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Email this11:20 am
September 11, 2013
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MattS, if your analysis is that interest income is punished and higher returns are repeatedly gift wrapped for equity markets, well, then your course of action is made easy/obvious.
11:56 am
March 30, 2017
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@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.
12:55 pm
April 18, 2022
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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.
2:23 pm
January 11, 2020
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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
2:27 pm
January 11, 2020
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Curious would you feel it’s fair that all investment income treated the same, as income and taxed the same way, not differently? I would… If taking on calculated moderate risks has proven as it has over time to produce a greater reward is that and should that not be the reward? Why does one need to benefit twice? And I’m not trying to pick any fights here guys, just friendly discussion.. leave the scrapping on the other thread:)
2:33 pm
January 11, 2020
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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..
4:11 pm
March 30, 2017
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MattS said
If taking on calculated moderate risks has proven as it has over time to produce a greater reward is that and should that not be the reward ? Why does one need to benefit twice ?
Buying Nortel or BreX or Bear Stearns or Leahman were all considered very good moderate risk at one point... hope you get my point.
How about earning a salary is essentially "risk free" (as in you dont risk your own capital), so is the return of interest income such as GIC. As such they both warrant the same tax rate.
And like you said, if someone does earn an outsized return in equities, lets say double their money. To make it simple $100 becomes $200. $50 will be taxable, and that $50 is being taxed at whatever his marginal tax rate is. Assume a GIC investor with same marginal tax rate invest that $100 in GIC and earn $4, he is being taxed on $4. The equity investor ended up paying way more absolute tax dollar, but he also earned more net net cuz hes willing to take risk on the $100, which can very well become $0. The GIC guy loses out cuz the comfort of knowing his money is "safe" is the opportunity cost, nothing to do with govt bailing out any body. And if the GIC guy really believe the govt will bail out any equity guys, feel free to become one. If not, then again it is the cost of "not comfortable with risk". I find the system is super fair from that perspective.
As to whether all source of income should be taxed at the same rate, that is maybe more sensible. But arguing "savers should be encouraged and via lowest tax" simply does not make sense. Investing in blue chip equities is "savings" too. Its a form of saving with calculated moderate risk that "promise" a bigger return 🙂
7:17 pm
October 21, 2013
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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.
7:26 pm
April 18, 2022
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Really someone needs to step forward to advocate for depositors.
6:20 am
September 7, 2018
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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?
7:20 am
January 28, 2015
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I'm turning 60 and thinking of retiring ,if I see 5% GiC's I'm calling it a day. I'm thinking of cashing out all my dividend paying stocks approx 700k and I currently have 800k in GIC's almost all coming due in the next year.
7:35 am
April 18, 2022
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canadian.100 said
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?
Yes, and they are reading "you can't lose long term index investing the data backs it up books". Never selling has become a religion they smirk when you warn them. They are on automatic buy while insiders are on auto sell. Check out yahoo insider transactions any company you'll see many billionaires selling monthly $50million 50 mill 50mill on and on till they deplete their holdings down to 10% to maintain control for other benefits and to say on tv they still have skin in the game. Wash and repeat another company and another. My concern is lawsuits as FIs get bigger into the game if it goes bust what will happen they manage trillions in equity for retail investors.
The "fed put" means they bailout equity investors every time when market drops 20%. Few bankruptcies anymore. The only losers according to all the stock jockeys are Gic holders.
8:07 am
September 7, 2018
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AllanB said
The "fed put" means they bailout equity investors every time when market drops 20%. Few bankruptcies anymore. The only losers according to all the stock jockeys are Gic holders.
Not familiar with the term “fed put”. 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.
8:20 am
September 11, 2013
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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.
9:02 am
April 18, 2022
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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. The fed put in Canada is real estate "you can't lose" unless you need a home more recently. Another thing a lot of investors missed was government involvement in big tech since 911 for security and to compete with China.
10:00 am
April 6, 2013
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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.
10:21 am
April 6, 2013
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AllanB said
… They are on automatic buy while insiders are on auto sell. Check out yahoo insider transactions any company you'll see many billionaires selling monthly $50million 50 mill 50mill on and on till they deplete their holdings down to 10% to maintain control for other benefits and to say on tv they still have skin in the game. …
I guess you glossed over the info about insider sales being not meaningful because many insiders are executives who are paid mostly in option grants and deferred stock units.
To pay for their mansions and children's private schools, those insiders need to sell shares from options exercises and deferred share units when they can.
11:05 am
September 7, 2018
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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.
12:00 pm
October 21, 2013
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canadian.100 said
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?
Yes, really, if one is to judge by the abundance of comments on this subject on this forum.
1:19 pm
September 7, 2018
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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.
Please write your comments in the forum.