We all work hard for our money, so when it comes to investing we naturally want to make our money work hard for us.

Whether we choose Guaranteed Investment Certificates (GICs) or alternative forms of investment like stocks, bonds and mutual funds, it all comes down to our individual goals, our tolerance for risk, and of course, our budget.

Today we have a multitude of options. Add to that different investment styles – simple and straightforward at one end of the spectrum to highly sophisticated at the other. Then there’s the decision of whether to handle your finances yourself or use a financial advisor. The fact is, you’re in a great position – you have money to invest and that’s an exciting prospect. So where do you begin?

After all, being knowledgeable is the first step toward making wise investment decisions.

Goals and Dreams

Most of us have goals for the future and realizing them likely depends on how smart we are with our money today. Chances are you aren’t independently wealthy, so making your dreams a reality will take serious financial planning and smart investing. Investing is all about preserving your money and making it grow. An investment is simply a vehicle into which you put your money in order to earn a return or profit (i.e. investment income). Typical investments include stocks, mutual funds, bonds, GICs and Private Mortgages.

Whether your goal is a comfortable retirement, a good postsecondary education for your children, a new home, your own business or even a holiday, the sooner you begin planning, the better your chances of success. This means a smart investment strategy and overall financial plan that balances how much money you need today with what you’ll need for the future, taking into account the effects of inflation.

Just as inflation can erode your investment savings; “Compounding” can help them Grow even Faster. Compounding simply refers to earning income on your income. You receive income not only on your starting amount, but also on any previous income accumulated in your investment. The chart below illustrates the effects of compounding at various rates of return. Note how a higher rate of return can significantly increase the size of your investment over time.

Registered Retirement Savings Plans (RRSPs)

An RRSP is simply a savings strategy for your retirement that allows you to invest on a tax-deferred basis. Your contributions to the plan are allowed to accumulate, along with investment income on a tax-free basis until the funds are withdrawn during your retirement years. Although the funds will be fully taxable at that time, this will be during a period of lower income and your tax rate will likely be lower.

One investment strategy is to contribute as much as you can to your RRSP each year. Check your latest income tax notice of assessment (issued by Revenue Canada) to find out your maximum contribution for the year or the previous years if you have not used the maximum. 

“Understand how tax rules affect your investments so you can Maximize your after-tax returns. Seek assistance from your Financial advisor or accountant”. 

For further information contact: 
Mike McCalla, AMP
Senior Mortgage Consultant
Tel: 416.496-1220 ext23 or 416.410-2150
Toll Free: 1-866.496-1220
Fax: 416.496-8666
Email: mike@4mortgages.ca