Looking at the asset mix of a portfolio is the easy part. Deciding how to break out where investments should be held is not so easy. Decisions about where to hold investments can have a significant long-term effect on your wealth. I believe that for wealthy Canadians, this is where some of the biggest investment mistakes occur.
Conventional wisdom suggests that it is important to start out with a well thought out review of your overall asset mix. The next step is to maximize it for tax purposes. If an Ontario resident has $60,000 of income, the tax rate on interest is 31 per cent, on capital gains it is 16 per cent, and on dividends from eligible corporations (most publicly traded Canadian companies), the tax rate is 10 per cent. The preferred shares are in the cash account for safety, but also because they produce dividend income, which is taxed at a much lower rate than interest.
Source: CTV
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