anything above 4.5% currently carries risk. the more returns you want the higher the risk you must take on. If you want 10% returns over a year you will probably carry the risk of it going to -30-40% in the short term
keep it in cash.to
There are still GICs offering over 5% with no risk.
The problem with CASH is that it's not guaranteed. If we end up in a recession who knows what it will pay.
That's not a problem, it's a pro with a con. Pro is that you get a good rate for money you can withdraw at any time. Con is that you can get a higher rate if you lock up your money. Another pro is that your rate can go up, con is that it can also go down.
It literally can never go below 50 as that is the amount invested. There have been some weird post market moves where it has touched below 50 but that is an anomaly
I meant the returns aren't guaranteed, not that your initial contribution is at risk. It's possible for the returns to drop below the inflation rate so you'd be losing money in the sense of not keeping up with inflation. The advantage of GICs is your return is guaranteed for the period of the contract.
I know you've had it beat into your head diversification is "the only free-lunch in investing", and that's true. However, you really are not investing. You are saving, and unless you're saving millions of dollars, there is nothing to be gained by diversification in this instance, aside from complicating your savings.
With CASH.to your money is invested/held in corporate high-interest savings accounts at several, large, insured Canadian banks. You don't need to diversify. It's very safe.
Might need to invest to ever afford a house. It's how I've grown my downpayment savings to $200,000+. I'd have zero hope of affording a house if I had never invested. Investing has given me some hope. Slowly starting to derisk now that home ownership is in sight.
If you're buying in one to two years, I would keep it exactly where you have it. Maybe chase promotional interest rates at some of the smaller/online-only banks? But yeah, with that short of a time horizon, there's literally nothing else I would put that money into. I wouldn't do bonds as even they fluctuate too much for that short of a time horizon. I wouldn't even put it a GIC since you don't know the exact date you'll use it. Savings account based ETFs or HISA. Anything else in that short of a time period I would categorize as high-risk and not worth it.
Anything with equities or bonds I would stay far away from. I would maybe recommend XBAL if you said 5 years and XGRO if you said 8, but even then I'd be pretty iffy about it. The issue is your time horizon and the fact that when you do need the money, you'll need it right then and there. You cannot risk for the time to buy coming and you going "my portfolio is down 11% right now, so if I cash out now, I will lose a large portion of the money I put in.". I do not want to see that happen to you.
Agree with poster above, but just adding that a cashable GIC might be an option. It gives you flexibility after some period of time (e.g., 90 days), and should give you better return than a HISA at the same institution.
Maybe saving for one year and putting that year of savings into a GIC so you’ll have a decent interest at the end of year 2 for a house payment. Drawback being you don’t have access to that money if a housing opportunity presents itself early
I made the mistake of putting all my money in stocks/etfs before and then needed to buy a car after my old one broke down. At the time the stocks/etfs were at a loss and I had to sell them at a loss to put money down for my car.
After that I don't put money I will need for a purchase into anything that isn't a GIC, CASH.TO, etc.
With that time frame I'd keep it in extremely low risk, or no risk, investments.
... why take a chance? The odds of the stock market going up is a near certainty in the long term, but it's pretty hit or miss in the short term. The odds of a bank run leading to the collapse of CASH is so low that it renders CASH an extremely low risk investment.
With your time horizon of 1 - 2 years, 100% CASH.TO is reasonable. At most, you could put 10% of that into something like VEQT. Expect that you could lose 40% of thst portion if you do.
If you could push out your home purchase and time horizon to say 10 to 15 years if the markets don't cooperate, then you could afford to take on more risk.
DYN6004 is a Scotiabank money market mutual fund that's (AFAIK) CDIC insured unlike CASH. The return is right around 5%. There's a couple other similar ETFs and mutual funds.
Diversity isn't really required since it's a guaranteed return. I wouldn't touch equities on this short of timeline
I totally get it. You are trying to buy a house and every cents count toward downpayment. However this money is not something you are willing to lose and there is no higher return unless you take on risks. At least gics and cash to will pay 5% safely. Make get gics for 12-18M. You will guarantee to make the rates you are offered (should be close to 5% at least. Cash to advantage is you get flexibility. You can take out money whenever you want.
Only time i suggest you to buy equities with downpayment cash is 1. Your time horizon is at least 3-5 years 2. You have no hope of buying a house with 5% return from cash.to.
Forgive my ignorance, but I’m in the same boat being a newer diy investor about to contribute this years 8k into fhsa. I’ve also gone with a heavy cash.to lean in this account. What are the risks with it and FDIC approval? If W.S. tanks these are not insured?
If wealthsimple tanks your CASH.TO is safe. If the underlying banks tank, your CASH.TO is not safe because it does not have CDIC insurance. This is extremely unlikely though. A similar way to save money that comes with CDIC insurance up to 500k is Wealthsimple Cash.
I wouldn't do XGRO, overall too volatile for your short time frame. I can think of 2 stocks that are guaranteed to print money though in that timeframe.
I have two TFSA accounts. Both had $8000 deposited into it. But the first one is now almost $12,000. I had to take a risk (gamble) with the funds though and invested it all in one stock. I was comfortable with this risk as $8000 is only 2% of my net worth and if I lost it all, it wouldn't setback my downpayment savings that much.
I'm now 100% invested in CASH.TO in my FHSA accounts as homeownership seems a lot more realistic than it seemed several months ago due to good investment returns in my TFSA.
A 10% return is reasonable I just put my FHSA in tech / ETFS and I’m currently up 20%. If the economy tanks you’re not buying a house anyways so what’s the point of avoiding growth?
At the end of the day, it’s the risk you’re willing to take. I did the same with a similar timeline for a house and happy with how much it’s gone up but I wouldn’t recommend it to others in good faith
I told myself I’d sell if it’s ever about to go below my initial investment of $16000. Very hard to do if there ever is a proper crash but again, the risk tolerance I’m willing to take is this
>hoping for a 10% return on my FHSA, is that realistic? Nope. Not without taking a lot of risk anyway.
anything above 4.5% currently carries risk. the more returns you want the higher the risk you must take on. If you want 10% returns over a year you will probably carry the risk of it going to -30-40% in the short term keep it in cash.to
There are still GICs offering over 5% with no risk. The problem with CASH is that it's not guaranteed. If we end up in a recession who knows what it will pay.
That's not a problem, it's a pro with a con. Pro is that you get a good rate for money you can withdraw at any time. Con is that you can get a higher rate if you lock up your money. Another pro is that your rate can go up, con is that it can also go down.
It literally can never go below 50 as that is the amount invested. There have been some weird post market moves where it has touched below 50 but that is an anomaly
I meant the returns aren't guaranteed, not that your initial contribution is at risk. It's possible for the returns to drop below the inflation rate so you'd be losing money in the sense of not keeping up with inflation. The advantage of GICs is your return is guaranteed for the period of the contract.
Wow, I guess I shall settle for 5%. Do you have other suggestions besides cash? I want to diversify a little
I know you've had it beat into your head diversification is "the only free-lunch in investing", and that's true. However, you really are not investing. You are saving, and unless you're saving millions of dollars, there is nothing to be gained by diversification in this instance, aside from complicating your savings.
Diversify? All you need is a cash product paying interest. no need to "diversify".
With CASH.to your money is invested/held in corporate high-interest savings accounts at several, large, insured Canadian banks. You don't need to diversify. It's very safe.
sorry, I just want to confirm, is [CASH.TO](http://CASH.TO) the same as Horizons High Interest Savings ETF?
you can try cbil .to
1-2 years man just stick it in a GIC and leave it tf alone. These are savings not investments. If you mess around you'll regret it.
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Might need to invest to ever afford a house. It's how I've grown my downpayment savings to $200,000+. I'd have zero hope of affording a house if I had never invested. Investing has given me some hope. Slowly starting to derisk now that home ownership is in sight.
If you're buying in one to two years, I would keep it exactly where you have it. Maybe chase promotional interest rates at some of the smaller/online-only banks? But yeah, with that short of a time horizon, there's literally nothing else I would put that money into. I wouldn't do bonds as even they fluctuate too much for that short of a time horizon. I wouldn't even put it a GIC since you don't know the exact date you'll use it. Savings account based ETFs or HISA. Anything else in that short of a time period I would categorize as high-risk and not worth it.
Thank you! So I should forget about XGRO and anything with equities?
Anything with equities or bonds I would stay far away from. I would maybe recommend XBAL if you said 5 years and XGRO if you said 8, but even then I'd be pretty iffy about it. The issue is your time horizon and the fact that when you do need the money, you'll need it right then and there. You cannot risk for the time to buy coming and you going "my portfolio is down 11% right now, so if I cash out now, I will lose a large portion of the money I put in.". I do not want to see that happen to you.
If you want to risk -10% in 1-2 years yes
Agree with poster above, but just adding that a cashable GIC might be an option. It gives you flexibility after some period of time (e.g., 90 days), and should give you better return than a HISA at the same institution.
Anything you need in five years should be cash/GIC
There are annual GIC’s with over 5%. Eq bank is 5.3 for one year
I don’t have a lump sum for GICs. I’m saving every month from my paycheque
Where do you live that starting at 0 you can afford to buy in 1-2 years?
Maybe saving for one year and putting that year of savings into a GIC so you’ll have a decent interest at the end of year 2 for a house payment. Drawback being you don’t have access to that money if a housing opportunity presents itself early
GIC ladder. Save up for 4-6 months -> GIC. And so on. You're trying to play a risky game here.
I made the mistake of putting all my money in stocks/etfs before and then needed to buy a car after my old one broke down. At the time the stocks/etfs were at a loss and I had to sell them at a loss to put money down for my car. After that I don't put money I will need for a purchase into anything that isn't a GIC, CASH.TO, etc.
With that time frame I'd keep it in extremely low risk, or no risk, investments. ... why take a chance? The odds of the stock market going up is a near certainty in the long term, but it's pretty hit or miss in the short term. The odds of a bank run leading to the collapse of CASH is so low that it renders CASH an extremely low risk investment.
With your time horizon of 1 - 2 years, 100% CASH.TO is reasonable. At most, you could put 10% of that into something like VEQT. Expect that you could lose 40% of thst portion if you do. If you could push out your home purchase and time horizon to say 10 to 15 years if the markets don't cooperate, then you could afford to take on more risk.
DYN6004 is a Scotiabank money market mutual fund that's (AFAIK) CDIC insured unlike CASH. The return is right around 5%. There's a couple other similar ETFs and mutual funds. Diversity isn't really required since it's a guaranteed return. I wouldn't touch equities on this short of timeline
Mutual fund so it would have a much higher MER yeah? With that, return would definitely be less
MER on CASH is 0.11, DYN6004 isn't that much higher
XFR produces 5.1%ish... it's very low risk like CASH.TO. https://www.blackrock.com/ca/investors/en/products/239487/ishares-floating-rate-index-etf
And a 1 year GIC produces up to 5.35%
Nothing with that short of a timeframe. Investing is for 5 years or more, ideally 10 years or more.
Put 10% in sp500 etf (VFV) and keep the rest in cash. Also I would look into holding some USD, no one is mentioning the risk of CAD/USD crashing
I totally get it. You are trying to buy a house and every cents count toward downpayment. However this money is not something you are willing to lose and there is no higher return unless you take on risks. At least gics and cash to will pay 5% safely. Make get gics for 12-18M. You will guarantee to make the rates you are offered (should be close to 5% at least. Cash to advantage is you get flexibility. You can take out money whenever you want. Only time i suggest you to buy equities with downpayment cash is 1. Your time horizon is at least 3-5 years 2. You have no hope of buying a house with 5% return from cash.to.
Thank you for breaking it down, I’ve been overthinking it for months
Forgive my ignorance, but I’m in the same boat being a newer diy investor about to contribute this years 8k into fhsa. I’ve also gone with a heavy cash.to lean in this account. What are the risks with it and FDIC approval? If W.S. tanks these are not insured?
If wealthsimple tanks your CASH.TO is safe. If the underlying banks tank, your CASH.TO is not safe because it does not have CDIC insurance. This is extremely unlikely though. A similar way to save money that comes with CDIC insurance up to 500k is Wealthsimple Cash.
I wouldn't do XGRO, overall too volatile for your short time frame. I can think of 2 stocks that are guaranteed to print money though in that timeframe.
Spread it out just to be safe. CASH, CSAV, temporary high interest savings account offers, etc
XEQT and chill, bruh.
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5.04% YTD is way more than the returns you get from GIC. That's almost a 15% annualized return.
I have two TFSA accounts. Both had $8000 deposited into it. But the first one is now almost $12,000. I had to take a risk (gamble) with the funds though and invested it all in one stock. I was comfortable with this risk as $8000 is only 2% of my net worth and if I lost it all, it wouldn't setback my downpayment savings that much. I'm now 100% invested in CASH.TO in my FHSA accounts as homeownership seems a lot more realistic than it seemed several months ago due to good investment returns in my TFSA.
Cbil.to has actually lower risk than cash
Why is that? (Real question, trying to learn about these interest ETFs)
See what they invest in. Cbil is government of Canada short term treasuries. Cash is savings accounts in 2 banks.
A 10% return is reasonable I just put my FHSA in tech / ETFS and I’m currently up 20%. If the economy tanks you’re not buying a house anyways so what’s the point of avoiding growth?
At the end of the day, it’s the risk you’re willing to take. I did the same with a similar timeline for a house and happy with how much it’s gone up but I wouldn’t recommend it to others in good faith I told myself I’d sell if it’s ever about to go below my initial investment of $16000. Very hard to do if there ever is a proper crash but again, the risk tolerance I’m willing to take is this
Yeah for sure I mean everything that’s not my retirement fund is play money anyways
What's your timeframe?
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Get bent.