As expected, it was quite hot in Montreal today, but it's tolerable. In times like these, I am missing working from my usual workplace. We all knew that terrible things were happening in Quebec province when it comes to health care who are giving to seniors in a specialized establishment, but it seems that the province of Ontario is suffering from the same lack of medical care, and not only medical, but also, simply basic care, and it's a real shame. Quebec and Ontario are among Canada's richest province, but it comparison, New Brunswick is in a much better position because we are simply the best, almost perfectly bilingual - and best investors of course, you cannot say otherwise because you are reading this right now - and we are caring. This being said, no place is perfect - even my beloved New Brunswick.
Today, the TSX was the place to be. The TSX closed today session at a good 15,148.12 points. My non-registered portfolio closed today session at $104,970.77, my TFSA portfolio at $81,396.56 and my RRSP portfolio at $43,967.58. My margin debt is at 45,526.03, and I have left $17,900.34 available in margin money. Earlier this month, I wrote a post about my margin account, but I have a bit more to say on the topic, so you can really understand what it is to have a margin account.
Currently, I have over $18 000 available in contribution room for my TFSA. One reason why I didn't maximize my TFSA usage yet is that specifically of my margin account. Personally, I like to do contribution in kind for my TFSA portfolio. It's a simple way to contribute to my TFSA when I don't have savings available. A contribution in kind is when you take an existing stock investment that you hold inside your non-registered portfolio, and get it transfer to your TFSA portfolio. This is something that appears quite simple to do, but nothing is simple when you have a margin account link to the exact non-registered portfolio.
Currently, I have left $17,900.34 on my margin - which secures it from the volatility of the market. Personally, to feel safe, I like to have at least a $15 000 left available on my margin. That way, if the value of my non-registered portfolio suddenly decreased, it will help me to keep my head out of the water. But that being said, if the value of my non-registered portfolio goes lower, the amount left that is at my disposal on my margin will go lower too. So it's always a struggle. While having a margin debt, you'll never remain out of the market, you'll always remain link to it, no matter that you like it or not. A margin debt really does take away your freedom. That's something really important to know. However, don't feel sorry for me, I wanted this, and it's had been my reality for a couple of years now. It's just that I really want to explain things the way they are because I feel that your broker probably won't explain things as clearly if you decided to sign up for a margin account. Your broker just wants to maximize the amount of money they can do on your back. Other than that, they won't give damn. Don't count on anyone when it comes to your personal finance.
The following will explain to you why I still have a $18 000 left in contribution room when it comes to my TFSA portfolio. I have spotted a few stocks that I hold inside my non-registered portfolio that I would like to take in consideration for a contribution in kind for my TFSA portfolio:
BCE Inc. (BCE): $1,261.04 (value on date of April 29, 2020). Margin value: $873
Rogers Communications Inc. (RCI.B): $1,779.90 (value on date of April 29, 2020).
Margin value: $1 195
Telus Corp (T): $2,082.60 (value on date of April 29, 2020). Margin value: $1 437
Power Corporation of Canada Subordinate Voting Shares (POW): $2,053.80 (value on date of April 29, 2020). Margin value: $1 316
Like you know, I have exactly $17,900.34 left available on my margin account. If, I decided to take all the shares that I own of BCE Inc. (BCE) inside my non-registered portfolio in order to proceed with a contribution in kind for my TFSA portfolio, that move will take away exactly $873 from that $17,900.34, which will leave me with a $17,027.34 as available money on my margin account.
While proceeding with a contribution in kind, it's always better, to stay on the safe side, to put the equivalent of the margin value of the stock you decided to use for the contribution in kind in cash, inside your non-registered portfolio. For example, if I would take my BCE Inc. (BCE) shares that are from my non-registered portfolio in order to proceed with a contribution in kind for my TFSA portfolio, I would have to inject exactly $873 inside my non-registered portfolio.
And this close for today your lesson for the margin account.
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2 comments:
there is no advantage to contributing in kind. It's the exact same thing as selling the stock in the margin account and buying it back in the TFSA. That contribution causes a taxable capital gain. Transferring the stock over to the TFSA and then "Injecting" cashback in the margin account to cover the margin makes no sense: If you instead contribute that cash directly to the TFSA directly and bought the stock directly, you wouldn't be paying any taxes for the "in kind" contribution, and therefore you keep more money in your pocket.
I don't agree with you of course.
When you do a contribution in kind, the stock that is now in your TFSA grows, and if you decide t sell them, it's free of tax.
Also, the dividend earn is free of tax.
I didn't explain it, but to maximize the move, always target the stocks that you like and really want to hold for a long time, and also, you need to target stocks who are on less growth. That's why, in my example, I have mostly target stocks that haven't been in my non-registered portfolio for a long time. The stocks that I target are mostly recent investments in my non-registered portfolio.
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