No, dividends are not tax-free in Canada. A Canadian investor owning Canadian stocks has a method of calculation that gives a substantial dividdend tax credit, increased substantially last year, meaning that s/he pays a low rate of tax on such dividends - but does not escape tax entirely. With one exception. If s/he is single and has *no other income*, regular tax credits added to the dividend tax credit team up to mean that s/he can earn about $49,000. annually before becoming tax-liable. Except ... in our province, the "taxpayer" would have to pay Ontario Health Levy of about $600. at that level of income. With a low-income spouse, charitable or political contributions, (and/or high rate of eligible medical costs, rather unusual in Canada, as we do not pay fees directly for most medical services), the tax-free level goes higher, due to additional credits. If s/he has other income, the rate of tax on Canadian dividends is lower - but s/he doesn't escape tax entirely. Which is why I much prefer to earn Canadian dividends over earning interest, which is taxed at top rate. The investment method that the guy whose 10-year record, back-checked for 20 years, I've followed uses a Canadian equivalent of the "Dogs of the Dow" system. Based originally on the Dow-Jones Industrial average, they picked the 10 stocks paying the highest rate of dividend with cheapest price and bought a position in each. Or, in the Canadian system, bought a position in each of the cheapest 5. A third system was to drop the cheapest priced one, as one possibly in trouble, maybe having suffered recent slide in stock price but dividend rate having been maintained till now, but possibly about to be cut. Then to buy a double-sized position in the second cheapest. That last, though more volatile, over a long term sometimes turned in the best rate of total return (if you don't mind riding roller-coasters). The investor re-balanced once per year, and it took about an hour or two to do the calculations. Leave everything alone through the rest of the year. In the Canadian system, usually about 70% of the holdings carried forward from one year to the next, so one had low levels of commissions to buy and sell. His system out-performed over 90% of mutual funds' managers records, and the market averages. Plus, very few mutual fund managers succeed in outperforming market averages over a number of years ... so in a number of cases it makes sense to buy Exchange Traded Funds, and pay under 1% fees. Actually, a substantial portion of the holdings of a number of fund managers is ETFs. In Canada, we pay higher rates of management expense to mutual fund managers than you do, especially the equity-based ones, which I prefer, so I haven't bought a mutual fund in the last 15 years. Learn to be my own manager, and stick the mutual fund manager's fee in my pocket. Something to be considered is that in a heavy correction, stocks paying dividends tend to slide less that the average. And a few stocks have had a record of growth in amount of dividend paid every year for the past 40 (I think J & J) and some others for almost that long. Now that the market is so much broader than in earlier years, it might be well to consider a wider-ranging system to use as base for one's evaluation than the Dow-Jones 30 Industials. But stay with large, quality companies. Learn how money works - an interesting hobby ... that pays well!! Very few objective, unbiased advisors around. ole joyful

I agree that very few of them beat the averages ... how could they? They have offices to run, computers, phones, postage and staff ... and buy and sell a lot of stocks, and though their fees are low, many of them pretty well turn over their whole portfolio annually. Those that do that ... have a lot of capital gain to report to you (you hope!) annually ... of which the income tax people want their, in that case, ongoing, share. And they have that management expense fee (often higher than the income tax cost) that reduces their effective rate - and they get their guaranteed rate, whether they produce or not! Also - when it comes time to sell those units, you'd better have kept records of not just your original cost ... but also of all of those declared payouts that were reivested, in order to calculate your capital gain. Many mutual funds keep track of your average cost per unit ... that works O.K. ... until they get bought out/merged, etc. and usually the new system just starts from when they took over. Have you checked Morningstar, the agency that rates them? What about learning how money works and buying individual stocks yourself? I bought shares in one of Canada's half dozen or so nationwide banks over 40 years ago for about $4.20 per share, that was paying about a dime or a bit more as annual dividend. A year ago May each of those shares was "worth" (i.e. "could be sold for") $107.00 ... but they were heavily involved with the U.S. stinky problem mortgage situation, so their price slipped down through the 90s, 80s, 70s, 60s into the 50s ... and have recovered a bit to low 60s. Some here recently said that, of course, I sold ... no, I hadn't. Partly, at the time of the high price, didn't have any idea that it would slide so far ... plus, it went from 4.5 doubles in 41 years to about 4 doubles in those years ... which, apart from the increased income via dividends over those 40 years, is a pretty good rate of growth. But if I were about to buy more bank shares, it'd be a different one, as this is not their first goof in recent years. Recently dividend rate grew from $2.80 to $3.08 to $3.48, which earlier in Canada were tax-advantaged, and recently that advantage increased substantially: so that a person with solely that kind of income went from tax-free $28,000. - 30,000. tax-free, to $46,345. tax-free, an increase of over 60% in one year. Further ... I've subscribed to what I consider Canada's best personal money management magazine for quite a number of years, that carries no ads, is pretty well all text - and the writers respond to subscribers' questions. Local subscribers meet regularly in about 40 places across Canada and I've met with about 20 others monthly here for about 8 years or so: many perspectives and I've learned a lot, there. Cost? Gas to get there, wear and tear on the car - plus, time ... a couple of hours a month, and another at the coffee house after, with a few of the guys and gals. If I'd put that $4.20 into the average even equity-based mutual fund 41 years ago, would the size of that asset have doubled that well? Rather doubtful, I think. A couple of mine have - several haven't. But I don't want to dump 'em this year, due to forced sale of a major holding - Canada's largest telco going private (damn it!). And that's with the income reinvested - and my shares paid me dividends quarterly, with frequent increases, for 41 years. However - the big proviso - the average growth rate has not been that good. I've avoided some taxes as I went along, but that piper will have to be paid, one of these days. Whether while I'm alive ... or for my executor to take care of, before dispersal of my estate to my kids and charities. Had I put that $4.20 into a bank account, GIC, bond, etc. where the number of dollars of principal has been guaranteed, would I have developed any such result? No way! Apart altogether from the tax advantages in the equity-based game (whether of the mutual fund or individual investment variety)! Did I say earlier ... that I prefer to run my own show? Further ... though it was 60 years ago, I grew up on a farm, and farmers are used to irregular income, with loss of some potential income when a cow dies, or reduced yields due to drought or flood (but the price of diesel fuel, fertilizer had to be paid, regardless). And seasonal income, for many. How many town folks could handle getting paid once or twice a year? Plus, they manipulate not only capital, but labour - to repair the tractor, or trade it on a bigger one? Which would require getting bigger tillage equipment, as well. Put a new roof on the barn, this year ... or build it larger? Farmers were much more used to uncertainty than city folks. Or, rather, than city folks used to be. Now, with pensions shrinking and disappearing like fog in the morning sun ... and, in many areas, the values of one's equity in one's owned home (well, "partly-owned", considering the mortgage), and with employment being uncertain, with full-time work scarcer, there have been major changes in the economic picture for city folks, as well. Back up and look at the far horizon ... occasionally, at least. Good wishes for increasingly more effective use of not only your income, but of your assets, as well. ole joyful

Carol, I found your post a few weeks ago on a search. For some reason, I keep thinking about your questions and the advice you got, and I finally decided to log on and comment. Here are a few comments about your post: 1) You make a good point about being able to get better returns with mutual funds over a MM. 2-3% is very achievable. On the other hand, it is also quite possible to lose 2-3% - or more- with mutual funds. This is the trade-off between risk and reward that is inherent in investing. Typically fixed income investments, such as MM, T-bills, and government bonds are called "risk free" investments. Equities, such as stocks, and stock mutual funds are typically considered to be riskier. In general, the "riskier" the investment, the higher the rate of return. 2) You mentioned investing in a mutual fund. Another aspect of risk/reward is diversification. Again, in general funds that are spread among several different investments are at lower risk (Dont put all your eggs in one basket). Taking this a step further, risk is reduced more by making sure the different investments are sufficiently diverse. Some examples of diversity would be bonds vs. stocks, growth stocks vs. value stocks, US stocks vs. foreign stocks, etc. 3) Everybody has a different risk tolerance. Your husband seems to be very risk averse. You seem to be more risk tolerant. The level of risk is a personal decision that both of you must feel comfortable with. 4) I would like to suggest that you visit a website called www.ifa.com. This is a company of investment advisors that specialize in mutual funds by Dimensional Fund Advisors (DFA). IÂm not suggesting you use DFA at this time. What I am suggesting is that you and your husband take the risk survey that IFA has on their website. It is free, and you donÂt have to sign up or give them your E-mail address. The risk survey is about 20 questions. The results give you an idea where you are on the risk taking spectrum. Based on the results, IFA will suggest one of 20 different portfolios that fit in with your risk tolerance. Again, I wouldnÂt necessarily suggest those portfolios for you, but they will give you a general idea of the types of investments that would be consistent with the level of risk you and your husband would like to take. I may make a few people angry, but I need to comment about the advice you have been given: First, the good advice. 1) I agree with much of what jkom51 says in the first reply. Although you probably donÂt need a CFP, it wonÂt hurt as long as you can find a good one. 2) Chisue suggested treasuries and CDs. These can be good alternatives to MM, but you should research the advantages and differences. 3) Great advice f lphacat. American Funds are "load funds". That means when you buy them, a salesman gets a commission, usually about 5.25%. If you invest $400,000, you will LOSE $21,000 immediately. The big problem with this is that there are "no load" funds out there that will do just as good if not better, and you can get them for about $30 per fund. If you have 10 funds, that would be $300 verses $21,000. Too often an advisor who is recommending a load fund has his best interests at heart instead of yours. I wouldnÂt even consider load funds if I were you. 4) Alphacat also suggested DFA funds. He is correct; almost any DFA fund runs rings around American. They are all no load and have much lower annual fees as well. On a $400,000 investment, the difference in ER between DFA and American can run $4000 per year. With compounding, this is about $60,000 over 10 years that you are giving up. 5) The absolute best advice you got was f lphacat when he recommended you go to www.fundadvice.com. Go there and read every article, especially this one (sorry, I canÂt get the link to work, so I just copied the whole address) http://www.fundadvice.com/articles/buy-hold/the-ultimate-buy-and-hold-strategy.html. Paul Merriman gives great advice to folks. He is also a financial advisor who you might want to consider. I think he will work on a percentage of assets or I know he will give advice on a per hour basis (around $200/hr). This may be your best option. For about $400 you can get some really first rate advice on how best to invest. For disclosure purposes, I donÂt invest with Merriman, but I do read his site quite often. Also, for disclosure, all my IRA assets are invested in DFA funds. Now for the bad advice: 1) The average investor has absolutely no business investing in individual stocks. If you put your money in 10 mutual funds you are invested in 10,000 stocks. Now if one of your stocks goes bankrupt, would you rather lose $40,000 ($400,000/10 stocks) or $4 ($400,000/10,000 stocks). This goes back to diversification. You just canÂt minimize the risk enough with individual stocks. 2) DonÂt bother going to Morningstar.com, or Forbes, or Money . Frankly I consider most of what they put out to be financial ography. They are trying to entice and tempt you with the "hot" stock, the " " stock, the investment that will make you filthy rich. But if you go back and look at last yearÂs "hottie" chances are it is a dog this year. For now, read everything you can at fundadvice.com. Another good site is www.diehards.org. That is a forum primarily by index investors. Go there and post the same message you put on this web, and you will get some fantastic advice (much better than I can give you). Just a few more comments. 1) The best portfolio for you and your husband will probably be one that includes MM, bond funds, and stock funds. Again, your risk tolerance will determine the best portfolio for you. 2) One more article at fundadvice.com is this one. http://www.fundadvice.com/portfolio.html Merriman provides several suggested portfolios with different fund families such as Vanguard and Fidelity. Most of these funds are index funds. Some are managed funds, but all are no load with low fees. 3) Many people prefer index funds. These funds track an index such as the S&P 500 or others. They typically have lower fees than managed funds and studies show that managed fund usually underperform index funds over the long term. You can get a good explanation of this at fundadvice.com 4) You asked for a few good funds. Several are listed in the site referenced in #2 above. 5) Good luck with your investment . Jeff

Chisue - As the person in charge of our family's investments, I say yes, go ahead and buy into an index fund. With your already good diversification and common sense and understanding of the portfolio you already own, and with your children established, you are in an excellent position to do this. You do not need any detailed understanding of how the market works to invest in something as simple as an index fund. 23 years ago I invested in Vanguard's Index 500 fund and our investment has quadrupled over that time despite some pretty significant dips. I have withdrawn a small amount of money perhaps 4 - 5 times over the duration, when I didn't want to touch cash or our IRAs. The taxes and expenses on index funds are extremely low, another reason they are so attracitve. Despite all this, four times my original investment makes me happy! Just to establish my street cred. DH and I are nearing your age group and have similar concerns. Our children are grown and gone and on their own (and I do like to gift them with cash occasionally), so we are mainly involved with concerns of retirement right now, plus health issues, travel expenses, etc. We are in a fairly good situation and we have never used a financial advisor (although we've had good discussions with our accountant). I saw what "advisors" did to my mother. No thanks. Here's another thought: Money gurus recommend that senior citizens keep some money in stocks. People are living longer and need the financial growth that stocks provide, even if they don't plan to touch the money. I would suggest an Index 500 fund. This invests in the 500 largest companies in the USA, although sometimes fewer than 500 stocks are held. That really doesn't matter. Some recommend a total market index fund, which holds every domestic stock (more or less). I like the index 500, it follows the DOW (our 40 largest companies) pretty closely, so when I check CNBC I know pretty much where this particular investment is. I would do the Index 500, because it's so easy to understand. I would not invest outside the USA right now. I have held a little money in an international fund for almost 20 years, a good fund from a solid brokerage (T. Rowe Price), and it has barely doubled in that time. You can also ask the agent if a small cap index fund would be good now. It might be good to put most in the 500 and some in a small cap. But remember - these brokerage houses - Vanguard, Fidelity, etc., - are BY LAW not allowed to give you advice. They can only explain, very thoroughly, but they cannot tell you what you should do. There is no charge for your conversations with them, and they may not give you advice. Maybe a few little suggestions, but nothing that you could hold the company accountable for. Any time is the best time to invest. Get In and Stay In. Do not panic. I have always withheld a modest amount of money in case of severe crashes, so that I could buy a bit more on a serious dip, but I never bought a lot more, because I try not to market-time. One can go crazy trying to time the market! Fidelity has a great story about this. The market crashed badly in 1989-1990, just before the first Gulf War. Fidelity's people were innudated with calls from panicked customers. One of them answered a call and there was an elderly gentleman on the line. He was apparently not aware of the crash. He said that he had put a bit of money into the Fido's first mutual fund many years before and was wondering what it was worth. The callperson looked at his chart and saw how much that fund had just lost, but also, that it was up tremendously from his initial investment. "$300,000" she replied, worried about his reaction. "Yippee!" he yelled, and hung up. It's all a matter of perspective. Anyway, sorry for blathering on. How you do this: Call Vanguard from its online number and tell them that you want to invest in a mutual fund. They will transfer you to one of their agents. It is so simple. He will explain what to do and tell you that he will send you the forms. When they arrive, you fill them out, write the check and send it all in. Or you can probably do this over the phone if you have the money in a checking account, which can be linked to your Vanguard account. You can also do everything online with a linked account, but am not sure if that's possible for an initial investment. It would probably be good for you to talk to an actual human being on your first visit. These people are very accommodating! They are used to dealing with all kinds of people, of any age, any language ability, crabby, pleasant, whatever. Apologies for the lecture. I hope it helps. If you have any questions for me, I usually go to the Home Decor Conversations forum a few times a day. I might forget that I've been here. So give me a shout-out over there if necessary. And good luck. You are thinking very wisely.