The RRSP season will reach a crescendo this week with Canadians rushing in to “buy RRSPs” to beat the March 1, 2010 deadline. Even if you decide to make a last-minute contribution, you do not have to rush your investment decision. If you are new to the RRSP game, you can open a RRSP account with a no-fee institution such as ING Direct, park your contribution in cash and take your time planning your investment strategy. With the strategy in place, you can transfer the RRSP account out of ING Direct at a later date to another institution that offers a wider range of investment products. If you work with an advisor or already have a RRSP account with your local bank, you can instruct them to park your RRSP contribution in cash temporarily.
All too often, RRSP accounts hold a hodgepodge of yesterday’s winners precisely because the annual contributions are invested in the latest ‘hot’ fund or sector or market. It would be better to devise an investment plan and asset allocation strategy first and then pick the products to implement the strategy. An even better strategy would be to then sign up for pre-authorized contributions and avoid the last-minute rush altogether.
In the spirit of the RRSP season, here are selected tips from past years:
- A RRSP Contribution may not always make sense.
- More tips including this one: don’t hold too many funds.
- If you are contributing in-kind, you may want to brush up on superficial loss rules.