U.S. or Canada? Taxation? Market correction? Parking money

On October 10, from Ian W. Tester DDS MSc

Question:

After reading (and enjoying) reading Monday Morning Millionaire,  I have a few questions:

1. I have a TD Waterhouse brokerage account – US and Canadian.  Should I put funds initially into the US account to avoid currency fluctuations on buys and sells?
2. If I am investing non-registered account funds in S&P etf how will my returns be affected?
3. Given the meteoric rise of the S&P in the past year and evidence of a soon to be correction would it be wise to start off with a 70/30 split cash to etf while waiting for the inevitable correction?
4. What money market fund would you recommend through TD?

Monday Morning Millionaire Program Answer:

Here is the simple answer. As we stated in our October 1 blog, titled When does diversification become diworsification? the Canadian stock market is focussed on financials and resources. Resources go through cycles lasting between 25 to 30 years and we are in the downward leg of such a cycle. On the other hand, the American economy represents every economic sector and is likely to do better than the Canadian market for an extended period. If you put your savings into your US portfolio by buying an exchange-traded fund which follows the S&P 500 and doing so in line with your 70/30 cash/ETF asset allocation, we feel that you will be investing wisely.

Investing outside of tax-advantaged accounts (non-registered accounts) will incur taxes. Don’t let that prevent you from taking advantage of good investment opportunities. Given your 70/30 cash/ETF asset allocation, such opportunities will arise when the market reverts to the mean and drops below it.

A good money market fund through TD is TDB166. It pays 1.9%. It is as good a place as any for parking your money.

A more in-depth answer comes from one of our experts who is a successful money manager and advises a $3 billion dollar fund.