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Exam CIFC Topic 1 Question 65 Discussion

Actual exam question for IFSE Institute's CIFC exam
Question #: 65
Topic #: 1
Xerxes, 45 years old, is a successful architect, having an annual income of $185,000. He has around $10,000 in his non-registered account, which he is looking to invest in a tax-efficient manner.
From the following options, which would be the most tax-efficient?

Suggested Answer: B Vote an answer

Explanation
A Canadian equity index fund is a type of mutual fund that invests in a portfolio of stocks that track the performance of a Canadian stock market index, such as the S&P/TSX Composite Index. This fund would be the most tax-efficient option for Xerxes, because it has low turnover and generates mostly capital gains, which are taxed at a lower rate than interest income or dividends. A bond fund would generate interest income, which is taxed at the highest marginal rate. An asset allocation fund would have a mix of different types of investments, which may not be optimal for Xerxes' tax situation. A target date fund would adjust its asset mix over time based on a predetermined retirement date, which may not match Xerxes' goals or risk tolerance.
(Canadian Investment Funds Course, Chapter 9, Section 9.2)
References:
* Canadian Investment Funds Course, Chapter 9, Section 9.2: Tax-Efficient Investing
* IFSE Institute: Tax-Efficient Investing1
* Investopedia: Tax-Efficient Investing2

by Mick at Jun 22, 2024, 01:00 PM

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