibility to adjust their asset allocation based on market conditions,” Obata said. 

    He also notes that in taxable accounts, these funds limit tax-efficiency strategies, such as tax-loss harvesting, because you cannot selectively sell the underlying holdings.

    Consistency beats contribution size

    After the initial investment, the next step is monthly contributions. If you only have $200 a month to spare, should you spread it around?

    Gill advises against it. “A monthly contribution of $200 is well-suited to investing in a single, diversified ETF, but is generally insufficient to be effectively allocated across multiple investment products,” he said.

    Young investors also shouldn’t fret that their monthly contribution is on the smaller side. Camilleri said consistency matters far more than the dollar figure. She recommends setting up automatic contributions to build discipline without having to think about it.

    Finally, both Gill and Obata said beginners should avoid the temptation of picking individual stocks. “Picking individual stocks is a difficult proposition that requires a significant time commitment to research and track companies, which most beginners simply do not have,” said Obata.

    [ad_2]

    The Canadian Press

    Source link

  • In planning for retirement, worry about longevity rather than dying young – MoneySense

    [ad_1]

    Or, as U.S. retirement guru Wade Pfau recently put it, “A retirement income plan should be based on planning to live, rather than planning to die.” The Michael James blog recently highlighted that quote.  

    Retirement is usually about planning for unexpected longevity, often exacerbated by inflation. After all, a 65-year-old Canadian woman can expect to live to 87—but there’s an 11% chance she’ll live to 100. 

    That fact was cited by Fraser Stark, President of Longevity Retirement Platform at Toronto-based Purpose Investments Inc., at a September presentation to the Retirement Club, which we described this past summer. Stark’s presentation was compelling enough that I decided to invest a chunk of my recently launched RRIF into the Purpose Longevity Pension Fund (LPF). A version of Stark’s presentation may be available on YouTube, or you can get the highlights from the Purpose brochure.

    Compare the best RRSP rates in Canada

    Stark confirms that LPF, launched in 2021, is currently the only retail mutual fund or ETF offering longevity-protected income in Canada. Note that LPF is not an ETF but a traditional mutual fund. It aims to generate retirement income for life; to do so, it has created what it describes as a “unique longevity risk pooling structure.” 

    This reflects what noted finance professor Moshe Milevsky has long described as “tontine thinking.” See my Retired Money column on this from 2022 after Guardian Capital LP announced three new tontine products under the “GuardPath” brand. However, a year ago Guardian closed the funds, so is effectively out of the tontine business. Apparently, it’s a tough slog competing with life annuities.

    Here’s the full list of wealth advisors and full-service brokers that offer it. Included are full-service brokerages (and/or their discount brokerage units) of the big banks, including Bank of Montreal, National Bank, and recently Royal Bank on a non-solicited basis. Among many independents offering it are Questrade and Qtrade. In addition, Stark says iA Financial allows investments in LPF on a non-solicited basis.

    Mimicking defined benefit pensions

    Purpose doesn’t use the term tontine to describe LPF, but it does aim to do what traditional employer-sponsored defined benefit (DB) pensions do: in effect, those who die early subsidize the lucky few who live longer than expected. 

    LPF deals with the dreaded inflation bugaboo by aiming to gradually raise distribution levels over time. It recently announced it was boosting LPF distributions by 3% for most age cohorts in 2026, following a similar lift last year.

    Article Continues Below Advertisement


    Here’s how Purpose’s actuaries describe LPF:

    “The Longevity Pension Fund is the world’s first mutual fund that offers income for life by incorporating longevity risk pooling, a concept similar to that utilized by defined benefit pension plans and lifetime annuities, to provide lifetime income.”

    Purpose envisages LPF working alongside annuities for some retirees (see my last column on why annuities aren’t as popular as some think they should be). LPF is not registered as a pension, but it’s described as one because it’s structured to provide income for life, no matter how long you live. It’s offered as a mutual fund rather than an ETF because it’s not designed to be traded, Stark said in one podcast soon after the launch. 

    Age is a big variable. Purpose created two classes of the Fund: an “Accumulation” class for those under age 65, and a “Decumulation” class for those 65 or older. You cannot purchase it once you reach 80. LPF promises monthly payments for life but the structure is flexible enough to allow for either redemptions or additional investments in the product—something traditional life annuities do not usually provide. When moving from the Accumulation to the Decumulation product at age 65, the rollover is free of capital gains tax consequences. 

    The brochure describes six age cohorts, 1945 to 1947, 1948 to 1950 etc., ending in 1960. Yield for the oldest cohort as of September 2025 is listed as 8.81%, falling to 5.81% for the 1960 cohort. My own cohort of 1951–1953 has a yield of 7.24%.

    How is this generated? Apart from mortality credits, the capital is invested like any broadly diversified Asset Allocation fund. The long-term Strategic Asset Allocation is set as 49% equity, 41% fixed income and 10% alternatives. As of Sept. 30, Purpose lists 38.65% in fixed income, 43.86% in equities, 12.09% in alternatives, and 4.59% in cash or equivalents. Geographic breakdown is 54.27% Canada, 30.31% the United States, 10.84% international/emerging, and the same 4.59% in cash. MER for the Class F fund (which most of its investors are in) is 0.60%.  

    Stark says LPF has accumulated $18 million since its launch, with 500 investors in either the Accumulation or Decumulation classes. He also referred me to the recently released actuarial review on LPF. 

    Longevity income vehicles in the U.S.

    While LPF (and formerly) Guardian are the two main longevity product suppliers in Canada of which I’m aware, several products in the United States attempt to tackle the same problem in different ways. A few weeks ago, I did a roundup of the major U.S. offerings by contacting various U.S. and Canadian retirement experts through Featured.com and LinkedIn. The resulting blog covers products like Vanguard Target Retirement Income Fund, Fidelity Strategic Advisors Core Income Fund, Stone Ridge LifeX Longevity Income ETFs, and others. 

    For now, it appears Purpose is alone in this space in Canada, apart from fixed life annuities offered by insurance companies. The U.S. market is different because of Variable Annuities with income options. 

    [ad_2]

    Jonathan Chevreau

    Source link

  • Why Canadian investors should avoid MLPs  – MoneySense

    [ad_1]

    Common examples include American mortgage real estate investment trusts (mREITs) and business development companies (BDCs). Both tend to be highly leveraged and structurally complex, and the headline yield rarely tells the full story. The same applies to Master Limited Partnerships, or MLPs.

    What is a master limited partnership?

    MLPs occupy the midstream segment of the energy sector. This part of the industry focuses on transporting, storing, and processing oil and gas rather than producing or retailing it. Canadian investors are already familiar with midstream businesses through TSX-listed companies like TC Energy and Enbridge. The difference is that these Canadian firms are conventional corporations, not partnerships.

    An MLP is a U.S.-specific pass-through structure designed to generate income from energy-related assets. By operating as a partnership rather than a corporation, an MLP avoids corporate-level tax and distributes most of its cash flow directly to unitholders. That structure is the reason for the eye-catching yields. It is also why MLPs have long been popular with income-focused investors stateside.

    From a distance, it is easy for Canadians to assume these investments should translate well across the border. Capital markets are similar, the businesses are familiar, and the income looks appealing. 

    The sticking point is taxation. Differences between Canadian and U.S. tax rules turn MLP ownership into a complicated exercise for Canadian investors, often reducing after-tax returns and creating ongoing administrative headaches. Those frictions matter more than most investors realize.

    Here is what Canadian investors need to know about U.S. MLPs, why they are usually best avoided, and which alternatives offer exposure to similar businesses without the same tax complications.

    The tax headaches of MLPs for Canadian investors

    For Canadian investors, the problems with U.S. master limited partnerships come down to two main issues: withholding tax and reporting requirements.

    Most Canadians are already familiar with how U.S. withholding works. When you own U.S.-domiciled stocks or exchange traded funds (ETFs), 15% of dividends are typically withheld at source. That withholding can be avoided by holding those securities inside a Registered Retirement Savings Plan (RRSP), thanks to the Canada-U.S. tax treaty.

    Article Continues Below Advertisement


    MLPs are treated very differently. They do not benefit from that treaty treatment. Distributions from MLPs are fully subject to U.S. withholding tax. Worse, the rate is not 15%. It is up to 37%. This withholding applies even inside registered accounts, including RRSPs.

    Source: r/CanadianInvestor

    That means more than one third of each distribution can disappear before it ever reaches your account. This is especially damaging because most of the long-term return from MLPs comes from reinvested distributions rather than price appreciation. 

    It does not stop there. When you sell an MLP, there is an additional 10% withholding tax applied to the gross proceeds by the Internal Revenue Service (IRS), because MLPs are classified as publicly traded partnerships. This is not a capital gains tax. It is withheld regardless of whether you are selling at a gain or a loss.

    There are numerous real-world examples of Canadian investors discovering this the hard way. Some have bought and sold the same MLP multiple times, only to find that 10% was withheld on each transaction.

    Source: r/PersonalFinanceCanada

    The final complication is tax reporting requirements. When you own a typical U.S. stock, you receive a 1099-DIV form that summarizes your income. With an MLP, you are not a shareholder. You are a partner. That means you receive a Schedule K-1.

    A K-1 reports your share of the partnership’s income, deductions, and credits. It is far more complex than a standard dividend slip, and it creates a U.S. tax filing obligation. In theory, you are required to file a U.S. tax return to properly report this income to the IRS.

    [ad_2]

    Tony Dong, MSc, CETF

    Source link

  • Stock news for investors: Groupe Dynamite reports strong Q4, adjusts 2025 outlook – MoneySense

    [ad_1]

    The retailer behind the Garage and Dynamite banners says based on the result it now expects comparable store sales growth for its 2025 financial year to be in a range of 26.5% to 27.0%. The new guidance for the year ended Jan. 31 compared with earlier expectations for between 25.5% and 27.5%.

    Groupe Dynamite also raised the lower end of its adjusted earnings before interest, taxes, depreciation and amortization margin for its 2025 financial year. The retailer now expects its adjusted EBITDA margin to come in between 36% and 37% compared with earlier expectations for between 35% and 37%.

    Capital spending for the year is expected to be in a range of $80 million to $90 million for the year, down from a range of $85 million to $95 million, mainly reflecting payments timing.

    Source Google

    Lululemon says it expects Q4 sales and EPS to be at high end of guidance

    Lululemon Athletica Inc. says it expects its net revenue and diluted earnings per share for its fourth quarter to come in at the high end of its guidance for the period. Chief financial officer Meghan Frank says the update is based on the company’s performance over the holiday season.

    The retailer had previously guided for revenue in a range of US$3.500 billion to US$3.585 billion and diluted earnings per share between US$4.66 and US$4.76 for the fourth quarter.

    The company made no changes to its guidance for gross margin, selling, general and administrative expenses, or the effective tax rate.

    The results come as Lululemon CEO Calvin McDonald prepares to step down from his role effective Jan. 31. Founder Chip Wilson, who has been critical of the company, has nominated three director candidates for Lululemon’s board, saying the search for McDonald’s replacement should be led by new, independent directors.

    Gold miner Kinross going ahead with three organic growth projects in U.S.

    Kinross Gold Corp. says it is going ahead with the construction of three organic growth projects in the U.S. that will cost a total of nearly US$1.4 billion. The company says the initial capital costs of its Round Mountain Phase X project in Nevada are expected to total US$400 million over four years, while the Bald Mountain Redbird 2 project in the state is expected to cost US$490 million over three years. The Kettle River-Curlew project in Washington is expected to cost US$485 million over three years.

    Article Continues Below Advertisement


    Kinross says the projects are expected to meaningfully extend mine life and will benefit long-term costs within its U.S. portfolio.

    Chief executive Paul Rollinson says the new growth projects are expected to contribute three million ounces of life-of-mine production to its portfolio. The company says it intends to fund the projects from operating cash flows.

    Source Google

    MoneySense’s ETF Screener Tool

    Read more news:



    About The Canadian Press


    About The Canadian Press

    The Canadian Press is Canada’s trusted news source and leader in providing real-time stories. We give Canadians an authentic, unbiased source, driven by truth, accuracy and timeliness.

    [ad_2]

    The Canadian Press

    Source link

  • Bitcoin’s journey in 2026 will depend on Trump, oil, and AI – MoneySense

    [ad_1]

    2025 was a milestone year for BTC and other cryptocurrencies. The passing of the GENIUS Act in the U.S., which regulates U.S. dollar stablecoins, confirmed crypto’s status as a mainstream asset. Equally important was the proliferation of cryptocurrency exchange-traded funds (ETFs) in Canada, the US, and other countries. Investors no longer need to jump through hoops or navigate the crypto ecosystem to invest in BTC, ethereum (ETH), Solana (SOL) or other cryptocurrencies. Now, getting exposure to crypto is as easy as buying an S&P 500 Index ETF or a S&P/TSX Composite Index ETF. 

    How did BTC perform as an investment in 2025? Although it was down a relatively modest 7.32% from the beginning to the end of 2025, investors experienced wild up and down swings through the year.  Here’s how much BTC gained or lost in each quarter of 2025.

    What the Venezuela crisis means for BTC

    2026 is off to a wild start. The US special forces entered Venezuela, captured the country’s leader Nicholas Maduro and his wife, Cilia Flores, and flew them to New York to face charges. 

    How does this affect BTC? BTC trades in two ways: sometimes as a safe haven asset like gold, and other times like a technology stock that rips higher in times of market optimism and exuberance. In the weeks since this year began, BTC has traded like a safe haven asset, gaining on the back of rising geopolitical tensions exemplified by the US military action in Venezuela. 

    The best crypto platforms and apps

    We’ve ranked the best crypto exchanges in Canada.

    From the beginning of 2026 to now (mid January 2026) BTC has gained over 8% and gold is up about 5%. Why so? Much of the geopolitical uncertainty these days is caused by actions taken by, or statements made by the US government. As a result, investors are on the lookout for assets that are—at least partially—independent of US government influence. 

    Enter gold and BTC. They’re both globally traded assets that aren’t structurally controlled by the US—or any other country. Further, both are considered by many investors to be alternative forms of money. In fact, gold and BTC are often clubbed together as hard assets; that is, assets the value of which cannot easily be manipulated or inflated by governments, including the US.

    Does this mean that the price of BTC will continue to rise this year as long as geopolitical uncertainty persists? It’s not that simple.

    BTC’s fate in 2026 will depend on inflation and interest rates

    While BTC—like gold—does rise on the back of geopolitical uncertainty, it is also (somewhat paradoxically) considered a risk-on asset. In other words, just like stocks, it gains substantially in low-interest rate regimes when the market is flush with liquidity. Therefore, for BTC to gain substantially in 2026, inflation (especially in the US, which is the world’s largest capital market) would need to be soft and interest rates would need to remain low. 

    Article Continues Below Advertisement


    US inflation data right now is encouraging, with the headline U.S. consumer price index (CPI) for December 2025 coming in at 2.7% on an annual basis. This is in line with expectations and within the U.S. Federal Reserve’s (the Fed’s) comfort zone—which means that the Fed may not be in a hurry to raise interest rates. This is positive news for BTC.

    The chart below shows the CPI trajectory from 2021 to the latest print for December 2025. As is clear from the chart, CPI has remained relatively low—within the 2% to 3% band—for well over a year on the back of soft crude oil prices and efficiency gains from the adoption of artificial intelligence (AI). 

    Source: cnbc.com as of January 13, 2026

    Where BTC goes in 2026 will in no small part depend on the price of oil, the continued adoption of AI by large global companies, and the effect these will have on inflation.

    Crypto price swings are common

    Cryptocurrencies including BTC, ETH, XRP, SOL, BNB, and others are speculative and highly volatile assets subject to significant price movements. Even stablecoins, which are seemingly “safe,” may be risky if not adequately backed by real-world assets.

    Investing in bitcoin and other crypto coins carries significant market, technological, and regulatory risks. Invest in crypto only if it aligns with your broader investment goals, time horizon, and risk profile, and always stay vigilant about crypto scams.

    Get free MoneySense financial tips, news & advice in your inbox.

    Read more about crypto:



    About Aditya Nain


    About Aditya Nain

    Aditya Nain is an author, speaker and educator who writes about Canadian investments, personal finance and crypto. He has co-authored two books and taught at universities for 12 years.

    [ad_2]

    Aditya Nain

    Source link

  • Tax implications of shareholder loans – MoneySense

    [ad_1]

    When your corporation owes you money

    If you personally pay for expenses on behalf of your company, it owes you for these personally paid corporate expenses. You can be reimbursed tax-free. 

    If you deposit money to your corporation, the same situation applies—that is, you are owed money back tax-free. This situation can occur if you have to top up your corporate bank account or deposit money to be used for a real estate down payment for the company. 

    The rest of this summary will focus on situations where you owe money to your corporation. 

    Clearing a loan with a bonus or dividends

    Some business owners take withdrawals over the course of the year from their corporation without running them through payroll. At year-end, you can address this by declaring a bonus with payroll withholding tax payable in January. This bonus has the identical tax treatment to salary, as both are reported as employment income on your T4 slip. 

    The other alternative is to declare a shareholder dividend. This has no withholding tax. The tax implications will instead be a combination of corporate and personal tax. This is because unlike a salary or bonus, dividends are not tax deductible for a corporation. Since a dividend is a distribution of after-tax corporate profits, the personal tax payable is lower than a salary or bonus. 

    However, the all-in tax is comparable, and in most cases, higher than paying a salary or bonus at most income levels in most provinces and territories.

    Income Tax Guide for Canadians

    Deadlines, tax tips and more

    Shareholder loan taxation

    If you want to loan money to yourself or a family member from your corporation, this is generally considered taxable income. The default assumption by the Canada Revenue Agency (CRA) is that loans are disguised as compensation unless a specific exemption applies. 

    The primary exception is if you repay the loan within one year after the corporation’s fiscal year end. For example, a loan outstanding on December 31, 2025 for a corporation with a calendar year-end needs to be repaid by December 31, 2026. If not, it will be considered taxable. 

    Article Continues Below Advertisement


    The CRA does not like when you engage in a series of loans and repayments, either, and may treat the original loan as being taxable. So, be careful about back-to-back loans. 

    Employee loans

    There is a very narrow exemption for loans to employees for specific purposes like buying a work vehicle for employment duties, a home, or shares of the employer. It does not happen often in real life, and owner-managers who think they can loan money to themselves under this exception are probably out of luck. Specified employees who own 10% or more of a company cannot qualify. 

    Interest and principal benefits

    Business owners and their accountants often overlook the deemed interest benefit of a shareholder loan. There should be an income inclusion for the notional interest on the loan. The rate applied is CRA’s prescribed rate. As of Q1 2026, the rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans is 3%.

    If a loan is forgiven, the principal may be considered a taxable benefit to the owner-manager. The problem is that the corporation may not get a tax deduction, so there is an element of double taxation that may apply. 

    Inter-company loans

    If an owner-manager owns more than one corporation, they sometimes lend money between two companies. You may be able to loan money between two companies you own without triggering tax. 

    If you are loaning money between an operating company that is a going concern and an investment holding company, be careful about exposing shareholder loan assets owned by the operating business to company creditors. In some cases, it may be better to ensure that dividends can be paid from one company to another, either directly with the second company as a shareholder or indirectly using a trust. 

    Business owner takeaways

    Shareholder loans should usually be temporary as opposed to permanent. They can have unexpected tax implications, so proper planning is key. 

    Owner-managers should discuss shareholder loans with their tax accountant with a proactive planning-first approach rather than after year-end when filing their tax return.

    [ad_2]

    Jason Heath, CFP

    Source link

  • How to find room to save in 2026—even with tight budgets – MoneySense

    [ad_1]

    Kelly Ho, a certified financial planner at DLD Financial Group, says you should start by identifying your fixed costs such as rent, mortgage, utilities or car payments followed by figuring out how much you make. “Sometimes when I ask clients, ‘What is your income?’ Not everyone can give me a straight answer,”  she says.

    From there, she says, take at look at the rest of your spending and see how it compares with your budget to see where the differences are. If you pay by credit or debit card, your monthly statement will help show where the money is going. “It’s just a matter of really understanding how much money is coming in and how much is going out,” Ho says.

    Subscription spending: easy to start, easy to overlook

    Subscriptions can be a stealthy way to lose track of costs. The cost of subscriptions for not just shows and music, but other services can pile up over time. With apps offering easy sign-ups and free trial periods, it can add up before you realize, unless you keep careful track of your spending.

    “Everything costs money and sometimes in the spur of the moment, we’ll subscribe with the intent of unsubscribing at some point. But again, life gets busy, so therefore we leave it on and we’re wondering why our credit card bill is so high every month,”  Ho says.

    Ho says finding savings of $10 a month here and there can quickly add up if you are cancelling more than one subscription or service you don’t need or use. “You multiply that by 12 months, multiply that over several years, plus, you know, potential investment growth. That’s a lot money on the table,” she said.

    Best savings accounts in Canada

    Find the best and most up-to-date savings rates in Canada using our comparison tool

    When real-life spending doesn’t match the budget

    Ho says travel is another area where your budget may not match reality.

    “Every single individual I’ve spoken to has underestimated the cost of travel,” she says. “I don’t know if many people actually keep track of what they’re spending when they’re there at their destination.” An extra round of drinks, a pricey souvenir or an extra excursion while on vacation can add up to blow past a planned budget. “I encourage people to be more intentional about saving for travel as opposed to simply lumping travel in with everyday costs,” Ho says.

    Becky Western-Macfadyen, manager of financial coaching at non-profit credit counselling agency Credit Canada, says when reviewing spending on things like wireless plans that can include all sorts of bells and whistles, it is important to understand what you need. “You want to make sure you’re paying for what you actually will use in your plan,” she said.

    Article Continues Below Advertisement


    Western-Macfadyen also says deleting apps like food delivery services from your phone might make it less convenient, but stopping regular spending on takeout or at least making it a littler harder will add up.

    She said the payoff of having a little savings put aside for an emergency can even help you save in the future by avoiding taking on debt. But, she acknowledged that changing spending habits can be hard and sometimes the reality is you can’t find areas to cut.

    “If someone looks at their budget and thinks there’s nowhere to cut, that doesn’t mean they’ve failed,” she said. “It means the budget is just telling you the truth. It’s information. And savings comes from understanding your cash flow and sustainable change. So you want to just tell yourself the truth so you can make decisions based on that.”

    Get free MoneySense financial tips, news & advice in your inbox.

    Read more about saving:



    About The Canadian Press


    About The Canadian Press

    The Canadian Press is Canada’s trusted news source and leader in providing real-time stories. We give Canadians an authentic, unbiased source, driven by truth, accuracy and timeliness.

    [ad_2]

    The Canadian Press

    Source link

  • How stablecoins could modernize Canada’s financial system – MoneySense

    [ad_1]

    Speed is also a problem. Traditional payment systems can take days to process cross-border transfers. Reducing this friction could boost productivity and strengthen Canada’s economy at a time when both are desperately needed.

    Enter stablecoins: regulated digital currencies that combine the reliability of traditional money with the efficiency of modern technology.

    What is a stablecoin?

    A stablecoin is a digital currency pegged 1:1 to a traditional currency, such as the Canadian dollar. Unlike Bitcoin or other cryptocurrencies whose values can vary wildly, stablecoins (true to their name) are designed to hold stable value. This makes them practical for everyday or recurring payments.

    Think of stablecoins as the digital equivalent of cash: familiar and stable in value, but built on blockchain technology. This allows money to move instantly, securely, and across borders without relying on slow intermediaries.

    The best crypto platforms and apps

    We’ve ranked the best crypto exchanges in Canada.

    Why Canada needs faster, smarter payment solutions

    Stablecoins could change how Canadians send and receive money. Each year, Canadians send roughly US$8 billion abroad. Families that depend on remittances could save significant amounts annually, while businesses could recoup lost funds from cross-border transactions.

    Beyond individual savings, a more efficient payment system strengthens the economy; it supports innovation, improves competitiveness, and makes it easier for Canadian companies to engage in global trade.

    Trust through regulation

    Global regulators are taking notice. The U.S. is moving forward with the GENIUS Act, and the European Union has its Markets in Crypto-Assets Regulation. Canada is keeping pace with a recently announced national stablecoin framework that, when in place, will ensure stablecoins meet strict standards, similar to traditional financial tools.

    These regulations help ensure that stablecoins are backed by high-quality reserves, so each digital dollar equals a real one. Strong regulation builds confidence and allows Canadians to feel more secure using new payment tools. In 2023, Coinbase research showed that 72% of Canadians say regulation is important, and 29% of non-owners say they would purchase crypto if the industry were better regulated.

    Article Continues Below Advertisement


    Canadian dollar-backed stablecoins like QCAD are already in development. With the regulatory framework in place, stablecoins could soon start showing up in everyday life—starting with business payment processors and e-commerce platforms.

    Canada’s chance to lead

    Canada has long been a hub for innovation, but it has lagged in integrating the advances into practical financial tools. Stablecoins give Canadians a chance to embrace faster, cheaper, and more efficient payments that are better suited to digital life and keep pace with trends in the global financial system.

    By modernizing the backbone of our financial system, stablecoins could help families and businesses save money, strengthen productivity, and expand participation in the digital economy. Faster, smarter payments aren’t just convenient—they’re essential for Canada’s economic future.

    Information is provided for informational purposes only and is not investment advice. This is not a recommendation to buy or sell a particular digital asset or to employ a particular investment strategy. Coinbase Canada, Inc. is registered as a Restricted Dealer in all provinces and territories of Canada. Trading in crypto assets may result in the loss of invested capital.

    Although the term “stablecoin” is commonly used, there is no guarantee that the asset will maintain a stable value in relation to the value of the reference asset when traded on secondary markets or that the reserve of assets, if there is one, will be adequate to satisfy all redemptions.

    Get free MoneySense financial tips, news & advice in your inbox.

    Read more about stablecoins:



    About Jessica Barrett


    About Jessica Barrett

    Jessica Barrett is the editor-in-chief of MoneySense. She has extensive experience in the fintech industry and personal finance journalism.

    [ad_2]

    Jessica Barrett

    Source link

  • If not bonds, then what? – MoneySense

    [ad_1]

    Over the same time, equity markets have provided returns well above historical averages, which can lead people to take more risk than they normally would by reducing their bond holdings.  

    Adding to that, if you look at pre-tax historical bond returns, there have been some long stretches when returns have been really bad as you can see in the table below.

    U.S. government bond returns

    Time Period Annualized Return
    Before Inflation After Inflation
    1926–2024 4.9% 1.9%
    1926–1980 3% 0.1%
    1980–2020 9.1% 5.9%
    2020–2024 -5.8% -9.6%

    Given that historical context and the knowledge that from 1980 to 2020 we were in a decreasing interest rate environment, ideal for bonds, why would you invest in bonds today? 

    Your question reminds me of a book I read about 10 years ago, Why bother with bonds? The author, Rick Van Ness, suggests there are four reasons to consider bonds: 1. Stocks are risky, 2. Bonds make risk more palatable, 3. Bonds can be a safe bet, and 4. Bonds can be an attractive diversifier in your portfolio. I’ll walk through each of these but, as I do, consider how each of these would apply to your portfolio needs.

    1. Stocks are risky

      I am guessing you have read that equities become safer over time. That is true and false. Sure, if you invest $1 today in equities, the longer you hold it the more likely you are to enjoy positive returns. You can see this looking at the historical data. Great! But does that mean equities became safer? No!

      If you have a $100,000 portfolio and equities drop 40%, taking your portfolio to $60,000, are you feeling good that the $1 you invested 10 or 20 years ago may still have a positive return? No, you are thinking you just lost $40,000. Will it get worse, will you get your money back, and how long will it take? What if you had a million-dollar portfolio that went to $600,000? 

      Article Continues Below Advertisement


      Equity markets are always at risk of dropping. What if they drop while you are drawing an income or spending money from your portfolio? The reason for holding bonds or an alternative to bonds is to protect the money you plan to spend in the short term from market declines and provide liquidity for spending needs.

      2. Bonds make risk more palatable

      Holding bonds may prevent you from buying high and selling low. Imagine you have a $1-million portfolio rapidly dropping to $600,000; what are you going to do? Buy, sell, or hold? Some people will panic and sell, which is the real threat to investment success. Volatility on its own is not a problem. It only becomes a problem when it is combined with a withdrawal.  

      What typically happens when a panic sell occurs? You wait for the right time to get back into the market, if you ever get back into the market. A scared investor doesn’t wait until things get even worse to invest so they can buy low. Instead, they wait until markets recover, things feel good, and then they buy high.   

      In this case the reason for holding bonds or an alternative to bonds is to anchor your portfolio so that it only drops to an amount you can tolerate before panic selling. Liquidity is not necessarily a requirement to make risk more palatable.  

      Have a personal finance question? Submit it here.

      3. Bonds can be a safe bet

      In its basic form, a bond is a simple interest-only loan. You lend money to a government or company and in return, they promise to pay you a rate of return. At the end of the term, they give you back your money. There are some risks with bonds, often associated with changes in interest rates, the length of the term, the strength of the originator, and the ability to buy and sell bonds. However, in general they are safer than equities at protecting your capital—capital you can use for spending. Equities are for protecting your long-term purchasing power, matching or beating the rate of inflation.

      If you are considering an alternative to bonds, ask yourself: is the investment as safe as a bond? 

    [ad_2]

    Allan Norman, MSc, CFP, CIM

    Source link

  • Hot stocks: Canada’s top performers in Q4 2025 – MoneySense

    [ad_1]

    Toronto-based Sigma Lithium Corp., which operates lithium mines in Brazil, led the pack, nearly doubling in value over the three months to December 31, 2025. Its performance testified to strong execution—net revenues rose 69% quarter-over-quarter and 36% year-over-year—but also to resumed investor interest in lithium, a key component in rechargeable batteries essential for the energy transition. 

    Aris Mining of Vancouver came in a distant second, with a 61.9% return, followed by Toronto-headquartered Discovery Silver Corp., at 58.9%. Aris is a miner of gold in Colombia that counts mining tycoons Frank Giustra, Ian Telfer, and Neil Woodyer among its shareholders; it consolidated its stake in the Soto Norte property during the quarter and was added to the S&P/TSX Composite in September. 

    Compare the best TFSA rates in Canada

    Backed by mining investor Eric Sprott, Discovery Silver acquired the Porcupine Complex near Timmins, Ont., from Newmont Corp., in 2025, adding to a roster of promising assets that includes the Cordero project in Mexico. Discovery and Aris were among seven of the top 10 stocks last quarter tied to precious metals, including six miners and the Sprott Physical Silver Trust, an investment vehicle for investors seeking exposure to silver bullion.

    By comparison, the cap-weighted, 218-member S&P/TSX Composite, the standard benchmark of Canadian stocks, rose 5.6% over the period; its total return, including dividends, was 6.25%. Though down from the third quarter, these numbers still bested the S&P 500 in the U.S., which returned 2.35% (2.7% total return) in Q4. 

    Here are Canada’s top 10 best performing mid- to large-cap momentum stocks for Q4 2025:

    There was significant overlap between the top performers for the fourth quarter and the 10 best Canadian mid- and large-cap performers (market capitalization of $2 billion or more) for the year. Seven of the top stocks of the past three months turned up in the top 10 for all of 2025. Discovery Silver shot out the lights with a more than 10 times return for the year. The next-best stock to have in your portfolio was tungsten miner Almonty Industries, with an 859% annual return, trailed by Americas Gold and Silver Corp. at 450%. Here again, mining stocks dominated, with the sole exception of Groupe Dynamite.

    Here are the top 10 best-performing mid- and large-cap Canadian stocks for 2025:

    Though momentum is a demonstrated factor in equities investment, past performance is not an indicator of future returns.

    Article Continues Below Advertisement




    About Michael McCullough


    About Michael McCullough

    Michael is a financial writer and editor in Duncan, B.C. He’s a former managing editor of Canadian Business and editorial director of Canada Wide Media. He also writes for The Globe and Mail and BCBusiness.

    [ad_2]

    Michael McCullough

    Source link

  • Your TFSA reset for the new year – MoneySense

    [ad_1]

    New TFSA contribution room

    Every Canadian resident aged 18 or older has $7,000 of new TFSA room as of January 1, 2026. This has been the annual maximum for three consecutive years now, but it could possibly rise in 2027 to $7,500. The 2027 TFSA limit will be confirmed in late 2026. 

    Since 2016, the annual maximum has risen in $500 increments based on adjustments tied to the Consumer Price Index (CPI), which measures annual inflation. 

    Cumulative TFSA limit

    Your cumulative TFSA limit is more important than the annual maximum. If you have missed contributions in the past, your TFSA room carries forward, with the yearly maximum added to your past room.

    If you were 18 years of age or older in 2009 and a resident in Canada all of those years, your cumulative TFSA room would be $109,000 as of January 1, 2026. That is: if you were born in 1991 or earlier, have been a resident in Canada since 2009, and have never contributed to a TFSA, you could have $109,000 of TFSA contribution room in 2026.

    2025 TFSA withdrawals

    TFSA withdrawals impact your TFSA room. If you took withdrawals last year, those withdrawals will be added to your TFSA limit for 2026 along with the annual maximum. 

    For example, if you withdrew $10,000 from your TFSA in 2025, you would have the $7,000 annual maximum plus another $10,000 of TFSA room, for a total of $17,000 of new TFSA room on January 1, 2026. 

    Confirming TFSA room with CRA

    You can confirm your TFSA room with the Canada Revenue Agency (CRA) by calling them or logging into your CRA My Account online. Note, however, that the data tends to be outdated. 

    TFSA contributions and withdrawals from the previous year are reported to CRA the following year, but may not be reflected until the spring or later. As a result, CRA’s TFSA records during the first half of the year may be inaccurate. This often leads to people inadvertently over-contributing to their TFSAs. 

    Article Continues Below Advertisement


    What to do if you overcontribute

    If you contribute to your TFSA beyond your limit, you may be subject to penalties and interest. The penalties are 1% of the overcontribution each month. For example, a $10,000 overcontribution would have a $100 monthly penalty, or $1,200 for a full 12-month period. Interest is also applied to the penalties, and a penalty equal to 100% of any income or gains resulting from a deliberate overcontribution.

    Non-residents of Canada cannot contribute to their TFSAs while living abroad. So, non-resident TFSA contributions will also attract penalties and interest. 

    The CRA may send you an education letter about your TFSA overcontribution and waive penalties and interest, but you should not count on it. 

    The bottom line: TFSA overcontributions can be very costly, so try to avoid and correct them as soon as possible. 

    Compare the best TFSA rates in Canada

    If you do over-contribute, you should file a TFSA Return (Form RC243) by June 30 of the next calendar year. The CRA may show leniency by waiving or canceling all or part of the penalty tax. There are three conditions they will consider:

    1. If the tax arose because of a reasonable error.
    2. The extent to which the transaction(s) that lead to the tax also lead to another tax under the Income Tax Act.
    3. The extent to which withdrawals have been made from the TFSA to correct the error.

    If you disagree with a TFSA Notice of Assessment, you have 90 days to submit a Notice of Objection – Income Tax Act (Form T400A). This is a way to formally disagree with CRA’s assessment and request a second review. 

    What to do if… you have RRSP room

    If you have a high taxable income and RRSP contribution room, you may want to consider an RRSP contribution. You can withdraw money from your TFSA and use it to make an RRSP contribution. 

    The most beneficial situation to consider this is if your income is relatively high now, and you expect it to be relatively low in retirement. Especially if you can commit the money to invest for the long-term. 

    [ad_2]

    Jason Heath, CFP

    Source link

  • Can you hedge against a market crash with ETFs? – MoneySense

    [ad_1]

    That approach, however, comes with trade-offs. Higher fees are a real issue, as many alternative strategies rely on active management. Complexity is another. Finding ETFs that genuinely diversify returns rather than just repackage familiar risks is not easy. And even when you get the construction right, one major gap remains. The portfolio is not designed to protect against a true market crash. When I say crash, I mean sudden, deep, double-digit drawdowns like those seen during the 2008 financial crisis or the sudden collapse in March 2020 at the onset of the COVID-19 pandemic. 

    Source: Testfolio.io

    In the sections that follow, I will walk through two ETF approaches that retail investors have access to, highlighting Canadian-listed options where available. It is worth noting up front that the Canadian market is far more limited than the U.S. in this area, but you still have a few options.

    And while these strategies can offer protection in specific scenarios, there is no free lunch. As you will see, the costs, complexity, and implementation challenges often make crash-hedging ETFs difficult to use effectively, even for experienced investors.

    Option 1: Inverse ETFs

    Inverse ETFs are designed to be short-term trading tools that aim to deliver the opposite return of a benchmark over a single trading day. Most track broad market indexes, though some focus on specific sectors or even individual stocks. The key point is that their objective resets daily. They are not built to provide long-term protection.

    A well-known U.S. example is the ProShares Short S&P 500 ETF (NYSEArca:SH). On any given trading day, SH targets a return equal to negative one times the daily price return of the S&P 500. If the index rises 1%, SH should fall about 1%. If the index drops 1%, SH should rise about 1%. In practice, it does a reasonable job of delivering that daily inverse exposure.

    For investors seeking stronger downside protection, leveraged inverse ETFs are also available. These apply leverage to magnify the inverse relationship. An example is Direxion Daily S&P 500 Bear 3X Shares (NYSEArca:SPXS), which targets negative three times the daily return of the S&P 500. If the index falls 1% in a day, SPXS aims to rise roughly 3%. If the index rises 1%, SPXS should fall about 3%.

    Canadian investors have access to similar products now. Instead of using U.S.-listed ETFs, investors can look at options such as the BetaPro -3x S&P 500 Daily Leveraged Bear Alternative ETF (TSX:SSPX). 

    Article Continues Below Advertisement


    During sharp selloffs, these ETFs can do exactly what they are designed to do. During the March 2020 COVID-related market panic, as the S&P 500 plunged, inverse ETFs like SH and leveraged versions such as SPXS rose sharply, with the leveraged funds moving by a much larger magnitude.

    Source: Testfolio.io

    As the chart above shows, the problem with these ETFs turns up once the panic passes. As markets recovered after March 2020, both unleveraged and leveraged inverse ETFs began to fall steadily. This highlights the core limitation of these products: you cannot buy and hold inverse ETFs if you accept that, over time, equity markets tend to rise. A permanent short position against the broad U.S. stock market is structurally a losing bet, which is why issuers are careful to emphasize that these products are intended for day trading only.

    That creates another challenge. Using inverse ETFs effectively requires anticipating the crash and positioning just before it happens, then exiting before the recovery begins. That is market timing, and it’s not only an active strategy; it requires being right twice. Even professional investors struggle with this consistently, and retail investors tend to fare worse.

    The long-term outcomes reflect those headwinds. Over a roughly 17.1-year period from November 5, 2008, to December 18, 2025, a buy-and-hold investment in inverse ETFs like SH and SPXS would have effectively gone to zero after many reverse splits.

    Source: Testfolio.io

    That outcome is driven by several factors. First, the underlying benchmark generally trends upward over long periods. Second, inverse ETFs carry relatively high fees, with expense ratios of 0.89% for SH and 1.02% for SPXS. Third, daily compounding works against investors in volatile markets. When prices swing up and down, the daily reset causes losses to compound faster than gains, creating volatility drag.

    In short, inverse ETFs can provide short-term protection during sudden market declines, but using them as crash insurance requires precise timing. That makes them difficult to implement effectively and risky to hold for longer than a few days.

    [ad_2]

    Tony Dong, MSc, CETF

    Source link

  • 5 money moves to make before the end of the year – MoneySense

    [ad_1]

    1. Revisit your budget

    Budgets are a great tool to help you stay on track with your spending and savings goals, but they need regular updates to maximize their effectiveness. Hopefully, you’ve recorded any changes to your income, expenses, or money objectives throughout the year. If not, now is the time to do a deep update and analyze your progress. 

    If you find evidence of impulse spending, it’s time to make some adjustments. For example, rather than keeping all of your income in an instant-access chequing or savings account, you could tuck some away in an account like EQ Bank’s high-interest no-fee Notice Savings Account. In exchange for giving advance notice of a withdrawal (10 or 30 days), you get a higher interest rate. It’s a win-win for spur-of-the-moment shoppers who want to hold some of their money at arm’s length.

    sponsored

    EQ Bank Notice Savings Account

    go to site

    • Monthly fee: $0
    • Interest rates: 2.60% for 10-day notice, 2.75% for 30-day notice. Read full details on the EQ Bank website.
    • Minimum balance: n/a
    • Eligible for CDIC coverage: Yes

    go to site

    2. Simplify your money management

    If you think managing your own spending and saving is a challenge, try doing it with others! For some people—like couples, family members, or even roommates—budgeting can be complicated by shared expenses or joint savings goals. That’s where a joint bank account can make a huge difference. 

    When you open a joint account, all account holders (you and up to three other people) can deposit, withdraw, and save in the same account. Rather than trying to bookkeep separately, everything is in one place. Make easier money management part of your financial resolutions. Pro-tip: Consider a no-monthly-fee, high-interest bank account like EQ Bank’s Joint Account to keep your money growing. 

    3. Top-up your retirement funds and get a tax break

    Registered retirement savings plans (RRSPs) let you save for retirement in a tax-advantaged account, meaning that every dollar you put away can reduce your taxable income for the following year. Every year, you have a certain amount of contribution room for your RRSP and unused room rolls over into subsequent years. 

    Taxes on your RRSP savings are only due once you withdraw. The idea is that you will be retired at that point, so your tax rate will be lower than during your working years. 

    Although the last day to contribute to your RRSP is in March, many Canadians strive to top up earlier. Not only does this give your savings more time to accumulate interest, but it also ensures that your retirement savings don’t end up inadvertently going to holiday expenses.  

    4. If you need it, consider making a withdrawal from your tax-free savings account (TFSA) before Dec. 31

    Similar to the RRSP, a tax-free savings account (TFSA) is a tax-advantaged registered savings account with a certain amount of contribution room added annually. The difference is that when you put money into a TFSA, you don’t get a tax-break on your income tax. Instead, any gains you earn are yours, tax-free. 

    Article Continues Below Advertisement


    The annual deadline for TFSA deposits is December 31, and on January 1, you get your new contribution room. What you may not know is that when you withdraw funds from your TFSA, the amount you withdraw is added back to your contribution room the following calendar year. 

    So, if you anticipate needing money soon but still want to make use of your full contribution room next year, making a withdrawal before December 31 is a good time to do it because you’ll get that room back quickly. 

    sponsored

    EQ Bank TFSA Savings Account

    GO TO SITE

    • Interest rate: Earn 1.50% on your cash savings. Read full details on the EQ Bank website.
    • Minimum balance: n/a
    • Fees: n/a
    • Eligible for CDIC coverage: Yes, for deposits

    GO TO SITE

    5. Capitalize on saving for a home

    A first home savings account (FHSA) is a tax-advantaged investment that works in a similar way to an RRSP in that the money you deposit can reduce the amount of your taxable income. And, similar to a TFSA, the money you withdraw is tax-free. Each year’s unused contribution room rolls over to the next year, so if you’ve never contributed but open one now, you could deposit up to $16,000 per person (or double that, for a couple) in 2026. 

    Unlike a TFSA or RRSP, you won’t begin accumulating contribution room until you open the FHSA. So, if you don’t have an FHSA but intend to open one, doing so before Dec. 31 can give you an extra year of contribution room in 2025. 

    On the other hand, if you have some extra cash (perhaps a year-end bonus!) to allocate to savings, contributing to your existing account by the December 31 deadline can reduce your taxable income for 2025.

    Get started on a new year’s financial plan

    Year-end is a great time to review your financial health. By choosing the right banking products and making smart investment decisions, you can build momentum toward lasting security and success.

    Get free MoneySense financial tips, news & advice in your inbox.

    Read more about investing:



    About Keph Senett


    About Keph Senett

    Keph Senett writes about personal finance through a community-building lens. She seeks to make clear and actionable knowledge available to everyone.

    [ad_2]

    Keph Senett

    Source link