Canadian new to investing in need of advice

General Discussion on the Permanent Portfolio Strategy

Moderator: Global Moderator

Post Reply
alexy
Junior Member
Junior Member
Posts: 5
Joined: Mon May 21, 2018 12:46 am

Canadian new to investing in need of advice

Post by alexy » Thu May 24, 2018 12:51 am

Hi everyone,

I'm new here and new to investing. Not young though, and need advice / help. Not sure if I need to go and hire an advisor, but figured I'll ask here since PP seems like something I believe in and reading the forum shows the wealth of knowledge of members.

Here is my situation. I'm from Canada, I'm 40, family, 2 young kids. Over past 6-7 years we had a single income, expenses are rising as kids grow. Have been really influenced by some friends who are believers of things going to be real bad. I'm into politics, which really supports the negative outlook, but at this time I'm just tired of being negative and came to painful realization that I'm wasting time and opportunities. Most likely I've missed the biggest life opportunities for investing, but worrying about the past is pointless - need to do something about the future.

I've got quite a lot of precious metals, physical in hand as well as physical in storage abroad (gold and sliver). I've got some cash, which is sitting in a savings account, making a bit of money, which is being taxed. In Canada we've got couple of ways for tax free savings - RRSP (analog of 401K in the US) and TFSA (max $5500/year to contribute, no tax on withdrawal).

My questions:
  1. I don't want my cash just be sitting in a savings account. Having it in a PP and being tax free seems like a much better idea. However I then should not be expecting any withdrawals in case I need money. What would be your advice:
    1. create a portfolio while leaving part of my cash amount outside in case I need that and using only part of what I've got?
    2. keep cash portion of PP outside of investment account (and just keep it in cash, savings, some other form)? In case I need money and use what I've got, i'm really screwing my PP.
  2. Should I keep full portfolio to a single investment account to avoid issues when rebalancing? If I have one for me, one for my wife - should I then have fully separate portfolios? If both of us have TFSA and RRSP (see above) - that becomes 4 accounts and there are issues with transferring fund between.
  3. When starting up - should I gradually get into it, eg. every month/quarter buy 20K worth of PP (5K for each part)? Or do you think it's better to do it all at once or over 2-3 purchases?
  4. How do you guys deal with physical gold in the portfolio? It is becoming quite painful / costly to sell/purchase gold with all the fees associated with that.
  5. My ratio is about 1/3 of gold and 2/3 of cash that I've got altogether. So, really heavy on gold.
    1. should I sell off most of it and buy other parts of PP (or GB) to get to 25/25/25/25 allocation right away?
    2. should I gradually be selling it off and buying other parts of PP (or GB)?
    3. should I just be very inbalanced for a while, adding to other three, while keeping all of the gold, trying to get to proper allocation ratio?
Well, I'd really appreciate any suggestions, pointers, ideas. I'm starting to learn, but I'm already realizing that this domain is huge and I really know nothing. It's going to take a while for me.

Thanks!
stuper1
Executive Member
Executive Member
Posts: 1365
Joined: Sun Mar 03, 2013 7:18 pm

Re: Canadian new to investing in need of advice

Post by stuper1 » Thu May 24, 2018 1:32 am

If I understand correctly, currently your portfolio is 1/3 physical gold/silver and 2/3 cash, all of which is held in a regular, taxable account.

As a percentage of your current portfolio, how much will your annual investment contributions be going forward?

Obviously, if you want to use the PP as a framework, you need to buy stocks and long-term bonds using cash and possibly selling some physical gold/silver. However, if your new contributions each year will be a significant percentage of your current portfolio, then maybe you won't need to sell physical gold/silver, although if you have some gold/silver that has gained in value since you bought it, then selling some should be fine.

You should probably take advantage of the TFSA each year if possible (sounds like the US Roth IRA), unless your tax rate in retirement will be lower than your current tax rate. $5,500 per year (hopefully the same amount for your spouse also if allowed) is not a huge amount, but it can start to add up after a while, and if you miss a year of contributions, the opportunity is gone forever -- you don't get that opportunity back, at least not with our Roth IRA, although we do have until April of the following year to make the contribution for the previous year.

Long-term bonds should go in the RRSP.
Stocks should go in the TFSA and then the RRSP.
Physical gold should be held outside the TFSA and RRSP.
You need some cash outside the TFSA and RRSP as an emergency fund I would think, but some can be held in the RRSP to help with minimizing taxes.
alexy
Junior Member
Junior Member
Posts: 5
Joined: Mon May 21, 2018 12:46 am

Re: Canadian new to investing in need of advice

Post by alexy » Sat May 26, 2018 1:33 am

Thank you for your reply!
stuper1 wrote:
Thu May 24, 2018 1:32 am
If I understand correctly, currently your portfolio is 1/3 physical gold/silver and 2/3 cash, all of which is held in a regular, taxable account.
Yes, something to that extent. I wouldn't call what I've got currently "a portfolio" as really it's just cash and gold which I bought a while ago and am still positive on it (silver - not so much).
stuper1 wrote:
Thu May 24, 2018 1:32 am
As a percentage of your current portfolio, how much will your annual investment contributions be going forward?
Not much. I don't think I'll be able to do more than 5-7% annually.
stuper1 wrote:
Thu May 24, 2018 1:32 am
You should probably take advantage of the TFSA each year if possible (sounds like the US Roth IRA), unless your tax rate in retirement will be lower than your current tax rate. $5,500 per year (hopefully the same amount for your spouse also if allowed) is not a huge amount, but it can start to add up after a while, and if you miss a year of contributions, the opportunity is gone forever -- you don't get that opportunity back, at least not with our Roth IRA, although we do have until April of the following year to make the contribution for the previous year.
Fortunately in Canada TFSA contribution room rolls over and we have around 55K each now, so that's pretty sizeable already. I wanted to use that room to keep money outside of taxable savings accounts.
stuper1 wrote:
Thu May 24, 2018 1:32 am
Long-term bonds should go in the RRSP.
Stocks should go in the TFSA and then the RRSP.
Physical gold should be held outside the TFSA and RRSP.
You need some cash outside the TFSA and RRSP as an emergency fund I would think, but some can be held in the RRSP to help with minimizing taxes.
Would keeping parts of portfolio in different accounts make it harder to rebalance? It's hard (if not impossible) to move money between RRSP and TFSA in lots of situations.

Also, I'm confused by the idea of keeping cash in RRSP for the purpose of minimizing taxes. Don't think I understand the idea there - cash would be expensive to take out (taxes at full income) if needed, but keeping it as cash in the account doesn't make sense either.

I also was confused by some people here saying that they "buy" cash in their investment accounts. Does it really mean - investing into something that is very liquid and doesn't go down in value (like GIC or bonds)?
Post Reply