TFSA - Why Bother Anymore | Page 3 | Tax Free Savings Accounts | Discussion forum

mordko said

The future is uncertain but the past is not like what you say. Markets had one bad year: 2022. Before that we’ve had double digit returns for 3 years. And looks like we may have double digit returns again in 2023.

Inflation provides an extra incentive to shield assets with higher returns from taxes. If you buy a company, the value of the asset will grow with inflation even if inherent value does not change. But the government will tax that inflation-related growth as capital gains when you sell.

Also to note: it’s wise to invest in a diversified portfolio which is not limited to Canadian stocks. And the favourable treatment of dividends which you focus on does not apply to foreign stocks.

Anyway, to each his own.  

Agree 100% with you on diversified portfolio - US has been and will be the place to be and we have been handsomely rewarded - but I have no complaints with Canadian resource stocks - returns have been delicious "figuratively speaking." Of course, no DTC on US stocks but lots of capital gains over the years.

mordko said
Understand that some people are ideologically opposed to equities

Alexandre said

That would be me...

mordko said
TFSA investments have been happily compounding at 7% for the last 5 years (I don’t track 4-year spans). That’s doubling every 10 years (assuming one does not add new money which I do).  

Rephrasing famous words: “All right, but let the one who has never lost money on equities throw the first stone at me!”

There's another saying: Penny wise but pound foolish.

Idealogy can blind one to the fact that the dollars earned more than make up for the occasional nickels, dimes, or quarters lost.

What mordko described is quite common. Net of any losses, one about doubles one's investment every ten years in equities.

Alexandre said

Did I just hear "invest in equities for guaranteed doubling of your investment every ten years?"
I think someone may wish to rephrase their statement or put an asterisk to it.  

There is no guarantee and nobody said there was one.

The way I look at it, whatever one does with money carries risks. In the long term the risks of not investing in equities are far higher - unless you have more than enough already, even accounting for longevity and inflation. And in that case TFSAs are neither here nor there; the cap is too small.

And yes, everybody who buys equities lost money at some point in time. I think the worst possible lesson of doing something silly (like buying tech stocks at the peak in 1999) is shunning investment for the rest of ones life. The original loss is invariably tiny compared to the cost of lost opportunity.

Alexandre said

Did I just hear "invest in equities for guaranteed doubling of your investment every ten years?"
I think someone may wish to rephrase their statement or put an asterisk to it.  

There are few rolling 10 year periods where equities in the broad sense, i.e. broad market index like TSX Composite, or S&P500, did not (including distributions and dividends) double in value. Using the rule of 72, it only takes a CAGR of 7.2% for a double every 10 years.

Norm Rothery's Asset Mixer http://www.ndir.com/cgi-bin/do.....de_adv.cgi can be used to demonstrate that for the 2-4 major capital market indices. Just plug in 100% for each of the indices, one at a time and run all the 10 year rolling periods to find out for oneself. Or better yet, put 33% in each of TSX Composite, Wilshire 5000 and MSCI EAFE for a global view of (developed) market (ignoring Emerging Markets).

Too many people have a negative view of equity markets but I believe that is mostly due to short term thinking, or putting their eggs in a small number of individual stocks.

Added: I agree with Norman1's use of the word 'about'. There was nothing said about 'guarantee'.

Why does one need to declare a range? An analysis of 10 year rolling average periods from the links I provided will provide that information, or alternatively accept that a CAGR of 7.2% does result in a doubling every 10 years (an indisputable fact).

I am sorry, but probabilities and confidence intervals are facts. That’s why your house isn’t falling down.

And I understand that this lack of certainty of avoiding a loss is psychologically challenging. But your alternatives are mathematically worse. By avoiding stocks altogether one pretty much guarantees a loss in real terms - over long periods of time.

some invest in equities, some cant stomach the risk, some gives themselves an excuse why they dont invest, call it moral code.

The dog ate my homework !