Ranking investment options for my self-directed RRSP

If the idea of handing your RRSP contributions over to a sales person (a.k.a. financial advisor) at a bank isn’t appealing to you, then it is time to consider your investment choices. I am about to contribute for the first time ever into my RRSP this year. So I performed my due diligence by researching and evaluating my choices. This post is a ranking of my findings.

I evaluate each investment strategy according to three criterias, in descending order of importance.

• Risk. Will I lose sleep at night if I put all my money in it?
• Reward. How much can I potentially gain?
• Effort. How much time and energy do I need to spend on it?

My overall portfolio is exposed to enough risk already from my other trading activities. So my risk appetite is leaning towards a conservative approach. Also note that I factor in costs as a part of my risk assessment. I place a 40% emphasis on this criteria.

Next, I consider the return of each investment vehicle using a 40% weight. For obvious reasons.

Lastly, I prefer something that requires as little time and effort as possible. I weight this criteria at 20%. As I’ve said numerous times, I don’t like the limitations in a registered account. It is like trying to invest with one hand tied behind my back. I do not want to put much effort to manage this account because I can do better in my regular trading.

The resulting ranking of the six types of markets that I am considering for my RRSP (and TFSA) is as follows.

1. Guaranteed savings
2. Indices or sectors (through passive mutual funds or ETF’s)
3. Fixed income (using a mutual fund or ETF bond index)
4. Gold
5. Stocks
6. Actively managed mutual funds

One thing of note about investing in physical gold within a registered account is that it can only be done at Questrade as far as I know. Although I doubt they are the only one.

Here is the table I used to estimate this ranking. I give each category a score from 1 (bad) to 5 (good) based on my own experience and my sentiment of future market condition. So yes, it is a very crude guess at best.

Nevertheless, the table shows that my best choice is to either put my RRSP money in a savings account or invest in indices using passive mutual funds (like the TD e-Series) or ETF’s.

However, I plan to do both. I will trade indices in my RRSP and put my TFSA money in a high yield savings account.

RRSP investment choices ranking

Related posts:

1. Considering investment options for my first RRSP
2. Still waiting on the sideside in my RRSP
3. Not pay trading income taxes through a TFSA trading account
4. The need for trailing stop: Expired November 2008 options post-hoc review