Diversifying Your RRSP Portfolio

It's possible to open one or more RRSP accounts at any type of financial institution (bank, credit union, insurance company, trust company) or investment broker. The procedure consists of "registering" your investments, which means you hold them within a registered plan (RRSP) and therefore, the Canada Revenue Agency (CRA) will not tax them or their returns until they're withdrawn.

If you have multiple RRSPs at a number of institutions, your portfolio will be harder to manage. However, this strategy could prove beneficial from the perspective of ensuring coverage by the Canada Deposit Insurance Corporation (CDIC).

You've certainly heard how important it is to diversify your RRSP portfolio. A wide range of investment options is available for your RRSP, depending on your investor profile. Some types of RRSP accounts, however, may be more restrictive.

The following are the types of RRSP accounts available and their features. 

Conventional RRSPs

This type of account lets you choose your investments according to your retirement savings strategy. All your investments are combined into one portfolio, and you receive a single detailed statement. This makes it easier to develop short and long term investment strategies, optimize your returns, and manage your portfolio. 

In general, investments eligible are the following:

  • Guaranteed term investments—guaranteed investment certificates (GICs) and term deposits (TDs)
  • Mutual funds

Self-directed RRSPs (discount brokerage)

Discount brokerage is for independent investors and those who want to manage their own holdings. A representative can guide you through the variety of investment products available. 

Since you manage your own investment portfolio, usually without advice, the fees are much lower than for a self-directed RRSP managed with a broker. Like in conventional RRSP accounts, your investments are combined into one portfolio and you receive a single detailed statement.

The following are some of the products eligible for this type of RRSP:

  • Treasury bills
  • Bankers' acceptances
  • Canada and Québec savings bonds
  • Term deposits
  • Federal, provincial, and municipal bonds (primary and secondary markets)
  • Stripped coupons and residual bonds
  • Debentures
  • Mutual funds
  • Canadian and U.S. shares
  • Canadian and U.S. stock options

Self-directed RRSPs (with a broker) 

This type of self-directed RRSP can include virtually all types of investments, as long as they're RRSP eligible. Nevertheless, it's important to verify that any given investment is eligible.

Self-directed RRSP accounts are for investors who have accumulated considerable savings in their RRSPs and want to further diversify their investments with the assistance of a financial advisor who can recommend financial products best suited to their needs and investor profile.

These accounts usually entail higher administration fees than conventional RRSPs and discount brokerage accounts (which are generally no charge since you don't receive advice). These expenses are nondeductible, because they're taken from your RRSP savings, which have never been taxed.

Your broker must respect the contract you conclude with him or her. Like the two other types of account, all your investments are combined in one portfolio and you receive a single detailed statement.

Discretionary Management

With discretionary management, more well-to-do investors can entrust their portfolios to investment specialists, who make investment decisions for them for an annual administration fees. The fees may be a fixed rate or a percentage of the portfolio value: they may vary from one establishment to another.  

In short, an RRSP can contain virtually any type of investment, as long as it's eligible.

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