Me and my TFSA
Barry Biner, 29, is a dentist living in Ottawa. He only opened his TFSA in 2013 and for the first three years he played catch up with all this past contribution room. Now that he has, he doesn’t want to fall behind.
To take advantage of the new contribution room that gets added to the TFSA every year, he set up a system where he makes automatic contributions through his bank for of $1,100 a month for the first five months of each year. “TFSAs are a phenomenal investment tool and I now make sure to contribute fully every year,” says Biner. “I’m really disappointed that they reduced the contribution room back down from $10,000 in 2015 back to $5,500 today. I would have loved for it to stay at the higher level.”
Biner is fortunate—he has a solid defined benefit pension plan (DBPP) through his employer so he’s not worried about taking on more risk in his TFSA. In fact, he is 100% invested in equities, and all his TFSA money is in low-cost exchange-traded funds (ETFs) that invest in Canadian, American, international and emerging market equities. “I’ve done a lot of reading lately on asset allocation and feel that with my more conservative DBPP, I can afford to take on a lot more risk in my TFSA—that, and the fact that I’m young and time is on my side.”
Lately, Biner has been reading more books on how to pick stocks successfully. His main interest is finding good dividend paying stocks as well as growth stocks worth holding for the long term. Biner also finds himself spending a lot more time at the library learning about spread sheets and stock screens. “When I feel a bit more confident in my stock-picking abilities, I will add some individual stocks to my holdings,” he says.
These days, he’s intrigued with Mogo Finance Technology (TSE: MOGO), a company focused on building a digital financial brand, as well as other up-and-coming small, online lenders. To learn more about these companies and their stock, Biner spends some of his free time examining their cash flow as well as their balance sheets. Lately, he’s also been following the Canada Goose IPO and likes tracking it. “I’m still trying to figure out my comfort level while hoping not to make too many wrong bets in the meantime,” he says. “But I’m not too worried. My money is in there for the long term.”
His advice for new investors? “Keep costs low with exchange traded funds (ETFs), explore the Tangerine funds as well as the TD e-Series ETFs. “And read MoneySense—especially Dan Bortolotti’s columns,” says Biner. “I did all that and now have a Questrade trading account which offers lower fees and allows me to do all my own investing at very low cost. In the long run, anything you save on fees will be money in your pocket.”
BARRY’S TFSA HOLDINGS
It’s a portfolio that works, but the strategy may have to change over time
Certified financial planner Jason Heath says Biner’s defined benefit pension plan with his employer can serve as the fixed income portion of his pension. “If it’s a lucrative DBPP, and your goal is to not touch the money for 30 years or more like Biner, then having his TFSA invested 100% in equities works,” says Heath. Although Heath suggests Biner should adopt a more conservative stance in any investments he has outside of his TFSA.
Just remember that goals can change as you get older, says Heath. “If Biner finds that he needs to access his TFSA funds for more immediate goals—higher housing expenses, for kids’ expenses if he has a family, a job change where he is no longer part of the DBPP—then at that time he should re-exmine his investments with these new goals in mind,” says Heath.