RRSP Investment Strategy
Since your RRSP compounds free of tax, the tax implications of an investment are minimized when determining your RRSP investment strategy. Therefore, the investment direction chosen for your RRSP should complement investments held outside your RRSP and match the level of risk with which you are comfortable.
Some investors take a conservative approach to investing their RRSP since it is generally intended to provide income and financial security in retirement. Individual strategies should vary depending upon an individual's circumstance. Investors who wish to have only the most secure investments will tend to have a greater allocation of fixed income investments in their RRSP. Growth oriented investors, on the other hand, typically allocate a greater proportion of their RRSP to equity investments.
Regardless of circumstance, it is important that equity investments not be ignored as they represent a potential for growth in a portfolio.
RRSP Investment Options
Your RRSP investment choices include Canadian cash, GICs, term deposits, stocks, bonds, mutual funds, and even mortgages.
Foreign Diversification
By diversifying your RRSP investments outside Canada you can potentially improve your overall return and create a currency hedge against the value of the Canadian dollar.
Foreign diversification can be achieved through investments such as mutual funds and individual foreign securities.
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