Q – I have RRSPs and TFSAs in my self-directed portfolios. As I start to enjoy retirement, I sometimes like to go off grid. Rather than take the chance of some disaster happening and losing principal while I’m away I prefer to simply sell off and hold cash, then buy back in when I get home. I sleep better that way. Interest rates have been so low the past few years it didn’t bother me to just leave it sit, but now things have changed. Where do you suggest that I put my cash while I’m away? I typically go for 2 – 8 weeks at a time. Thanks for your help and thanks for the newsletter. – Dennis P.
A – This is certainly an unusual strategy – in fact, I’ve never heard of anyone using it before. You may sleep better at night but all this trading in and out is costing you commissions. Even if you deal with a discount broker, those expenses add up over time. Then you must consider how much you are losing if the market rises while you’re on the sidelines.
I have four suggestions for you. The first is to restructure your portfolio so that you can go away for a few weeks and not worry about it. A combination of conservative, dividend paying stocks and some fixed income securities would achieve that goal.
The second thought is not to cut yourself off completely from the outside world. Use your phone to check the markets and the status of your portfolio every few days. If you don’t like what you see, call your broker and take action.
Thirdly, enter stop-loss orders on any security you’re concerned about. If the price falls below the stop level, your broker will sell. Of course, if the stock rebounds the next day, you’re out of luck.
Finally, if you’re determined to stick with your current plan, put the cash in a high-interest savings account while you’re away. The problem is you will be limited in your choices to those offered by the financial institution with which you’re dealing. For example, Saven Financial currently offers 3.75% on a high-interest savings account. But you’re not going to close all your existing accounts and move the money over there for a few weeks.
I think you should reconsider your approach. There are more effective ways to deal with a temporary absence. – G.P.