RE:RE:RE:Another posiive report from management of this quarters babedinkleman wrote: Nice job....seems we follow a few of the same stocks. One thing....your last statement there....once you pulled that money out from a TFSA you can't put it back in until next year.
Thank you, I know you and I like our nice dividend payers!
Yes that's true, but that hasn't affected me the past few years as I'm well under the TFSA Max so I can move in about out of it fine, I keep a tally of what I can and can't do. I do have to watch it, because my TFSA is worth over twice as much as I've put into it over the years with my gains and payouts. If I'm pulling out, I have to watch out for the floor, as the allowable 0 is higher than actual reality of zero, and if I pull out more than I've put in, I don't get any allowance credit for that, which I don't think is talked about much. Both limits are extreamly important to watch and know.
I've decided to put a strategy to use with margin, if I am looking to get a stock that is on the LSERM (margin capable) I buy in taxable because I can take advantage of leverage, if a company doesn't qualify and I don't see it getting there in a couple years I'll add it in TFSA, TFSA is kinda a nice account to take big risks in because a big win is untaxed. I do have a few stable dividend payers in my TSFA from before my strategy change as I learned lessons. but I'm mostly looking at playing with penny stocks I feel have a big return potential, like this NWX can be, Junior minors, developing tech and such...
Yes there's taxes on the margin account, but because margin interest is tax deductible it somewhat acts like an RRSP in that most of my income in the taxable account is dividends at this moment, and dividends like CNR, AEM are below the margin rate currently so they help lower taxes on my higher yeilds and also help if I book a capital gain which only happens if I'm day/short term trading something or I make a big decision to move out of something.
There is a fun thing that I can spend $10,000 on a blue chip like CNR and then pull 70% margin cash ($7,000) and then put that in my TFSA to buy a risky smaller name that I think will pay off). It's rare that CNR will drop drastically, it's better odds it's gonnna grow, so my leverage is pretty safe and growing, and then I have a chance at a 2+ X company or a huge risky yeilder like this can be. If we experience a pull back and I get margin calls or close to it, I can pull from my Line of Credit for coverage as needed and pay it back down on the rebound and it only cost me an extra 3.6% interest for a short period. Really, I utilize 3 bank accounts in conjunction with each other to make plays and reduce risk tho it is still a house made of cards, that I'm doing my best to not let fall.
I'm playing within the rules that they have put out, but I'm also flying close to the sun to see when they are going to penalize me for a short term trade in the TFSA, I haven't 'day traded' per say, but I've bought and pulled out in less than a week a few times, tho that was not the plan as I play with a few penny stocks that spike regularly, but spikes are usually 6-12 months from each other and I've had a couple surprises I cash out on. Also I've owned NWX twice now and I haven't made 6 months in either case. The first time I hit a stop-loss I put on for safety. I'm waiting to see them flag my account in a tax season, but I'm not confident they monitor too closely as thier official numbers on my TFSA are always wrong to the low side, so if I wasn't prudent, thier numbers would cause me to break limit rules. If their records aren't accurate to what I have put/taken out of the account, I'm not confident they will look at my transactions inside the account records. I would also like to test what they consider a 'short term investment' that is not allowed in a TFSA, at no point that I'm aware of or can find, have they ever defined that rule. I'm also not aware of anyone who has been pulled up on that rule as I've asked my bank and tax guy if they are aware of any cases. The only penalty they have mentioned for breaking the rule which they don't define is that 'your gain will be treated as a normal taxable event as if it was in a taxable account'.