Need advice for short term investment | General comparisons | Discussion forum

Personally, I have no particular concerns with Peoples. You will find some discussions under the Peoples Trust topic in this forum. As far as security is concerned, all banks are vulnerable to hackers, even the largest ones and the government itself. I do not have the expertise to evaluate their security systems myself. Once bitten, twice shy, I hope. Certainly you can't do better than this rate, with th ability to withdraw at any time.

I can't explain why MB Deposit Corp has no limit on their insurance. There are threads about that here too somewhere. The general consensus seemed to be that their system is as good as others which have ceilings, at least that was my impression. You could try writing to them and see what they say by way of explanation. My own philosophy about it is that I don't see how it really matters whether you have 10 deposits at 100,000 or one at 1,000,000 (as an example). In my view it's the total amount on deposit versus what is held on reserve by the insurer plus any other streams that it has to cover losses. As long as they have covered their deposits at a reasonable ratio, then that's fine by me. You can read more about this in another thread - I can't claim to have understood it all. It's NOT true that they are backed by the MB govt, however.

I can't foretell the real estate market. Wish I could! BC has historically been a bit of boom-and-bust market in real estate, especially in the lower mainland and environs, as I'm sure you know. All I can say is that, all things being equal in the market, your money will be worth more now than it is a year from now. It's not a huge difference, though, depending on how much you have. If you have 100,000, invest it at 2.4% for one year, you will gain $2400 gross. CRA will want its share, the amount depending on your marginal tax rate. Let's say it's 33%, so that will cost you about $800, so now you have $1600 + 100,000 = 101,600. I don't know for sure what the inflation rate will be over the next year, but 2% seems fair as they are forecasting a 5% hike in food costs even though oil is going down. Food is not discretionary, although many items on the CPI are. 101,600 - 2% = 99,558, so, in a year, you would have less buying power than you do now. Even at a low marginal tax rate, you will still lose a bit. The more money you have, the more you lose in absolute dollars, proportionately.
It's something to think about, but, by itself, I don't think it's sufficient to base the timing of a house purchase. There are many factors that are much more significant, such as interest rates, price of houses, emotional readiness to make a wise decision, etc. It's possible that BC prices, especially in lower mainland/Victoria and islands, will go down a bit due to problems in the oil patch reducing the capital of baby boomers wanting to retire to Beautiful BC, as their existing assets may be worth less and probably will be. Rising interest rates could have a similar impact. or an earthquake, god help us! On the other hand, they aren't making any more land, and that SW corner of BC in particular doesn't have a lot of it to go around.

ronniejohnson said
Lonnie, I am assuming that by your last comment that you feel the best place to put my money is back into real estate ASAP?

Good Lord no.

There is the report by the BoC, and I don't think they are telling the whole truth.

Oil may crash through $60 this week, new projects for the sands will not be started at that price,
and existing projects will not be expanded. Alberta will struggle after New Year.
The real estate slip will echo through places like Kelowna, a lot of Fort Mac people commute from there.
Victoria is way overpriced and has been declining.
Vancouver, well forget it.
Bond interest rates will rise soon enough, which will put pressure on the BoC to raise interest rates.
This, plus job losses, will make a lot of people default.

I think the housing bubble just popped, wait 6 months at least for buying a house.

Anyone here read Garth Turner ?

The discussion around the value and future of real estate investing is a bit of a red herring, as the OP was just asking about interest rates. Sorry I brought it up.

However, having done so, and gotten responses, I will make a few comments and will try hard to be brief - not one of my strengths!

Real estate has booms and busts like everything else. There are factors at play right now that could definitely cause a bust in some geographical areas. However, in my view, there are many aspects of our economy which are teetering right now, and a significant change in one or more of them could create a lot of problems.

Much depends on where in BC you will be looking to buy.
Also, real estate is normally a longterm investment, even if you move, as long as you stay in the same market. As an example, people who bought in Toronto in the late 1980s really felt the pinch a few years later when prices dived about 20% or so (I forget the precise details but it was significant). But then they eventually came up again, and those people are now looking at prices 4 to 5 times what they originally paid, and many are still in the same houses today. You have to look at real state as a longterm investment, precisely because it can be volatile. But if you're still relatively young and plan to be housed for a long time to come, it may still be a good investment today, but don't over-extend yourself, and be sure to study all the factors carefully.

Real estate agents are not, in my view, an objective source of information about future value of property. They only make money when people are buying and selling, so they can't afford to be discouraging.

As regards advice from Garth Turner, he would be at the bottom of my list to consult. For a variety of opinions about him, check here http://canadianmoneyforum.com/.....th-manager

Roonie, consider your situation, I will not be hurry to get back in your market as it seems to be vary reliant to something that is having a big hit right now while I don't there are many foreign buyers in the market as it is just a small town. You have to understand I am in a university town and they are known to have very little impact from bust and boom cycle, which reflect in the price of real estate. (Combine this with high rent from subletting room to university student, they make good investment !)

Loonie, the real estate agent know very well that I am a student and I don't have money to buy houses, so conflict of interest really doesn't exist here. If he is trying to sell houses to a person that doesn't have a stable income to buy houses, I will be very afraid and I will borrow every penny I can to short-sell everything as a big meltdown is coming soon .

Greg, the CFF deal only apply to Ontario resident.

ronniejohnson said

Hello, thanks again for all the great advice and Merry Christmas! One last question. If I have more then $100 000 would you recommend putting it in more then one financial institution?

If one would like to remain a depositor, then it would be a good idea to stay within any limits of the deposit insurance coverage of the institution.

Otherwise, one crosses the line and becomes an unsecured lender to the institution. It really depends what one wishes to be.

Greg Franklin said

I thought CFF bank was a federally regulated financial institution cover by CDIC. If their 3.00% and 3.30% TFSA 3, 4 and 5 year TFSA GIC rate and 3.00% TFSA savings account promo until March-31-2014 is only available to Ontario residents then Ronniejohnson, maximize your TFSA contributions first.
....

CFF Bank is a Schedule I Bank and a member of CDIC. It looks like their products are retailed "through owner-managed locations called Canadian First Financial Centres."

There are Canadian First Financial Centres in BC, Alberta, Saskatchewan, Manitoba, and Ontario. But, according to CFF Bank: Tax-Free Savings Accounts, their TFSA products are "currently available in select Canadian First Financial Centres across Ontario."

Loonie said

As you are probably aware by now, deposit insurance limits vary according to whether one is dealing with a CDIC-insured bank, or a provincially-regulated credit union. They all have 100,000 limits (including interest earned) except for the MB credit unions which are unlimited.

So,if you wanted to invest with a MB credit union, you would not have to worry about limits. you may (or may not) want to spread out your money with more than one institution if you still feel the institution could be vulnerable.

It is also worth remembering that the TFSA is insured separately. Thus you could have, for example, $35,000 in a TFSA and also $90,000 in a regular GIC and even an RRSP as well, in the same CDIC-insured bank, and they would all be covered. However, you would not want to ALSO have a savings account, as that would be combined with the GIC and both would need to come in under 100,000 at maturity together in order to be covered. For more details, a close reading of the CDIC website is useful. You can avoid all these complications with a MB credit union if that suits you.

I was not aware of Norman's point about being an unsecured creditor, and that this would be frowned upon at the bank. When I did have over the limit in TD, they used to phone periodically and try to get me to move it to their investment depart (stocks and bonds etc). Perhaps this was a reason. On the other hand, if it bothers them so much, they could always refuse the money, which of course they never did.

Loonie .... BC CU insurance is also unlimited.