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I thought you might be interested in hearing my thought process as to what I should be doing with the $100,000 I have lying around..

So I was a little bit idealistic when I thought I would meet someone on the short term and be able to use the money I have towards a wedding, RESPs, my TFSA/RRSP, or even *gasp* another down payment towards another place.  The search for Mr. Right isn’t going as well as I had hoped, and now I am contemplating that I need to be doing something with my money instead of just letting it sit there in my high interest savings account.

There are a few options that I have been considering, and I may take a balanced approach in the end.  I thought you might be interested in hearing my thought process as to what I should be doing with the $100,000 I have lying around (other than spend it eating oysters, drinking mimosas, and going for brunches all the time).

Related: Choosing the Latest Investing Fad

Moneysense did a great series on what to do with the first $1000 and $100,000 now, you have available and some of the options were entertaining.  One of the suggestions was to invest in a franchise.  While I wouldn’t want to invest my money into a franchise at this point (that would suck up way too much of my time and energy that I already have so little of), it was an interesting consideration.

My goals for investing this $100,000 would be to protect my capital and opt for growth that is more than what I am getting in the high interest savings account, while reducing taxes owed on the income generated, if possible.  I am a bit wary of the Canadian equity market at present because everything seems overvalued at present.

In This Article:

The Options…

Invest in ETFs

Since I would have a higher capital investment, investing in exchange traded funds would make sense.  I should be able to set a stop loss on my exchange traded fund purchases and be able to rebalance on a regular basis.  Setting the stop loss should protect my principle investment from a huge market crash, while I would still be able to enjoy monthly or quarterly gains from the dividends produced within the exchange traded fund.  I would most likely opt for a model portfolio recommended by the Canadian Couch Potato with a heavier emphasis on United States and International equity.  I would try and keep most of the United States and International holdings within my RRSP.  I have about $10,000 of RRSP room that I have yet to contribute thanks to the emptiness created when I took money out from the Home Buyer’s Plan.

Related: Read our book on ETF Investing

Smith Maneuvre

This is risky and probably a poor choice with the pending rising interest rates, but it would provide a great tax happy option.  I should be able to deduct the interest income from my home equity line of credit (I have about $25,000 in my home equity line of credit) in order to offset my taxes.  I most likely would not opt for this idea because I am too risk averse. The Passive Income Earner has a great post on how to see if the Smith Maneuvre will work for you.

Invest in U.S. Real Estate

Another fun idea that has come and gone from my idea bank is to invest in some U.S. real estate, somewhere where I can manage it more easily without having to fly anywhere (Arizona and Palm Springs properties are out, then!).  I was thinking somewhere close, like Seattle or Tacoma.  I would opt for something that is cash flow positive so that I am not completely considering recovery from the market or speculating.  I have a friend who is doing this and bought a 2 bedroom house in the Tacoma area for $70,000 and is renting it for $900 per month.  I do not know enough about the tax implications of rental income in the United States and the capital gains tax once the property is sold so I would need to research this before considering this further.

Invest in Robo Advisors

The newest option in the Canadian market is that of robo advisors.  I know what you’re thinking – what the heck is a robo advisor, and why would I trust a robot with my money right?  The truth is that robo advisors are just super easy index investing options.  There is no robot investing your money, it’s simply human advisors that invest your money in basic low-cost index ETFs using a computer algorithm.  This keeps your money out of the hands of mutual funds and stock pickers (always an easy win).  I signed up with Wealthsimple a few months ago and have really enjoyed the ease of use when it comes to investing in my TFSA that I have with them.

The Decision…

So after hashing out my thought process, still no decision haha!  I am leaning towards the ETF option but very tempted by the U.S. real estate option.  Perhaps I need a professional at this point and the do-it-yourself thing is a bit too risky for this large amount.  I would only opt for a fee-only financial advisor, but even then I would prefer to have it done for free haha (I am so cheap!).

Readers, what would you do if you were in my shoes?

Article comments

Fiscally fit says:

I hate idle cash but if you might need the cash in the next couple years then cash it should stay. If you are looking to invest it, I know exactly what i did with mine.

If I had $100,000, I would definitely invest it in a real state business because it is the most safe and risk free business that I know of. If you invest it in other businesses, then you might have a much bigger risk factor but it also depends on the market you belong to as well.

Tahnya Kristina says:

$100k is a lot for a wedding. Invest $80k and leave $20k in cash just in case Mr. Right Now turns into Mr. Right for the long term. I have been with my boyfriend 14 years and I have $0 saved for our wedding because I have finally accepted the fact that it just won’t happen. I hope to see you at CPFC13 in Toronto.

Young says:

@Tahnya- I won’t be going to CPFC13 🙁 but hopefully next year! Awe congratulations on 14 years with your boyfriend! Tell him to sh*t in the pot or get off it! haha. jk.

David says:

Canadian preferred share and REIT ETFs are down right now and represent good buying opportunities. I’d pick up CPD and XRE/ZRE. I’m guessing most of that money will be non-registered so CPD would be tax-efficient. Of course this depends on the rest of your portfolio too but $50,000 in CPD would spit out (this is admittedly approximate) ~$200 a month in dividends.

I would add that I think it’s definitely worth paying a fee-only advisor for a couple hours of their time to suggest a plan for you to execute. What’s a tax-deductible $500 or even $1000 when deciding what to do with $100,000?

Young says:

@David- I just bought more CPD! 🙂 But not $50,000. Just to top up my TFSA. I think the hesitance with going for a fee-only advisor is I am not sure who is “good”, know what I mean? I have a tendency to have difficulty trusting. I blame it on my parents divorce haha.

kc says:

If you love white elephants, buy US real estate…

True story from a brother of a guy I work with.

He bought into the “buy US real estate” scam. jumped into Arizona with out really looking into all the laws and pit falls…. As you know “real estate only goes UP”

1st problem… his next door neighbour became a US property cop and started to lecture him on how he is NOT allowed to be doing any home repairs on his place (not a US citizen.

2nd He can’t just drive down the street to see his “rental” investment. so of coarse things start to go WRONG…..

3rd… the renter lost his job and decides to stop paying rent, you can bet your bottom dollar that there is NO help from anyone there on this problem… the place gets thrashed….

4th …. something about a sucker born every minute…. DON’T listen to Ozzy Jurock

Buyer beware!!!!

What’s wrong with mimosas and going for brunch all the time? You just called out my weekends???

Kidding aside, I would consider investing about 50% in CDN and US dividend paying stocks and 50% into broad-market ETFs (VTI, XIU, etc.)

The P/Es on some bank stocks are still under 12. WMT is falling in price. Some good prices to be had. You get 3-4% yield on these holdings plus capital appreciation with those dividend-payers (as you know). All good.

Aren’t you still around 30 or under 30? What’s the rush?

Nice problem to have. I’ll trade ya… 🙂


Young says:

@Mark- Thanks Mark! Great balanced approach. Haha I am 30 now 🙁 Haha it takes time to meet someone that you like and somehow convince them to propose hahaa.

Joe says:

I think REIT or ETFs would be good. I wouldn’t want to manage a property long distance, but I guess some people made it work. Great job saving up.

Phil says:

Nice problem I’m sure many would not comprehend… Your thoughts are good, but everyone’s situation is different. Myself, I would buy 10 high earning momentum stocks and think long term to turn that 100K into something, well bigger, and in the mean time research that idea of investing in real estate. US has some good deals, but research for the right area, real estate contact and actual property might take a few months… As to taxes, while it should be a consideration, growing on hand capital should be your primary focus, as idle capital does no one any good… – Cheers

Young says:

@Phil- You my friend are a risk taker! 🙂

Phil says:

Maybe, but I did retire from working at 40 – Cheers. =P

fiscally fit says:

So you mentioned that you want to protect your capital, so what type of volatility are you willing to take on? Also do you need access to the money any time in the short term? Where are you sitting in terms of tax bracket. Lots of unknowns but the ETF idea doesn’t seem to fit quite right 😉 and neither does the real estate but more info is needed.

I know exactly what I would do haha but that is neither here nor there

Also, if you need to speak with a professional don’t start with a fee only advisor. Start with finding a a few CFPs with some post secondary education as well (regardless of how they are paid) and see what they have to say. Don’t let compensation model determine who you speak with, start with qualifications. If you really are dealing with a qualified professional, there really shouldn’t be any hidden conflict of interests due to compensation model. Sorry for the rant haha it is late out!

Young says:

@fiscally fit- Right now I am like on the poverty like haha (well close) but next year will be different.

Martin says:

Don’t get married. Horrible idea.

What about US real estate? Maybe something in Florida?

Young says:

@Martin- Wise words from the perpetual bachelor? 🙂

Leigh says:

I would just invest the money according to your IPS! You do have one, right? 🙂 http://www.bogleheads.org/wiki/Investment_Policy_Statement

Young says:

@Leigh- hehehe I DO NOW!! hahaha… I am going to simplify my RRSP Questrade account because it kind of looks like a gongshow right now.

krantcents says:

I think I would invest REITS. No management issues and it would be diversified geographically.

Young says:

@krantcents- Brilliant!

Liquid says:

Congrats on the amazing problem that I only wish I had 🙂 Since you still have some contribution room left in your RRSP one way to invest in real estate south of the border is through REITs based in the US. I have Annaly Capital (NLY) which pays a 13% dividend, but there are probably other ones out there with better diversification in the assets they hold. Maybe not as profitable as directly buying a house, but it’s more tax efficient. However I’ve heard if Canadians set up an LLP in the US or have dual citizenship, then they won’t be taxed as heavily as an individual foreign investor by the IRS. Let us know what you decide to do 🙂 If I had that much cash I would use half of it to pay down my debt, and the other half to buy another farm.

Young says:

@Liquid- You know you’re right… good thinking… It would just be a headache waiting to happen. A U.S. REIT is a great idea, though of course I would not hold that in the bulk of my RRSP.