Alright, I promised that I would share the other 4 equities I bought to hold in my TFSA aka Tax Free Trading Account. With the markets plummeting these past few days, it might be a good idea to load up on some stocks you have been keeping an eye on. The volatility is back.. stocks are on sale (that’s how I like to think of it, anyway).

Like last week’s post, I had you try to guess what the equity I bought in my TFSA was. So I’ll try and do the same again this week.

I had bought a very small amount of shares of this income trust before 2011 rolled around.  With the newly added money ($5000) I put in last month, I added more shares to equal 100 shares.  When I get more money in my TFSA from my tax refund, I plan on buying more of this stock.

Alright, here goes, time to put on your thinking caps:

• This is another big dividend payer- 8.28% annual yield  (that’s $0.10333 per share per month or $1.24 per share a year)
• They didn’t decrease their payout to investors even though they converted from an income trust to a corporation (one of the few ones that didn’t).  This says a lot since the government changed the tax structure, so they are being taxed and still paying the investors the same amount.  That says a lot.

• It’s an independent energy supplier with electricity and natural gas customers throughout Canada and the US (they use contracts and long term fixed-price agreements)

• More energy supplied to the US (more customers) and a little more natural gas supplied to Canada (in terms of customer numbers)
• They are also one of the largest competitive green energy retailers in North America- you can choose to have a portion of your energy come from renewable resources
• Current P/E ratio is 10.03 (which is good)
• Canadian stocks are heavily weighted in utilities and this is one of them
• You can DRIP it (I still need to get in on this DRIPing action)

Okay, did you guess it?  It’s kind of an investment darling for a lot of people, PF bloggers alike (I know Sunny from My First 50,000 is a huge fan)- it’s…. drum roll please….

Just Energy.  Their Just Green program (using renewable resources) seems very innovative and it appears there is a lot of potential growth for the company.  Again, if you are thinking about this stock, I warn you I am not a financial professional, so do your due diligence and research before you make the plunge with any investment advice or opinions.

Readers, did you guess it right?  If you have this stock, what do you think about it?  Any readers use this company for their electricity and natural gas?

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As you know, I sold off my Tax Free Trading Account portfolio (remember, it’s a “souped up” TFSA) and took the money out for the house down payment.  My portfolio was up about 20% Return on investment, but 2010 was such a great year for making gains on the stock market, I’m sure most people had similar returns (20% beats the 1.5% in a regular ol’ TFSA any day- though of course there is risk involved) .  I then transferred $5000 of my non-registered money (I sold a few loser stocks there as well) into the Tax Free Trading Account.  I will have $10,000 remaining that I can put in, and I plan to put my tax refund into my TFSA and RRSP this year too.

The reason why I sold off a lot of my TFSA portfolio was also because of the changes in terms of taxation on the income trusts I was holding- they had to convert to corporations and a lot of their distributions (read= 9-11% per year given back to you) were going to be slashed big time.

I thought I would share my picks for this year and give the reason why I chose the particular investment.  This year, it was more difficult to find bargains in terms of more bang for your buck because lots of stocks were trending at their 52 week highs.  Ideally, I would like for the stocks I pick to perform well (duh, who doesn’t?) but I would be happy if it stayed “status quo” too because they will pay me some juicy dividends anyway.

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There has been a lot of talk about which one is better, the TFSA vs RRSP in both the PF blogosphere and the media.  Both are great tools for saving for us Canadians.  Given that it’s a fresh year (and almost time the RRSP contribution deadline for 2011- March 1, in case you forgot), more people are thinking about the TFSA and the RRSP.

In an ideal world, one could max out both the RRSP and the TFSA.  That would be ideal. Though in the real world, life happens, and it is oftentimes very difficult to be able to scrounge up the money (without having to sell a kidney on the black market-kidding!) to be able to max out both the RRSP and the TFSA.

In my opinion, the RRSP and the TFSA are like siblings. Very different siblings. Almost mirror opposites and the inverse of each other. They both compete for your money and attention.  They are both good, but as we all know, one can be better for you than the other, just like parents really do have a preference of one sibling over the other, but they just don’t say it aloud (uh oh, is my middle child syndrome coming out in my post?!  Sorry about that).

So let’s talk about the RRSP first (the older sibling):

The Basic Lowdown on the RRSP:

• The RRSP was introduced in 1957 (yeah, it’s the really old sibling)
• As detailed in my RRSP post, the RRSP can hold a number of things (including GIC’s, stocks, mutual funds, bonds); it’s like a basket of investments sheltered from tax
• Contributing to the RRSP is with PRE-TAX income (the tax refund you get is your pre-tax money, but given to back to you at a later date)
• You will have to pay tax eventually when you take money out of it- it’s a tax deferral program (the hope is that when you take money OUT of the RRSP, you’ll be low income aka retired, so there won’t be as much income)
• You are supposed to contribute to it to reap the tax deductions when you’re at a higher tax bracket, and take it out when you are at a lower tax bracket.
• There are two options where you are allowed to borrow money from your own RRSP: 1) Home Buyers Plan and 2) Lifelong Learning Plan (with both you are expected to pay back 1/15 and 1/10 respectively, of the amount you borrowed per year until its fully paid)

The Lowdown on the TFSA:

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Just wanted to quickly update you in a new post to point out changes to the old posts, namely the HISA (high interest savings account) post and the Questrade USD Transfer post.

Extra Interest, say what?

Canadian Tire bank has recently unveiled a limited-time bonus interest rate incentive on two of its personal banking services (you get an extra 1%).

April (a Y&T.ca reader) wanted me to let you guys know about this new promotion going on a Canadian Tire bank:

The Canadian Tire High Interest Savings account and the Canadian Tire Tax Free High Interest Savings account are perfect for people who are looking for the flexibility of earning interest on their savings, with no monthly fees, no lock-in period and 24/7 online banking. For the first 90 days from when money is deposited into a new account, customers will earn a special interest rate of 2.50% (if the account is a Canadian Tire High Interest Savings Account) or 3.50% (if the account is a Canadian Tire Tax Free High Interest Savings Account).

After the 90 day period, the extra 1% they gave you won’t be applicable anymore (so it will go back to 2.5% for a HISA TFSA and 1.5% interest earned for a regular HISA).

Just remember not to over-contribute to the TFSA (e.g. don’t withdraw and think you can put it back in immediately) like the 70,000 other Canadians that accidentally did this year.

Questrade USD Transfers:

A reader and subscriber (thanks for writing to me!) wrote to me about her experience with the USD Transfer with Questrade.  I also had the same experience, but the amount I transferred was quite small, though I was still peeved about it.  Looks like we shared the same issue.  She had started up a registered account (just like I did) and had specified the currency preference to Canadian dollars (because who wouldn’t, it IS an RRSP/TFSA after all).  She then proceeded to transfer the USD as a pre-authorized deposit.  Then, checking to see how the deposit went, it turns out that the USD was automatically converted back to CAD dollars at the end of the day.

The same thing happened to me.  I was befuddled.  It didn’t make sense that the reason someone WOULD transfer USD to a trading account is to avoid the currency conversion, but they screwed that up by transferring your money back into CAD, hence you the investor, will have to pay the currency conversion twice.  Which sucks big time- can you say OUCH?  The thing is, they don’t have a pop up box that warns you or cues you to tell you your money will be transferred back to Canadian dollars at the end of the day.

The lesson learned here is that you need to set your currency preference to NEUTRAL when you first register for your account (and if you don’t know how to do this, ask! They are pretty accessible by their online chat option or by phone) to avoid the currency hits!

It is pretty awesome that Questrade allows you to trade with USD (I believe the only registered account in Canada that lets you hold foreign currency) but you just need to make sure it’s not converted back to Canadian money, which beats the point of wanting a USD registered account in the first place.

Happy Trading and Saving, guys!

Readers, any other mishaps like this happen to you?

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As you (my fellow Canucks) probably know by now, the Harper government introduced a new savings vehicle in 2009- the TFSA!  TFSA’s are great- they grow tax free (that’s a beautiful thing!) and you can withdraw money whenever the heck you want.

But can you re-invest money whenever the heck you want?

The Story

A youngandthrifty.ca reader wrote in the other day telling me that she received a statement the other day from the Canada Revenue Agency assessing almost $600 interest on what they called an over contribution.

What she did had was $5000 in a ING TFSA high interest savings account.  She withdrew $5000 at the end of January 2009, she took that money and opened up a TD bank TFSA account with the same $5000 (likely because she would get more interest, I assume).  All was fine and dandy…until June 2010 when she received a letter from the government asking for $600.

How did this happen??

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