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How do i start investing my hard earned money in a mutual fund under the Tax Free Savings Account with Bank Of Montreal (BMO)?

+10 votes
All these years, i had been keeping my money in savings account and i must admit what a waste of time it was to put money in savings account. The interest earned is barely more than 1% per year and i feel i could put my money somewhere better where it cold earn better interest. I contemplated about putting my money in a GIC fixed for three years but even then, the interest earned is not much. If i suddenly require money i can't take out this invested money because then i could lose some portion of interest that was suppose to be earned. Shares and Stocks are for the hungry and daring sharks that is to say people who have the brave heart to bear the ups and downs of the financial market.

I like to take some moderate risk and earn a good return instead of playing it safe. I had played it safe for many years and i am not very pleased with the lost time and minimum interest earned. That leaves me with one last option which is to invest my money in Mutual Funds with some banks. I prefer Bank Of Montreal (BMO) since they seem to have some good performance years as mentioned to me by a friend of mine. Are we allowed to invest in Mutual Funds kept under Tax Free Savings Account instead of other investment account? I mean i would like to save myself from having to pay the income tax on the interest earned. The government of Canada wants all our money through taxes on everything from income tax, sales tax, capital gain tax, property tax, tax on interest earned and vehicle tax. At least, for Mutual Funds interest earned, i would like a break from having to pay taxes to our Government through Tax Free Savings Account
asked in Charlottetown by James Davis (133 points)

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2 Answers

0 votes
Although putting your hard earned money invested in Mutual Funds sounds like a great thing to do, you must be careful and aware that there are ups and downs in Mutual Funds investment. Someday, the value of your Mutual Funds will rise and someday it will drop just all of a sudden. You are not Guaranteed to get back the same amount you invested or all of your interested earned. Since Mutual Funds have invested in various areas such as ETFs, Bonds, Stocks, Fixed income, foreign markets and many more places, your risk is more or less controlled. Should the market perform bad in one section of financial market, the other section will earn to cover the losses. In the end, you may end up with more or less the same amount you invested. At times, if the market seemed to be performing well, the value of your Mutual Funds will increase pretty and the interest earned is much higher than interest earned through savings account.

Mutual funds are not for the faint heart people who are afraid of losing even a small amount of money. You must have a brave and risk taking type of personality to invest in Mutual Funds due to the volatile nature of the Mutual Funds. However, compared to purchasing stocks and shares, Mutual Funds are much safer to play with. Yes, you can open a Mutual Fund account under TFSA (Tax Free Savings Account) to legally escape from paying taxes on the interest earned.

When you approach BMO (Bank Of Montreal) to open a TFSA account with Mutual Funds investment, you will be asked several financial questions just to determine what type of financial characteristics you possess. Based on that you could be put under low risk, medium risk or high risk investor category. I suggest to go for low risk investment for starters. Then when you feel you are more confident and less afraid, you can change to more riskier investment. You must understand that with Mutual Funds you don't have much choice on which shares or stocks you want to invest in. For example, BMO has a Mutual Fund manager who helps you and other investors invest in various financial sectors and markets, from the money that you and other people pooled together to create the Mutual Funds.

You will be charged fees of about 1.8% per annum for maintaining the Mutual Funds and fees are subjected to change without notice. If you need to invest more or take out money from your mutual funds, you will need to make appointment with your Mutual Funds advisor to do so. You can't do this online. You can setup an automatic investment of a certain amount ( Lets say $100 ) to be invested into your Mutual Funds account monthly.
answered by Debra Baker (126 points)
0 votes
Watch video on "How does a Mutual Fund work and what benefits or risk are involved with investing in Mutual Funds" :

answered by Canada Mutual Funds

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