Trading in Tax-Free Savings Accounts (TFSA)
I opened up a TFSA with Questrade as soon as it became available. This account must be in the individual’s name. If you’re transferring funds from a joint bank account, Questrade may ask for proof that you are, in fact, one of the account holders of this joint account (I ran into that issue). A simple screenshot of your bank e-statement is enough proof. I started with the minimum CAD $1,000 and after thinking about it for some time, decided to make it my challenge for the year – turn $1,000 into $5,000, without additional deposits. No restrictions on the method, except no direct shorting or selling naked options (it’s not a margin account). In the top menu on the site, there’s a new button, TFSA $5K. On that page I’m going to post all the trades I make in TFSA.
Quick backgrounder on this new account type —
TFSA (Tax-Free Savings Account) advantages:
- Invest up to $5,000 each year and every year
- Accumulate faster by never paying tax on your investment income, interest, dividends and capital gains
- Withdraw funds any time and for any purpose without paying any taxes
- All income earned — dividends, interest, capital gains – grows tax free
Questrade’s trading services in TFSA:
- No annual fees, no inactivity fees, and a low account-opening minimum of CAD $1000
- Low commissions on stock trades: 1¢ per share, minimum $4.95 / maximum $9.95
- Hold and trade U.S. dollars and pay no forced currency conversion fees
- Trade gold bullion
- Get $50 in free trades when you open a new account (must open account from the link above)
Kat,
This makes a lot of sense…I’m assuming for Canadians only though?
There are no capital gains taxes in NZ, which is the best part of their tax code.
Why TSFA & not TFSA [reading from the title?] Just curious.
jog on
duc
Duc,
I made a mistake 🙂 TSFA is wrong, TFSA is right (but I have to force it, harder for me to pronounce).
It is indeed only for Canadians, it’s the same thing as Roth-IRA in the U.S.
Canadian capital gains taxes aren’t bad (roughly half of the regular income tax rate).
You have it very nice there — no taxes and a mild climate. What are the cons of NZ?
Kat,
You’re 10hrs flying time from anywhere else. 30hrs from Europe, not sure how far from the US. Isolated. Might prove to be a good thing down the road…
They have no idea how to actually build a house.
Otherwise, not too bad.
jog on
duc
>> Might prove to be a good thing down the road…
Please elaborate
(you *know* you’re enabling my doom habit 🙂 )
Hi,
When you said no ‘direct shorting’ with questrade TFSA, did you mean there’s no way to go on a short position (sell short) with that account? only long positions?
Thanks,
G.
Hi Glenn,
that is correct — cannot short anything directly in TFSA.
You can short via buying puts or going long inverse ETFs. Both are prone to decay.
Hope this helps.
I am a big fan of the TFSA. I am also using Questrade for my TFSA. Trading my TFSA is not what I believe to be the best option since your trading costs are not deducted from the income because it results in tax free gains there is not incentive to trade it. I would rather trade outside the TFSA to use margin.
For my TFSA I use income trusts since they will be highly taxed come 2010. This way you are sheltered. I am more than happy with a 10% annual dividend tax free with bonous capital appreciation.
Stuart,
which income trusts do you like?
And won’t that tax reform only happen in 2011, not 2010?
Thanks for visiting!