Posted at 7:00 a.m.
Interesting news was published recently: the leader of the PLQ, Dominique Anglade, and her spouse have a net worth of $12 million.
This kind of news is a bit like a political Rorschach test: everyone sees in it what they want to see in it, and I would bet that no one has changed their opinion on the PLQ or Mme Anglade because of this.
However, my attention was drawn to one of the elements of this story: Mme Anglade said he has $212,000 in his tax-free savings account (TFSA).
Since the contribution room for the TFSA since its creation is $81,500, we could deduce that Dominique Anglade enjoys portfolio management that is as formidable as it is inaccessible to ordinary mortals. “$212,000! It is not my financial planner who could give me such a return! »
This is a good opportunity to talk about the TFSA, an account that I like to call a legal tax haven, but which, for some reason that escapes me, is treated by most people as a checking account rent a cottage or finish your basement.
The TFSA should instead be called the TFSA, for tax-free investment account. Why ? Because the assets you put in this “box” called a TFSA (up to $6,000 a year) can grow, and when you sell them and withdraw them one day, they’ll be completely immune to tax. A person who would live on his TFSA in retirement would have zero income in the eyes of governments.
So the key here is growth. A TFSA without growth is a bit like a Tesla without electricity: it’s all well and good, but it’s useless.
Yet the primary asset Canadians hold in their TFSA is…cash.
We do not know what Dominique Anglade has in his TFSA. But an investor who made full contributions to their TFSA each year and invested in an index exchange-traded fund (ETF) that tracks the value of the S&P 500, or the 500 largest companies in the United States, would find themselves today today with an investment of approximately $200,000 when including the reinvestment of dividends.
I’m not suggesting that everyone invests this way, certain to stir up strong emotions during stock market crashes. I simply want to show that it was possible to reach $200,000 in this account without any particular expertise.
And if this investor were to keep up the pace, their TFSA could show a balance of around $680,000 in 10 years and around $2 million in 20 years, according to historical returns for the S&P 500, which have been nearly 11%. per year on average since the 1950s.
I hear the critics coming at a run.
“It must be nice to have $6,000 to invest in your TFSA every year! You have to be rich to do that! »
Let’s not forget that $6,000 a year (a mountain for many people) equals $16 a day (not a mountain for many people). This is the price of a poke bowl. Or the equivalent of a fifth of a full tank of gas.
A person who chooses to ignore the prestige vehicles that are multiplying on our roads in favor of a Honda or a Toyota (the favorite vehicles of American millionaires) could free up $6,000 a year, and often much more.
Is it easy? No. To paraphrase American billionaire Charlie Munger, getting rich is not supposed be easy. Otherwise, everyone would be rich.
Sixteen dollars a day.
It doesn’t matter who you vote for, that’s something to remember.