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Old 01-08-2015, 01:12 PM   #21
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Vanguard and others offer index ETFs that trade on the TSX. A Canadian can also buy any ETF trading on the NYSE. Mutual funds are another matter. You are pretty much limited to those offered by Canadian firms. Most Cdn MFs have high MERs, TD e-funds have some of the lowest.

If you are investing small amounts (like a 25 yo might do) buying MFs commission free might be smarter than paying $10 - $29 per trade to buy ETFs.

While it is unlikely to apply to a 25 yo, owning large amounts of US companies (or US ETFs) on the NYSE can put you in the position of owing US estate tax. Yes there are high NW limits to when it applies but tax rules are subject to change at the whim of politicians.

Research the TFSA. It may be the investment of choice for low income 25 yo.
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Old 01-08-2015, 01:25 PM   #22
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Originally Posted by Rick_Head View Post
Vanguard and others offer index ETFs that trade on the TSX. A Canadian can also buy any ETF trading on the NYSE. Mutual funds are another matter. You are pretty much limited to those offered by Canadian firms. Most Cdn MFs have high MERs, TD e-funds have some of the lowest.

If you are investing small amounts (like a 25 yo might do) buying MFs commission free might be smarter than paying $10 - $29 per trade to buy ETFs.

While it is unlikely to apply to a 25 yo, owning large amounts of US companies (or US ETFs) on the NYSE can put you in the position of owing US estate tax. Yes there are high NW limits to when it applies but tax rules are subject to change at the whim of politicians.

Research the TFSA. It may be the investment of choice for low income 25 yo.
I agree. Your friend's DD first needs to start LBHM, pay down consumer debt, don't accumulate any more, then start investing on a small scale. Assuming she is in a low tax bracket, the TFSA is where she should begin. This has been around since 2009 and for the first couple of years, the annual contribution room was $5K; it has since gone up to $5.5K. If she has never put money into a TFSA she now has a cumulative contribution room of $36,500. Those savings can be invested in a broad range of products and returns will never be taxed. At her age she should put some money in equities and should also have some liquid emergency funds. I recommend that she open a TD Waterhouse account and purchase some TD e-funds.

Disclaimer: I do have some TD e-funds in my own TFSA, including a Canadian index fund (TDB900) and an investment account (TDB8150) which pays 1.5%. There are no commissions to buy or sell TD e-funds within a TD Waterhouse account.
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Old 01-08-2015, 06:30 PM   #23
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Owing mutual funds and stocks across borders introduced international taxation concerns and tax treaties. There are usually restriction for non-residents buying from brokers and investment companies. So a Canadian should buy their investments through a Canadian broker, bank or investment firm. They will have access to the same sorts of investments as Americans. There may also be restriction under Canadian law about owing foreign funds...there are in the US (PFIC rules) and in the UK (HMRC reporting funds regulations)

The situation is particularly complex for US citizens where ownership of foreign mutual funds is to be absolutely avoided as they are Passive Foreign Investment Corporations (PFIC) and taxed at high rates. For US citizens living outside the US this can get them into a Catch 22 situation if the country where they live also restricts the ownership of foreign funds by it's residents....like the UK does. The US citizen resident in the UK cannot efficiently invest in any mutual funds at all. They are limited to a few US ETFs that HMRC recognizes and individual stocks.
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Old 01-08-2015, 07:11 PM   #24
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Thanks for your comments.

Did you choose VTI (Vanguard total US market) over VUN (CAD$ version of the US total market) due to lower expense ratio? are there other advantages/disadvantages to buying the US version of the fund directly?
VUN is a relatively new incarnation and most of my VTI was purchased before it was in existence. I also had USD from working overseas for a few years and didn't want to convert it to CAD.

TD does have the lowest MER index funds, known as efunds. They don't push them as they obviously don't make much money on them.
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Old 01-08-2015, 07:43 PM   #25
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VUN is a relatively new incarnation and most of my VTI was purchased before it was in existence. I also had USD from working overseas for a few years and didn't want to convert it to CAD.

TD does have the lowest MER index funds, known as efunds. They don't push them as they obviously don't make much money on them.
The other advantage of VTI is that if you hold in your RRSP, there's no withholding tax due to the US/Canada tax treaty. VUN in an RRSP would be subject to 15% withholding tax on distributions.
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Old 01-10-2015, 08:20 PM   #26
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You know, an alternative title for this thread could be "Canadian investing for Canadians whom Americans wish to advise". Or even "Canadian investing for Americans who wish to advise Canadians".

Perhaps fiend's DD could be advised to read this thread herself, if she is ready.
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