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aughhhhh comments on Efficiently Allocating ETFs to RRSP, TFSA, and a Non-Registered Account?

First ask why you want to own bonds. Probably because you want their damping effect during a stock crash. But bonds create the 'damp' by rising in price (yields drop). With interest rates at less than 3% there just isn't much room for rates to drop much.

Then there is the reality that many (most?) of the bonds you find in funds were originally issued many years ago as much longer-dated issues and at higher yields. That means they are priced above par - which means you should expect capital losses (half-taxed) that offset the higher-than-market distributions (fully taxed). In a taxed account that is just the worst of both worlds.

And then there is the basic question .... Are the probabilities slanted toward rising interest rates (prices drop) or the reverse.? I think the former.

I know 50% capital gains and losses are taxable, but dividends tax rate is less than 29%.

  1. Why did Redditor write "distributions"? Bonds pay dividends.

  2. Why priced above par means you should expect capital losses (half-taxed) that offset the higher-than-market distributions (fully taxed)?

  3. Why in a taxed account that is just the worst of both worlds?

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