If your long-term savings are all in RRSPs and TFSAs, consider yourself lucky. Using tax-sheltered accounts is easy compared with the plight of investors who are saving in non-registered accounts. From deciding on the right asset location, to harvesting losses, to calculating the adjusted cost base of your holdings, taxable investments are always a challenge. But André Fok Kam’s new book, Tax-efficient Investing for Canadians, will make the job easier.
There are countless books on taxes, but this is the first one I’ve seen that focuses specifically on investments, and it’s loaded with excellent advice. Here are three tips to give you a taste:
Be careful when reinvesting distributions. In the chapter covering the tax implications of mutual funds and ETFs, Fok Kam explains why distributions add no value: “Instead, they merely transfer value from the fund to its unitholders. Investors are enriched when the fund earns a return, not when it transfers value.”
Cash distributions can help pay living expenses if you’re drawing down your portfolio. But investors in the accumulation phase often reinvest all distributions, which is a potential problem at tax time,