I am using a TFSA to build up a portfolio on which to retire on tax free. I will invest yearly the maximum that the TFSA allows. Using this system even at a 10% annual interest rate it would take 30 years to save up $1,000,000. This is not bad considering that you’d definitely be able to live off of your dividends, and they’d all be tax free! It is however very capital intensive as you would have to make the contribution yearly for 30 years. Assumption: that inflation is 2% and therefore contribution will go up 2% a year. The government has stated that contributions will be tied to inflation but will only be increased in $500 increments; I have simplified this assumption by just increasing the contribution by 2% a year.
For conservatism let’s step this down to 5%.
At 5% you would earn the equivalent of $34,000 before tax after 30 years of saving. While $34,000 after tax is plenty to live off of, it may not be enough for a “comfortable” retirement.
Instead of either of these two “long term” strategies, I am going to pursue a day trading (or more accurately) week trading strategy to get there a lot quicker. It will look like the following below. Note: those are not years, those are weeks. Now I realize that as soon as I get beyond a certain size it will be difficult to trade for as large gains as I can when I start (because I’ll start changing the market). But at a certain point I plan to do this full time and will therefore have more time to manage my trades to spread out my impact on the market.
Note: $3,500 is used instead of $5,000 as I currently had $1,500 invested prior to coming up with this plan, that $1,500 is considered “dead money” in my strategy. The $1,500 is currently in a loss position but is producing 12% yearly yields. I have kept the $1,500 as an income producer rather than losing by trading it now as TFSA you don’t pay tax on your gains, but you don’t get tax credits on your losses. The money is however dead to me for trading purposes. Aside from general market risk, dead money is another risk I face. I have created this term, however I have a detailed strategy that I follow closely. My strategy involves never taking a loss (unless in certain circumstances when my strategy permits it, mostly due to opportunity costs).
etc...at 114 weeks meeting the goal of $1,000,000.
In this blog I will provide weekly updates as to my progress.
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