RRSP: Anyone else into ALL equities?

[Spazmogen]

I'm 37. I'm a provincial civil servant in a job with 100% job security. No strikes, no layoffs.

I have a defined benefit pension plan. 70% of my best 5 years when I retire.

My wife has the same employer, same type of job (security, no strike etc.) but with a slightly better pension plan.

We live well within our means.

So, when it comes down to our RRSP accounts, I've planned it to have no fixed income at all. No cash, no bonds. Nothing but equities-in pooled money.

The pension plans are secure (Provincial Government run).

The RRSP is just play money when we retire. Each of our RRSP accounts should be in the 400K + range at age 60.

In the next 5 years I'll buy some actual strip bonds to hold on to.

Anyone else doing this kind of 'high-risk' investment?

Does it sound crazy?

[Rehan]

Food for thought for you:
http://www.advisor.ca/images/other/ae/ae_0204_insideoroutside.pdf

And within this, pay attention to the comments on OAS clawbacks:
http://www.phn.com/pdfs/retirement_savings_debate.pdf

[Spazmogen]

Rehan:
Thanks for the links.

The 1st one was of interest, but the OAS clawback one wasn't. I'll probably make too much to even qualify for OAS/CPP when I retire.

Regardless, I do appreciate it.

[eelfliw]

I'm doing the same. Almost 100% equity.

When the interest rates finally go up, I'm switching to 100% bonds & dividend funds.

[scottyb]

You seem to have sort of a care free attitude about it, which is a little bit scary... but that said, being in 100% equities may not be a bad thing for you, becuase you will also draw on a fixed pension, so your investment income is really not going to come all from equities, but maybe half and half.

Plans like where I work, where you get to manage your pension $ too, you have to be careful about over investing in equities.

[Powderworker]

Isn't it true that if you even go with 20% bonds and 80% equity, you increase your returns because you reduce the variation in your portfolio? A little bit of bonds aren't going to kill you, even if interest rates do begin to rise (which they haven't yet - remember last year when people thought interest rates were going to begin rising at rapid rates?). Bonds make even more sense in an RRSP where interest and capital gains are essentially taxed at the same amount when you withdraw it.

Even if your RRSP is just "play money"... why not try to maximize your return on it, and leave the money to charity, kids, relatives, etc?

[Powderworker]

I'm doing the same. Almost 100% equity.

When the interest rates finally go up, I'm switching to 100% bonds & dividend funds.

I'm not sure what to think of this strategy. Do you have a crystal ball that indicates the direction of interest rates in the future? If so, hook a brother up! :)

[eelfliw]

I'm not sure what to think of this strategy. Do you have a crystal ball that indicates the direction of interest rates in the future? If so, hook a brother up! :)
Don't need a crystal ball. I switch to Bonds/dividend funds after the interest rates go up (when prime's around 7+%). At that point, bond prices will be rather low (gov bonds yields around 10%). So I buy and wait. Sell it when the interest rates drop.

I know this seriously impacts liquidity. But this is retirement money (don't need it for many many years) and I have a pretty good pension plan like the other poster. So I look at it as play money too.

[Jer]

From a strictly tax-reduction point of view, if you have some savings inside your RRSP and some outside, the most tax-efficient split is to have GIC/fixed income inside the RRSP and equities/mutual funds/stocks outside. This division ensures that the favourable tax treatment of capital gains and dividends isn't lost - keeping equities in an RRSP effectively doubles the tax rate on your gains.

Given the expected large value of your RRSP, you may want to quit/retire a few years before collecting your pension, and cash in the RRSP during those years of "zero income" in order to further reduce the tax grab on those funds (that decision depends a lot on how much you enjoy working).

There is likely also an option to "cash in" your (or your spouse's) pension credit for a big pile of money if you quit before age 50 ....

Given the big amounts of money involved, I'm surprised you're asking our opinion rather than paying a few hundred to get an independent professional opinion (not from your bank staff!) 8-)

Maybe you should check out http://www.cfp-ca.org/index.asp ?

Just my $0.02 ($0.04 in 12 years if I can get a 6% per year return after taxes!).






I'm 37. I'm a provincial civil servant in a job with 100% job security. No strikes, no layoffs.

I have a defined benefit pension plan. 70% of my best 5 years when I retire.

My wife has the same employer, same type of job (security, no strike etc.) but with a slightly better pension plan.

We live well within our means.

So, when it comes down to our RRSP accounts, I've planned it to have no fixed income at all. No cash, no bonds. Nothing but equities-in pooled money.

The pension plans are secure (Provincial Government run).

The RRSP is just play money when we retire. Each of our RRSP accounts should be in the 400K + range at age 60.

In the next 5 years I'll buy some actual strip bonds to hold on to.

Anyone else doing this kind of 'high-risk' investment?

Does it sound crazy?

[blackhawk]

You can call your govt pensions the fixed income portion of your investments so I dont see the problem with going all equities.

With a 23 year window you should be able to ride the ups and downs.

[bionicbadger]

I switched all my RSP holdings to a self directed RSP this year and invested it all in stocks. I have at least 25 years before I retire and have a company pension too. Mutual funds have sucked for the last several years. I know I can do better than some fund.

[scottyb]

I switched all my RSP holdings to a self directed RSP this year and invested it all in stocks. I have at least 25 years before I retire and have a company pension too. Mutual funds have sucked for the last several years. I know I can do better than some fund.

Eeeekkk... so you know more than professional money managers? Stick to index funds if you don't like the way your fund was managed.

[bionicbadger]

Eeeekkk... so you know more than professional money managers? Stick to index funds if you don't like the way your fund was managed.
Those fund manager just try to not lose money. They buy nothing risky and nothing that makes huge gains. I talk to my normal broker and get information and then buy and sell the stock myself in my RSP account. While it would kind of suck to lose that RSP money, it wouldn't be the end of the world for me, and I'm pretty confident I can out perform 10% year.

[scottyb]

Those fund manager just try to not lose money. They buy nothing risky and nothing that makes huge gains. I talk to my normal broker and get information and then buy and sell the stock myself in my RSP account. While it would kind of suck to lose that RSP money, it wouldn't be the end of the world for me, and I'm pretty confident I can out perform 10% year.

What education/background do you have that helps you pick out stocks?

[bionicbadger]

What education/background do you have that helps you pick out stocks?

16 years of personal investment experience. I read & research about the stocks I buy and I talk with my broker. Investing isn't rocket science. If others aren't comfortable doing it, fine, but I don't mind going 100% stock market for RSP.

[Spazmogen]

I guess I should have read this post after I submitted it.

Sorry for any delay in getting back to you guys...


I do have RBC INVESTMENTS (http://www.rbcinvestments.com/) looking afte both my & my wife's RRSP & the RESP for the kids.
Both of the RRSP's are set up as self-directed. So I can own what ever I want inside them. Including Strip Bonds, which I will buy in a few years time.
I've been working with a professional adviser from RBC Investments since 1998.

The pools (http://www.russell.com/CA/Investor_Services/Sovereign_investment_Program/Default.asp) of money are managed by Russell. I've had some great years since 1999, and some horrible years. I bought the ticket & took the ride. You only loose if you sell when you're down $. I looked into the pools, and at the time, GM & The Ontario Governemnt (and several others) had their pension $ invested with Russell in this program. So I felt comfortable that the pools would not collapse.


My corporate pension plan is about 40% bonds/fixed income, so its pretty stable.

My pension contribution is 8% of my wage & vested by my employer by another 8%. So it doesn't leave me a lot of room for RRSP contributions.

I was just curious if anyone else was in a similar position. The post was not meant to be bragging in anyway.

[Paksis]

I guess I should have read this post after I submitted it.

Sorry for any delay in getting back to you guys...


I do have RBC INVESTMENTS (http://www.rbcinvestments.com/) looking afte both my & my wife's RRSP & the RESP for the kids.
Both of the RRSP's are set up as self-directed. So I can own what ever I want inside them. Including Strip Bonds, which I will buy in a few years time.
I've been working with a professional adviser from RBC Investments since 1998.

The pools (http://www.russell.com/CA/Investor_Services/Sovereign_investment_Program/Default.asp) of money are managed by Russell. I've had some great years since 1999, and some horrible years. I bought the ticket & took the ride. You only loose if you sell when you're down $. I looked into the pools, and at the time, GM & The Ontario Governemnt (and several others) had their pension $ invested with Russell in this program. So I felt comfortable that the pools would not collapse.


My corporate pension plan is about 40% bonds/fixed income, so its pretty stable.

My pension contribution is 8% of my wage & vested by my employer by another 8%. So it doesn't leave me a lot of room for RRSP contributions.

I was just curious if anyone else was in a similar position. The post was not meant to be bragging in anyway.


You should have a serious rethink as regards putting more into RRSP's. Remember you have the Capital gains exemption as well as the favorable dividend tax credit. I only have fixed income in my RRSP's, and 15 years ago started investing in high grade Canadian and some US dividend paying stocks. Mostly Financial with Some Util and a couple of income trusts in Canada and Industrials in the US. Invest some time and money in some decent investment books ie Bernstein and Seigel. The High Grade universe in Canada is very small only about 20 companies, if you plan on living in Canada after retirement then place about 60% Canadian, 30%US, 10% European. Reverse for the US.


You can also use ETF's as well as Dividend funds, but purchase the ones with the lowest fee's. PHN Div Fund have done very well for me. The crash of 2000-2002 didn't even hurt, just lopped some percentages off the ROR. And lastly look at some real estate, a few good rentals plus capital appreciation means deferred income in the bank. Hard assets are best when it comes to dealing with banks.

Minimize expenses by using a discount broker, buy from firms with DRIP(dividend reinvestment plans) and SPP(share purchase plans). Keeps the costs lower by purchasing directly from the company.

A very good magazine and website is Moneysaver.ca. The golden rule when investing in high tax countries is LOOK AT NOT WHAT YOU EARN BUT WHAT YOU KEEP.