# Need advice about my RRSP/TFSA



## Sherlock (Apr 18, 2010)

Newbie investor here... I just read Investing for Dummies for Canadians. I skimmed through it pretty fast but feel I got all I could out of it, though I'll probably refer back to it later.

A year ago I opened a TFSA and an RRSP with CIBC. At that time, I didn't know that a RRSP could hold different types of investments, I thought all RRSPs were the same. Anyways my RRSP holds a DISA which earns me the impressive interest rate of one tenth of one percent per year. Needless to say I can't save for my retirement with such a dismal return rate. What kind of interest should I be aiming for? In order to get a decent interest rate out of my RRSP, do I have to transfer it out of CIBC to some other type of institution, or can I keep it with CIBC? For example, can I just go to CIBC and tell them to put mutual funds in my RRSP instead of the DISA, and voila I have a much higher return rate? Or is it more complicated than that? What about my TFSA, what kind of investments should I be holding in it? The authors of Investing for Dummies seemed to strongly suggest not using a brick-and-mortar bank like CIBC because they always pay less interest, but then why do so many people use such banks for their RRSPs? I'm not sure what kind of interest I'm getting with my TFSA, but it's slightly higher than my RRSP.

My RRSP is to be used as a retirement fund, I am 27 now so I can take some risk, though I may withdraw some money in a few years under the homebuyer's plan, but that's not a certainty and if I do I will repay it back as quickly as I can. Should my RRSP be self-directed or bank managed? I am leaning toward the latter because I don't think I possess the necessary skill to manage it on my own. I don't want to have to actively pick investments or anything like that, I want the bank to do that for me automatically and all I have to do is visit them once in a while and tell them how much money to transfer from my chequing account into my RRSP.

I also have a Bonus Savings account, which earns 0.75% interest. It was 2.25% when I opened it but then they reduced the rate. Should I close this account? I don't see the point of having both it and the TFSA/RRSP, especially considering I am not maxing out the RRSP or TFSA.


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## OhGreatGuru (May 24, 2009)

Most of the people on this site are DIY investors. But from what you describe I would suggest you put your RRSP into the CIBC Balanced Fund until you know more about investing and/or have accumulated more capital. As a young, long-term investor for your RRSP your profile might suggest a higher percentage of equity than the balanced fund, but I am not going to suggest it to a novice such as yourself.

CIBC has "Managed Portfolio Services", that are known generically as "wrap" funds, but many of these have high MERs for mediocre returns. I'm not familiar with the ratings for CIBC's.

Otherwise, CIBC has a broad range of mutual fund sand index funds from which you can build your own portfolio when you know more.

For the TFSA, you have discovered that interest rates on savings accounts are at an all-time low. What you choose to invest in instead depends mostly on when you think you might want to spend that money. If it is equally long term like your RSP yiu can put it into equity. But if you are saving for a car or a down-payment you need something with security of capital, and perhaps liquidity. You can get about 4% on 5-year GICs right now, but that's non-cashable.

For the bonus savings, you might want to keep it for "ready money". You don't want to use your TFSA for really short-term savings.


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## Cal (Jun 17, 2009)

Yep, I would make an appointment at your bank to discuss some of your options.

If they can make money off of it, they will sell you it. (mutual funds and such) They just make more money off of you if you give them your money and they pay you a crappy interest rate.

A balanced fund or index fund would be a good start for your RRSp and perhaps TFSA depending upon when you would need the $.


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## Sherlock (Apr 18, 2010)

Thanks for the info! I guess I will stick with cibc for now, at least until I become more knowledgeable.

I heard that REITs are really good investments, should I look into putting those into my RRSP?


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## Cal (Jun 17, 2009)

At this point...I would hold off.

Read more....


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## Mike59 (May 22, 2010)

Sherlock said:


> What kind of interest should I be aiming for? In order to get a decent interest rate out of my RRSP, do I have to transfer it out of CIBC to some other type of institution, or can I keep it with CIBC? For example, can I just go to CIBC and tell them to put mutual funds in my RRSP instead of the DISA, and voila I have a much higher return rate? Or is it more complicated than that? What about my TFSA, what kind of investments should I be holding in it?


Rather than seeking specific answers to these questions, I think you are better off thinking about the general themes for your portfolio. In particular: 
- how much risk are you willing to assume? For every gain you seek above the savings account, there is the chance you will lose principal. An advisor from the bank can help you determine the level of risk to assume
- Are you confident a bank can earn you more income? Studies would argue that you're better off arranging a direct deposit into index mutual funds and checking it periodically
- Have you thought about asset allocation? Perhaps a fixed blend of investments (Cash, bonds, mutual funds etc.) that matches your comfort level would allow you to have some control, but also allow you to sleep at night if the markets slump
- What is your tax situation and where will it be when you need the money? In some cases you should re-allocate your conservative, interest bearing funds into the RRSP and keep your equity in the TFSA. 
- where are you going with this? When do you plan to retire, how much do you need to be liquid along the way? 

Hopefully that gives you some topics to consider learning more about


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## Y&T2010 (Dec 29, 2009)

Sherlock said:


> Newbie investor here... I just read Investing for Dummies for Canadians. I skimmed through it pretty fast but feel I got all I could out of it, though I'll probably refer back to it later.
> 
> A year ago I opened a TFSA and an RRSP with CIBC. At that time, I didn't know that a RRSP could hold different types of investments, I thought all RRSPs were the same. Anyways my RRSP holds a DISA which earns me the impressive interest rate of one tenth of one percent per year. Needless to say I can't save for my retirement with such a dismal return rate. What kind of interest should I be aiming for? In order to get a decent interest rate out of my RRSP, do I have to transfer it out of CIBC to some other type of institution, or can I keep it with CIBC? For example, can I just go to CIBC and tell them to put mutual funds in my RRSP instead of the DISA, and voila I have a much higher return rate? Or is it more complicated than that? What about my TFSA, what kind of investments should I be holding in it? The authors of Investing for Dummies seemed to strongly suggest not using a brick-and-mortar bank like CIBC because they always pay less interest, but then why do so many people use such banks for their RRSPs? I'm not sure what kind of interest I'm getting with my TFSA, but it's slightly higher than my RRSP.
> 
> ...


Hey you're on the right track! Congrats on opening up an RRSP and TFSA. Not sure what it is in the big bank advertising and marketing, but many many young people think that RRSP's are 'one type' of investment and TFSA can 'only' be under high interest savings accounts. Don't worry, it ain't just you- a lot of my friends (and I in my younger days) thought so too =)

Ouch 0.1% interest is pretty bad! Those big banks are good at giving you crappy interest meanwhile partying it up with your money and earning 100x that amount of interest they give you! 

I would suggest maxing out your TFSA first before you have any other bonus savings accounts. Initially the rates were good (2.25%) a few years back, but with the central bank decrease their rates, 0.75% to 1% is the going rate for high interest savings accounts right now.

If you plan to dip into your TFSA soon, I'm sure CIBC has a High Interest TFSA account that you could open up (instead of the 0.1% interest, you could get 1%). It might be only offered online (e.g. you will have to do internet banking) but it's better than getting 0.1%. 

If you feel that you don't have the time or energy to self manage your RRSP, a lot of people use the bank managed mutual funds. They will charge you a MER though, which ends up being about 2-3% in most cases. The beauty of a mutual fund though, is that you can make monthly contributions despite market conditions to dollar cost average.

Hope that helps, and good luck with your investing!


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## Cal (Jun 17, 2009)

Pretty much any institution will have a 'high' yield savings account, etf's, mutual funds, brokerage to buy equities to hold in your RRSP and/or TFSA.

Just go talk to a rep.


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## 1stmilliondollar (Feb 20, 2010)

lbs said:


> In order to get a decent interest rate out of my RRSP, do I have to transfer it out of CIBC to some other type of institution, or can I keep it with CIBC? For example, can I just go to CIBC and tell them to put mutual funds in my RRSP its really helpful.


You can still keep it at CIBC. Just call your branch and ask them that you want to convert your account to mutual funds. CIBC have a couple of good index funds. As others mentioned, just don't get trapped into high management fees funds. You can check globefund.com to find our how they charge for management fees.

Alternatively, you can also convert to CIBC Investor Edge, where you can buy mutual funds from any other institutions such as TD, RBC, BMO, etc. The catch is you need at least $25K for RRSP (otherwise, they'll charge $100 / year).

Transferring your account to another institution is also an alternative.


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