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Email this11:28 am
February 20, 2018
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I'm rethinking the 5yr maybe it's the way to go although selectively i don't believe in laddering when rates r unacceptably low and u know they're going up. Going forward what is the "must-do-can't-lose" 5yr yield 3.75, 4% or higher?
3:55 pm
February 24, 2015
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If I could understand your first sentence, I would give my opinion. Please again in a different way.
4:27 pm
October 21, 2013
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I think he wants to know what your minimum acceptable five year GIC rate would be if you were persuaded to do laddering and needed to buy a five-year GIC. Would it be 3.75, 4.0, or something else?
My answer would be that, with laddering, you can't hold out too long, so you basically have to take the best available rate, whatever it is. You can fiddle around for a few months perhaps, but if you wait too long, you will no longer be laddering. You will just be picking rates.
I bought five-years at 3.5 at Oaken in 2017 and am glad I did. Yes, I could get 3.75 today, maybe 4 in a while, but I would have missed out on the extra interest in the meanwhile.
I have another one at 2.75 that I'm not too happy about, but, still, it was better than other available options for a year or two. They average out; and that's the point of it.
It's like the old adage for stocks: timing the market vs time in the market.
4:59 pm
February 20, 2018
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Forget laddering whats a good to great 5yr rate looking out to the future? 3 now is unacceptable, 3.5 is minimum, 4 is reasonable the sweet spot i think that'll attract more 1, 2, 3yr gic investors to the 5
5:17 pm
October 21, 2013
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Note to self: Why do I bother?
8:27 pm
November 7, 2014
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hotmony said
I'm rethinking the 5yr maybe it's the way to go although selectively i don't believe in laddering when rates r unacceptably low and u know they're going up. Going forward what is the "must-do-can't-lose" 5yr yield 3.75, 4% or higher?
I find it really interesting that some people still think they know that "rates are going up." As we have recently seen, rates have been stalled by a suddenly sluggish economy. We could all make a ton of money if we knew with any certainty where rates and the economy in general were going and when. Well, we don't. And, we never will. I am happy to continue laddering my investments with the best rates available when my money is available. As a friend of mine once reminded me, "the only certainty is uncertainty. "
8:30 pm
November 7, 2014
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Loonie said
Note to self: Why do I bother?
Sometimes it's frustrating to care.
10:32 pm
February 24, 2015
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I suppose that 4% is the rate that will attract new money. It is a nice round number, reflects the minimum RRIF withdrawal rate at age 65, and IIRC is often used as the 'sustainable withdrawal rate'. However, I don't think we will see that soon, if ever. The Government of Canada 5 year bond rate topped at just over 2.4% in November and has declined to 1.8%.
1:32 am
February 17, 2013
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Acceptable rate for me is the best rate I can get at my bank, on my investment, when I'm ready to lock it in. Isn't the whole point of laddering to lock the best rate of the day, and the rising/lowering interest rates will level out the average? Between my wife and I, we have, or will have, 20 x 5 year GIC's with one maturing every 3 months. I figure that's a good spread to take advantage of rising/lowering rates. Better question would be which institution do I want to select to set them up with that consistently offers above average rates? I want to avoid having to keep track of GIC's spread over multiple FI's, maturing at several different times a year. Too old to deal with that.
7:17 am
February 20, 2018
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General trend of rates markets is predictable not to the day of course. Now for example we know rates could go either way but the bias is still up a quarter point at some point late in the year.. if trends didnt have some predictability smart money pros wouldnt spend billions to forecast. Clowns like buffet say one thing and do the other he trades and holds a few stocks like coke to tout his image
8:17 am
March 17, 2018
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Now that we know rates have stalled, with at most 1-2 more increases in 2019, it seems like a good time to either put all your money in a 5 yr GIC, or start a GIC ladder with 20% of money in 1 yr, 2yr, 3yr, 4yr, and 5yr terms and renew all when they mature at 5 yr terms.
If you only have small GICs in multiple institutions, seems like it would be easier to just convert all to a 5 yr GIC when they renew this year, to avoid confusion.
I don't like the stock market, otherwise I wouldn't be in this forum, but if you have about 1.6 million in cash you can invest it exclusively in dividend paying stocks and make 48,000 dollars a year tax free.
https://business.financialpost.com/investing/investing-pro/sell-your-losers-avoid-dividends-and-more-tips-to-minimize-your-investing-tax-bill
9:15 am
October 29, 2017
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2of3aintbad said
I suppose that 4% is the rate that will attract new money. It is a nice round number, reflects the minimum RRIF withdrawal rate at age 65, and IIRC is often used as the 'sustainable withdrawal rate'. However, I don't think we will see that soon, if ever. The Government of Canada 5 year bond rate topped at just over 2.4% in November and has declined to 1.8%.
And with the 2 year bond dropping to 1.77% there isn’t going to be a rate hike on March 6. Once that 2 year bond touches the overnight rate and drops below it, interest rates will most likely get pulled down.
10:38 am
February 20, 2018
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Bri ya might be time for some to switch to 5. The magic number to me is 4%+
Bond traders dont set rates alone retail influences to they dont recognize bond yields as much as the pros.
Im a leader not a follower like many other retail investors. I dont march to someone elses order. My money is as valuable as buffetts or any other trader. I listen, I decide. If something is too complicated or uncomfortable i dont care how good an investment it is its worth zero in my book. I expect investment respect bad spelling n all and give it in return. If the evidence proved beyond a doubt everyone would do it. Nothing is 100% nothing. Ride your gains cut your losses expect the unexpected dont trust anyone including family within reason.
2:58 pm
April 6, 2013
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Rick said
Acceptable rate for me is the best rate I can get at my bank, on my investment, when I'm ready to lock it in. Isn't the whole point of laddering to lock the best rate of the day, and the rising/lowering interest rates will level out the average? …
Yes, that is the point to laddering that is being lost.
Because one is renewing a portion of one's money for five years every year, every six months, or every three months, one is capturing the current five-year GIC rate. The five-year GIC rate has a strong tendency to be higher than the one-, two-, three-, and four-year rate.
3:39 pm
October 21, 2013
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Rick said
Acceptable rate for me is the best rate I can get at my bank, on my investment, when I'm ready to lock it in. Isn't the whole point of laddering to lock the best rate of the day, and the rising/lowering interest rates will level out the average? Between my wife and I, we have, or will have, 20 x 5 year GIC's with one maturing every 3 months. I figure that's a good spread to take advantage of rising/lowering rates. Better question would be which institution do I want to select to set them up with that consistently offers above average rates? I want to avoid having to keep track of GIC's spread over multiple FI's, maturing at several different times a year. Too old to deal with that.
I agree with almost everything you've said, Rick.
Perhaps, for younger people, hopping all over the place is worthwhile, and they have the energy and need to do it. I won't argue against anyone who pursues a higher return with no greater risk if they can manage it.
But at my age, I need to ensure that my money is relatively easy to manage, looking to the day when a POA might have to take over. And, for me, that means trying to focus on only a few FIs even though I know it will mean returns that are sometimes less than optimum. Once in a while, though, an offer comes along that I can't refuse!
I am increasingly nervous though about he the "his, hers, and ours" approach, wherein one has 3 sets of accounts with each FI, to spread out the money for insurance. This means that when the first spouse dies, there will be probate tax on the deceased's holdings. I want to avoid this, and it seems very unfair anyway, as the govt will likely take probate tax twice.
With that in mind, I am more fond of the CUs. Their 245K cap in Ontario and no cap in MB make them more attractive to me. With that and the double insurance available through Oaken, I think I can do it all in joint accounts. To that end, we are trying to equalize our funds by judicious spending - spending from one person's capital while saving the other one's income.
3:51 pm
March 17, 2018
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Loonie said
I agree with almost everything you've said, Rick.
Perhaps, for younger people, hopping all over the place is worthwhile, and they have the energy and need to do it. I won't argue against anyone who pursues a higher return with no greater risk if they can manage it.
But at my age, I need to ensure that my money is relatively easy to manage, looking to the day when a POA might have to take over. And, for me, that means trying to focus on only a few FIs even though I know it will mean returns that are sometimes less than optimum. Once in a while, though, an offer comes along that I can't refuse!I am increasingly nervous though about he the "his, hers, and ours" approach, wherein one has 3 sets of accounts with each FI, to spread out the money for insurance. This means that when the first spouse dies, there will be probate tax on the deceased's holdings. I want to avoid this, and it seems very unfair anyway, as the govt will likely take probate tax twice.
With that in mind, I am more fond of the CUs. Their 245K cap in Ontario and no cap in MB make them more attractive to me. With that and the double insurance available through Oaken, I think I can do it all in joint accounts. To that end, we are trying to equalize our funds by judicious spending - spending from one person's capital while saving the other one's income.
Also Alberta has no cap on guarantee of funds in credit unions. but Motive Financial in Alberta is a bank, not a credit union, so has the CDIC $100,000 cap.
Theoretically if one person's income is used to fund a joint account, the tax owing should be paid by that person as well, if I understand the law correctly. But I think it's safe to have each spouse declare 50%. Is that your understanding Loonie?
6:37 pm
October 21, 2013
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Yes, it is my understanding that the person who "owns" the money is supposed to pay the tax on it.
Further than that, I can't say for sure, but I think it's wise to work towards equalizing the assets.
I am trying to maintain a paper trail for sources of funding for joint accounts, just in case.
8:53 pm
April 6, 2013
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I think it would be quite risky to declare the interest 50/50 when each spouse didn't source 50% of the joint account funds and there is a significant difference in the marginal tax rates of the spouses.
It would look like an attempt by the higher-income spouse to income split the interest with the lower-income spouse.
9:14 pm
February 9, 2019
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Norman1 said
I think it would be quite risky to declare the interest 50/50 when each spouse didn't source 50% of the joint account funds and there is a significant difference in the marginal tax rates of the spouses.It would look like an attempt by the higher-income spouse to income split the interest with the lower-income spouse.
We always do 50/50. Because of statements similar to what you are saying one year I did a “test” and I took 100% and with income splitting it came to the same number any ways. Whoever designed the income tax form was a math wizard. We are both retired.
9:40 pm
October 21, 2013
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I agree with Norman's caution.
On the other hand, once money gets into joint accounts, it's difficult to trace accurately.
Let's say you each put 50K into an account. Next year, 20K of it is spent. Is the remaining 80K owned 40K:40K or 30K:50K? How would you know?
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