safe places to put my cash

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yoshhash's picture
yoshhash
Status: Martenson Brigade Member (Offline)
Joined: Sep 20 2008
Posts: 271
safe places to put my cash

First off, let me say I am not a rich guy- do not have any investment porfolio to speak of.  My investment for the future thus far has been switching to a sustainable career path (architecture- switched over from construction, although I still do both).

My question is this.  I am thinking of withdrawing my limited cash funds (several thousand) in anticipation of a run on the banks.  However, I know that the "shoebox under the bed" option would be even more foolish (my neighbourhood does not have the best reputation).  I am considering getting gold, but that is also not terribly realistic, and although I have great faith in the staying power of gold, I feel I have kind of missed the boat- this is not what I call "buying low".

Are RRSPs (I guess Americans call it 401k?) considered safe/stable?  In the case of a run on the banks, is it just as inaccessible as any form of cash?  Am I naive to think that an RRSP has any advantage over cash?  I get nervous when I hear phrases like "impaired 401k assets".  

I've heard the idea of"investing in things you can eat", but I don't think it suits us.  We (my wife and I) are extremely self sufficient and already have a gameplan for growing our own food if the SHTF.   Almost a completely side issue, but I have always been partial to real estate.  I know that getting out of debt should be a primary goal, but it really seems to me that as long as you don't pay an inflated cost, land is one of those "hard value" items which can only go up in value once the bubble is burst and things gravitate to its true value.

What other options are out there?  Is there anything flawed in the way I am thinking/planning?

bearing01's picture
bearing01
Status: Silver Member (Offline)
Joined: Sep 8 2008
Posts: 153
Re: safe places to put my cash

An RRSP is just investing in mutual funds or bonds, but inside a retirement tax shelter.  If you are, for example, CIBC then you are likely buying a bunch of mutual funds from them.  These funds are equities (stocks) in different companies.  The fund managers should be picking the healthy companies for you.  But still, the real problem lies in whether or not the stock market will tank and you plan to retire in the next 10 years.  If the companies the funds invest in have low debt and are strong then you shouldn't loose any money.  ie: they don't invest in companies like Nortel.  If you have more than 10 years before retirement then I would suggest you continue to contribute to your RRSP as always.  This is a great time to buy to hold long term.  At this time I am buying individual Canadian stocks only, particularly the investment trusts that pay a decent yield.  Just make sure your Mutual funds don't contain any US bank shares and preferably any US treasury bonds.  

If you are in Canada (as I assume since you are asking about RRSP) then I wouldn't worry too much about the Canadian dollar as say the USD.  Canada has the most healthy banks in the world (as per a TD bank report in December) and had been running a balanced fiscal budget until now.  Canada is not insolvent, as say the US (or possibly Britain in the future) and I don't forsee the CDN dollar collapsing at all. Canadian dollar is weak now because oil is at $40/barrel.  US dollar is strong only temporary.  Canadian dollar will get strong again when oil comes back, unless the bank of Canada inflates to weaken it to help improve trade with US.  Canada may undergo some Inflation though (not hyper-inflation) because the central banks have been coordinating their printing presses to weaken their currencies together. 

Don't worry about a run on Canadian banks.  THey're not going to fail.  Canada does not have a housing problem or mortgage problem like the USA or Europe.  Canadian banks are also not structured the same as American banks either.  During the Great Depression there were thousands of American banks that went broke.  During that crisis not one Canadian bank went bankrupt.

To protect yourself against inflation I would recommend you put 20% of your cash in gold. If you can't find bullion then you can buy shares in Central Fund of Canada.  It's ticker CEF.A on the TSX.    You can buy it on the NYSE as well.  It's a bullion fund that consists of gold and silver that is stored in the basement  of CIBC in Toronto or Calgary somewhere.  Google search will tell you all you need to know.  Wait for  a day where gold is down around $900 usd.  There is a very high probability that gold will be much higer than it is right now.

If you don't have that much money and want to buy other stuff then just focus on things you will need for the next year or so.  If there are clothes or furniture or other things you expect you will need in the long term then you can buy it now while it's cheap.

If you're in Canada the main thing you have to worry about is loosing your job.

bearing01's picture
bearing01
Status: Silver Member (Offline)
Joined: Sep 8 2008
Posts: 153
cedar's picture
cedar
Status: Bronze Member (Offline)
Joined: Oct 7 2008
Posts: 96
Re: safe places to put my cash

An RRSP is an account. You own what is in the account. If your bank (or whoever holds your account) goes bust the account is insured to a maximum of $1,000,000. And you would only need this insurance if you were holding cash in the account that the bank could not make good on. Any form of equity, mutual fund, etc. should be ok if the bank goes bust, even without the insurance. Read here for more info: http://cipf.ca/

Note that the insurance does not protect you against losses in your investments. So if, for example, you invested in a mutual fund that was heavily weighted in banks, and banks get into trouble, then you are out of luck.

You can hold pretty much anything you want in an RRSP. If you are worried about capital safety you should buy a money market fund that holds Canadian government debt exclusively. If you want some gold as Chris advises, then buy some CEF.A and hold it in your RRSP.

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