Should You Invest Now?

There will be no small number of people looking to save every penny they can get their hands on right now, in the midst of a lending crisis that has permeated even the most disciplined economies in the world. Putting money aside – squirreling would be the best way to put it – is certainly quite tempting as things stand, not knowing when the recovery will really begin in earnest. In order to be sure of having money in the months to come, it is perfectly sensible to put some by. On the other hand it could be said that if you don’t invest a bit now, there will never be a better time.

Sure, there will be some reluctance on the part of any of us to put money where it might lose value, and the fact of the matter is that investing does carry that risk – “remember, investments can go down as well as up” ring any bells for you? Without that kind of fluidity, there would be no chance of making a bit of money on the stock market, or through any kind of investing – and you would be better off just putting it in a savings account. What we can be certain of is that several investments are now at as low a value as most of us can remember – and ripe for the buying cheap.

Award-winning book Invest Now is jam-packed with timely information and timeless advice for the beginning Canadian investor. To purchase a copy, visit Chapters Indigo or buy online – Invest Now: A Canadian’s Guide to Investing

No-one with any knowledge of such matters will tell you that your investment is guaranteed to increase in value, and less still will you be told that you will get an instant return, so it is worth having a savings plan at the same time. The chances are, however, that a small investment will have an initial small return, and can even act as a dry run for investing in greater amounts. As rules of thumb go, “Only invest what you can afford to lose” is a good one. It will allow you to learn the ropes in a less pressurized context.

Of course, investing can be a daunting prospect. If you stand to make any kind of money at all, the chances are that it will carry a frisson of nerves as you watch and wait for the right moment to sell or stay in. The chances are that on your first investment you will be tempted to sell as soon as you realize any kind of profit on the deal. While there is every reason to be happy at turning a profit, it is worth taking into account that people who have been playing the market for longer will stay in longer than those who haven’t. The reason for this is that they have learned to recognize when a stock will keep rising.

It is worth purchasing a guide to investment because these are invariably written by people who have done it and been successful. Warning signs that might go ignored by the novice will be covered in these guides, as will those false alarms that make first time investors panic and get out. When you are investing for the first time, it is good to have this reassurance.

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What Is An RRSP?

An RRSP (registered retirement savings plan) is not something you actually buy. You buy qualified investments to hold inside an RRSP. This is a type of account and you can hold a variety of products inside your RRSP.

What Products You Can Buy?

You can buy mutual funds, GICs, stocks, savings account and so on. These are just some basic products to mention. There are many other investment products you can buy and hold inside your RRSP account.

Is It Complicated?

Depending on what you are buying, it can be complicated to buy certain products such as stocks, bonds, etc. In my book Invest Now, I have described in detail how to buy these products. Today, in simple words, I will explain how you can open your first RRSP in a snap.

Two Easy Solutions for Novice Investors

Option One – Walk Into Your Local Bank

This is the easiest way to buy. Just walk into your local bank branch and your personal banker will be able to explain ins and outs of RRSP and what products you can buy based on your personal needs. Most of the banks have a variety of products to choose from, and you can pick the one that best suits your needs.

I like the idea of opening an RRSP in your local branch because it is very easy and simple. This option gives you the opportunity to talk to a live person, and you can hold your RRSP with the same institution you are already dealing with – that translates into less hassle and paperwork. Also, you have the option to transfer your money into your RRSP from your chequing or savings account.

Option Two – Do It Online

Financial institutions like ING Direct or President Choice Financial let you purchase RRSP online. This is good in one sense that you are doing everything from the comfort of your own home; however, there is no one sitting in front of you to answer your questions. Although they do have customer support to call, it’s not the same as talking to a person in front of you.

Final Word

One major advantage of going to a bank is that bankers are able to recommend and advise products based on your individual needs. However, this is not the case if you choose online option. Customer service reps will answer your questions and guide you through the procedures to choose a product, but they are not licensed to advise.

These are the basic and simple procedures to buy your RRSP. If you are looking to buy a wider variety of products, I would recommend award-winning book Invest Now – available at Chapters.Indigo bookstores and at all online retailers.

Related Posts

What Is An RRSP?

What Is An RRSP – Part 2 – Advantages of an RRSP

What Is An RRSP – Part 3 – Disadvantages of a Registered Account

What Is An RRSP – Part 4 (Final Part) – Miscellaneous

These days you will hardly find an investor without having at least one mutual fund. Most of us never pay any attention to mutual fund fees, which can be very confusing and hard to grasp. Many of us do not realize how much of our returns can be evaporated by these fees. I consider one of the best features of mutual funds is that fund companies camouflage fees as a percentage of assets.

There are 3 basic categories of mutual fund fees – management fees which is known as MER, sales fees and special fees. I will discuss only MER because regardless what type or class fund you buy, MER is a built-in feature and it will be always there.

MER stands for Management Expense Ratio and expressed as a percentage of fund total value. MER is made of sales, administration, marketing, legal, accounting, reporting and portfolio management costs and charged directly to the fund, thus reducing the value of your investment. You will never see any statement or transaction or invoice or you will never write a check to pay MER as fund companies deduct this cost from funds per unit value everyday, making it invisible and hard to track. MERs can run from ?% to over 3% or even more. Let’s say a fund charges an MER of 2.5% which may sound harmless but when you look at in terms of real numbers, it looks scary and hard to believe. Suppose you have $100,000 in a mutual fund which charges 2.5% MER. Assuming you are 30 and will have this $100,000 invested till you reach 70. How much is your cost? The answer is a whopping cost of $100,000 ($100,000 * 2.5% per year for 40 years) I used very simplified calculations and omitted many other factors. Remember, there are other costs and taxes to pay as well. Be a smart investor by educating yourself and avoiding fees and expenses. There are variety of options these days and always do your homework before investing and seek help from someone whom you find knowledgeable and trustworthy.