Wealth tax increases risk of GICs | Page 4 | GIC discussions | Discussion forum

@matts

I don’t see the logic behind a lower return deserves a lower tax.

And if one envy the return and tax treatment of capital gain / dividends, one can always participate by investing in equities. But wait there is no principal protection….

GIC is a lower return cuz it offers ‘safety’. Just cuz one choose safety over risk does not mean they should pay less tax. Whether it’s seniors or not should not be part of the tax equation either.

‘Reward non risk taker via lower tax’. That.simply sounds wrong.

I imagine those the advocate Interest income sb taxed the lowest are more or less speaking for their own benefits / situation, not in terms of what’s considered ‘right’ or proper.

Lower return maybe doesn’t warrant a lower tax, but if I rephrase as a question, why does a guaranteed lower return warrant the harshest highest tax treatment? And for myself it’s not so easy to make the decision to invest in equity’s if part of my thinking is government will always bail out.. because I think some day that will come to an end IMO

AllanB said

savemoresaveoften said

‘Reward non risk taker via lower tax’. That.simply sounds wrong.

 

No, he means reward and incentivize savings not debtors, corporate welfare and bubbles.  

Yes better put. Thank you..

Just to add additional thoughts to the mix:

Many (and I would argue most) of the people who buy blue chip dividend stocks don't expect to ever lose a penny. They don't really believe there is any risk to speak of. That's why they buy them, because they think they are safe, a no-brainer.

We can talk about categories of risk and which investment has more of them, yes, but degree of risk is actually much more difficult to assess. If you believe it's a sure thing, then maybe this is effectively true for the purchaser simply because that is their assessment.

There have been endless bragging posts on this site from people who invested in dividend stocks basically because they figured they were a sure thing, and used that "success" to cast aspersions on GIC investors. Part of their "success" is the dividend tax credit which rewards them again for their assumption that these stocks are a sure thing, NOT for taking a risk.

It could be argued that GIC investors who invest beyond insured limits or who buy credit union investment shares are taking the same or greater risk than blue chip buyers who get dividends.

Yes, I do realize that lower tax on eligible dividends is related to taxes paid by the corporation, but, then, all corporations pay taxes - or should if they are successful. I'm mot sure what the difference is.

GIC investors ARE contributing to the economy. GICs would not exist if they weren't, and it would be very difficult to get mortgages and other loans.

On another thread, someone said a "GIC strike" , where we simply refuse to buy them when rates are unacceptably low, was a bad idea because it would create economic chaos. It can only do that if the economy is dependent on us buying them.

Loonie said

Many (and I would argue most) of the people who buy blue chip dividend stocks don't expect to ever lose a penny. They don't really believe there is any risk to speak of. That's why they buy them, because they think they are safe, a no-brainer.

Really?

Careful, mechone, referring to your $700K in dividend payers is considered "bragging" by some here, though I believe the $800K in GICs is not.

Generally no right to sue if you lose money in the stock market, not sure why anyone would worry about that, plus retail investors are dwarfed by institutional investors. But I'll take my cue from pension funds, gov't CPP fund, etc, fixed income is always only a part of what they hold, lots of equities held too in order to be able to meet their obligations. And if the authorities are bailing out, gaming interest rates, etc for the benefit of stock investors and the billionaires are messing with stocks (has anyone become a billionaire via GICs?) then all the more reason to think that's the place to be for some of your money, I figure. Though I get the 100% GIC devotees too, i.e. due to pension funds, etc some folks already have what they consider to be significant market exposure.

AllanB said
Pension funds have been moving out of stock markets into private investing since 08. They saw a flawed system like everyone else but what some missed was the fed put which refers more to US equities which drive other markets. …

You clearly don't know what you are talking about.

Pension funds have not been moving out of stock markets. They have started to allocate funds into private equity and infrastructure because the funds are becoming too large for the public markets. They are not allowed to control more than 10% of single companies.

As well, there are higher returns from the lower valuations in non-publicly traded companies. The ability to sell on a stock exchange carries a premium around 100%.

The talk about a "federal put" is just propaganda. You should have a look at your GIC's and stop ignoring the "federal put" called CDIC and the "provincial puts" like FSRA and DGCM that are there.

Correction -
My response in Posting 73 was not meant to respond to Posting 72 (AllanB) but to respond to Posting 68 (Loonie). I repeat the response as follows:

I gather u have read many books on investing - I would respectfully recommend u take a basic economics course or a course on money and banking and u will have a better understanding of concepts such as time value of money and inflation. It is a basic concept that inflation is detrimental to GIC returns. In addition u discount the effect of taxation on returns - it is an important factor in investing. You can flaunt GICs but no need to bash investors in equities who have done their homework.
My portfolio is presently 1/3 in Equities and 2/3 in HISA/GICs. I am very familiar with my bottom line return/performance in both segments.

Loonie said

Yes, really, if one is to judge by the abundance if comments on this subject on this forum.  

Certainly an abundance of really negative comments by you on the subject of equities, ETFs, Investment Advisors etc. - so my conclusion after seeing all your long posts is that you and/or your partner must have lost a pile of money in equities sometime in the past and you are still reeling from it. For sure, that is unfortunate, and if so, I can well understand why you think GICs are the best thing.