Charles Brown had some ideas he wanted to put to work in the market despite the fact that he was already fully invested.
“I have an RRSP and a TFSA and the problem with these accounts is that you’re limited to purchasing only as much as you can afford with your cash balance,” says Brown.
As registered accounts can’t be margined, they can become repositories of “dead money’ for active traders, Brown explains. “I was holding onto some really good issues; it wasn’t a good time to sell. Consequently, that money sits there. It can’t be accessed.”
Margin Power provided the solution. The newly launched Questrade service, which allows investors to link their TFSA with their margin account, enabled Brown to extend his margin, using the market value of his TFSA assets to take advantage of opportunities he would have otherwise missed.
So he opened a margin account and transferred his TFSA account to Questrade in August. Since then, with the help of Margin Power, he’s been able to more than double his original investment.
In his TFSA, Brown explains, he holds a number of blue chip stocks that are paying cumulative dividends of about 6% per year. “They’re still rated as buys by analysts, and I'm still making money – but I wanted to use my capital to generate other investment opportunities,” he notes.
“It’s the best of both worlds,” says Brown. “On one hand, I can enjoy the tax-free capital gains and dividends that can be achieved in the TFSA account. At the same time, I’m able to use those holdings to generate margin power.”
“TFSAs have proven to be an extremely popular way to build a tax-free portfolio, but they have limitations,” says Edward Kholodenko, president and CEO of Questrade. “With Margin Power, we’ve delivered a simple solution: a margin account connected to a TFSA can leverage those assets. It transforms the margin account into a more powerful trading tool and enables our clients to take advantage of additional market opportunities.”
In unpredictable markets, the ability to maximize and unleash the value of their tax-free savings accounts is an innovation Questrade clients have welcomed. “I am absolutely thrilled with it,” says Brown. “I was effectively out of the market, waiting for my stocks to recover. I can’t understand why everyone isn’t doing this.”
“Many traders don’t yet realize the potential of their TFSA,” says Kholodenko. Traders often see opportunities at times they are already fully invested, he adds. “The service allows them to access the margin from their TFSA as a form of overdraft protection to get out of a margin call, or to get into a trade that they would otherwise miss. It’s one more way we empower the independent Canadian investor.”
To learn more about
Questrade’s Margin Power service, visit
Questrade.com
To set up Margin Power and to see how it increases your buying power, watch
this video
Disclosure: Questrade is a Stockhouse client.