Are TFSAs the best place to hold new Vanguard asset allocation ETFS? (2024)

FAQs

Are TFSAs the best place to hold new Vanguard asset allocation ETFS? ›

As for the tax implications, Joe, the TFSA is the ideal location in this respect, too. For starters, the bond component of the Vanguard asset allocation ETFs is likely to be quite tax-inefficient, so it's best not to use these products in non-registered accounts if you're in a relatively high tax bracket.

ETFs in a TFSA

If you're looking for a long-term investment, ETFs could be right for you. Another potential advantage of going the ETF route is a management expense ratio (MER) that's often lower than mutual funds that require additional research.

As a reminder, you will need to hold VOO in your RRSP to avoid the 15% withholding tax.

A key strategy is to contribute early, so your investments have more time to grow. Make sure you're consistently contributing to your TFSA by enabling automated deposits into your account. This will keep your TFSA growing in a tax-free environment. Remember to ensure that you stay within your contribution room.

You must buy and sell Vanguard ETF Shares through Vanguard Brokerage Services (we offer them commission-free) or through another broker (which may charge commissions). See the Vanguard Brokerage Services commission and fee schedule for full details.

Unlike RRSPs, other accounts like the Tax-Free Savings Account (TFSA) and non-registered accounts (e.g., a cash trading account) don't have this specific provision. Instead, if you hold VOO in these accounts, your investment will be subject to the 15% withholding tax.

In bold, of note, you should know that U.S. stocks or ETFs held inside a TFSA are not eligible for the foreign income tax credit. So, there is no advantage to own any U.S.-listed assets over Canadian-listed assets from a tax perspective inside the TFSA.

U.S. stocks held in a TFSA are subject to 15% withholding tax on U.S. dividend income. Withholding tax would apply to other foreign stocks held in a TFSA, with rates starting at 15%, depending on the country. Only Canadian stocks are not subject to withholding tax on their dividends inside a TFSA.

Remember, the key to getting the most out of your TFSA is to make regular contributions, invest and save wisely, and use it for long-term savings goals. Also, avoid withdrawing the TFSA for as long as you can. The earlier you start contributing, the more you can take advantage of the compounding effects of the TFSA.

Vanguard High Dividend Yield ETF (VYM)

The better Vanguard ETF for their needs is likely VYM, which delivers a higher 2.9% 30-day SEC yield by targeting the FTSE High Dividend Yield Index. It also charges the same expense ratio as VIG does, at 0.06%.

Which Vanguard fund has the highest return? ›

Top performing investment funds owned by Vanguard worldwide 2024, by one-year return. As of May 2024, the Vanguard Communication Services Index Fund provided the highest one-year return rate. The Vanguard Mega Cap Growth Index ranked second having a one-year return rate of 37.4 percent.

The best TFSA investments and how to choose between investing in a TFSA and a registered retirement savings plan (RRSP) Your TFSA can generally hold the same investments as an RRSP. That means the best investment for TFSAs include cash, mutual funds, publicly traded stocks, GICs and bonds.

The best investment for a TFSA depends on your unique circ*mstances and hinges on how soon you'll need the money and your risk tolerance. Choose stable investments like cash or GICs for the money you'll need soon. If you are investing for the long term, stocks or ETFs could help you grow your account.

ETFs offer several advantages for IRAs. They often have lower expense ratios compared to mutual funds, which can result in higher long-term returns for your retirement savings.