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What Investments Can I Hold in My FHSA?
Written by The Inspired Investor Team | Published on July 4, 2023
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The First Home Savings Account (FHSA) is now available – but don't let the word “savings" in the name throw you off. Like a Tax-Free Savings Account (TFSA), this new account for first-time homebuyers is an investment account.
So, just what investments can you hold in an FHSA?
In short, you can largely hold the same investments in an FHSA as you can in a Registered Retirement Savings Plan (RRSP) or a TFSA. That means a range of investments are eligible, such as:
- mutual funds
- guaranteed investment certificates1 (GICs)
- stocks
- bonds
- exchange-traded funds (ETFs)
- cash
There are two key points to keep in mind when choosing investments for your FHSA:
1. The Canada Revenue Agency only allows qualified investments in an FHSA. Generally, if a security trades on at least one exchange that's considered a Designated Stock Exchange by Canada's Finance Department, it will be recognized as a qualified investment. Those exchanges include well-known North American exchanges such as the NASDAQ, NYSE and TSX. Holding non-qualified investments can have tax consequences and may result in penalties levied by the CRA.
2. If you choose to include investments in your FHSA that pay foreign dividends, many governments — including the U.S. — apply a non-resident withholding tax to dividends and interest. That means the tax may reduce your overall return.
PLUS, like TFSAs, FHSAs are not meant for frequent trading, running an investment business or day trading. If you trade extensively in your FHSA, the Canada Revenue Agency (CRA) may consider it "carrying on a business." Any income (dividend and interest) and the full amount of realized gains (net of any realized losses) would be subject to tax. Find out more in What to Know About Frequent Trading in Your TFSA, FHSA and Other Registered Accounts.
To learn more about FHSAs, check out 9 Questions Answered About the New First Home Savings Account. Ready to open an FHSA? Start here. RBC Direct Investing clients can also log in and choose "open a new account" under your profile icon.
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1 Certain GICs cannot currently be purchased, sold or transferred into your FHSA.
Any information, opinions or views provided in this document, including hyperlinks to the RBC Direct Investing Inc. website or the websites of its affiliates or third parties, are for your general information only, and are not intended to provide legal, investment, financial, accounting, tax or other professional advice. While information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by RBC Direct Investing Inc. or its affiliates. You should consult with your advisor before taking any action based upon the information contained in this document.
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