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.
- Guaranteed savings
- Indices or sectors (through passive mutual funds or ETF's)
- Fixed income (using a mutual fund or ETF bond index)
- 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. [caption id="" align="aligncenter" width="493" caption="RRSP investment choices ranking"][/caption]