Tax Free Savings Accounts
This is a quick article outlining the importance having a TFSA account.
TFSA, the tax free savings account and how I learned to love it
It isnt easy to invest in the volitile global economy that we're living in today. And, it doesn't look like its going to get any easier. It seems every week another country is on the brink of collapse or in need of some stimulus package. Germany, for gods sake, has managed to take over Europe without an army and with everyone loving them for it. But what does this mean for you, the average canadian investor?
A few years ago they introduced the TFSA, the Tax Free Savings Account. This is an account that you can put money into up to $5000 per year and whatever money is generated through this account is tax free. What most people don't realize is, you can buy securities and exotic investment instruments in this account where the dividends and capital gains are tax free.
So why aren't more and more Canadians utilizing their tax free savings accounts? Laziness and lack of education. People just don't know what it is or how to take advantage of it. Here's how I used my TFSA this year to double my money to buy a brand new LG TV in less than 2 weeks. This is not something that can be done often so please don't think that this is a great and easy way to make money. I understand the game and can stomach losses. If you can't then this is not for you.
I opened up my TFSA account and simultaneously opened a direct investing account linked to it so I can buy stocks under the TFSA guidelines. I spent $2000 investing in Yellow media Inc. YLO:TSX. The stock still had a bit of life left in it at around $0.25/share I bought 2Gs worth. In a few days the shares were reduced to a paltry $0.19 per share, so at that point I just left it. Two weeks later a rebound came about and the share price jumped to $0.40 per share. I quickly dumped my holdings for a quick double. Now, had that been done on my investment account I would've had to pay tax on it.
Thats just a small example of how using your TFSA can save you money by investing using it as your securities holdings instead of just a savings account. My strategy of what to buy with it will be in my next post tomorrow.