Why am I discussing what’s in my RRSP? I wanted to share my philosophy because it can break rules for some but it’s usually for a higher profit. Don’t mistake higher profit with higher risk in such case. Here are some rules, or more precisely guidelines, that you will hear:
With that said, I hold many dividend investments inside my RRSP along with balanced and fixed income mutual funds through my employer’s plan. It used to all be mutual funds but I was able to transfer some mutual funds to RRSP and add more fund to my RRSP for dividend investments. I pick dividend investments in my RRSP because they simply are good investments with compound growth. My TFSA only holds dividend paying investments and my non-registered investments are also pretty much just dividend paying investments.
Whether or not the tax treatment is better in one account or another, if I have the opportunity to improve an investment, I will do so while keeping in mind the tax implication on the return on investment. For example, which would you choose, a dividend investment paying 7% or a GIC at 4% for your RRSP? Note that the dividend investment has better tax treatment outside since anything you withdraw is taxed at your marginal tax rate but at the end of the day; one pays 7% and the other 4%. For the purpose of making my money work for me, the dividend investment is superior. This is where the rules fall apart for me. Once the money is committed to a RRSP, I invest based on the scenario that presents itself while considering sector diversification and risk.
At the end of the day, my rule is to have solid investments in any of my accounts with a good balance between the sectors and the risks with the purpose of building wealth to generate income for retirement.
Readers: What rules do you have that you follow? Are they rules or guidelines?