Don’t be too conservative with your investments

I’m not going to spend the whole article writing about the benefits of RRSP investing and that contributing by March 3  will allow you to make an income deduction on your 2013 tax return.

There could be a number of reasons, such as: no extra cash, you want to pay down other debts or apply to your mortgage first, you don’t ‘believe’ in RRSPs, you wish to contribute to your TFSA (Tax free savings account) instead,  or you have given up trying to save for your retirement.

If you agree with anyone of the afore-mentioned comments, it is highly unlikely that I can write anything in this article that will change your mind and convince you to invest in your RRSP.  Instead, I will focus on those that have made saving for the future one of their financial goals and share a few top concepts for maximizing your return. First, I will say that depending upon your personal situation, a TFSA contribution may be of more benefit to you long term than a RRSP contribution.  Talk to your advisor about the pros and cons of both to make an informed decision that is the best for you.

Don’t be too cautious with your portfolio. GIC rates are very low and your rate of return will be stretched to keep up with inflation and protect the purchasing power of your dollar. Being too cautious may also lead to procrastination; if the markets have gone up nicely, you may fear that the stocks are too expensive and that a decline is imminent. If the markets have gone down recently, you may be too fearful to buy into the market in case we have another economic crisis such as we had in 2008.

Don’t be too conservative. You are guaranteed not to lose any of your capital if you buy GICs only, but your portfolio may not grow enough to support you in retirement. After inflation and income taxes, the return is minimal. If you stop to consider the future, the real risk may lie in running out of money.

Be aware of costs associated with your investments. Mutual funds have different MERs, and choosing the ones with the lowest costs does not necessarily mean that you will have a higher yield.  Mutual funds with the banks also have MERs, you pay the expense even though you do not see the cost on your statements.

If you recognized yourself in the first paragraph, remember, it is never too late to start saving for your financial goals and retirement.  Call today and start on the road to being more informed.  You are probably in better shape than you think you are!

Carol Plaisier, CFP, is an investment advisor with HollisWealth, a division of Scotia Capital Inc. and an insurance advisor with HollisWealth Insurance Agency Ltd. Call 250-248-2399 or e:mail:

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