One of the highlights in terms of my own personal finance in the last week was the opening of an RRSP account.
Long story short, I have finally decided to open an account with TD bank (my own personal bank) for now because it is simply less of a hassle. Initially, I have considered RBC Direct Investing because of the waiver of it’s maintenance fee but I did not go through with it. Additionally, I have also opened an account with Questrade for my direct investing needs.
With the accounts now opened, the next step would be to determine the configuration of these accounts. Here is what I currently have planned for my RRSP:
The Focus on Passive Investing
As it stands right now, I have decided to use passive investing to grow my RRSP account. The reason for this decision is because I simply do not have the funds to create a well-diversified portfolio at the moment and my main focus is to max my TFSA (70% completed).
To keep management fees low, I have registered for the TD E-series account. This is the main reason why I have decided to stick with TD. Their management fees are the lowest around when it comes to mutual funds.
My Semi-Aggressive Growth Portfolio
In terms of portfolio allocation, I am pursuing a semi-aggressive growth approach resulting in less bond holdings. Here is how my portfolio is distributed:
- 40% US Equity (TD US Index E-series) – 0.35% MER
- 30% Canadian Equity (TD Canadian Index E-series) – 0.33% MER
- 20% Canadian Bonds (TD Canadian Bond Index E-Series) – 0.50% MER
- 10% International Equity (TD International Index E-series) – 0.51% MER
However, when it comes to investing in the E-series, TD requires that a minimum of $100 is invested in each index. I have reflected my above distribution in the minimum amount and this is the actual value of my portfolio right now:
- $400 US Equity
- $300 Canadian Equity
- $200 Canadian Bonds
- $100 International Equity
Total Amount invested in RRSP so far: $1000
Opening a Self-Directed RRSP with Questrade
On top of my TD E-series portfolio, I have also opened an RRSP account with Questrade. Although there is nothing invested in it so far, this account will be for bargain stock purchases. Once I have maxed my TFSA, I will be able to transfer more cash to this account.
I have chosen Questrade for stock purchases because it has no annual maintenance fee and the commission fee for trading each stock is $4.95. These fees make Questrade much more attractive than the self-directed RRSP offered by the major banks.
Final Thoughts on my RRSP
As it stands right now, my RRSP has a contribution room of just above $8000. Since I have already invested $1000 in my E-series account, I will only have $7000 worth of contribution room for the rest of this year.
This shouldn’t be much of a problem because my main priority is to maximize my TFSA. I also expect my contribution room for my RRSP to increase dramatically for next year as I have worked a lot in 2014.
Once I have a sizeable amount invested in my RRSP, I will convert my TD E-series account into a self-directed one and start selecting my own stocks. The plan is to hold mostly US equities since my TFSA will be holding a majority of Canadian stocks.
That’s all the update I have for now. What do you think of my plan? I’d love to hear from you in the comments!
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