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[OP]
Newbie
Jan 13, 2013
40 posts
2 upvotes
Markham

Equity Funds

Hello everyone, I just started an RSP with Great West Life that my employer will match up to 3% of my income that I put in. I don't plan on touch my investments anytime soon (at least 5-10 years). I'm 31 and my new company offers the matching so it sounded good to get into.

I'm going through the list of funds to pick one and it's pretty intimidating with how large the selection is. My plan was to find an equity fund to invest in but not sure what's the main differences between Canadian/ US/ and Foreign. I guess Canadian equities have investments solely in Canadian companies, US in US, and Foreign in international?

I'm just not sure which direction I want to go with, I see there is some with like 50/50 Canadian/Foreign which seems like it can be a good decision. I'm going to google some articles to help my learn the basics on this, but any guidance, tips or links to articles that might be helpful would be appreciated. Thank you.

Here's the page on one that I'm thinking about choosing. It's almost entirely in Foreign Equities.
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4 replies
Deal Addict
User avatar
May 11, 2014
4020 posts
4263 upvotes
Iqaluit, NU
Hi OP

Whether you choose Canadian/US/Foreign equity or not isn't a decision based on whether you buy it or not. Rather the choice of what funds should be based on your goals, what is offered and what you have available to get there. Even within the same geographical location, the funds could just be index funds (targeting a representation of the geographical location's stock index), growth fund (targeting equities of that area that are growing), dividend (targeting companies that distribute earnings etc). etc. etc.

First things first, the fund you show is fine, except we have nothing to compare it to. Additionally, employer plans are specific to each company, so we have nothing to compare it to. To make a proper comparison, please list all your funds made available to you. Secondly, list the management fees for the funds as well. Some employer plans are great in that they are very reasonable or cheap. Some unfortunately are expensive. Because you have a 100% match (up to 3%), it makes sense to contribute the full match as that effectively doubles your money. But additionally, should these funds be really cheap, you may want to go past the 100% match and make the plan your main RRSP account.

You said not touching the money for 5-10 years. Curious, what exactly were you planning (seems early for retirement haha)? Were you aware that the employer match will likely be in a locked account that you cannot access (locked RSP or LIRA)? Because of this, you may not have access to these funds or need to stack it more appropriately. For instance, if you were thinking of using the funds in the plan towards the Home Buyers Plan, you may want to consider making your contribution account portion less equity to accomodate for the short term vision while making the locked employer portion equity heavy. Also consider there are often vesting periods. For instance, to qualify for the employer match,the contribution has to be in the account for at least 1 year etc. Some plans make exceptions for Homebuyers and Life Long Learning, but most importantly, you need to read for these things. Because of these restrictions, it may make more sense for you to save some money in a personal RRSP account to plan for this.

Anyway, please give us further detail as it's a bit difficult to vet your situation here.
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Deal Addict
Mar 8, 2013
2617 posts
1334 upvotes
For an RSP, I would not go with 50% Canadian and 50% Foreign. For a long term investment, for retirement, I would go with the Global Equity fund on the assumption that the fund manager MAY make good choices in the geographical allocation. By going with 50% Canadian, you are assuming that Canadian stocks will outperform, and (in an RSP) you are losing the benefit of the Canadian dividend tax credit. If you become a more experienced (and successful) investor and have some reasoning that Canadian stocks are the place to be, you certainly can add Canadian equities preferably in a non-registered plan. In my case, I added Canadian stocks to my RRSP only when I was close to age 71, and most of those were Real Estate Investment Trusts because of the income required for RIF minimum withdrawals At age 31, you are a long way from that requirement.
[OP]
Newbie
Jan 13, 2013
40 posts
2 upvotes
Markham
Thank you everyone for taking the time.

My plan was just put in the 3% that my employer will match for now. This is my first time having an RRSP. My only other savings is a TFSA with my bank that I have been putting in a little every week. Rest of my income is pretty much bills, rent, car loan and paying off my credit card.

I really don't know what I want to do with this RRSP yet. Hopefully I got a lot more years with this company and the matching will just build up. I don't see myself buying my first home for at least for 5 years.

Here's a list with "annualized charges" I hope this is what you were asking for...
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Deal Addict
User avatar
May 11, 2014
4020 posts
4263 upvotes
Iqaluit, NU
Wow, they give you a lot of choices! No wonder you would get overwhelmed. Based on some of the product names, fee structures, and the fact this is through GWL/Canada Life, these are segregated funds. They have some insurance built into them, probably guaranteeing 75-100% of your contributions as well as your employer's contributions upon death. I would inquire with them in regards to the contract for your plan.

Second point is while there seems to be many choices here, from a basic view, the groups of funds are fairly similar. There isn't going to be huge differences long term within the same group. Some points to keep in mind
-Avoid NEI Socially responsible funds. They are fairly expensive and from my research and own experience tend to not perform well. There are better ways to make a social impact on your own.
-From a general perspective, index funds are great in that they are cheap and can be a good way to participate in investing as cheaply as possible. However because in this case you have to pay for segregated funds, the fee difference here is minimal at best.
-There are some all-in-one funds here (the asset allocation funds and the balance funds). The asset allocation ones are slightly pricey considering you could put together a similar mix with the individual funds offered. Additionally the balanced ones are probably too conservative considering your age. But if you feel risk adverse, they could be an option.

Here is an example portfolio for you. You do not necessarily have to follow it. However it is an example of what you can do...

20% Canadian Equity (GWLIM)
10% Growth Equity (Montrusco)
50% Global Equity (Montrusco)
20% Canadian Bond Index (TDAM)

This gives a blended MER of 1.4328% MER which is reasonably cheap. I picked a global equity fund which will contain both US and International Equity. One might argue against a large Canadian equity portion,but I personally like having a good chunk in domestic markets as it acts to buffer currency fluctuations. I have added 10% in smaller cap Canadian equity. I used a bond index as your fixed income as especially with low interest rates, it is difficult for managed bond funds to do well, so I stuck with lowering fees on fixed income as much as possible. I picked Montrusco and the GWLIM fund as their base fund seems to have done fairly well. This also considers that you were looking at the fund. Mind you with active management, this can change, however most big Canadian equity funds are fairly similar in make-up. Montrusco has rated fairly well and in the small-cap does better than Bissett and AGF, and rates decently for the global equity fund.

Now your response has shown where you need to focus: Credit Card and Car Loan.. It doesn't matter how good investments are. Guaranteed returns on debt payment cannot be beat. I would recommend maxing your employer match, but any extra money should go toward your credit card debt. 19.95% guaranteed interest is equivalent to over 23% in a tax-free investment. You cannot beat that whatsoever in a TFSA or RRSP. Make a resolution to pay that off immediately. And depending on the terms of your car loan, a similar threat exists here. See what your interest rate is there and pay accordingly. Take heed. That debt payment will make a bigger difference than comparing and contrasting which specific funds to pick here. So any extra money after the employer match (can't beat an immediate 100% gain) should be dedicated to that credit card balance.
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