It’s completely understandable if your eyes glaze over at the thought of sifting through all the available information on what to put in your RRSP: there is a lot of information out there. Even though RRSPs themselves are a pretty stable product – they’ve been doing what they were designed to do since their introduction in 1957 – the amount of choice and options multiplies every year.
The answer to the information overload is to arm yourself with the basics, give some thought as to what your goals are, and then ask as many questions as you can. No matter what you’re looking for, there’s a product that’s right for you. To find it, you’re going to have to start with the most basic evaluation – where are you in your savings timeline, and what do you want your retirement plan to accomplish? With this in mind, your advisor can help you through the next step, which involves deciding what type or types of product to hold in your RRSP.
Beyond the savings accounts and GICs offered by your bank, there are plenty of options to consider.
Secure and predictable, guaranteed funds are available in different forms from banks, governments and insurance companies. Each supplier has their own name, and each product has its own features, but the bottom line is that guaranteed funds provide a safe place to put your money when markets are volatile.
These pool your money together with money from other people and invest it into a collection of stocks, bonds and other investments as defined by each fund’s objective. Pooling your money leads to a number of advantages:
Diversification: These funds can invest in many more securities than you could on your own. By holding many investments at once, there’s a good chance that while some will fall in value, others will rise and smooth out the fund’s performance. Diversification can lessen the risk that your investments will lose value.
Professional management: The assets of a fund are managed by a professional investment manager that invests them on behalf of all the investors. While you likely couldn’t afford this kind of expertise on your own, it comes with the territory when you purchase a mutual fund.
Growth potential: This is what it’s all about, isn’t it? Diversifying your investments and using a professional manager may help you to achieve better long-term investment growth than you could achieve on your own.
Like mutual funds, segregated funds give you access to a collection of stocks, bonds and other investments, and you get the same benefits of diversification, professional management, and growth potential. What makes segregated funds different is that they’re offered through an insurance contract. They can only be sold by insurance companies. They offer you death and maturity guarantees that mutual funds do not.
For example, all segregated funds have a set “maturity date.” If you keep them until that date, a maturity benefit guarantee dictates that you’ll receive back the greater of a percentage of your investment (75% or 100%, depending on the product you choose) and the market value. These guarantees can minimize your exposure to market downturns and potential for losses. There are even segregated funds that can guarantee your retirement income will last as long as you need it.* And, of course, with guarantees come higher management fees.
Find the answers you need
An advisor can help you sift through your goals and attitudes and pinpoint your investor profile. You’ll need to consider:
Are you an aggressive investor? Or reluctant to take on risk?
Are you interested in taking an active role in managing your investments, or are you happier to rely on experts?
From there, there will be even more choices to make, including the specific funds you want to choose.
Don’t hold back on the questions – keep searching until you get the answers that satisfy you.
Standard Life offers a wide range of products to hold in your RRSP. To learn more, ask your advisor or visit www.standardlife.ca
* Subject to certain conditions.
To learn more consult the Information Folder for Ideal Segregated Funds or the Simplified Prospectus for Mutual Funds. Subject to any applicable guarantees, any part of the premium or other amount allocated to an Ideal Segregated Fund is invested at the risk of the contractholder and may increase or decrease in value. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.
The Standard Life Assurance Company of Canada, February 2012.
Standard Life Mutual Funds Ltd., February 2012.
The information provided in this article is for informational purposes only and is not intended as advice.