Making a contribution for an RRSP or even to a TFSA is not the finish of the story plot. That’s the conserving step. The cash must then earn a come back. What are some options and current returns among the various possible types of investments (see previous post Investment Building Blocks – Securities to get more explanation)?
Inflation surreptitiously eats away at the worthiness of your cost savings if it is within a tax-deferred RRSP or TFSA. It cannot be avoided by you. Leaving the money sitting as cash these days gets interest of 1% or so from major banks, even in a savings account (see rates on CANNEX). CANNEX also provides a complete table of rates available in registered plans. Rates again is quite low. Returns on bonds are the interest and possible changes in capital value due to changes in default risk and interest rate risk. The maturity longer, the greater the chance of interest increases. The examples below are investment-grade bonds.
- If you itemize, then
- Paid cash to owner for personal use, $2,500
- Identify the best performing, highest liquidity, lowest cost alternative
- A single person
Lower ranked bonds will give off greater yields (see prior post-Seeking Safety: Assessing Default Risk). There are several individual problems with varying returns, but the dividend yield of the following give a basic idea of the much more attractive returns available among preferred. See Prefblog for much in-depth knowledgeable discussion of particular issues.
Many of the business enterprise trusts are being converted …