The Canadian Investor - 3 TFSA Mistakes That Could Cost You Thousands

Episode Date: May 5, 2025

In this episode, we take a closer look at Gildan Activewear after its latest earnings call, which was dominated by tariff discussions. Despite being in a sector typically hit hard by trade restrictions, Gildan's vertically integrated model could actually give it an edge. We also cover Visa’s latest results, where payment volumes remain strong but questions linger around possible pull-forward demand ahead of new tariffs.  Dan and Simon then three of the most common TFSA investing mistakes—ranging from overly speculative bets to portfolio structure missteps—that could cost you serious long-term returns. Lastly, we revisit Bitcoin ETFs, breaking down the pros and cons, Canadian and U.S. options, and what recent AUM trends reveal about investor demand.   Tickers of stock discussed: IBIT.TO, BITO, ARKB, BTCX-B.TO, FBTC.TO, V, GIL.TO Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Finchat.io for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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This is the Canadian investor where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Bélanger. Welcome back to the Canadian Investor Podcast. I am here with Dan Kent. We are doing a hybrid show today. We'll have a little bit of earnings,

couple of earnings here, one Canadian name, one American name. And then we'll move on to, I'll talk a little bit about Bitcoin ETFs. I had a question from JoinTCI, and then you'll talk about three big TFSA mistakes that Canadian investors are doing. So I think it'll be fun, a little bit of a mixed bag for this episode. So I think there's going to be a little bit for everyone listening.

So I think it'll be fun to talk about today. Yeah, there's a lot of a lot of earnings coming down the pipeline right now which kind of probably why we're doing two episodes on it. Yeah it's good it went from nothing to everything and uh yeah I did a youtube video on those on those TFSA mistakes and it was very well received so I think uh the podcast will be good as well it's uh there's a lot of information there. Okay well let's get started do you want to start with Gildan Activewear? They just reported. Yeah, so they reported after the bell last night and this is not a company that I follow all that much really so I won't have many comments on the quarter in the company itself but

I mean immediately when you think of like a clothing company reporting earnings like right now you're just thinking of tariffs so I thought it would be a pretty good company to go over and in the conference call I did a Just a quick search of the conference call and tariffs was mentioned 29 times So it's definitely a pretty hot topic of discussion and yeah It makes complete sense because Gildan is a clothing company. So in terms of top and bottom line growth, the company grew revenue by low single digits and earnings were effectively flat. Just a quick look at the financials of the company over the last while.

It's a company that, you know, it's struggled to grow over the last five or six years. I mean, it has a compound annual growth rate on revenue of around three and a half percent. Earnings have actually grown by 10% annually over that timeframe, but a lot of this is due to operating margin expansion. I don't know what they've done to do it, but pre-pandemic, their operating margins were around 12% and they're now 19%. So they've definitely done something there that's improving the profitability. But I mean, ultimately you eventually need that top line to grow and it hasn't really been over the last while. So again, if you own this one, I don't really know much about this company. But the thing here is, is when we think of these clothing companies, again, we almost automatically assume they'd be hit by tariffs because of, you know, the bulk of the production is going to be outsourced.

And I mean, I definitely made that assumption when I, when I first dug in, but Gildan is actually vertically integrated, which, which pretty much means it does a lot of the stuff itself. So it sources the material, which is primarily, I believe, cotton and yarn in the United States. It spins the yarn, knits and dyes the fabric, things like that, then it sends it away to places like say Bangladesh for final production, but it can source a lot of its materials from the United States, which are not exposed to tariffs. The company said that the cotton yarn that they do buy

from the United States is at this point in time exempt. So the fact that they're vertically integrated like that also makes it so they can kind of move production around to where they see fit to maybe offset the offset the potential tariff impacts. And it says, although the tariff on like that yarn and cotton is 10%, it's exempt at this point and it's effective should be, they said, significantly lower than that. And again, this is a pretty interesting situation because in this case, their current structure could actually cause tariffs to be a bit of a tailwind, maybe not a headwind, because if their competition is forced to raise prices because of their current supply chain, but Gildan doesn't really have to raise prices all that much It could draw more people towards their products and I think they're they're actually up quite a bit this morning where they have like 6% I think as of this morning. So so they did like the the quarter they probably liked a lot of the the comments on the conference call and they were questioned on Bangladesh, which does

on the conference call and they were questioned on Bangladesh, which does manufacture a decent chunk of their final products. But what they mentioned is more than half of the production in Bangladesh actually serves international markets with the other half coming back to the US. So that's half of that production there probably won't be impacted by tariffs. And we've had a lot of companies that are yanking guidance, pulling out guidance, reducing guidance. Gilden is pretty confident it won't have much of an impact. They maintain their full year guidance. They expect earnings per share to come in around $3.38 to $3.58 on the high end. The only difficulty for me here is the company earned around $3.30 in 2024. So I mean, even at the midpoint of guidance,

I mean, even at a high point would be close to double digit growth, but at the midpoint, there's not much growth here and there hasn't really been for quite a while, but I mean, it just goes to show what we've been saying for quite a while now. I mean, with these tariffs, you really need to know what you own.

And in addition to this, I mean, try not to have any sort of assumptions or bias when doing any type of research, because it can end up in you missing out on some potential opportunities. I'm not necessarily saying Gildan is an opportunity, but if it was in this situation, I probably would have glanced over it just because I would have automatically assumed a clothing retailer would probably be exposed to two tariffs quite a bit. But the impact in this regard should be pretty minimal from them, at

least what they're saying in the call. And yeah, it was an interesting business that I didn't really know how much of that production they actually handle. And it should help them you know, create a bit of a buffer in terms of tariffs. Yeah, I didn't realize that they get like roughly 90% of their revenue coming from the US. So it's a very high percentage and then I guess the rest of the world is the 10%.

So that's interesting. I didn't realize that. Yeah, it's not, I think they they manufacture like I wouldn't necessarily say cheaper clothing But like maybe middle of the line stuff, but again, I don't know all that much. They're a company that's been around for quite a while I think they went through like a bit of a Not necessarily an acquisition situation last year, but like I I can't remember what was going on. It cause a lot of shakiness in terms of the stock. But yeah, it's it should be one of the rare clothing companies that's that's not impacted all that much. I mean, you look at a company like Nike isn't like 90 plus percent of their manufacturing overseas. Like

they're a company that's could potentially be heavily impacted. Whereas Gildan is a company that that that should weather it just fine Yeah, and I was on their website and I guess they don't sell online in Canada. Oh really? Yeah Yeah, cuz I have to market. Yeah, it's an untapped market. I mean, I'm looking at it here No, I just I was kind of looking as you were going over here and I can't find like I was like oh, I'm looking at it here. No, I just, I was kind of looking as you were going over here and I can't find, like, I was like, oh, I'm just kind of curious what the price point would be. And yeah, I'll share the website here. They just don't have anything that's available

to buy online. So you have to look at the various distributors. Like, what is this? Like, 2005, like 2005 like my god. Yeah that's pretty yeah. Yeah like that's just so I was looking at it just for fun I mean I don't know I feel like they have the looks alright like if you're looking for stuff that's not like showing much of a brand just kind of plain. Plain Jane. Yeah exactly so I'm looking here at like a green polo just for fun.

You know, I don't mind it per se, but it would be good to see the price. So, Gildan, if you're listening to this, maybe, you know, you need to invest in your e-commerce in Canada if you want to grow those sales. Just a little tip because when I see like look for a distributor, there you go. It just, yeah, that pisses me off. Like if you want to not, no, but it's true if you want to make sure I don't buy your product, you've done a good job right there. Because then it's an extra step that I have to go and find a distributor and then hopefully there's one in Ottawa and then if there is one I have to go in

person and go get it when I could just order something else from another company online and I can return it if I don't like the product too. Yeah, but now you might be paying a heavy, heavy tariff on those. Yeah, well I'll be paying the gas I need to. Yeah, it's interesting. Because again, it could be a tailwind. I mean, if all these companies are ending up having to jack prices up, if deals aren't figured out, I would imagine deals will be figured out, but if they don't and they linger, I mean, this could actually be, you know, it could be a tailwind. And they do mention that.

They do mention that in the conference call. They didn't necessarily say it would be a good thing, but they said it might not necessarily be a bad thing. Yeah. I mean, if they become more attractively priced, and again, I don't really know what the price point is because they don't post it on the websites. It would have been helpful to have that. Maybe they have it on their US side who that who knows I would think they they might have that so let's have a look at the US side here let's see if you can maybe you can order stuff from the US get tariffed and

then shipped it to Canada yeah no I think it's the same thing fine inventory that's so weird yeah yeah. Yeah, that's weird That is in this day and age. That's weird. I feel like you're very much Yeah, because i'm trying to like large Yeah, you have to search for okay. This is This makes no sense at all. Anyways, well Well, they've maybe that's why you know revenue actually really budged Yeah Well, maybe that's why, you know, revenue hasn't really budged. Yeah, yeah, no.

So that's that is very weird. Yeah. So I thought I was screen sharing while I was looking at that, but apparently it was not. So that's OK. I was explaining it for everyone. We we are lacking a little bit of sleep. So just bear with us for this episode here. As an investor, I'm always looking to reduce my fees, which is why I'm excited that Questrade now offers $0 commissions on stocks and ETFs.

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So the next time you invest in ETFs, consider AZ instead. Visit BMOETFets.com for more. So we'll move on here to Visa. Everyone is familiar I'm sure with Visa. They had a pretty good quarter I would say overall. Net revenue was up 9% to 9.6 billion. Net income was down 2% and EPS was up 1%. So obviously what that tells me, I think you know, it's just they've been buying back shares. That's where you see that discrepancy between the two. Payment volumes were up 5% with cross border volume being pretty robust and increasing

by 10%. The US payment volume grew 6% while international payment volume grew 9%. They kept their full guidance unchanged for the full year. On the call, which I was looking to listen to again because I think it's really interesting to see what management teams are saying about tariffs, they said that consumer spending remained resilient in an uncertain environment. So they clearly acknowledge that yes, there is increased uncertainty right now. They also said they haven't seen any signs of consumer spend weakening in the US in various income bands. They did specify

that the higher income households are clearly spending more and carrying the load. They did also mention that travel and airline spending has been decelerating but overall consumer spend remains strong for essential and non-essential item. And one thing that they were asked during the call and I was actually thinking about that before I got to that section of the call was is there a pull forward spending by US consumers because they know that tariffs are coming and if you know tariffs are coming and you need to buy something or you know you'll have to make a certain purchase

in the next few months, then why not buy it now to get it at a cheaper price? And they said they saw some evidence of this happening for electronics specifically, but they did not view it as a major thing. And I don't have any reason to question them, but I think it's something that's going to be hard to gauge until the next quarter. Because how can you really gauge? Are we seeing right now an economy that's slowing, yet consumer

is spending a bit more because they want to buy things that they need. They want to buy it now because they're going to save money versus waiting after the tariffs are applied. So I just don't know. I know they have a whole lot of access to data. I just don't know how you can really make that conclusion to be able to say, well, it's still robust, but there's also a possibility that the economy is actually weakening. And the only reason that it's robust is people are pulling forward some of that spend. Yeah. And I think like they might expect it next quarter as well because they did issue guidance and they said that revenue, they expect revenue to grow like double digits and they actually

expect like high teens earnings growth. So I imagine they would expect, you know, because their full year guidance is only for low double digit like 10 to 12% earnings growth. So they expect something next quarter. The one thing I'll say on that earnings is adjusted earnings, I think we're up 10%. And I think they've had to put aside quite a bit of money

for litigation. Yeah, for the US, right? They have like a litigation escrow and I'm pretty sure that would come out of earnings. They've been putting money aside just because of the antitrust lawsuits and stuff that are going on. So I think that's kind of impacting earnings, probably a one-time cost. So they're adjusting it out. And yeah, I don't know how much more money they'll have to put in there but I think

they put like 400 or 500 million aside this year this quarter it might be more I'm not 100% sure which I think I haven't like seen anything regarding that and maybe there is stuff out there but I don't think that's going away with the Trump administration because it's not like Visa and MasterCard are the most popular companies from a consumer standpoint because a lot of people just think they take 2% off of every transaction or whatever it is, a relatively high percentage, which is not the case in most cases. The banks actually take a decent chunk of the fees and yes Visa, MasterCard do get a small percentage of that but I think it's just the optics is it looks good for the US government to go after a company like Visa when the perception is that they're just taking value away from

merchants and consumers. Yeah, especially when there's virtually no competition, right? Like it's a pretty easy target. We're seeing it with Google right now as well, or Alphabet, I guess that's being hit in that regard as well. The one thing about the escrow, as I will say, is I don't think it's guaranteed to all be spent on litigation. They could kind of go over that.

They could go below that. And I would imagine it'd be added back into earnings if it wasn't spent money. But I don't think it'll go away. Like you said, I think this is probably going to linger for quite a while. Yeah. I think the biggest risk for Visa is the potential implication for the future of their business. I think that whether they have to spend X amount on litigation or they get to break the business up somehow, that is the biggest potential threat out of these lawsuits from the US government. Yeah, and again, I'll go back to Alphabet again,

it's a very similar situation, right? They're kind of trying to break up the business. I mean, Alphabet has a lot more businesses to break up, I guess I would say. Yeah, probably more on lock value too. Like YouTube, a standalone YouTube, how much is that word? Like half a billion dollars, like 750? Like, I don't know, but it's-

Oh, it's gotta be way more. They're, YouTube generates almost 40 billion in revenue a year. Okay, so yeah. Yeah. Anyways, regardless- They paid a billion dollars for it, or 1.5. Yeah, it, they paid a billion dollars for it or one point five. It would be a mega cap on its own, right? So I think that's fair to say,

but no, it'll be interesting to keep an eye on. I was looking at it more from just to see if they have insights on where the economy is going. And they did have some, I think it's the kind of thing I would just keep an eye on it. They do have a whole lot of data so I don't have any reason to question them. I own the business too. So it's a small position in my portfolio. I'll just put that out there so people are aware. I think you own it too. I own it, yeah. It's one of my bigger US positions. Oh, there you go.

Bullish. It's one of my bigger US positions. Oh, there you go. So bullish. Yeah. Bullish, exactly. So that's it. Anyways, we'll move on here. We finished the two earnings we wanted to do. We'll move on here for just some common TFSA mistakes. I'll probably add one towards the end, but these are some really good ones that are not talked about as much, but still have, pretty big impact on a TFSA.

Yeah that was one of the main things I wanted to do was kind of like you see enough content, videos, whatever it may be on like you know very you know talked about things a lot in terms of the TFSA so I just wanted to find some other angles and identify some common investing habits inside the TFSA that could potentially be costing you returns. I mean, number one is guaranteed costing you returns if you do it. Number two and number three are a bit more situational, but I will speak on them as if they're mistakes based on your overall situation. I'll do this just so people don't take them at face value and kind of instead analyze their own individual situation.

But the number one mistake I would say would be speculation with the hopes of no taxation. So I find this is more often made by newer investors. I mean, I definitely did it when I first started out. And a lot of people understand very quickly that the TFSA is the most tax efficient account in the country. You don't pay tax inside the account when you buy or sell or whatever. You don't get losses, but you don't pay tax. And you don't pay tax when you withdraw, unlike the RRSP. So even if you made a ton of money on a stock in your RRSP when you sell it and you don't get losses, but you don't pay tax. And you don't pay tax when you withdraw, unlike the RRSP.

So even if you made a ton of money on a stock in your RRSP, when you sell it and in retirement, when you pull it out, you're going to get taxed on it. So as a result, a lot of people tend to try and buy highly speculative stocks with the hope of nabbing, you know, some sort of big return 10, 20 bagger that they can eventually pull out completely tax-free. And I kind of, I like to call these types of stocks scratch-off tickets because you're going to lose on most.

You're going to break even on a few, but you're going to win on very few. And this type of activity is kind of amplified by the, the financial media bit and even like content creators, because you always see those articles about how some person turn their TFSA. I mean, I believe I won't name the publication, but they do quite a few where they interview people who have huge TFSAs.

And like, when you dig into it, like, I believe one of the most recent ones I read is somebody took their TFSA and pretty much during the peak of COVID invested it into a bunch of junior oil and gas companies. And obviously made up, they made a boatload of money, like good for them. But a lot of people see this and they're like,

oh, like, you know, I could have XX amount, seven figures of tax-free income. So they kind of try to do it themselves. But I think these articles put people in a very bad spot because most of investors tend to focus on the potential gains, but don't think about how devastating the losses would be. And I say devastating because there's a substantial difference between blowing money in a taxable account and the TFSA. Yes, it's lost money

but the TFSA is even more amplified because Once your TFSA room is gone, you don't get it back So to realize losses in a TFSA, they're gone forever So if you lose ten thousand twenty thousand thirty thousand dollars on a on a speculative bet in your TFSA All you're gonna get the next year is your allotted amount that whatever it may be $7,000. I don't know if it'll go up later on. So I mean, if we take a simple situation to explain this, we have two investors, $7,000 in room, one invests in an investment returning 8% annually, whether that's like an index fund or a basket of high

quality stocks. And the other person invests in a speculative stock. They eventually sell it after they lose 50%. And then they kind of, you know, they learn their lesson and they buy a fund earning 8% annually. So after 30 years, the person who simply invested their money in the index, the basket of stocks that earns 8% will have $70,000. While the person who lost the money initially

and then kind of went back into that proper investing habit, I guess I would say would only have $35,000. So this is a $35,000 swing on one year worth of contribution room. And I had a friend, I won't name him, but back in 2018 he invested $35,000 of his TFSA in a US bio farm company essentially that was in clinical trial stages and the company ended up going bust and he lost the vast majority of that money. So he's not getting it back. Like his next year's room was whatever room he had. And if we take the situation above where you could earn 8% annually in 30 years,

that $35,000 would have been $352,000 instead. It's lost. It's lost for good. You're not getting it back. And that's tax free money and probably the most flexible account in terms of withdrawals and you know, tax planning, things like that. And I mean, in my opinion, the TFSA should be one of the more conservative accounts in terms of your overall portfolio. You don't get the write off capital losses. Your contribution room is finite and in retirement, it's the most flexible account in the country.

So I mean, it just seems crazy to me to take absurd risk in this account, because if it doesn't work out, I mean, you are no doubt going to pay for it down the line. Yeah. And don't interpret what Dan is not saying either. So he did say absurd risk. I mean, it's not you can also manage your risk, right? If you wanted to have most of it invested in more conservative investment, but say you have 5% of your TFSA that you're like, you know what, I'm going to take a shot at this junior minor or bio med company. If that goes to zero, it's not the end of the world. Yes, you lose the room, but it's not

as big of an impact than if you use all of your TFSA room to do that. And I think that's important for people to recognize is yes, you want to be conservative, but if you do want to take a bit more risk, just size accordingly. You don't need to do an all or nothing. And in terms of some of the stories, people growing their TFSA because they took a swing and ended up hitting a home run, but they took a whole lot of risk and they went from five digits to seven digits TFSA. There's probably a thousand stories

for each of those stories where people have gotten completely wrecked. So you have to keep that in mind. And typically you won't, financial media will not talk about those that lost it all doing that, the hundreds or thousands of people that just took a swing, missed and then they're back to zero. They'll talk about the ones that took the swings and made it big and it creates a bit of that FOMO and unfortunately some people will take more risks than they should because they saw it the one time and they think it's really easy to do that.

Yeah, yeah like especially when we look back to like the small cap boom like back in 2021, there's yeah there was a lot of people that were doing this. I mean micro nano cap stocks in the TFSA, I mean highly speculative investments and I again, you lose that room and it's gone. And even, you know, a simple $7,000 annual contribution, you know, if you're like 25 years old right now, that's tens of thousands of dollars when you're retired. If you were to just, you know, buy a basic index fund, which, and you use historical market returns, 8%, something like that. Yeah, no, good point.

You wanna go over the second mistake here after you're done coughing a lung? Yeah, you're good, okay. So this is one, this one is a bit situational, but I actually see like a lot of people actually make it. It's actually probably one of the most common ones I see. And that is, and even from like very experienced investors is they try to avoid US withholding tax on the dividends

because in a TFSA you still pay withholding tax on the dividends. It's only the RSP that you can actually, they won't charge them. And then in a taxable account you will get charged but you can kind of get it back with the some of it back with the foreign tax credit. But again this one is very situational. I mean if you have an RSP and can get proper US international exposure in that account it may make sense to go all Canadian with your TFSA. However, the main mistake here is from people who either don't have RSPs because they're

suboptimal from a contribution standpoint, which is the case for a good chunk of people. The RSPs, they benefit you more as your income is higher. They're less beneficial when your income is lowered because, you know, the all from a from a taxation perspective, or they just haven't contributed them yet, because maybe they're trying to fill their TFSAs. And in this type of situation, I mean, there's a 15% withholding tax on the dividend. So if you have a dividend in or sorry, if you have a US stock that pays dividends in a TFSA, for every dollar you get paid in a dividend, you're gonna pay a 15% withholding tax. So you're gonna lose 15 cents from that. And in the TFSA, you are not allowed to recover this

through a tax credit either. So it's a little bit different in that regard. And we're kind of wired to avoid taxation at all times. So many will structure their TFSAs to be 100% Canadian equity in order to save that 15 cents because you don't wanna pay that tax. Nobody wants to pay tax. So the only difficulty here is,

and again, this would be the situation where you don't really have an RSP to hold US dividend stocks or you're really just starting out and the TFSA is your only account. They'll hyper concentrate to a single economy, that being the Canadian economy, one that is heavily cyclical and really not growing that fast in order to save a 15 cent tax on a $1 dividend. Like I own, my RSPs are full. So I do own US dividend stocks in my TFSA.

I mean, it's a non-issue to me that taxes like, it's so minor, especially when you consider the overall growth of both indexes. So over the last 20 years, the SP 500 has returned around 7.8% annually while the TSX has earned around 5.3. So to give you an idea on an absolute dollar basis, 100,000 in the SP 500 20 years ago is around 461,000

while the TSX is around 284,000. So that's a difference of around $177,000 or around $8,850 a year. So when you look at those numbers it starts to seem a bit ridiculous to avoid exposure to those faster growing equities and indexes just to try and save 15 cents on a $1 dividend. Now obviously there's no guarantee that the S&P 500 will outperform the TSX moving forward or any other international market, but this is kind of a past situation where it's cost you a lot more hyper-concentrating in the Canadian market just to save that tiny amount of withholding tax on the dividend. Yeah. yeah, I don't worry about it too much.

My rule typically is I won't hold US names if they pay a big dividend. So if they pay like, you know, if a lot of my returns from that US company is dependent on the dividend, then of course I think I will definitely opt to have it either in a taxable account or an RRSP. But I mean, I don't have really a rule of thumb, will definitely opt to have it in either in a taxable account or an RRSP but I

mean I don't have really a rule of thumb but I would say anything yielding less than like two and a half percent three percent I don't really care whether it's MIT FSA or not if it's US listed of course again if you're looking at type of companies like a telco in the US that pays a huge dividend and most of your returns will be coming from that then you're looking at yes It's probably gonna impact well It will impact your returns way more than a company where only a little bit of your returns are coming from dividend and the rest are coming from price appreciation

Yeah, and again in your situation and in a lot of people's situations like you have the account flexibility to Kind of move them around to make them more tax efficient. Like this mistake is more often something I see where, you know, say somebody's starting out and like they have, I don't know, 30,000, $50,000 in their TFSA and that's their only account. And they've been told, don't buy US dividend payers in a TFSA because you'll be charged that tax. So they end up buying a whole ton of Canadian options in the TFSA.

And there are high quality US companies that don't pay dividends, but I mean, even in today's environment, we're seeing a lot of the big tech companies now pay dividends, which kind of like, it could really get somebody to be way too over allocated. Whereas if you have a portfolio, it could really get somebody to be way too over allocated. Whereas, if you have a portfolio, like you have an RSP, you can put the US dividend stocks in there

and you can go all Canadian in your TFSA and you're still properly allocated. It's really not an issue. But the main issue would be, like you're concentrating your portfolio heavily in Canadian stocks just to avoid that tax, which I mean, historically it's cost you much more than that tax itself, that, you know, small

withholding tax. Again, the future is nobody really knows. TSX could go on a big run over and above the S&P 500, but I mean, proper allocation regardless of what you think future returns are going to do is pretty key. And many people are told it is a mistake to hold US dividend payers in the TFSA. And in a situation of optimal allocations, yes, it is a mistake. But if this isn't the case, the mistake that you are avoiding is just trying to avoid that tax rather than just building a diversified portfolio. Yeah, and what I'm sharing here is it's a little bit counter to what you're saying in some way, but I think it's more of the argument that a lot of people will own Canada listed ETFs that have

exposure to US equities, thinking that they will not have a withholding tax. And what I'm showing here is a document that just shows from Vanguard that yes, if you own a Canada listed ETF that owns US equities, there will be withholding taxes. So just to keep in mind that- Even in the RRSP, yeah. Yeah, exactly. Even in RRSP in some cases, it really depends. The RRP will be fine

there's a little bit more nuance for the depending on where the ETF is located for the RSP but in that situation yes. So just so people are aware like Dan said I mean at the end of the day I think people probably make it too big of a deal then it should be but just a little thing I wanted to add here is that a lot of people I think own Canada listed ETFs that have direct disclosure to US equities thinking that they won't be a withholding tax and there will be. Yeah so the way it works is if the fund is domiciled in Canada which would be like something

like a VFV, you would still pay withholding tax even if that is in an RSP because it's effectively the fund that owns the US equities, not you. So you will pay the withholding tax even inside of an RSP because it's a Canadian domiciled fund. Whereas something like VOO is US equities US domicile fund if you own that in an RRSP you won't be charged that withholding tax and the TFSA obviously you're gonna get charged that withholding tax either way but in an RRSP US domicile funds are what is going to get you to not have to pay that withholding tax.

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Find a co-host at airbnb.ca forward slash host. It's the small things that make us Canadian. At BMO ETFs, all of our tickers start with Z. That's right, Z not Z. From ZSP to ZEB, we know how to build solutions for the Canadian investor. So the next time you invest in ETFs, consider AZ instead. Visit bimoets.com for more. So yeah, so next year, the third mistake. Yeah, so this one is going to be very situational as well, and it would likely apply probably to

people closer to retirement. And I mean, most people kind of understand the TFSA is one of the best accounts in Canada for building tax-free wealth, so they tend to focus it on 100% equity. And there's kind of a notion- I would push back and say a lot of people haven't figured that part out and just think it's a savings against. And that's a good argument as well. Yeah. Yeah, just holding cash in it.

You could talk about that after this, which is another- It's basically the same mistake on the opposite side of the spectrum. Yeah, exactly. So people tend to focus this account. And again, I'm mostly speaking about people who are closer to retirement that probably hold, their portfolios are not 100% equity, but they kind of get the intention that the TFSA

is the best way to grow tax-free wealth. So they tend to focus the accounts 100% towards equity. So there's a notion that, you know, like fixed income or other assets, like gold equals poor returns, which equals a waste of TFSA space. So they believe that- They shouldn't see my TFSA then.

Yeah. Yeah, exactly. And I mean, they believe that, you know, if they're not getting the maximum tax-free returns from the TFSA, they're wasting it. But I mean, ultimately, the real goal should be the best tax-efficient outcome based on your entire portfolio.

And again, for someone with a longer time horizon, this is likely irrelevant, even if you wanted to say, roll with like an 80-20 equity fixed income portfolio, because yes, the equities are likely going to outpace the fixed income beyond the potential tax benefits of having that fixed income inside of a TFSA. However, those were shorter time horizons. I mean, the flexibility of the withdrawals inside your TFSA plus the 100% tax-free situation on effectively one of the poorest forms of investment income should definitely have you asking the question, if it's a solid place to park fixed income investments. In the case of physical assets like gold, they would be a capital gain. So they would be more on the tax friendly side. But like if you're talking like GICs, high interest savings ETFs, bonds, things like that,

it's important to remember that the RSP is not tax free, it's just tax deferred. So fixed income investments inside of an RSP. So their interest, the interest is earned tax free, it's just tax deferred. So fixed income investments inside of an RRSP, so the interest is earned tax free, but you pay tax on that interest once it's withdrawn. So there is some benefits here in regards to if you hold fixed income investments during higher periods of income and higher taxation, it's more beneficial to say hold them there

until retirement because you'll be able to pull them out at a lower tax rate than if you would pay tax in the year they were received. But the RSP is definitely not as flexible as the TFSA in terms of withdrawals. So I mean, it's a lot more flexible of an account. But I think people are just trying to, you know, 100% maximize those returns inside that account at all times. So I mean, they might even go as far as holding fixed income investments in a taxable account and all say Canadian dividend payers and a TFSA. Whereas from a taxation perspective, I mean, and obviously this is very individualized, like it has, you know, your situation, but it could be, you know, more beneficial to hold those Canadian dividend payers, which is one of the more friendly forms of tax income and kind of shift that around. Obviously, this requires a lot of financial planning. I think that's where a lot of them come in handy. It's not just a surface level situation, but there might be some situations where you could actually make some modifications that benefit your after-tax returns, but a lot of people don't do it because again, the TFSA, you got to maximize those returns, 100% equity, things like that. Yeah, no, well said. So I think those are

really, I think they're pretty common mistakes and I think it's good for people to be aware of them and make sure they avoid it and you really want to maximize your TFSA in terms of, yes, getting the best returns, but you want to get the best risk adjusted returns. I think that's the most important thing is you don't want to take excessive risks, but you want to take enough risk so that your money actually grows as well. So it's creating that balance. Just be diversified.

If you want to take some additional risk that's fine but size it properly. Don't put you know all of your portfolio into one long shot company that probably has you know 1% probability of like 10xing your money but also a 99% probability of going to zero. So you really want to be able to adjust that accordingly and if you're looking to take some small bets then just size them size them correctly. Just size them in a small amount so it doesn't hurt you too badly if it goes goes south. Yep, the scratch off ticket theory.

Yeah. But the only difference is in the TFSA I mean you could go and keep buying and buying and buying but eventually your TFSA room It'll dry up. I mean number one is probably the most devastating the the speculation like the high speculation But I would say number two is probably the most common the the tax avoidance. But yeah, they're they're all They're all pretty good You know situations that you know that you can look at, figure out if maybe you're doing them again.

Two or three are situational. I mean, number one is no brainer mistake, but two or three, it all just depends on your overall situation. Yeah, no, well put. So we'll move on here. The last segment shouldn't take too long because like I've said before,

we're both running a little bit on fumes for lack of sleep so I'll try to get to the point here so Daniel on not you Dan so Daniel on join TCI asked if I could refer him to past episodes where we talked about Bitcoin the thing is sometimes the search function is not that great and it can be pretty hard to find the actual episodes when you've done over or close to 500 episodes we're about 20 episodes away now so I decided just to do a new segment for those are bit new or to the podcast and interested in learning in about the various Bitcoin ETFs how they work the pros and cons some of the options available to Canadians, and also how

the US ETFs have performed since launching in January of last year. So the pros of using an ETF over buying actual Bitcoin. So first of all, it's easy. So if you know how to use your brokerage, you'll be able to buy it just like you buy any other ETF, any other stock. It's very easy. You don't need to learn how to purchase actual Bitcoin through an exchange, for example. And then if you want to store it securely through self-custody, it is a learning curve and can be a bit overwhelming for a lot of people. So it is easy for those wanting to own the actual Bitcoin. You can go

back to the episode that I did with Ben who's also known as BTC Sessions. So we talked about that quite in length. I'll put it in the show notes for people who are interested. There is definitely more regulatory oversight which can be a good or bad thing but for a lot of people more regulation as an investor is a good thing because it just provides them with protection. You can own it in a registered account like a TFSA that you just talked about or RSP so it's definitely eligible for that. It's even eligible for our ESPs. So you can definitely own it there. Of course it's a riskier asset. It's pretty volatile so you'll want to make sure that again if you have it in a TFSA

like we just talked about you want to size accordingly. So if you end up putting all of your money into Bitcoin ETF just buckle on just put on your seatbelt and enjoy the ride because it's going to be quite the ride. And the last thing is you don't have to learn about buying and storing the actual Bitcoin which again it is a learning, which is scary to a lot of people and a lot of, and some people just don't want to mess it up and lose their Bitcoin. There are ways to mitigate that, but these are the advantages of, I think the main advantages of buying a Bitcoin ETF. Anything you wanted to add, Dan?

No, it's good points. I mean, that's pretty much exactly why I own it. I mean, I've never like I own an ETF I've never I've never even tried to Attempt to buy just the coin. It's so much easier to just one-click it. Yeah I'll do it with you I'll hold your hand now the cons You don't have direct ownership in the underlying bitcoin, which means there is counter party risk especially when you compare to self custody. Of course, self custody there could be some user error there.

You have to always be careful with that. The second con here is you will be paying management fees. So something to keep in mind, there will be additional fees because these ETFs, I mean they have to make money on them so they do do charge management and expense ratios. So they do charge that. It does not trade 24-7 like Bitcoin does. So that may be a pro or a con depending on who you are. But I think for a lot of people, it is a con because if you do need to sell it, you need the liquidity very quickly. That's the beauty about Bitcoin and actually owning it. You can be on a Sunday at 2 p.m.

and you'll be able to sell your Bitcoin and get some cash in exchange. So there is that advantage that you don't have when you have the ETF. And you lose a lot of attributes that makes Bitcoin so attractive, like not being reliant on any third party, confiscation, censorship risk

if government decide to clamp down on the asset, and the instant liquidity like I just said for the 24-7. So these are all cons that you have to live with. For a lot of people it's not too big of a con so they're fine with it, but you've seen it with your stop losses right Dan. Bitcoin ETF does not trade 24-7, so when Bitcoin has a huge swing and you had a stop loss in place and it happens overnight, well, the stop loss is completely useless.

Yeah, I mean, I would actually say the fact that you can't trade it 24-7 probably benefits more people than as a con. Well, it could be a pro or con, yeah, if you don't have self-discipline more people than it than as a con. I could be a pro or con Yeah, if you don't have self-discipline, yes, it could be a pro Yeah, people already have a hard enough time holding stocks that they probably have You know extensive knowledge of when there's panic whereas a lot of people who buy Bitcoin I mean I have I have a very basic understanding of Bitcoin. I probably wouldn't panic sell it if it dumped.

But a lot of people, if they see a dump, they might panic sell. And it tends to dump fast. But it also Bitcoin takes the elevator up and down. Whereas the you know, they say the market tends to take the stairs up and the elevator down. Bitcoin is both ways So I think the way the the fact that you can't Sell it at like, you know Saturday at 11 p.m. I mean is probably a net benefit I would say but I don't know it'd be difficult to tell

Yeah, it could also make some people panic right? so oftentimes what will happen is the only asset trading on a Sunday or on the weekend and then if there's something happening in the markets if you know, The hedge fund needs liquidity or whatnot this oftentimes will be one of the only assets that they can actually access liquidity So you can see a price swing pretty quickly and oftentimes that will accentuate the next Monday when it starts trading so it could also create some panic for ETF folders and then they just sell that at an even lower price. But I get what you mean for some people not being able to trade could save them. In terms of the Canadian options, thankfully over the last what like six months, I guess

over the last year ever since the US launched the Bitcoin ETFs in January of last year there's been pressure on Canadian ETF Bitcoin ETFs to lower their fees because the difference was so great so you were looking at 1% plus fees some of them still charge that but for it was almost all of them I think were 75% zero when I 75% 0.75% up to 1% plus in terms of fees. And that was basically across the board. And then I think a lot of people like yourself ended up saying, well, you know, you're charging me a percent plus in fees when I can get the US one at like 0.25%. I'm just going to do the conversion conversion buy it in USD and you hold the

US one and over time I'll save much more money on the the management fees and it's also denominated and stronger currency of the two so I think a lot of people ended up doing that so which resulted in three ETFs substantially reducing their fees in Canada. Yeah, you had a situation where I used to own BTCC, I think it was, I can't remember what that one was. Yeah, the purpose one. Yeah, but they were like 1.25%, I believe it was.

So I mean, it was like, it was a no brainer, like even being at Well Simple, I just paid the one and a half percent currency conversion fee. Like as soon as it came out, I sold it, converted it to US dollars because I mean, you're paying that currency conversion fee in a year. I mean, obviously you have the dollar fluctuation. So it gets a little more complex than that, but like I imagine they saw a lot of outflows to the US assets just because the fees are so much lower. And I mean, competition is good in the space. I mean, all it does is bring down fees.

So I imagine- Well, at the end of the day for these providers, it comes down to the conclusion is, are you making more money by losing AUM but having a higher fee or trying to increase your AUM at a lower fee, right? What are you making the most money? Are you making more money on volume or on higher fees?

So you have to make that calculation. And what we saw is that, yeah, when we were doing these ETFs reviews every month when National Bank was coming out with their ETF fund flows from Canada and the US, as we were seeing last year, a lot of outflows from Canadian crypto ETF, which were pretty predominantly Bitcoin ETFs going to the US. So that resulted in all that to say that there are some very attractive Canadian options now.

They're not quite as low as the US, but if you want to buy in Canadian dollars, I think it makes a whole lot of sense to just put it in one of these ETFs because now the spread, the difference between the Canadian and the US one is much, much more reasonable. So there's three of them, two I think above the last one, but they're the three most affordable in terms of fees. The first one is the Fidelity Advantage Bitcoin ETF ticker FBTC. That one has a management fee of 32 basis points, so 0.32% and a management expense ratio of 0.43%. The management expense

ratio just includes the management fees and the operational fees and a few other fees there, so it's more all-encompassing. So that's the better one to look at. The reason why I put both for this one is just to give people an idea because the next one the iShares Bitcoin ETF, I believe it's iBit the ticker on the NEO exchange. Well that one has management fees of again 0.32% but they don't have their MER listed just yet. Typically that will come out when it's been listed for a full year so they'll have a better idea but just to I would gauge that it's probably going to be similar to the FBTC it's probably going to be 0.4 to 0.45 would be my guess in that range. So still pretty reasonable and then the last one

here is the CI Galaxy Bitcoin ETF BTCX. That one has a management fee of 0.40% and a management expense ratio of 0.69%. So definitely on the higher end, from my perspective, I would choose one of the two, whether it's FBTC or the iBit, the iShares Bitcoin ETF, just because they're pretty decently lower than the CI Galaxy Bitcoin ETF. So I think for me that would be the option I would choose. But it is nice to see that there are lower fees. There are other Canadian options, but you're looking at 1% plus or pushing on 1% for a

lot of them. So that's why I only including those three. Yeah. And another thing on the management expense ratio, and this would come down to any ETFs, not just the Bitcoin ETFs is whenever you're looking at these ETFs, look at the fact sheet because they'll have the management expense ratio and they'll also have the trading expense ratio,

which is not included in the MER so you might get. I thought it was no. Well a lot of them separated so they'll have the the MER then they'll have the TER and then they'll have the total ETF expenses. Okay okay. Yeah. Like I'm looking at Fidelity's Bitcoin ETF right now and yeah they have them separated so you have the Mer and then you have the Ter, the TER. They don't charge a trading expense ratio, but sometimes it can be different. I might be wrong on this, but I'm almost positive I'm right that the trading expense ratio is over and above the management expense ratio. Yeah, for whatever reason, I thought my DMER included all of that, but hey, I could be wrong. So anyways, all that to say you want to look at the all-encompassing. So

happy to be proven wrong if I was here. Now in terms of the US options, there's quite a few of them. They're all relatively low in fees. They're all between 0.2 and 0.3 not all but most of them. So you have iBit, you have Biddle, you have FPTC, you have the ARKB, so the ARK Fund. These are all within 0.2 to 0.3. If you're looking to you know convert Canadian dollars to US those make a whole lot of sense. If you already have USD and you don't want to convert it back and forth then these would make sense as well. But it's been, yeah, it's definitely been a big tailwind for reducing those fees. So have you found that answer? I could tell you were searching

in the meantime. Yeah, so it doesn't. So in Canada, the MER and the TER are separate. So the MER would be your management fees, operating expenses, taxes, whereas your trading expense ratio, brokerage commissions, transaction costs. It's weird that it wouldn't fit in the operating expense, right? Like wouldn't that be an operating expense? You'd think it would be. Yeah, that's why. They are separate.

But I guess it's not, it probably doesn't have a big impact for a Bitcoin ETF just because no, they just own one asset where you have a managed fund, especially if it's actively managed, right? They're actively trading. So they for sure going to be incurring some more fees where when you have a Bitcoin ETF, yes, they have to, you know, they have to buy Bitcoin as there's more money coming in, but there's going to be a lot less trading altogether. Probably very minimal. Yeah. The one the one example that is great for this would be a fund like HXS, which is Horizons or sorry, GlobalX now. Their S&P 500 total return ETF, where they use the,

the swap contracts with the banks. So you're going to see, I'm looking at their sheet right now. So you'd see a management expense ratio of 0.11, which would be what is reported on, on most like financial websites. You're going to see a MRR of 0.11, but you're not paying that you go to the trading expense ratio, which again is reported separately and that's 30 basis points. So you're not paying that. You go to the trading expense ratio, which again, is reported separately and that's 30 basis points. So you're paying 41 basis points. So that's what I mean, not just isolated in these funds. This is kind of a separate topic, but make sure you're going to

that fact sheet and you're seeing the total cost to own the ETF because I just quickly threw it in chat GPT. I said, is it included? And included and it says no it doesn't include the trading expense ratio It's a separate cost No, that's good to know and I mean I think it's probably has the biggest impact on those kind of funds that are using Options contract because then you're getting much higher trading fees because of that like typically I'm sure like for the most part these Organization are probably getting like close to zero fees when they're just buying an asset, right? Not buying like options contracts. So that would make sense that it's much higher for those. So something I don't pay attention all that much to clearly, but I'll pay a closer eye on it. But I still

don't buy really like any of those ETF no that have options contracts So it's probably you know, even though it may have an impact. It's probably very minimal Yeah on most funds. I think it will be I'm trying to dig up some more funds here that I think would be a good example But don't really have time but yeah, it's uh Something to know at least. Yeah, always. Well, you can keep looking. I'll finish here what I was going to say with the US and the Bitcoin ETF. So essentially, this is I think a good primer for people want to invest in the Bitcoin ETF. And obviously the US approving the Bitcoin ETF in January 2024. Just like I was saying a bit earlier, it really opened the asset class to institutional and retail investors in the

in the US market and the reality though, like a lot of people were saying in the space that oh, it's gonna just boom and the reality it's taking some time. Yes, it was approved but institutions notoriously move slowly whether they have committees that they have to go through, whether they have to modify investment policies, or whether they're just risk averse, it takes time. And for retail investors, it makes it easier for sure for them to hold the asset via an ETF. But again, a lot of money is in retirement accounts, which may or may not be eligible to purchase the ETFs depending on who the account is with. It could be with a 401k which is a pension. It may not be one of the options available. It could also be managed by a financial

advisor who may not want to invest in that asset for his clients. So it is something to keep in mind. I think long term it will be a tailwind for Bitcoin and the price of Bitcoin, but I think it's going to take some time But it has had some positive effects So when the Bitcoin ETF launched there was about 28 billion in asset under management the bulk of that came from Essentially just one it's called GBTC through the grits grayscale Bitcoin trust that was known back then. As the approval came in for the ETFs, the GBTC actually got converted to an ETF. So the assets got converted.

So that's why there was a starting point of $28 billion. And since then, what's been really interesting is as of April 29, so as of yesterday, AUM had grown to $116 billion. So that's a 315% increase in asset under management. Now people will point out rightfully, during the same period Bitcoin increased in price. So what proportion does the price have to play? Well, during the same period Bitcoin increased approximately 105%. So clearly there's been more new money flowing into the ETFs than the price increase. Yes, the increase in price has

played a role in the increased asset of their management, but it clearly shows that there has been quite a bit of new money going into the asset. And you can see that growing over the past year and change year and a half or so ever since it's been approved. So it is something to keep an eye on. For those wondering where I'm getting this data you can just go on the blog.co. They have some really good information when it comes to the Bitcoin ETFs there. So you can just type in the block, the THE block Bitcoin ETF and then you'll see all different kinds of data that's really interesting. They break in down by specific ETF and the assets that they have under management over time. You can see the, I have it over the last year here. So if you see, you go back since inception, you can see where GBTC

really was the bulk of the asset under management and now over time has grown smaller and smaller and smaller with BlackRock's iBit being by far the largest of them all. I think iBit has around 55 billion in asset under management currently. Not quite half but pretty close to it. Yeah I mean as I mentioned competition is good for the space. Yeah exactly. So one other, like I just looked this up. You're gonna see it more with actively managed funds. Like you're not gonna see much of a trading expense ratio with index funds. So I took, like I just was kind of scrambling.

Probably why I wasn't managing, like noticing it, because every time I look at it, I never see it because you know me, like I, I do have ETFs, but they're typically it's pretty much like there's a gold, I have a gold ETF. I have a Bitcoin ETF and I have a few index funds. So they probably, there's not going to be a lot of active management there. But if we look, I grabbed another one just that I knew that was kind of an actively managed fund off the top my head, which would be the Global X Big Data and Hardware ETF. So they're like data centers, things like that, like exposure to AI effectively. And yeah, management expense ratio of 58 basis points, trading expense ratio of 34.

So you're talking total fees of 92, but if you were to look on any website, it would show you a 58 basis point fee. So yeah, there's a good thing to dig in. It's good, yeah. Yeah, dig into the fact sheet whenever you want to, whenever you wanna buy these funds. Because yeah, when I go on

Y charts the big data hardware ETF 58 basis points. Yeah, I don't actually dig into it. Yeah, you're paying much more It's it's interesting that those aggregators are not pulling that part. Yeah Yeah, well something I Again, yeah, cuz I was every time I invest in ETF, I always look at the fact sheet, but I think it just happened that pretty much all the ETFs I would invest in literally had none of those or very little. So I'm never really well, the thing is, is they'll that won't be anywhere near the top

of it. Like you'll they'll show management expense ratio, like right at the top, you really got to dig into the bottom of the sheet to find the total fund expenses and then it'll show you. Okay. No, that's good to know. It's a good point to wrap it up. So we appreciate the support.

Thank you for listening to the podcast. It was a fun one to talk, a bit of a hybrid episode today. So it was a fun one. We'll see you back this Thursday in a few days. We'll be back for some warnings and news. Yep, thanks for listening everybody. The Canadian Investor podcast should not be construed as investment or financial advice. The hosts and guests featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial

professional before making any financial or investment decisions.