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Short-term Fund purchasing advice...

Not sure if people can help me with this but maybe there are others who face a similar plan or advice needed...

I am taking advantage of the new Tax-Free Savings accounts and will be using this account for 4-5 year goals. I've decided on 60% stock funds and 40% fixed income funds

For those not in Canada this TFSA allows up to $5000 per year to be deposited into a special account. The investments in this account can earn capital gains free of tax (and do not qualify for capital gains losses on your tax forms :))and you can withdrawl from this account without penalty.

Any usused limit room can be carried forward for the following tax year so in 5 years I "could" have $25 000 in this account earning a return tax free, withdrawlable pentaly free.

I've opened an account with my national bank cause they offer the lowest cost MER index funds and I can't afford the commissions on ETF's as I will be putting money into this accout biweekly (12% of my paycheque).

The problem is I've never invested into fixed income funds before and I have no idea how these work. My retirement plans are at least 25 years away and my mid-term investments are in stock index funds as well. This particular account cannot hold cash as it's a fund account. In order to hold cash I'd have to open another type of Tax-Free Savings account. Besides the interest paid on cash is really pitiful these days.

What I can get access to is from this list:

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The E-series are the low cost funds but they only offer one e-series for all of fixed income. The rest have standard MER's. There is no admin fees or commission's etc. Just MER's.

Can anyone help show me how to construct a fixed income portfolio using small biweekly contributions? The Balanced funds are also available but they have higher MERs. Maybe those are the way to go? The remaining 60% of this account will be 1/3 CDN indx, 1/3 US indx Currency neutral and 1/3 International Currency neutral if this helps...

D.

Reply to
The Henchman
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On Jan 6, 6:32 pm, "The Henchman" fixed income funds

You aren't going to gain much by diversifying in your tax-free account. Put your fixed income funds in your taxable account and stock funds in the tax-free account.

list:

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Just put it all into the TD Energy fund because the managers of that fund should be knowledgeable. You should be safe with that strategy over the next 5 years.

-- Ron

Reply to
Ron Peterson

list:

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That's what everyone was saying about Bernard Madoff.

Reply to
PeterL

The Madoff situation wasn't under any sort of supervision.

-- Ron

Reply to
Ron Peterson

Without knowing his other investments, do you really think it is smart to put all his money in one sector fund for a 4-5 year period? Sector funds are volatile by nature and that one seems particularly so. -- Doug

Reply to
Douglas Johnson

Yes, I am guessing that he isn't already heavily invested in energy stocks. He won't have any more than $25,000 in the account at the end of 5 years which probably won't be more than 50% of his annual income. I would guess that home equity and other investments are at least $100,000, which would make the energy fund only 20% of his investment which is reasonable amount to have in the energy sector.

-- Ron

Reply to
Ron Peterson

I am a renter, 32, and not interested in homeownership, but cottage ownership in the next 5-7 years. All my net worth is in registared and non-resgistared index stock funds (and that amounts to $20 000). and 6 or 7 months living expenses in a taxable savings account in cash. I have decent income but no high school diploma so my earning ability is limited.

I have no debt, no car payments, no school debts, no credit card debt. 4 or

5 years ago I had $32 000 in these sorts of debts including 28% interest credit cards and I paid every cent of it back without a single missed or late payment. I now avoid consumer debt altogether even though my credit score shows over 800.

I wanted to contribute up to 36% of my take-home pay into the following 3 accounts: Retirement, Mid-term, Cash. I'll need about $10 000 cash to purchase a replacement automobile in the next 18 months. My health is good and universal medical care is afforded to me.

I'll use the tax-free savings account to hold half of my mid-term investments with the primary goal of cottage ownership. So I wanted to preserve equity in these mid-term investments because I'll be using it for a goal that'll still build equity. The way I figured it roughly 30-50% of my monthly contributions towards this goal should be in a fixed income type fund(s) but there are not alot of options for small incremental purchases, say biweekly.

So should I forget about contributing to the fixed income component of this tax-free savings plan account and just keep that portion set aside in cash, or is it still worth it to buy fixed income funds incrementaly, say $25 or $35 a week? My goal is to get a 7 or 7.5% return overall.

Reply to
The Henchman

On Jan 8, 9:02 am, "The Henchman"

Reply to
Ron Peterson

the 7 or 7.5% is from Stock funds plus income funds after MERS.

I already have 7 months living expenses set aside in cash. Do you think I need more for an emergency expenditure. Do people keep about 12 months worth? or maybe an amount equal to their salary?

Reply to
The Henchman

On Jan 9, 7:35 am, "The Henchman"

Reply to
Ron Peterson

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