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Stock Indexed GIC's
- Thread starter inreb
- Start date
Yes, that's me. I've bought from Scotia in the past and more recently TD Canada Trust. It's always around RSP crunch time and involves throwing myself at the mercy of my banker. I'd like to change that.
I would rather own the underlying stocks. Open a discount brokerage account. Pick 5 dividend paying big companies that are unlikely to go bankrupt anytime soon and that are in different segments. Split your funds equally between the 5 and just buy the stocks.
A bank ... an oil/gas company ... a telecom ... a miner ... a manufacturer. Or maybe a food company or a pharmaceutical. Something like that. Pick names of companies that everyone knows. Feel free to stay the heck out of the flavour of the month. Anything high-tech is notorious for being the flavour of the month. (I've never owned AAPL and overall, I'm quite content to have never owned it)
Once in a while, take a look at your portfolio. If something has gone up and is now out of proportion in your account, sell some of it and buy one of the others that has been lagging. "Buy low and sell high"
Another choice is to open that very same brokerage account and buy a broad-market ETF as described above. Personally, I've never owned an ETF because my view of them is that you are getting the bad along with the good.
A bank ... an oil/gas company ... a telecom ... a miner ... a manufacturer. Or maybe a food company or a pharmaceutical. Something like that. Pick names of companies that everyone knows. Feel free to stay the heck out of the flavour of the month. Anything high-tech is notorious for being the flavour of the month. (I've never owned AAPL and overall, I'm quite content to have never owned it)
Once in a while, take a look at your portfolio. If something has gone up and is now out of proportion in your account, sell some of it and buy one of the others that has been lagging. "Buy low and sell high"
Another choice is to open that very same brokerage account and buy a broad-market ETF as described above. Personally, I've never owned an ETF because my view of them is that you are getting the bad along with the good.
You can buy and sell stocks in a registered account. Using a discount brokerage (I use TD Waterhouse), I simply transfer funds into the registered savings account, then buy/sell securities from there.
Interesting. I should dabble in this at first, learn the mechanics of it. For 2013 tax year I'll probably just do the usual random stock indexed GIC as time is now of the essence. Thanks.
I agree with bank stocks. I bought Tesla at $150 and I have a target range for it to be at $225. I think it will do higher in the future, but I will pull out before that. I want to see more products from the company before investing. Right now it's the market dominant, but that won't be for long as other companies catch up. It is first to market which helps it establish a name and credibility.
I recommend bank stocks such as TD, RBC and BNS which are heavily into business banking which is one of the highest growth sectors in banking right now as mortgages as cooled or levelled off.
I recommend bank stocks such as TD, RBC and BNS which are heavily into business banking which is one of the highest growth sectors in banking right now as mortgages as cooled or levelled off.
kwtoxman
Well-known member
bboySushi
Well-known member
Banks are very high right now, I would advise against putting a lot of money into them right now.
A self-directed investment account is the best way to go. It is also very fun and you pay minimal fees and have total control over your own money.
What's interest rate in a bank account these days, like 0.5%? (aside from ING). I've made 15% in the last 2 weeks and I'm no investment guru. Take into consideration also income from stocks/dividends is treated differently that pure income earned, and also add to that the fact that you can invest within an RSP, or a TFSA account and now you're really talking.
A self-directed investment account is the best way to go. It is also very fun and you pay minimal fees and have total control over your own money.
What's interest rate in a bank account these days, like 0.5%? (aside from ING). I've made 15% in the last 2 weeks and I'm no investment guru. Take into consideration also income from stocks/dividends is treated differently that pure income earned, and also add to that the fact that you can invest within an RSP, or a TFSA account and now you're really talking.
eljay
Well-known member
I disagree. As a depositor, you are higher of the credit food chain than an equity holder. I think you should own the strongest competitor. For those afraid of stocks, go for pref shares of banks, and for even less risk, bonds of the same.
For those putting money into GICs in multiples of $5k or more, you should be buying instead bonds of the same bank. You'll probably make more money for less risk. I promise.
For these market linked GICS, replicate and have similar risk with higher potential returns doing the following (assuming 3 years and $5k+ invested. RBC has this with "up to" 3% return per year for 3 years; it's actually worse than that).
step 1: buy bonds of RBC with 90% of the money. Maturity should exceed Feb 2017.
step 2: use the rest of the money to buy the March 2015 $20 Calls on XIU. This isn't rocket surgery. Just phone your brokers helpdesk.
step 3: in Feb 2015, sell your options. buy some March 2016 calls, atm.
step 4: repeat in 2016. Sell everything in Feb 2017.
step 5: get money back( under the scenario the bank does not fail.) And if the market goes up, a hell of a lot more than the GIC.
It's more work, but you did work to get the money in the first place didn't you?
Brian's also right in that it's just easier to buy much less exotic products and just leave it.
For the simplest low risk setting I think just a corporate bond fund plus a broad market ETFs, say 50/50 XCB/XIU. Turn the mix more XCB less XIU to have less risk.
- solving 1st world problems the hard way.
****caveat: I work for a money manager. I'm not a financial adviser. These opinions are totally my own and not likely my employers and are JUST opinions and can not be construed as recommendations. my opinion should only be heeded if you deem it suitable to your situation. you alone are responsible for decisions you make and I nor my employer can be held liable.****
^ That is an interesting strategy. I don't know how to buy a bond through my discount brokerage account. Supposedly there is a way to do it but I haven't figured out how.
As for the calls on XIU ... that's the interesting part of this. For the uninitiated, XIU is an iShares ETF that represents the TSX 60. The current price of XIU as of this very moment is $20.55, so a $20 call is slightly in the money. The March 2015 call's last trade was at $1.38.
The deal with this option is that if, over the next year, XIU goes above $20, that option will have an "intrinsic value" of whatever the difference is (i.e. if XIU goes to $22 then the option will have an "intrinsic value" of $2) plus some additional amount that reflects the risk of the trade - the "risk premium" - which decays over time until eventually, at expiration, the option will be priced at the strike price plus the intrinsic value. Right now, that option on XIU has an intrinsic value of 55 cents and the other 83 cents is the option premium. By selling it a month before expiration, you capture most of the option premium. On the other hand, if XIU goes below $20, the "intrinsic value" will be negative and if it stays below $20, it will expire worthless. This is why you only want to do this with a small fraction of your capital - the small fraction that you can afford to lose if it all goes south.
Hmm, I'm going to keep this strategy in mind. The TSX has been on a tear lately, and I don't like buying at 52-week highs. But, I'll file this strategy away for possible later use. Good idea.
As for the calls on XIU ... that's the interesting part of this. For the uninitiated, XIU is an iShares ETF that represents the TSX 60. The current price of XIU as of this very moment is $20.55, so a $20 call is slightly in the money. The March 2015 call's last trade was at $1.38.
The deal with this option is that if, over the next year, XIU goes above $20, that option will have an "intrinsic value" of whatever the difference is (i.e. if XIU goes to $22 then the option will have an "intrinsic value" of $2) plus some additional amount that reflects the risk of the trade - the "risk premium" - which decays over time until eventually, at expiration, the option will be priced at the strike price plus the intrinsic value. Right now, that option on XIU has an intrinsic value of 55 cents and the other 83 cents is the option premium. By selling it a month before expiration, you capture most of the option premium. On the other hand, if XIU goes below $20, the "intrinsic value" will be negative and if it stays below $20, it will expire worthless. This is why you only want to do this with a small fraction of your capital - the small fraction that you can afford to lose if it all goes south.
Hmm, I'm going to keep this strategy in mind. The TSX has been on a tear lately, and I don't like buying at 52-week highs. But, I'll file this strategy away for possible later use. Good idea.
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