Invest like a pro with the December/January issue

MoneySense won Financial Publication of the Year, while editor-at-large Dan Bortolotti won Financial Journalist of the Year. Dan, who is working on his Certified Financial Planner designation, narrowly edged out our retirement columnist, David Aston. David has a CFA, as does our stock-market guru, the inimitable Norman Rothery. This issue features Norm’s ninth annual Top 200 cover story, highlighting the Top 200 Canadian and Top 500 American stocks. Much of the latter is online, while the magazine focuses on the top 28 U.S. picks overall, plus the top “sector diversifiers” for Canadian investors.

From a tax perspective, many of those top Canadian picks may be destined for Tax Free Savings Accounts, or TFSAs. It’s hard to believe but this January will be the sixth year of new contribution room for this most alluring of tax breaks conceded by Ottawa.

As of January 2014, when another $5,500 of contribution room is added, Canadians will have a cumulative $31,000 of TFSA room. That’s merely the initial contribution amount. It’s what you do with those contributions that really counts, which is why we created “The Great TFSA Race,” Julie Cazzin’s feature story this issue. There you’ll meet a reader who parlayed an initial $25,500 into a whopping $344,000 at one point!

As our “Double Your Money” feature argued last April, you don’t get 10-baggers investing defensively in GIC rate or CSBs paying a paltry 1% or 2% in interest. But tragically, that’s what many Canadians do, either out of ignorance or lack of courage.

Only by investing in stocks can you get the giant TFSAs Julie has uncovered. Typically, these readers took a flyer on a junior stock, took profits at the right time and repeated the process. Some—especially those with a CFA—may view this as gambling. At least one reader profiled by Julie experienced the downside of an aggressive TFSA investing strategy, losing the lion’s share of the contribution. The same happened to the subject of this issue’s Portfolio Makeover.

We’re well aware that more conservative readers, even if willing to embrace stocks, aren’t likely to have accumulated such massive amounts through passive but prudently diversified Couch Potato portfolios. By putting the spotlight on big winners, we draw attention to those who aim—like Babe Ruth—to hit grand-slam home runs. Remember he also led baseball in strikeouts.

So take our winners list with a grain of salt. They are what author Malcolm Gladwell might term “outliers.” It’s fun to peek at other people’s finances but even if you’ve maximized contributions since 2009 and taken a diversified approach to your equity portfolios, most TFSAs will be around $31,000 or $32,000.

I can think of several winners in my own non-registered portfolio that might have created triples in my TFSA but sadly the rules don’t permit retroactive asset relocation. Preet Banerjee tackles this very issue of Asset Location (as opposed to Asset Allocation), explaining what investments should go in tax shelters and which should not.

About Jonathan Chevreau

As MoneySense’s Investing-Editor-at-Large, he is also author of Findependence Day and co-author of Victory Lap Retirement. Reach him at [email protected], where he is the founder of Financial Independence Hub.

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