Before we get started, it’s important to note that robo advisors are not robots. While the process of investing is automated by an algorithm, that algorithm is created and monitored by financial professionals; human beings who are also there to handle customer service requests.

Robo investing is great for those who are looking for a ‘set it and forget it’ type of strategy to save for their retirement. There are a number of robo advisors in Canada including Justwealth; the subject of this Canadian robo advisor review.

Justwealth runs off the motto “investing the way it should be”. This Canadian robo advisor prides themselves in offering a diverse selection of investment services that are convenient, affordable, and fit the needs of their clients. In this Justwealth review, I’m going to help you determine if they are the right robo advisor for your needs.

Justwealth Accounts

Justwealth has a variety of accounts to choose from including the following:

• RRSP
• Spousal RRSP
• TFSA
• RESP
• Non-Registered taxable account
• RRIF
• Locked-In Retirement Account
• Life Income Fund
• RDSP
• FHSA

Once you choose the account that is best suited for your interests, you will be asked several questions to help determine your risk tolerance and goals. A personalized portfolio will be selected for you based on your answers and will be automatically adjusted as required.

Interested individuals should note that you will need to invest a minimum of $5000 to open an account with Justwealth, unless you are opening a RESP or FHSA which has no minimum.

Already have an RRSP or other investment accounts? Read on how you can transfer it here. Justwealth will even cover your institution’s transfer fees up to $150 for accounts of $25,000 or more.

Bonus: Money We Have readers can get up to $500 for free when you sign up for Justwealth through my referral link.

Justwealth Fees

One of the great things about Justwealth is that their fees are very straightforward and easy to understand.

• Accounts under $500,000 will be charged a 0.5% management fee
• Amounts over $500,000 will be charged a 0.4% management fee
• Minimum monthly fee of $4.99 if your annual 0.5% fee is less than $4.99 per month

Justwealth has a fee structure that’s a tiered system, similar to what Wealthsimple and other robos do. If you have over $500,000 invested, then the first $500K is charged a 0.5% management fee and any additional amounts above that are charged a 0.4% fee. The first $500K is always a 0.5% fee regardless of how much the client has invested.

On top of this, there is an MER fee on the ETFs in your portfolio of about 0.25%, which means your fee overall annual fee is roughly .60% – .70%.

The minimum monthly fee of $4.99 per month only applies if the 0.5% annual Justwealth fee (divided over 12 months) is less than $4.99 per month. The minimum monthly fee for RESP or FHSA accounts is $2.50/month.

Clients will be charged the minimum monthly fee OR the 0.5% annual fee, whichever one is greater.  However, clients will NEVER be charged both fees.  It is always one or the other.

This fee structure is incredibly low when you consider that the average mutual fund MER is 2%. It’s not as cheap as doing things yourself, but you’re basically paying a low fee for the convenience.

Justwealth review

Justwealth started in 2016, so it’s one of the longest-established robo-advisors in Canada. There are decades of hands-on experience behind the creation of this Canadian robo advisor, including many people who have diverse backgrounds. It’s a strong, knowledgeable team that is more than capable of handling and taking care of your financial needs.

Justwealth stands out from other Canadian robo advisors because each individual that signs up will receive a portfolio advisor and support team. In addition, you can request financial planning services for free if you’re a client. Portfolio reviews are also free to anyone, client or not. According to Justwealth, they offer the largest portfolio collection of any robo advisor available in Canada; they offer 80 portfolio options using 50 different ETFs. While this may seem like a lot, your dedicated portfolio advisor will help you choose what makes sense for your individual situation.

Justwealth’s strength lies in its Registered Education Savings Plan (RESP) portfolios, which use target dates.  Target-date portfolios gradually change their asset allocation over time. They are more heavily invested in equities in the early years to maximize growth, and over time, they gradually shift to safer investments as your child gets closer to their post-secondary education.

The same applies to their Retirement Target Date portfolios, but in reverse fashion as it gradually becomes more conservative as you’ll eventually need to draw down.

What may also interest people is Justwealth’s line of tax-efficient portfolios that have been optimized for after-tax performance in non-registered accounts.

Additionally, Justwealth has a fiduciary requirement. This means that the financial advisors at Justwealth are obligated to put their clients’ welfare and interest above all else. This is a huge benefit to have if you are looking for somewhere to help you manage your money and save for the future.

Pros and cons of Justwealth

Of course, like any other robo advisor, Justwealth isn’t perfect. Here’s a breakdown of the main pros and cons.

Justwealth pros

• Large selection of portfolio types
• Fiduciary requirement
• Personal advice options available
• Up to $500 cash bonus offer for Money We Have readers

Justwealth cons

• Minimum investment requirement of $5000
• More expensive than doing it yourself

How Justwealth compares to others

So, how does Justwealth compare to other Canadian robo advisors?

Well, Justwealth definitely takes the proverbial cake when it comes to portfolio options, which is definitely something to keep in mind when choosing the best robo advisor for your needs. Another huge benefit that makes Justwealth a standout is the fiduciary requirement – something that will definitely bring a little peace of mind to those new to investing or those who are on the fence about robo advisors.

As mentioned, their RESP options are excellent and are arguably the best of all Canadian robo advisors.

However, the biggest pitfall of Justwealth is the minimum requirement of $5000. While this sum likely isn’t a big deal if you are considering switching your RRSP, it’s a large amount for young investors or those just starting out. Especially when you consider that Wealthsimple and Nest Wealth have no minimum requirement and Questwealth Portfolios only require $1,000.

Transferring your TFSA and/or RRSP to Justwealth is easy as they can ensure you don’t pay any taxes.

Final thoughts

Clearly, my Justwealth review is positive. With its fiduciary requirement and a large selection of portfolio options, Justwealth proves itself to be one of the top contenders when it comes to Canadian robo advisors. It’s an especially great choice for those who want to take advantage of the low fees and simplicity of a robo advisor, but still want to have easy access to a support team.

With competition being tough, many consumers would chase the highest interest rates, but that often required you to constantly switch banks. To combat this issue, horizons introduced CASH.to, a High Interest Savings exchange-traded fund (ETF). When looking at the yields, it’s obvious that CASH.to is a great choice for those looking to invest in fixed income. But what is CASH.to, is it safe, and how do you buy CASH.to? I’ve got all the answers in this CASH.to guide.

Understanding CASH.to?

CASH.to represents the ticker symbol for the Horizons High Interest Savings ETF listed on the Toronto Stock Exchange. The “.to” extension indicates that it trades on Canada’s main stock exchange.

This exchange-traded fund focuses on generating monthly income for investors by allocating assets into high-interest deposit accounts held with Canadian chartered banks. The fund’s primary goal centres on maximizing your monthly distributions while maintaining capital preservation and liquidity.

When you invest in CASH.to, you gain exposure to Canadian dollar-denominated cash-equivalent investments without needing to manage multiple bank accounts yourself. The ETF operates as a convenient vehicle for parking cash while earning competitive interest rates that often exceed traditional savings accounts.

How Does CASH.to Work?

When you invest in CASH.to, your funds are pooled with other investors’ money and placed into high-interest savings accounts at major Canadian financial institutions. The fund manager actively seeks out accounts offering the strongest returns and can shift money between institutions to maximize yields.

This pooling strategy provides a significant advantage. Because CASH.to manages billions of dollars in assets, it can negotiate better rates than individual investors typically access on their own.

Key operational features:

• Monthly distributions are paid directly to your brokerage account
• You must hold shares by the ex-dividend date to receive that month’s payment
• The fund continuously reallocates capital to maintain optimal yields
• Returns reflect the aggregated performance of multiple high-interest accounts

The mechanics mirror those of a standard savings account, where you deposit money and receive interest payments. The main difference is that CASH.to leverages institutional scale to secure enhanced rates for investors.

How do CASH.to Yields Work?

CASH.TO generates returns based on interest earned from deposits held at Canadian financial institutions. The fund’s performance fluctuates with prevailing interest rates. During 2021’s historically low rate environment, yields hovered around 0.6%. Current interest rates have pushed yields into the 3.5% to 4.5% range.

These rates typically exceed what you can access by opening accounts directly with banks. The quoted yields represent annual figures. You receive distributions monthly, calculated as roughly one-twelfth of the annual rate.

The fund charges a management expense ratio of 0.11%. This fee is deducted before your yield is calculated and posted, meaning the rate you see already accounts for costs. You don’t need to subtract anything additional to determine your actual return.

Your distributions arrive as monthly deposits into your brokerage account if you hold shares by the ex-dividend date. This structure mirrors traditional savings accounts but operates through the exchange-traded fund framework.

How Does the Share Price of CASH.to Function?

The share price of CASH.to operates on a predictable cycle tied to its monthly distributions. The ETF maintains a floor net asset value of $50, which means the trading price stays at or above this baseline.

Throughout each month, the share price gradually increases as the fund accrues interest income. This daily appreciation continues until the distribution payment date arrives. On the ex-dividend date, the share price typically reaches its monthly peak before resetting to the $50 minimum after the distribution is paid out.

Key pricing mechanics:

• The price climbs each trading day incrementally
• The increase reflects the accumulating distribution value
• The share price drops back to $50 after the payout

This structure means that the timing of your purchase makes little difference to your returns. When you buy at a higher price mid-month, you’re paying for the upcoming distribution that’s already embedded in the cost. The distribution you receive offsets the elevated purchase price, resulting in a neutral timing effect for investors.

How Are You Taxed on CASH.to?

When you hold CASH.to in a non-registered account, you’ll pay tax on the monthly distributions as interest income. This interest gets added directly to your total income for the year and taxed at your marginal tax rate.

If you sell your CASH.to shares for more than you paid, you’ll trigger a capital gain. The tax treatment works like this: only 50% of your capital gain is added to your taxable income. For example, if you sell shares and realize a $100 profit, you’ll include $50 in your taxable income, which is then taxed according to your marginal rate.

Registered accounts work differently:

• RRSP
• TFSA
• LIRA
• RESP

When you hold CASH.to in any of these registered accounts, you don’t need to track interest or capital gains. You won’t owe any tax on distributions or price appreciation within these accounts.

How to buy CASH.to?

You can buy CASH.to via your broker or your online discount brokerage account. CASH.to can be held in all registered and non-registered investment accounts.

CASH.to is eligible for placement in registered accounts such as TFSAs and RRSPs, as well as non-registered investment accounts. Your brokerage may charge a commission for executing the trade, though many platforms now offer commission-free ETF purchases.

Important limitation: Certain financial institutions restrict access to this ETF. TD Direct Investing currently blocks clients from purchasing CASH.to, which appears to be a business decision rather than a regulatory restriction.

Before placing your order, verify that your brokerage permits CASH.to transactions. If your current platform doesn’t support it, you may need to transfer funds to a different brokerage that allows High Interest Savings ETF purchases.

CASH.to vs. GICs

CASH.to and GICs represent two distinct approaches to cash management in Canada. GICs are fixed-term products offered by banks and trust companies that lock in a specific rate of return for a predetermined period.

The yield structure differs significantly between these options. A GIC provides a fixed interest rate that remains constant throughout its term, whether that’s one year or longer. CASH.to distributes monthly dividends that fluctuate based on prevailing market conditions and short-term interest rates.

Liquidity is another key distinction. GICs typically require you to commit your funds for the entire term, restricting access until maturity. You can trade CASH.to shares during Toronto Stock Exchange hours, providing the ability to access your capital when needed.

Protection and costs also vary. Eligible GICs qualify for CDIC coverage up to $100,000, safeguarding your principal. CASH.to does not carry this insurance protection. Additionally, CASH.to charges management fees that reduce your net returns, while GICs have no associated fees.

Overall, CASH.to gives you more flexibility than GICs since you can withdraw your funds at any time. However, you need to pay fees for CASH.to and there’s no CDIC insurance.

Comparing CASH.to with Other Options

Besides GICs, there are a few other alternatives to CASH.to that are worth considering:

High Interest Saving Accounts

ou can bypass CASH.to entirely by placing funds directly into a high-yield savings account. The returns from CASH.to typically exceed what most banks offer on standard deposit accounts.

Higher rates may be available through promotional offers for new deposits, but this requires effort on your part to transfer money between institutions and open multiple accounts. A key benefit of direct deposits is CDIC protection, which covers your money if you open an eligible account with a member institution of the Canadian Deposit Insurance Corporation.

CASH.to does not provide CDIC coverage, making direct savings accounts more secure for those prioritizing capital protection.

Money market funds

Money market funds are funds that invest in short-term bonds. They typically invest in bonds that have a maturity of less than 30 or 60 days so their yield can follow the interest rate movements. This can be a decent alternative to CASH.to, but investors should look at the quality of all bonds within the funds to make sure they match their risk profile.

What Happens to CASH.to if Interest Rates Drop?

When interest rates decline, your CASH.to distributions will decrease accordingly. The fund generates returns by depositing cash into Canadian bank accounts, and these earnings fluctuate with prevailing interest rates.

Your monthly payouts will shrink as the fund earns less on its holdings. During periods of historically low rates, distributions can fall significantly—potentially to levels similar to 2021 when yields hovered around 0.6%.

Key impacts on your investment:

• Lower monthly distributions
• Reduced annual yield percentage
• Decreased passive income generation

The fund’s performance remains directly tied to what Canadian banks pay for deposits. You won’t receive fixed returns, as the yield adjusts continuously based on market conditions.

Is CASH.to Safe?

CASH.to does not carry CDIC insurance, which distinguishes it from GICs or traditional high-interest savings accounts. This lack of insurance coverage applies to all ETFs, stocks, preferred shares, and bonds, not just CASH.to specifically.

The ETF deposits funds into accounts at major Canadian financial institutions, including National Bank, Scotiabank, and CIBC. Canadian banks rank among the most secure financial institutions globally, which provides a degree of safety for your investment.

While you cannot consider CASH.to 100% safe due to the absence of CDIC protection, the risk remains relatively low. If one of Canada’s major banks were to collapse, the resulting economic crisis would likely overshadow concerns about individual deposit losses.

Key Safety Considerations:

• No CDIC insurance coverage
• Funds held at multiple established Canadian banks
• Canadian banking system has strong stability record
• Risk comparable to other ETF investments

Your money faces minimal risk under normal economic conditions, though you should understand the differences between ETF holdings and insured deposit accounts.

Final Thoughts

CASH.TO stands out as a practical choice for parking funds you want to keep accessible. You won’t be locked into your capital for months or years, as you would with fixed-term products. The ability to trade during market hours gives you flexibility that traditional savings products can’t match.

You can hold this ETF in your TFSA, RRSP, or any other account type you already have. This means you won’t need to open additional accounts or juggle multiple institutions. The competitive interest distribution makes it worth considering, though you should weigh the absence of CDIC coverage against your own risk tolerance and financial goals.

The popularity of this fund reflects its usefulness for investors seeking liquidity combined with reasonable returns on cash holdings.

Have you ever found yourself thinking, “I really want to start investing, but where do I even begin?” It’s easy to feel overwhelmed – between all the jargon, acronyms, and that mysterious “ticker talk” (yes you got it, those ETF symbols), it can seem like a lot to handle. Figuring out what to invest in, how much of each asset to hold, and when to rebalance? It’s enough to make anyone feel stuck, even the most analytical among us.

But here’s the thing: investing doesn’t have to be intimidating. BMO’s Asset Allocation ETFs are designed to take the complexity out of the equation, giving you an all-in-one solution that balances your portfolio without all the stress and second-guessing.

What are Asset Allocation ETFs?

Asset allocation ETFs are portfolios built with a pre-determined asset mix. Within that mix, you’ll find a variety of asset classes, like fixed income and equities, across various indexes, sectors, and countries. Instead of having to manually automate and rebalance your portfolio, these ETFs have an automated re-balance set to bring it back to your determined asset mix, for a low cost.

For example, the BMO All-Equity ETF (ZEQT) focuses on growth by allocating a higher percentage to equities, while the BMO Conservative ETF (ZCON) has a conservative approach with a higher allocation to fixed income securities. This flexibility means that investors, whether just starting out or nearing retirement, can find a product that matches their goals.

Asset allocation ETFs provide a one-stop-shop for those looking for broad diversification, considering each investors unique goals and desired asset mix.

Solving a Problem: The Origins of Asset Allocation ETFs

To understand the popularity and importance of asset allocation ETFs, it can help to look back in time to how these useful tools came to existence. The concept was born out of a problem faced by many investors: managing a diverse investment portfolio, while sticking to their chosen asset allocation.

Imagine an investor in the early 2000s with a mix of individual stocks, bonds, and perhaps some mutual funds. Every year, they had to review their portfolio and adjust the weightings to match their evolving goals, all while considering tax implications, trading costs, and time constraints. Not only was this time-consuming, but there was also room for human error—sometimes leading to portfolios that were overly concentrated in certain sectors or regions.

The financial crisis of 2008 further highlighted the need for better portfolio management. Investors who had failed to properly diversify or rebalance suffered significant losses, while those who had a more disciplined approach weathered the storm more effectively.

Recognizing these challenges, ETF providers like BMO saw an opportunity to create a product that simplified the investment process. The idea was simple but powerful: create an all-in-one ETF that would offer diversification, automatic rebalancing, and cost efficiency. By using ETFs as the building blocks, providers could offer exposure to global markets and different asset classes at a fraction of the cost of traditional mutual funds. Thus, the asset allocation ETF was born.

Source: BMO Global Asset Management, BMO Growth ETF (ZGRO:TSX), as of September 18^th 2024 

The portfolio holdings are subject to change without notice and may only represent a small percentage of portfolio holdings. They are not recommendations to buy or sell any particular security.

Why Does the Mix Matter?

The famous Brinson, Hood, and Beebower (BHB) study, published in 1986, found that over 90% of a portfolio performance variability is driven by asset allocation, not stock picking or market timing.

This shifted how investors approach portfolio management, emphasizing the importance of diversification across asset classes for long term success. Most asset allocation ETFs, or funds for that matter, are now built on this principle. Reinforcing the idea that asset allocation, rather than stock-picking or timing, drives the bulk of long-term investing success – a perfect fit for investors looking for a hands-off “couch-potato” way to build their wealth.

Why Asset Allocation ETFs

Simplicity and Convenience

With asset allocation ETFs, they take care of the heavy lifting. With automatic rebalancing and built-in diversification, you get a hands-off investment strategy.

Diversification

These ETFs provide exposure to a broad mix of global stocks, ensuring you’re well diversified across sectors and regions, whether you prefer a conservative, growth, or somewhere in between approach.

Cost-Effective

One of the biggest advantages of ETFs is their cost-effectiveness, and BMO asset allocation ETFs are no exception. Additionally, with fewer transactions needed to maintain the portfolio, investors can avoid high trading costs.

Long-Term Focus

Asset allocation ETFs are designed with a long-term perspective in mind, making them ideal for investors focused on building wealth. By keeping a steady asset mix and rebalancing regularly, these ETFs help investors avoid emotional decision-making that often leads to buying high and selling low.

The T Series: A Tailored Solution for Retirees

One of the newer innovations in BMO’s lineup of asset allocation ETFs is the T series¹, specifically designed for retirees and those nearing retirement. Retirees often face the challenge of generating a steady cash flow from their investments while minimizing the risk of running out of money. The T series solves this problem by offering a systematic withdrawal plan, allowing investors to receive monthly cash flow helping to ease retirement planning.

For example, the BMO Balanced ETF (T6 Series) (ZBAL.T) is a T series ETF designed to provide steady cash flow by investing in a balanced mix of equities and bonds. The fund pays out fixed monthly distributions (6% annualized)² that are a blend of income and return of capital, which is especially valuable for in retirement.

Final thoughts

BMO Asset Allocation ETFs offer a simple, diversified, and cost-effective solution for investors at every stage of life. Whether you’re just starting out, looking for steady growth, or planning for retirement, these ETFs provide the perfect blend of convenience and financial security. For retirees, the T series includes the benefits of consistent cashflow, making it easier to manage withdrawals during retirement.

With BMO’s asset allocation ETFs, investors can feel confident in their financial future, knowing they’ve chosen a product that aligns with their long-term goals and offers peace of mind in any market condition.

For more information visit BMO Global Asset Management to learn more.

^{1 T series – These units are Fixed Percentage Distribution Units that provide a fixed monthly distribution based on an annual distribution rate of 6%. Distributions may be comprised of net income, net realized capital gains and/or a return of capital. The monthly amount is determined by applying the annual distribution rate to the T Series Fund’s unit price at the end of the previous calendar year, arriving at an annual amount per unit for the coming year. This annual amount is then divided into 12 equal distributions, which are paid each month.}

^{2 Standardized Performance: ZBAL.T, BMO Balanced ETF (T6 Series) 1 Year: 15.91%, Since Inception: 5.96% as of August 30th, 2024.
ZGRO.T, BMO Growth ETF (T6 Series) 1 Year: 18.78%, Since Inception: 14.61% as of August 30th, 2024.}

^Disclaimer:

^{This article has been sponsored by BMO ETFs.}

^{All investments involve risk. The value of an ETF can go down as well as up and you could lose money. The risk of an ETF is rated based on the volatility of the ETF’s returns using the standardized risk classification methodology mandated by the Canadian Securities Administrators. Historical volatility doesn’t tell you how volatile an ETF will be in the future. An ETF with a risk rating of “low” can still lose money. For more information about the risk rating and specific risks that can affect an ETF’s returns, see the BMO ETFs’ prospectus.}

^{This article is for information purposes. The information contained herein is not, and should not be construed as, investment, tax or legal advice to any party. Particular investments and/or trading strategies should be evaluated relative to the individual’s investment objectives and professional advice should be obtained with respect to any circumstance.}

^{The viewpoints expressed by the author represents their assessment of the markets at the time of publication. Those views are subject to change without notice at any time. The information provided herein does not constitute a solicitation of an offer to buy, or an offer to sell securities nor should the information be relied upon as investment advice. Past performance is no guarantee of future results. This communication is intended for informational purposes only.}

^{Any statement that necessarily depends on future events may be a forward-looking statement. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Although such statements are based on assumptions that are believed to be reasonable, there can be no assurance that actual results will not differ materially from expectations. Investors are cautioned not to rely unduly on any forward-looking statements. In connection with any forward-looking statements, investors should carefully consider the areas of risk described in the most recent prospectus.}

^{Distribution yields are calculated by using the most recent regular distribution, or expected distribution, (which may be based on income, dividends, return of capital, and option premiums, as applicable) and excluding additional year end distributions, and special reinvested distributions annualized for frequency, divided by month end net asset value (NAV). The yield calculation does not include reinvested distributions. Distributions are not guaranteed, may fluctuate and are subject to change and/or elimination. Distribution rates may change without notice (up or down) depending on market conditions and NAV fluctuations. The payment of distributions should not be confused with the BMO ETF’s performance, rate of return or yield. If distributions paid by a BMO ETF are greater than the performance of the investment fund, your original investment will shrink. Distributions paid as a result of capital gains realized by a BMO ETF, and income and dividends earned by a BMO ETF, are taxable in your hands in the year they are paid. Your adjusted cost base will be reduced by the amount of any returns of capital. If your adjusted cost base goes below zero, you will have to pay capital gains tax on the amount below zero.}

^{Cash distributions, if any, on units of a BMO ETF (other than accumulating units or units subject to a distribution reinvestment plan) are expected to be paid primarily out of dividends or distributions, and other income or gains, received by the BMO ETF less the expenses of the BMO ETF, but may also consist of non-taxable amounts including returns of capital, which may be paid in the manager’s sole discretion. To the extent that the expenses of a BMO ETF exceed the income generated by such BMO ETF in any given month, quarter, or year, as the case may be, it is not expected that a monthly, quarterly, or annual distribution will be paid. Distributions, if any, in respect of the accumulating units of BMO Short Corporate Bond Index ETF, BMO Short Federal Bond Index ETF, BMO Short Provincial Bond Index ETF, BMO Ultra Short-Term Bond ETF and BMO Ultra Short-Term US Bond ETF will be automatically reinvested in additional accumulating units of the applicable BMO ETF. Following each distribution, the number of accumulating units of the applicable BMO ETF will be immediately consolidated so that the number of outstanding accumulating units of the applicable BMO ETF will be the same as the number of outstanding accumulating units before the distribution. Non-resident unitholders may have the number of securities reduced due to withholding tax. Certain BMO ETFs have adopted a distribution reinvestment plan, which provides that a unitholder may elect to automatically reinvest all cash distributions paid on units held by that unitholder in additional units of the applicable BMO ETF in accordance with the terms of the distribution reinvestment plan. For further information, see the distribution policy in the BMO ETFs’ prospectus.}

^{Index returns do not reflect transactions costs, or the deduction of other fees and expenses and it is not possible to invest directly in an Index. Past performance is not indicative of future results.}

^{The Index is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”), and has been licensed for use by the Manager. S&P®, S&P 500®, US 500, The 500, iBoxx®, iTraxx® and CDX® are trademarks of S&P Global, Inc. or its affiliates (“S&P”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”), and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by the Manager. The ETF is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the Index.}

^{The ETF referred to herein is not sponsored, endorsed, or promoted by MSCI and MSCI bears no liability with respect to the ETF or any index on which such ETF is based. The ETF’s prospectus contains a more detailed description of the limited relationship MSCI has with the Manager and any related ETF.}

^{Commissions, management fees and expenses all may be associated with investments in exchange traded funds. Please read the ETF Facts or prospectus of the BMO ETFs before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all dividends or distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Exchange traded funds are not guaranteed, their values change frequently and past performance may not be repeated.}

^{For a summary of the risks of an investment in the BMO ETFs, please see the specific risks set out in the BMO ETF’s prospectus. BMO ETFs trade like stocks, fluctuate in market value and may trade at a discount to their net asset value, which may increase the risk of loss. Distributions are not guaranteed and are subject to change and/or elimination.}

^{BMO ETFs are managed by BMO Asset Management Inc., which is an investment fund manager and a portfolio manager, and a separate legal entity from Bank of Montreal.}

^{BMO Global Asset Management is a brand name under which BMO Asset Management Inc. and BMO Investments Inc. operate.}

^{“BMO (M-bar roundel symbol)” is a registered trademark of Bank of Montreal, used under licence.}

As Canadians, we don’t have many options when it comes to investment services. 

So, I took it upon myself to have a look at one of Canada’s leading investment platforms, along with one of Canada’s fastest growing in recent times, Motley Fool and Stock Trades Premium.

Both the Fool and Stock Trades offer a Premium subscription service whereby investors can sign up for an annual fee – is paying for these investment services worth it? 

Let’s compare these two leading Canadian investment services, because they have enough differences that make them completely unique platforms.

Let’s start with the basics, website navigation and move our way through both platforms.

Stock Advisor Canada Vs Stocktrades Premium Review

When looking at Stock Advisor Canada and Stock Trades Premium, the platforms are directed at Canadian investors who are looking to either start building a portfolio, or earn more from their current portfolios.

While Stock Advisor Canada focuses on Canada and U.S. stocks, Stocktrades Premium is a platform that exclusively focuses on the Toronto Stock Exchange and Canadian stocks. This is the only platform in the country that does this, and as a result, it has gained a ton of popularity over the two years it’s been around.

Website Navigation

When it comes to an online service, ease of use and online navigation is incredibly important. When members first log in, members are greeted by two very different dashboards.

Immediately, StockTrades slicker and more modern platform is noticeable. The platform is simple to navigate and very intuitive. You get all the important information up front on the Dashboard, and you can immediately get caught up on any new information.

The Fool’s dashboard looks like a typical ‘blog’ site. Although not necessarily a bad thing, it does look dated and you have to go searching for most of the information.

Outside of the Dashboard and the look of the sites, navigation is pretty self explanatory on both sites.

If someone were to ask me what website would get me where I need to be faster, Stocktrades is the clear winner here.

Verdict: StockTrades edges out the Fool thanks to its modern design and informative Dashboard.

Similar features

Let’s get into the specifics of what the services offer. These platforms are very different, however they both have a few similarities at their core that I’m going to discuss.

Beginner stocks

Both services offer a basket of stocks tailor made for a beginner investor. These are intended to be strong ideas for those just starting out or new to investing. Stocktrades titles their 10 annual picks “Foundational Stocks” while Motley Fool has no specific name.

Out of respect for the effort and research put into these ideas, I will not comment on the picks themselves outside of the fact they were well thought out and presented on both sites. 

Neither site tracks the performance of their beginner stocks. Although Stocktrades Premium has stated they will release and track returns on an annual basis.

Verdict: Tie – nothing in this area sets either service apart.

Top picks

With an investment service, naturally investors will be looking for top picks. You’d think it would be a simple explanation, but the delivery and detail of these top picks are very different.

The Motley Fool’s “Recommendations”

They offer 1 Canadian recommendation and 1 U.S. recommendation per month.

One of the issues that present itself with the Fool is the confusion around these recommendations. 

It was not immediately clear to me if every pick on the list was still a buy and although they have taken steps to clean up their list by introducing categories, it still was a very confusing experience for me.

Compounding the issue, once a stock is recommended there are no consistent updates provided by the team. 

As I navigated the list, many had not had an update since the original recommendation. In some cases, it had been more than a year since the last update.

As someone who is looking for guidance on what stocks to buy, looking at a year old report doesn’t exactly provide me with a ton of confidence.

Overall, it was a very difficult list to navigate and members are left to discuss among themselves (in the forums) whether previous recommendations were still in fact buys.

In terms of the company reports, these are once again structured like a blog post. Although quality is not an issue, the presentation of these reports lack consistency and varies from company to company. 

At times, I could easily see it being overwhelming for beginners. It is unclear how these picks are made exactly, but they appear to be a mix of growth, value and income plays.

They have their list of historical picks and display a running average all-time return. You can also see the individual’s pick’s performance in relation to the TSX Index.

Stocktrade’s “Bull List” picks

At Stock Trades, the top ideas take the form of what they like to call “Bull Lists”, which take the form of the Growth and Dividend Bull Lists.  

They also add two TSX-listed stocks a month to their Bull Lists, one growth and one income. One particular thing I noticed is that the Motley Fool charges a separate subscription fee for income stocks. So, this was a huge positive for me.

Their lists and investment thesis behind them are quite clear. 

Those on the Growth Bull List are added as a result of strong growth prospects. Those on the Dividend Bull List are added with income in mind.

Unlike the Fool’s top recommendations, the team at StockTrades is diligent in their updates. Each report is updated quarterly, within days of the latest quarterly report. 

And, I was pleasantly surprised to see a recent email about a stock they’ve decided to remove from their list due to what they felt was an excessive run up in price.

This gave me confidence in the idea that they truly do mean that if a stock is on one of their Bull Lists, they still have confidence in it. 

They have a unique and well-structured format for both types of Bull List stocks (Growth & Dividend). They are easily digestible by both experienced and beginners alike and the investment thesis is made clear.

Furthermore, each report is supported by their unique ranking system (more on that later). There is no confusion around the list – if a company is on the Bull List, then they believe in the long-term prospects of the company.

Where Stocktrades comes up short, is in keeping a visual running tally of the performance of each of their Bull List picks. 

Although they keep members informed via monthly updates, it is not front and centre on the site itself. The results are there, but a bit of digging is required.

Verdict: StockTrades with a slight edge – Surprisingly, both the Fool and Stocktrades have similar outperformance metrics relative to the TSX Index. And by the way, the results are honest, from both platforms.

However, the Motley Fool runs a bit of a different system as they tend to “double down” on their losers, which gives the illusion that a stock they’ve highlighted has gone up in price, when in reality it could still very well be a losing highlight since they first mentioned it.

Stock Trades on the other hand, tracks a pick against their results indefinitely, regardless of price movement or if they’ve removed it from their lists.

Both offer two stocks a month, and the research behind each is sound. So why does Stocktrades come out on top?  

Two reasons. First, the Stock Trades reports are more engaging and can appeal to investors of all types. 

Secondly, and more importantly, StockTrades is committed to updating each report quarterly, there is nothing stagnant on the site. As a result, there is no confusion around which stocks they consider to be good opportunities today. 

Question and answer segment

Once again, not surprised that both had a Q&A section where members could ask questions. 

However, the quality of the Q&A sites was vastly different. 

While the Fool has an active forum, many of the questions are answered by members themselves. It also can take days, if not longer to receive a response directly from the Fool team.

In contrast, I’ve never waited longer than 24 hours to receive a response from either Mat or Dan. And, the vast majority of the answers went above and beyond what the members question was initially about.

The one thing I did notice was that on Stock Trades Q and A, there was next to no member to member communication. Which, in my eyes, is a positive. 

I don’t doubt that both platforms have some relatively experienced investors, but if I’m paying for an investment platform, I want answers from the brains behind the operation.

In my opinion, Motley Fool’s Q&A platform comes well, well short of Stock Trades Premium. In fact, I would argue in many instances that the Q&A over at Stock Trades Premium is worth the price of admission alone.

The only reason I don’t give it a 5/5 is the fact that sometimes the navigation can be a pain, as all of the buttons like back, forward, edit etc. are found inside of the website. Clicking back on the browser window doesn’t work. It’s taken some getting used to.

This is where the similar features end

That is about all that the Motley Fool and Stock Trades Premium have in common. Both offer stock picks, and a question and answer segment. However, even though these are similar features, as you’ve read, how they’re handled is very different.

But now, let’s move onto the features that are unique to Stock Trades Premium. 

And be aware, there are a ton of them.

Stocktrade’s Dividend Safety Screener

This was a feature I found incredibly useful over the course of 2020, especially navigating a stock market where dividend cuts were happening all over the place.

Stocktrades has an in browser stock screener that analyzes the quality of a company’s dividend. The companies are then ranked on a grade of 0-5 and updated every single week. 

The tables are easily sortable, readable on both mobile and desktop (although a little clunky on mobile) and from a single page I can see dividend growth streaks, growth rates, payout ratios in terms of earnings and cash flows and more.

Stocktrade’s Growth Stock Screener

These guys call their growth stock screener the “backbone” of their whole service, and it essentially ranks Canadian stocks on their forward growth potential.

They say the screener ranks stocks on safety, growth and valuation, and spits rankings out on a weekly basis.

In turn, they e-mail out the stocks their screener highlights on a weekly basis. One thing you won’t be left without is constant e-mail contact from the guys at Stock Trades.

More impressively, at the time I’m writing this they say their screener has outperformed the TSX index in over 83% of the weeks they’ve been tracking it. I verified this, as they have all of the data available, and it is correct.

Custom stock research on request

This is something I am truly amazed they have time for. But, you can request an in-depth report from the guys at Stock Trades. This isn’t an add on, this just comes with your membership. One a month, however.

But, the one report I did request, I received within 4 business days and it was in just as much detail as a Bull List report. All of these reports are available to all members as well.

9 Model portfolios

I’ve never followed Stocktrades model portfolios, but there’s no doubt they’re outperforming in a big way. They’ve got 9 portfolios, all aligned with different age groups, risk tolerances etc.

As I’m writing this, all 9 of them are outperforming the TSX since inception, with a couple portfolios posting over 100% gains since December of 2018. Impressive, considering the crash and all.

IPO Centre

This is a new feature they’ve introduced over at Premium (they’re constantly adding new features) and it highlights all of Canada’s major IPOs. They dive into news, produce stock reports on recent IPOs and are constantly answering questions on them via the IPO.

They invest in the IPO’s themselves as well, and are fully transparent about doing so. All they state is that you should be doing so with capital you can afford to lose. You won’t see any IPOs on their Bull Lists, due to the high risk nature of them, but this is a really cool feature nonetheless.

Marketing and upsells

This is a critical component for me. When I purchase something like this, I do expect to have access to the full platform.

With Stock Trades, marketing is completely transparent. You sign up, and you get absolutely everything they’ve indicated inside the platform. They promise, under no circumstances will you be upsold to another more expensive platform once they’ve got you in the door.

Motley Fool on the other hand, after a few days of being inside of Stock Advisor Canada, I was hit with upsells. More expensive platforms offering more explosive stocks.

The issue I had with this right away, is the fact they promised me the most explosive stocks for the initial price I paid.

There is a type of “get rich” style atmosphere with a lot of the content Motley Fool produces, and pitches to prospective and current members, including the fact they just have to pay a little more to finally get there.

I don’t get this with Stock Trades. 

In fact, once I got inside of Premium the only emails I ever received were helpful emails to navigate the platform, e-mails about tutorials, new stocks, strategies and other Premium related content.

Price

Let’s get down to the brass tacks shall we? Pricing.

Pricing is huge when it comes to the selection of an investment service. A platform can make you money, but it needs to be able to cover the costs of the platform and also help you earn a positive return. 

If it doesn’t, you’re better off giving your money to a fund manager.

Stocktrades Premium comes in at $249.99 a year. I was given an initial 30% discount so I got in for around $175. Stock Trades states that the price you pay when you sign up (full price) is the price you’ll always pay, if they decide to raise prices.

And, this isn’t an empty threat, the company went ahead and raised its service from $199.99 to $249.99 this past October. So, those who got in before October were locked in to the $199.99 rate.

The Motley Fool’s pricing structure is just downright confusing to be honest. Prior to signing up, I was hammered relentlessly with random discounts that “only lasted 24 hours”.

Typically, they offer their platform for $99 for the first year. They say this is $200 off, so you’d think that the platform would cost $299 annually right?

Wrong. It’s actually only $199. So, they’re essentially stating their membership is worth more than it is, to make you think you’re saving more.

Overall, the extra $50 for Stock Trades Premium is well worth the cost, especially considering the plethora of extra features. However, I’m going to give a tie to both, as they’re both extremely affordable.

Stock Advisor Canada Vs Stock Trades Premium final verdict

Overall, these are both two solid services for long term investors who don’t have the time to do the research, don’t have the knowledge, or need some extra tools.

But overall, I have to give a large edge to Stock Trades. While the Motley Fool labels themselves as a stock picking service, Stocktrades Premium is a complete investment platform, and I’ve found myself logging in multiple times a week to use their tools to better my portfolio.

With the Motley Fool, I’ve essentially read their stock picks when they were emailed to me, and that’s that. They don’t really offer much more than this.

The information on Stock Trades Premium is updated frequently. I have significantly more confidence using their information over the Fools. I’ve seen some reports on Stock Advisor Canada that were more than a calendar year old. The oldest report from a stock pick you’re going to get on Premium is 3 months.

You pay $50 more a year for Stock Trades Premium, but that $50 is easily justified by the amount of features they offer.

Looking at Motley Fool’s other services, they charge separate subscriptions for dividend picks, IPO research and model portfolios. 

So if you include what you would have to pay with Motley Fool compared with what you get at Stock Trades Premium, you’d be paying thousands at the Motley Fool.

The guys over at Stock Trades claim to have started the service and website because of a lack of quality Canadian stock information. For years the landscape has been dominated by sites like the Motley Fool. 

In my eyes, they’re doing a hell of a job. I’m going to be picking one service to renew next year, and it will be Stocktrades Premium.

What is a TFSA?

The Tax Free Savings Account (TFSA) program was created by the Government of Canada in 2009 as a way for adult Canadians (age 18 and above) who hold a valid social insurance number (SIN) to save money, tax-free, throughout the course of their life. Unlike a registered retirement savings plan (RRSP), a TFSA is not considered a taxable income, even when you withdraw it. 

Thanks to its flexibility and the fact that it is tax-free, a TFSA can be used for all kinds of savings goals. Some will use it to save for the down payment on a house, while others will keep it as an emergency fund. You can also use it to save for smaller goals like a vacation or a car purchase or long-term goals like retirement. There are tons of possibilities for this account. 

Every year, the government sets annual TFSA contribution limits, which are the maximum contributions of money that an individual can put into their TFSA account. Your TFSA contribution room starts the year in which you turn 18 and will accumulate every year after that. So, if you can’t deposit the full amount in previous years, then your unused TFSA contribution room is carried over to the following year(s). However, you cannot over-contribute, or you will have to pay a penalty tax.

You can read the in-depth guide to TFSAs here.

TFSA withdrawal rules

One of the best features of TFSA accounts is that the withdrawal rules are incredibly flexible. You can generally withdraw at any time without having to pay any taxes. You also don’t have to worry about them impacting any benefit programs like old age security (OAS), employment insurance (EI), or guaranteed income supplement (GIS). Plus, you don’t lose your contribution room. 

For example, say you started your TFSA when you turned 18. When you turn 25, you pull out $3,000 of your money to put towards buying a car. You haven’t lost the room for that $3,000. You can recontribute that money, but you need to do so correctly. 

TFSA recontribution rules

Recontributing money to a TFSA can be tricky and is one of the most common mistakes Canadians make with their TFSAs. While you can withdraw from your TFSA as needed and replace it, you will have to wait until the following year to replace those funds. Otherwise, it will be considered as going over your annual TFSA dollar limit. 

So to stick to our car example,

Say in January of 2023 you contributed the maximum amount you could for the calendar year and all previous years. In this case, $6500. Then, in April, you need extra cash to buy a car, so you withdraw $3000. But come December, you have saved another $3,000. You can’t re-deposit that $3,000 within this calendar year. You’ve already maxed out your contribution room and doing so will register as over-contribution and result in a fee.

You will have to wait until the next calendar year (in this case, 2024) when your contribution room resets. At this point, you can recontribute that $3,000 plus the new maximum amount for the calendar year.

There is one exception to this rule. Let’s say you didn’t max out your TFSA in one of your previous years and you still have $5,000 in contribution space. You could contribute the $3,000 you saved up by December into your TFSA as it would just be considered a regular contribution. Come 2024, you’d get your new contribution room, the $3,000 back which you withdrew in 2023, plus any room you haven’t used yet.

TFSA transfers

Other rules to be aware of are those surrounding TFSA transfers. Throughout your life, you may want to change how you invest your TFSA or even parts of your TFSA. For example, for short-term goals, you may want to put your money into a high interest savings account or guaranteed investment certificates where it is relatively safe. But for long-term goals, you are willing to take more risks and invest in exchange-traded funds.

This might mean you need to shuffle your money around and transfer your TFSA to another financial institution. But, remember, if you withdraw the money, you have to wait until the next calendar year to replace it. 

So, what happens?

You ask the financial institution to do it. Get in touch with a financial advisor, and they can complete the transfer for you without triggering any official withdrawals. There may be a fee associated with this, but the financial institution will often cover that as well. Here’s a detailed guide on how to transfer your TFSA to another financial institution.

TFSA Contribution limit

Since TFSAs first came about in 2009, the current maximum contribution room is $88,000 ($95,000 come 2024). Remember, you can only contribute once you start to turn 18, which means you would need to be 18 or older in 2009 to have access to a maximum of $88,000. 

The contribution maximum has fluctuated over the years. These are the current contribution limits.

• 2009-2012: $5,000
• 2013 and 2014: $5,500
• 2015: $10,000
• 2016-2018: $5,500 
• 2019-2022: $6,000
• 2023: $6,500
• 2024: $7,000

Where to check TFSA contribution room

If you log into your MyCRA account, you will be able to find details about your TFSA contribution room. However, it’s not always accurate. Beside the unused contribution room number, you will notice a highlighted yellow box that says ‘important information.’ This basically indicates that the number listed may not be current, is only reported based on the year before, and does not include any transactions from the current annual year.

For this reason, it’s best to keep track of your contributions yourself so you can maximize your deposits without having to worry about over-contributing and facing any penalties.

This is a first article of a six-part DIY Investing series, which will span over the course of a few months. As a self-directed investor for a dozen years, I’ll be sharing some of my experience and expertise to guide you to become a DIY investor. 

Why you should invest in the stock market 

If you haven’t already started investing in the stock market, there are plenty of reasons why you should start now. If you have some money that you’ve saved up that’s sitting in a low-interest savings account that you don’t need to touch anytime soon (and you’ve got your emergency fund topped up), then you may benefit from investing it. That way, you can earn interest on your money and it will help you reach your financial goals much faster through compound interest and dividend payouts.

Before you start investing, it’s important to think about what your financial goals are. Perhaps you are looking to save for retirement, achieve financial independence/retire early (FI/RE), quit your full-time job, or start a family. Whatever your reason, investing your money is a great way to have money work for you and to grow your net worth.

3 ways to invest your money in the stock market 

Here I’ll explain the three common options for you to start investing your money. 

Using a financial advisor

If you’ve received an inheritance, windfall, or have a complex financial situation, going with a financial advisor may be helpful. They can sit down with you and provide advice on how to invest your money. However, be sure to check if they are tied to specific institutions or products and they should disclose upfront what their fees are. A fee-only advisor can be a good option if you want unbiased advice. 

Since it’s not an entirely regulated industry yet (anyone can give themselves a fancy title to sound legit), you’ll want to check that they have the proper credentials and can suit your needs. Since they make a living from fees, they typically only work with high net worth clients ($250K to $1M+) and their fees can be quite high. Ask for recommendations, referrals and interview several candidates before you make a decision. 

Going with a robo advisor 

With as little as $1,000, you can start investing with a robo-advisor. Typically you’ll fill out a questionnaire and an algorithm will assemble your portfolio. The fees are in the middle of the road: you’ll still need to pay the management expense ratios (MER) of the funds you buy and the cost of having a robo-advisor manage your portfolio for you. For some high-net worth investors, the provider may offer services of a human advisor. This option is a good choice for those who want to be more hands-off with their investments but don’t want to pay high fees with a financial advisor. 

DIY investing 

Becoming a self-directed investor can be a suitable choice for individuals who feel like they have good investing knowledge and want to have full control over which funds they hold in their portfolio and save on fees. Since you’re responsible for your performance, it’s important to keep your emotions out of the equation so that you don’t start tinkering with your portfolio. Your success will be based on your own decision-making ability. 

If you’re looking for a discount brokerage where you can start investing with low fees, consider opening a Qtrade Direct Investing account where you can get up to $150 in bonus cash.

What is compound interest?

Remember when you were a kid and you built a huge snowball? At first, it takes a lot of effort to get the ball going, but once it gets bigger, it gets easier to roll. That’s the same way compound interest works in the stock market. 

When you first start investing with a small amount of money, you’ll see your account grow slowly. Then the pace picks up and the money will accumulate at a faster rate over the long term.

In this chart below, you can see that if you were to invest $6,500 a year (the current annual TFSA contribution limit) with an annual interest rate of 6%, after 10 years it will be worth $85,675.17 when compounded yearly. Even though your total investment will be $65,000, you will have earned $20,675.17 in compounded interest. That’s why Warren Buffett called “compounding interest the 8th wonder of the world.” 

How compound interest can help you grow your portfolio

Here’s a comparison chart showing how much your investment will grow annually, based on a certain monthly contribution and a certain annual interest rate. 

Please note: the following is for illustrative purposes only. There is no guarantee when it comes to investing as there are always risks involved. 

In the diagram above, if you had a monthly investment of $100.00 at an annualized interest rate of 4% will be worth $116K after 40 years when compounded yearly. 

Bumping this up to $500 per month, at a 6% interest rate, your investment will be worth $953K.

For the super savers, if you invested $1,000 per month, at a 8% interest rate, you’ll have a jaw-dropping net worth of around $3.2 million after 40 years. 

You can use this compound interest calculator and plug in your numbers to see how much your investments can grow. This goes to show that the longer your time horizon (the amount of time you have to invest your money), then the more time for compounding interest to work its magic! 

The benefits of switching to DIY investing

As humans, it can be easy to sit on the fence and not make any changes. However, as I’ve illustrated above how much money you’re wasting on excessive fees, may be the tipping point for some of you to make the decision to become a self-directed investor. Plus, if you want to be in the driver’s seat to select your funds, then it’s a good reason to hop over the fence. 

When I decided to switch my mutual funds from one of the big banks over to an online brokerage, all it took was a few hours of my time filling out some paperwork, and mailing it in. Again, that was over a decade ago and technology has made it a lot faster and easier. 

Nowadays, you can fill out the paperwork online to expedite the processing times. Once you open an account with your new online brokerage, you’ll be able to transfer your money from your existing RRSP and/or TFSA. 

There are several ways to bring your money over. The most common method when you fill out the transfer form, is to checkmark the box to transfer in-kind so that it ports everything as-is to your new brokerage. It may take a few weeks, so you’ll have to be patient. Once this is complete, you’ll be able to start managing your investment portfolio and save on fees immediately. 

Make the switch and get started

There are many benefits when it comes to DIY investing such as minimizing your fees and being in control of your investment decisions. For those of you who are making the switch from a financial advisor or robo advisor to an online brokerage, then you’ve got your work cut out for you. If you’re willing to make the commitment to learn (which is why you’re here reading this!), then soon you’ll be able to reap the benefits of becoming a self-directed investor. 

Remember, you don’t need to know everything about investing—just the basics to get you started. 

You’ll always have the opportunity to make adjustments as you become a more experienced investor. Unlike a decade ago, there are so many options available to you. The key is to get started early so that you can take advantage of compound interest. 

The next part of this DIY Investing series focuses on learning about your investor personality type.

One of the most common questions I get is what happens to your deposited money if a bank fails? Well the good news is that you’re covered up to $100,000 thanks to the Canada Deposit Insurance Corporation (CDIC). To explain what deposit insurance is, I partnered directly with CDIC who provided this guest post on how your money is protected.

We all work hard to save money for our future – to buy a home, to pay for our children’s education, for retirement or for a dream trip. And we keep these savings in banks and other financial institutions across Canada. But have you ever stopped to wonder what would happen to your money if the financial institution holding it were to fail? Enter the Canada Deposit Insurance Corporation, a federal Crown corporation that protects deposits in all its member banks in the event of a failure.

If you’ve never heard of CDIC or deposit insurance, you’re not alone. Just over half of all adults in Canada are aware of CDIC, and even fewer millennials are aware. But deposit insurance is an integral part of our country’s economic system and it contributes to our overall financial stability. Those who know how deposit insurance works can trust CDIC to make sure their hard-earned savings are there when they need them.

Here are 6 things you need to know about CDIC deposit insurance:

It’s free and you don’t need to sign up

CDIC protects eligible deposits in its member institutions, up to a maximum of $100,000 per coverage category. You do not need to sign up or pay any premiums. Anyone with eligible deposits in one of CDIC’s member banks is protected, as long as these deposits are in Canadian funds. Citizenship or country of residence of the depositor doesn’t impact coverage.

Banks can fail and they have

In CDIC’s 50-year history, they’ve handled the failures of 43 of their members! These failures affected over 2 million Canadians, but not a single dollar under CDIC protection was lost. The most recent failure was in 1996. While it hasn’t happened in decades, it can happen and CDIC works hard to be ready for this possibility.

CDIC has over 80 members

From Canada’s biggest banks, to small trust companies across the country, over 80 financial institutions are members of CDIC. This means that savings in each of these members are protected separately from the other members. Curious if your bank is a member? You can see the full list here. Alternatively, you can look for CDIC’s membership sign on your bank’s web site. Note: some CDIC members have trademark companies which are not distinct members, but which may fall under the coverage of their parent company (Such as EQ Bank falling under Equitable Bank). If your financial institution isn’t on this list, you can contact them and inquire about their CDIC membership.

Not everything is covered

While deposit insurance protects eligible deposits in your own name, joint accounts, trust accounts, TFSAs, RRSPs, RRIFs and more; not everything is covered. CDIC does not protect investment products like stocks, bonds and mutual funds. Here is a full breakdown of what is and isn’t covered.

The “limit” really isn’t the limit

CDIC protects up to $100,000 (including principal and interest) per deposit category in each member. There are 7 categories. For example, deposits in your own name are protected separately from joint accounts. Deposits in RRSPs, TFSAs and more also each receive their own coverage. If you have a chequing account, a joint savings account with a spouse, a joint account with a parent, a TFSA and an RRSP, you could have protection of up to $500,000 – and this assumes all these accounts are with the same member. If you also have a TFSA and a savings account in another member bank, that’s another $200,000 of protection! So there are endless ways to ensure your money is protected by CDIC. Here’s a detailed breakdown of how CDIC covers various accounts.

You can calculate your coverage

So you have several financial products in one or more member banks. Now you want to know how much of your money is safe? No problem. CDIC has an online estimator to help you calculate your coverage. Try it out!

Learn more about CDIC

Now that you’ve learned a little about CDIC and deposit insurance, you’ll be better informed when making financial decisions for yourself and your family. You can follow CDIC on Twitter, Facebook and LinkedIn for more coverage info, helpful tools and videos. Happy saving!

Fortunately, EQ Bank has listened to its consumers and has introduced the EQ Bank Tax Free Savings Account. As you can imagine, it’s similar to its Savings Plus Account where you get a good interest rate without having to pay everyday banking fees. Read my EQ Bank Tax Free Savings Account review now for the full details.

EQ Bank TFSA features

• TFSA Savings Account
• 3%* everyday interest rate
• TFSA GIC

The EQ Bank TFSA only gives you two options. There’s the TFSA Savings Account and TFSA GIC. The TFSA Savings Account pays a respectable interest rate that is typically higher than traditional banks. If you’re interested in one of EQ Bank’s GICs, the rates mirror their existing EQ Bank GICs, so you can quickly look up the current rates.

Unfortunately, you can not purchase ETFs, mutual funds, stocks, etc., within your EQ Bank TFSA. The account is built for fixed income investments, so if you’re looking for exposure to equities, you’d have to go somewhere else.

For you to open an EQ Bank TFSA, you must have an active Savings Plus account. All contributions and withdrawals can be done online, so it’ll be easy to move your money around.

There’s a plan limit of $200,000, but note that this is separate from your contribution limit. To find out your current contribution limit, you’d have to check your CRA My Account.

EQ Bank TFSA contributions

All contributions to your EQ Bank TFSA is done online from your Savings Plus Account, Joint Account, or via an electronic funds transfer (EFT). In case you’re unfamiliar with EFTs, it’s when you link EQ Bank from another bank directly.

It’s also possible to transfer money into your EQ Bank TFSA from another bank where you’re currently holding your TFSA. You’d have to initiate the transfer online first, and then the customer center will take care of the rest. For reference, here’s a detailed guide on how to transfer your TFSA to another financial institution.

EQ Bank TFSA withdrawals

Withdrawals from your EQ Bank TFSA can be done at any time to your Savings Plus Account, Joint Account, or EFT. While this is convenient, you need to ensure that you understand the contribution rules if you plan on redepositing any funds later in the year.

For example, let’s say you have a maximum contribution room of $6,000, and you deposited $6,000 on January 1st. If you withdrew $3,000 in July, you wouldn’t be able to put that $3,000 back in until the following year.

The contribution and withdrawal rules can sound complicated, but once you understand them, they’re pretty straightforward.

CRA reporting

EQ Bank reports any TFSA deposits you make to the CRA. While your CRA My Account is great for finding out how much contribution room you have left, it’s not always accurate.

Generally speaking, it only updates once a year, so any deposits you make throughout the year should be tracked manually on your own.

How does the EQ Bank Tax Free Savings Account compare to others?

Comparing the EQ Bank Tax Free Savings Account to others can be tricky. EQ Bank has chosen to focus on fixed income investments, so the account is designed for people who need to keep their money relatively safe. It’s ideal for people who have a short term goal in mind and want to ensure their money doesn’t decrease in value.

For example, someone who is planning on buying a home within the next 1-5 years could park their money in the EQ Bank Tax Free Savings Account. That would allow them to earn some interest without having to pay any taxes.

If you’re the type of person who wants to maximize their gains for retirement, then this account isn’t for you since you can’t invest in stocks, ETFs, or mutual funds.

Is EQ Bank safe?

EQ Bank is brought to you by Equitable Bank and they’ve been operating in Canada for decades. More importantly, Equitable bank is a Member of the Canadian Deposit Insurance Corporation (CDIC). As a member, your deposits are protected up to $100,000 for each eligible account.

CDIC considers your TFSA separate from your HISA and joint account. In other words, if you have all three, you would have up to $300,000 in coverage.

Final thoughts

My EQ Bank Tax Free Savings Account review is positive. Although you’re limited with what you can invest in, the EQ Bank TFSA is perfect for people who need to keep their money safe and don’t want to pay any taxes.

The account is so flexible that it can be used for just about anything, including retirement or short-term savings. Alternatively, some people use the account to hold their emergency funds. 

Even though the account is ideal for different situations, you can’t just use it freely. There are specific contribution and withdrawal rules to be aware of. In addition, there are tax benefits and potential tax consequences when using the account.

What is a TFSA?

A TFSA is a registered account that comes with tax benefits. Whenever you contribute to your TFSA, there is no tax break. However, your account’s interest and capital gains are completely tax-free. Even when you withdraw the money that you made, there are no taxes to be paid.

For example, let’s say you’ve contributed $50,000 to your TFSA over the last 10 years and your portfolio now has a value of $70,000 since you invested your money. You’ve now decided to withdraw the entire amount as a down payment for a home purchase. When you withdraw the money, there are no taxes to be paid. You don’t even need to report or disclose any information when you make the withdrawal.

What investment products can be purchased in a TFSA?

When researching what is a TFSA, the first thing you need to understand is that it’s not just a savings account. Many people don’t realize they can purchase different investment products inside their TFSA. Think of your TFSA as an investment vehicle that includes the following:

• Cash – If you plan on using your TFSA as your emergency, holding cash within a TFSA high-interest savings account (HISA) will allow you to grow your funds slightly.
• Guaranteed Investment Certificates (GICs) – If you have a short-term investment timeline but still want to earn interest, GICs can be attractive since their terms are typically one to five years.
• Government and corporate bonds – Another type of fixed income investment is government and corporate bonds.
• Individual stocks – For those looking to use their TFSA for growth, equities such as individual stocks can help you reach your long-term goals.
• Mutual funds – Instead of picking individual stocks, mutual funds can give you access to a diverse portfolio within a single fund.
• Exchange-traded funds (ETFs) – ETFs are also a pooled investment option, but they have a lower management expense ratio than mutual funds since there is no portfolio manager. 

While many investment products can be held within your TFSA, a few exceptions exist. Cryptocurrency and Non-Fungible Tokens (NFTs) can’t be purchased within your TFSA unless you’re purchasing a qualifying ETF that has exposure to them.  

Who is eligible for a TFSA

To qualify for a TFSA, you must meet the following requirements:

• You must be a Canadian resident
• You must have a valid Social Insurance Number (SIN)
• You must be the age of majority in the province or territory you reside in

Note that the age rule applies to your actual birthday, not the calendar year. So, if you were born on December 30, you wouldn’t be able to open a TFSA until you turn the age of majority in the province or territory you live in. 

Eligibility for non-residents of Canada

You can still keep your TFSA if you ever become a non-resident of Canada, but there are a few things to be aware of. First off, your gains and withdrawals won’t be taxed from Canada. However, not every country recognizes the tax benefits of your TFSA. For example, if you move to the U.S., the withdrawal gains from your TFSA would count as income and would need to be reported.

In addition, if you’re a non-resident, you wouldn’t be able to make contributions without paying a 1% tax for each month the contribution remains in the account. Plus, you may be liable for other taxes while you reside in another country. Many non-residents of Canada will typically close their TFSAs before leaving, so they don’t have to deal with the tax consequences.

How to open a TFSA

Opening a TFSA is easy since you can open one at most financial institutions, including credit unions and digital banks. In addition, some insurance companies can also open a TFSA for you.

To open a TFSA, you can do one of the following:

• Go to a branch – Anyone new to investing will likely want to go to the local branch at their financial institution to set up their TFSA.
• Call your financial institution – Many financial institutions allow you to open up a TFSA over the phone. 
• Go online – You can often set up your accounts online. If you’re opening up a TFSA with a digital bank or robo advisor, online is the only way to go.

If you plan to open an account online or call in, you’ll likely need to provide additional documentation to verify your identity. That said, if you’re already a client of the financial institution, you may be able to bypass that step.

Keep in mind that opening a TFSA is just one step. You’d still have to fund your account and then purchase investments. A financial advisor can recommend some investment products if you’re opening an account with your financial institution. 

If you prefer to manage your investments yourself, you can open up an account with a discount brokerage such as Questrade or TD Direct Investing. This would give you full control over your portfolio.

When opening a TFSA, you would set your beneficiary. This can be anyone, including your spouse, common-law partner, children or someone else. Having a beneficiary in place is a good idea since it won’t leave your account in limbo if you were to suddenly pass.

What is the TFSA limit?

When researching what is a TFSA, one natural question to ask is, what is my TFSA limit?  Your contribution room depends on what year you turned the age of majority in the province in which you live. 

Here’s how much TFSA contribution room was allocated each year since TFSAs were introduced:

• 2009: $5,000
• 2010: $5,000
• 2011: $5,000
• 2012: $5,000
• 2013: $5,500
• 2014: $5,500
• 2015: $10,000
• 2016: $5,500
• 2017: $5,500
• 2018: $5,500
• 2019: $6,000
• 2020: $6,000
• 2021: $6,000
• 2022: $6,000
• 2023: $6,500

Assuming you became eligible to open an account in 2009, your current TFSA contribution limit would be $88,000. However, if you became eligible in 2020, your maximum contribution limit would be $24,500.

Towards the end of the year, the government announces what the annual contribution limit will be for the next calendar year. They base that number on inflation.

TFSA contribution limit carry forward

Your TFSA contribution limit carry forward is quite generous since unused contribution room carries forward indefinitely. That means any unused room can be used at a later date. In addition, any withdrawals you make can be contributed later (a further explanation is found below)

TFSA over contribution

A TFSA over contribution is when you contribute more money than you have in available space. When this happens, you’ll be required to pay a tax penalty of 1% each month for the excess amount. Since your financial institution and the government of Canada won’t warn you if you go over your limit, you need to track your contributions on your own. 

Where can I find my TFSA contribution room limit?

The quickest way to find your TFSA contribution room information is to check your My Account for Individuals via the Canada Revenue Agency (CRA) website. Once logged in, you can see your TFSA contribution room limit under RRSP and TFSA.

While this method is the quickest way to see how much room you have, it’s not updated in real time. Financial institutions typically only report contributions once or twice a year. That means the number you’re seeing may not be accurate. If you want to know for sure how much contribution room you have left, you should be tracking everything on your own in a spreadsheet.

TFSA deadline

There is no TFSA deadline. You can contribute to your account whenever you want as long as you have available contribution space. You can also withdraw funds from your TFSA whenever you want. In addition, you can keep your TFSA open indefinitely. There’s no need to convert it to another account when you retire. 

TFSA rules for withdrawal 

Without a doubt, the TFSA rules for withdrawal are what confuses people the most. You can withdraw funds from your TFSA whenever you want. However, it’s the re-contributions that throw people off. Basically, you can only re-contribute to your TFSA if you have available contribution room.

For example, let’s say your TFSA is currently maxed out. On July 1, you decided to withdraw $10,000 to do some kitchen renovations. You would only be able to re-contribute that amount the following year. That means on January 1, you could contribute $10,000, plus the new limit for the year. 

Your TFSA is not like a high-interest savings account. The contribution rules will still apply even if you’ve withdrawn funds from your TFSA. 

Now let’s say your TFSA wasn’t maxed out. Instead, you have $50,000 in contribution space. If you took out $10,000, you could re-contribute that amount in the same calendar year since you still have the room available. You would get the $10,00 in space back the following calendar year. 

Remember, financial institutions only share your contributions to the CRA once or twice a year, so you’ll want to keep track of things yourself if you plan on making multiple withdrawals from your TFSA. 

The benefits of investing in a TFSA

Even though you might know what is a TFSA by now, you’re likely still wondering if it makes sense for you. Generally speaking, everyone should have a TFSA since it provides the following benefits:

• No taxes paid – All interest and capital gains earned are entirely tax-free. Compare that to capital gains in a non-registered account where 50% of your profits are taxable.
• Contribution room is the same – Unlike Registered Retirement Savings Plans  (RRSPs) contribution room that’s earned based on your income, the TFSA contribution room is the same for everyone who qualifies.
• Flexibility – Your TFSA is not just a savings account. You can purchase different products within it that can help you meet your investing goals.
• Additional registered account – If you can afford to max out your RRSP and TFSA, you can quickly build tax-deferred and tax-free income.
• Does not affect benefits – Since income from your TFSA doesn’t get taxed, it doesn’t affect benefits such as Old Age Security (OAS) and Guaranteed Income Supplement (GIS)

TFSA alternatives

While the tax advantages of a TFSA are pretty clear, there are a few other accounts worth considering. Which account/s you choose should be based on your goals and individual circumstances.

Registered Retirement Savings Plan

With your RRSP, you get a tax deduction when you make a contribution, and any interest, dividends, and investment income made within the account are tax-free. However, when you eventually withdraw the funds from your RRSP, it’ll count as regular income, and you’ll pay taxes at your marginal tax rate. Generally speaking, RRSPs are better for people who make $50,000 or more since the tax break you get from contributions is worthwhile.

High-Interest Savings Account

In an ideal world, you’ll use your TFSA for long-term investing where you can capitalize on the tax-free gains. If your account is indeed maxed out, then using a HISA for short-term goals such as saving for a home down payment is ideal. 

How to transfer TFSA

If you already have a TFSA but have just learned that you can do more with it, you still have options. Transferring your RRSP to another financial institution is easy. All you need to do is have your new financial institution request a transfer of funds from your current account. By doing this, you won’t need to make any withdrawals.

Alternatively, you could withdraw all of your funds one year, and then re-contribute them the following year to your new account. You could then close your old account.

So why does your MER matter? Canada has the highest average management expense ratio in developed markets at 2.14%. For most of us, paying an average of just 2.14% for a mutual fund sounds like good value, but over your investment lifetime, those fees could up costing you tens of thousands of dollars, if not hundreds of thousands. That’s why you need to know what is a management expense ratio and how you can reduce it.

What is a management expense ratio?

A management expense ratio is a fee that investors need to pay to the investment provider for running certain investments such as mutual funds or exchange-traded funds (ETFs). A quick example would be if you invested in a mutual fund with a 2.5% expense ratio, your cost would be $25 for every $1,000 invested. Sounds pretty straightforward forward but it’s a little more complicated than that.

MERs usually consist of a few different things with the management fee for the portfolio manager usually being the largest fund expense. Since someone actually has to run the fund, that’s where the management fee comes in. What gets tricky is sometimes your advisor may tell you they get a very small percentage for their services; well that price is part of the larger management expense ratio that you pay which obviously adds up over time.

The MER also includes operating expenses such as transaction costs, office supplies, record keeping, administrative costs, legal fees etc. Although the MER covers most expenses, there can be separate fees that we pay such as front or back-end loaded funds which are commissions paid separately from the MER. This doesn’t apply to all funds so always ask for the details.

Management expense ratios are different from management fees. MERs are what the fund charge while other companies such as robo advisors may charge you another management fee on top of the MER. This management fee usually isn’t more than about .50%, but if you combine that with an index fund that charges a .50 MER, your total fees for that found would be 1%. That’s still much lower than mutual funds.

How does the management expense ratio affect me?

Some of us still believe that we’re getting value for paying a small percentage of our investments, but let’s take a look at how the MER eats into our returns. The following chart assumes the following:

• $100,000 initial investment
• $5,000 annual contribution
• 5% annual rate of return

Obviously, the lower your MER, the more money you have in the end. The MER percentages I’ve chosen are actually the average of the most common investments and are broken down as follows:

• 2.5% – Average mutual fund MER
• 1% – About the cost of using a robo-advisor or Tangerine investment funds
• .50% – About the cost of using TD e-Series index funds
• .20% – About the cost of a self-directed ETF portfolio

As mentioned, there are a few other costs associated, and if you’re a self-directed investor you will incur some trading fees so the above chart isn’t an exact science. The idea is to give us a general idea of why we should pay attention to our MER.

The difference between paying 2.5% and .20% MER over the course of 25 years would be $168,452.00 in our above scenario. Think about how far that money could go in our retirement years.

It’s also worth mentioning that the most expensive funds don’t necessarily mean you’ll get better returns for your funds’ investment portfolios.

When people see the potential savings, they start thinking about transferring their TFSA and RRSP.

How much am I paying?

Now let’s look at it strictly from a fee perspective. The following chart shows how much money we pay for our management expense ratio.

An average mutual fund will cost you $182,909.94 in 25 years, is that not insane? It’s impossible to get our MER down to zero, but you can see what a HUGE difference it makes on our bottom line. Most of our investment timelines last longer than 25 years, so by the time we retire we could have paid hundreds of thousands of dollars in fees if we stuck to regular mutual funds.

I’m not expecting everyone to become DIY-investors, but there are so many different options such as robo advisors and Tangerine investment funds, there’s no reason we can’t reduce our management ratio. Seriously, it’s so easy to transfer your RRSP to a robo advisor such as RBC InvestEase, Justwealth and Wealthsimple.

How do I find out my MER?

Every mutual fund and ETF has a prospectus available to potential shareholders that lists the MER. In addition, you’ll also find the following information on the prospectus:

• ​Fund name
• Portfolio manager names (if any)
• Fund’s assets
• Net asset values
• Summary of fund goals
• Historical data on the fund
• Distribution fees

The prospectus will give you a clear idea of what the funds’ goals are and how it’s performed since its inception. Note that the MER is automatically factored into the gains. For example, if the fund is showing a return of 5% in the last year, the MER has already been subtracted.

If you’re new to mutual funds and WTFs, a good place to start is Morningstar. They provide market research for investment products. You’ll quickly be able to research different equity funds, total fund assets, any transaction fees, and even what the administrative fee is for different brokers. 

Should you switch funds because of the MER?

Since mutual funds have an average expense ratio of 2% to 2.5%, you should definitely consider switching to funds with lower expense ratios. Better yet, switch to an ETF since there will be no sales charges or sales loads to pay.

There are so many all-in-one ETFs these days from reputable companies such as Vanguard that charge an MER of less than 0.50%. Why pay a high mutual fund expense ratio when you don’t have to? As I’ve already pointed out, the savings can be considerable. That said, you do need to do some basic research first to understand why buying index funds with a low MER is the ideal solution. You would also have to open an account with a discount brokerage so you can purchase the funds on your own. For reference, all of my investment accounts have a single ETF.

However, if you’re a high-net-worth individual who gets additional services from your financial advisor such as estate and tax planning, then the additional fees may be worth it. That said, if you’re getting those kinds of services, you’re probably better off paying a fee-only planner.

Final thoughts

I understand that the majority of people have no interest in managing their money, but I do believe most people would prefer to have more money when they retire. Now that you know what is a management expense ratio, don’t you want to start saving money? The purchases you make and a fund’s expense ratio can have a huge impact on your investment objectives. By reducing your fund fees, you could potentially increase your net worth.