What investment is the best to put your RRSP's

[SimplifiedMommyTips]

I have started putting some money in our RRSP's last year after we took our money out to purchased a condo few years ago but we changed our mind and took the money back in 2006. Since we are planning to buy a house hopefully in another five years I decided to put it in GIC for five years. I read some of the thread putting some money for RRSP is good because of the tax refund which I agree. We have a 7 digit saving in our interest plus savings account and I thought of putting half of it in RRSP this year .
Now my question would be which one is better GIC, Equities, Mutual Funds or Buying stocks. I also opened a stock trading account last year but has not been able to put it anywhere. Any feedback is greatly appreciated.

[blueeyetea]

If you have $30K and up, your best bet would probably be publicly traded exhange funds (ETF's) because they have low management costs. Mutual Funds are notorious for paying themselves high fees whether the fund makes money or not.

One good book to read on the subject is: Count on Yourself by Alison Griffiths.

With RRSP's, know that you're deffering paying tax on the money you're depositing. You're saving tax today with the hope that your income will be reduced by the time you start making withdrawals, and therefore pay less taxes on it. Also on the subject of RRSP's make sure you have the room. There are limits to how much you can deposit based on your income and what you socked away into RRSP's in years past. You find this out by looking at the paper you got with last year's Income Tax Notice of Assessment.

Also look at the possibility of making deposits into a TFSA where you don't get any deduction, but any growth in the account you won't be taxed on it when you take it out.

[Gsxrboy]

How about finding a financial adviser to help you with the decisions. There are fee based ones, and free ones from local credit unions. Pick one that you are comfortable with, like a personal trainer, a adviser will help with investments, taxes and future proofing your money.

[SimplifiedMommyTips]

If you have $30K and up, your best bet would probably be publicly traded exhange funds (ETF's) because they have low management costs. Mutual Funds are notorious for paying themselves high fees whether the fund makes money or not.

One good book to read on the subject is: Count on Yourself by Alison Griffiths.

With RRSP's, know that you're deffering paying tax on the money you're depositing. You're saving tax today with the hope that your income will be reduced by the time you start making withdrawals, and therefore pay less taxes on it. Also on the subject of RRSP's make sure you have the room. There are limits to how much you can deposit based on your income and what you socked away into RRSP's in years past. You find this out by looking at the paper you got with last year's Income Tax Notice of Assessment.

Also look at the possibility of making deposits into a TFSA where you don't get any deduction, but any growth in the account you won't be taxed on it when you take it out.

I have that book and read it that is why I opened a trading account but has not been able to put the money in ETF yet as of this time.
We are planning to purchase a house sometime in another 5 years.I understand that if yu put your money in ETF it is worh keeping it for longer period to get some earnings, other just put it in GIC.

I have three TFSA for my children, one each of them.
Have you tried putting money in ETF??

Thanks a lot though.

[SimplifiedMommyTips]

How about finding a financial adviser to help you with the decisions. There are fee based ones, and free ones from local credit unions. Pick one that you are comfortable with, like a personal trainer, a adviser will help with investments, taxes and future proofing your money.

Do you have any idea how much it will cost to see a financial advisor ???

[blueeyetea]

Do you have any idea how much it will cost to see a financial advisor ???

It depends. Some charge by the hour, others on a percentage of assets to be managed. This list will give you an idea.

[blueeyetea]

Have you tried putting money in ETF??

Thanks a lot though.

Not until next year, due to the fact I don't have enough assets yet. I'm still using the monthly withdrawal plan that goes into mutual funds.

[SimplifiedMommyTips]

Not until next year, due to the fact I don't have enough assets yet. I'm still using the monthly withdrawal plan that goes into mutual funds.

my understanding is that it is better when you have a $50 k for ETF so you dont pay much for the brokerage fees, however, you did mention that $30k is good enough to start a ETF ??

[marstec]

The first thing you should decide is what is your level of risk. Remember, equities and stocks fluctuate in value, and you have become accustomed to gic's which appreciate in value (not by much, but still you aren't losing money unless you are factoring in inflation). ETF's or exchange traded funds are simply equity products that are bought on the stock market. The advantage to them over ones you'd buy at the bank are that the fees are lower, the risks are similar.

You aren't going to have as much liquidity with your money in an RRSP as you would in an investment account outside your RSP. That's a good thing if you are saving for your retirement or for your first home purchase. But you need to consider whether you will need that money soon, might be better to stick the money into a high interest e-savings account. If you owe the government money every year when you do your taxes, you should probably consider maximizing your RSP contributions...imo, it's better to pay yourself than to give it to the government.

It's a good idea to have your children enrolled in a family plan with their RESP's, rather than individual ones. This way, should one child not want to continue post secondary, the funds (minus the child's grant) roll into the family plan. If the RESP is through a bank, there would be no problems switching it.

Go to the library and take out some books on investing, and read as much as you can from trusted online sources. You need to learn the financial jargon before jumping in.

[SimplifiedMommyTips]

The first thing you should decide is what is your level of risk. Remember, equities and stocks fluctuate in value, and you have become accustomed to gic's which appreciate in value (not by much, but still you aren't losing money unless you are factoring in inflation). ETF's or exchange traded funds are simply equity products that are bought on the stock market. The advantage to them over ones you'd buy at the bank are that the fees are lower, the risks are similar.

You aren't going to have as much liquidity with your money in an RRSP as you would in an investment account outside your RSP. That's a good thing if you are saving for your retirement or for your first home purchase. But you need to consider whether you will need that money soon, might be better to stick the money into a high interest e-savings account. If you owe the government money every year when you do your taxes, you should probably consider maximizing your RSP contributions...imo, it's better to pay yourself than to give it to the government.

It's a good idea to have your children enrolled in a family plan with their RESP's, rather than individual ones. This way, should one child not want to continue post secondary, the funds (minus the child's grant) roll into the family plan. If the RESP is through a bank, there would be no problems switching it.

Go to the library and take out some books on investing, and read as much as you can from trusted online sources. You need to learn the financial jargon before jumping in.

We opened a RESP family acct couple of years ago, Im going to the bank Fri to add the new member of the family. Will definitely read more books for finances, right now that I am not knowledgeable enough to go further will just keep my money in GIC and will take one step forward as soon as I am confident as I am a low risk taker.

thanks for your advise.

[blueeyetea]

my understanding is that it is better when you have a $50 k for ETF so you dont pay much for the brokerage fees, however, you did mention that $30k is good enough to start a ETF ??

My bank charges $29 transaction fees when you buy up to 1000 shares, which is nowhere near how many I'll buy. Since I plan to buy 4 funds, the cost to me will be $116, which I don't think makes a big different between investing 30K and 50K.

[Brad]

Once you accumulate some money, transaction fees are reduced. In CIBC (investor's edge) case if you have 50k then it's $10 per trade and if you have 100k it's $7 per trade. I'm guessing the other banks have similar.

[SimplifiedMommyTips]

Once you accumulate some money, transaction fees are reduced. In CIBC (investor's edge) case if you have 50k then it's $10 per trade and if you have 100k it's $7 per trade. I'm guessing the other banks have similar.

in bmo the high your available funds is the low the brokerage fee, at 50 k you will be charge $6.95 per trade.
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[brunt]

<snip>I read some of the thread putting some money for RRSP is good because of the tax refund which I agree.</snip>

I have to interject here. What you get with an RRSP is tax deferral, not tax savings. This may sound like nitpicking, but it is an extremely important distinction.

You pay taxes on your contributions when you take money out of the RRSP. Taxes are still paid, just later. And they are taxed at the full income rate.

RRSP's make sense if:
1) you expect to have some years of very high income and others of very low income,
2) (similarly) you expect you income to drop after you retire,
3) you expect tax rates to be lower when you retire (not likely)
4) you have an employer matching program

RRSP's make no sense if:
1) you will have a high retirement income,
2) tax rates increase by the time you take out your money

Another case where RRSP's may not make sense is the point where you pay full income tax on your withdrawals. If you have an investment that pays off dividends, or where you can expect a good capital gain, then there are many cases where these are best held outside of an RRSP due to the fact that such income is taxed lower in unregistered accounts. The flip side of this coin is that if you are likely to hold interest bearing investments, then you are probably better off holding those in a registered account if you have one.

I personally favour the TFSA since the taxation issues are known since there is no deferral of taxes.