Ayra believes the Canadian economy will be booming for the next five years. Which mutual fund can provide Ayra with the most tax efficiency if she keeps her investment in a non-registered account?
In a booming economy, equity growth mutual funds provide the best opportunity for capital gains. In a non-registered account, capital gains are the most tax-efficient form of income since only 50% is taxable.
Bonds, mortgages, and money market funds primarily generate interest income, which is fully taxable at the investor’s marginal rate.
Thus, the most tax-efficient choice is an equity growth fund.
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