With competition being tough, many consumers would chase the highest interest rates, but that often required you to constantly switch banks. To combat this issue, horizons introduced CASH.to, a High Interest Savings exchange-traded fund (ETF). When looking at the yields, it’s obvious that CASH.to is a great choice for those looking to invest in fixed income. But what is CASH.to, is it safe, and how do you buy CASH.to? I’ve got all the answers in this CASH.to guide.

Understanding CASH.to?

CASH.to represents the ticker symbol for the Horizons High Interest Savings ETF listed on the Toronto Stock Exchange. The “.to” extension indicates that it trades on Canada’s main stock exchange.

This exchange-traded fund focuses on generating monthly income for investors by allocating assets into high-interest deposit accounts held with Canadian chartered banks. The fund’s primary goal centres on maximizing your monthly distributions while maintaining capital preservation and liquidity.

When you invest in CASH.to, you gain exposure to Canadian dollar-denominated cash-equivalent investments without needing to manage multiple bank accounts yourself. The ETF operates as a convenient vehicle for parking cash while earning competitive interest rates that often exceed traditional savings accounts.

How Does CASH.to Work?

When you invest in CASH.to, your funds are pooled with other investors’ money and placed into high-interest savings accounts at major Canadian financial institutions. The fund manager actively seeks out accounts offering the strongest returns and can shift money between institutions to maximize yields.

This pooling strategy provides a significant advantage. Because CASH.to manages billions of dollars in assets, it can negotiate better rates than individual investors typically access on their own.

Key operational features:

• Monthly distributions are paid directly to your brokerage account
• You must hold shares by the ex-dividend date to receive that month’s payment
• The fund continuously reallocates capital to maintain optimal yields
• Returns reflect the aggregated performance of multiple high-interest accounts

The mechanics mirror those of a standard savings account, where you deposit money and receive interest payments. The main difference is that CASH.to leverages institutional scale to secure enhanced rates for investors.

How do CASH.to Yields Work?

CASH.TO generates returns based on interest earned from deposits held at Canadian financial institutions. The fund’s performance fluctuates with prevailing interest rates. During 2021’s historically low rate environment, yields hovered around 0.6%. Current interest rates have pushed yields into the 3.5% to 4.5% range.

These rates typically exceed what you can access by opening accounts directly with banks. The quoted yields represent annual figures. You receive distributions monthly, calculated as roughly one-twelfth of the annual rate.

The fund charges a management expense ratio of 0.11%. This fee is deducted before your yield is calculated and posted, meaning the rate you see already accounts for costs. You don’t need to subtract anything additional to determine your actual return.

Your distributions arrive as monthly deposits into your brokerage account if you hold shares by the ex-dividend date. This structure mirrors traditional savings accounts but operates through the exchange-traded fund framework.

How Does the Share Price of CASH.to Function?

The share price of CASH.to operates on a predictable cycle tied to its monthly distributions. The ETF maintains a floor net asset value of $50, which means the trading price stays at or above this baseline.

Throughout each month, the share price gradually increases as the fund accrues interest income. This daily appreciation continues until the distribution payment date arrives. On the ex-dividend date, the share price typically reaches its monthly peak before resetting to the $50 minimum after the distribution is paid out.

Key pricing mechanics:

• The price climbs each trading day incrementally
• The increase reflects the accumulating distribution value
• The share price drops back to $50 after the payout

This structure means that the timing of your purchase makes little difference to your returns. When you buy at a higher price mid-month, you’re paying for the upcoming distribution that’s already embedded in the cost. The distribution you receive offsets the elevated purchase price, resulting in a neutral timing effect for investors.

How Are You Taxed on CASH.to?

When you hold CASH.to in a non-registered account, you’ll pay tax on the monthly distributions as interest income. This interest gets added directly to your total income for the year and taxed at your marginal tax rate.

If you sell your CASH.to shares for more than you paid, you’ll trigger a capital gain. The tax treatment works like this: only 50% of your capital gain is added to your taxable income. For example, if you sell shares and realize a $100 profit, you’ll include $50 in your taxable income, which is then taxed according to your marginal rate.

Registered accounts work differently:

• RRSP
• TFSA
• LIRA
• RESP

When you hold CASH.to in any of these registered accounts, you don’t need to track interest or capital gains. You won’t owe any tax on distributions or price appreciation within these accounts.

How to buy CASH.to?

You can buy CASH.to via your broker or your online discount brokerage account. CASH.to can be held in all registered and non-registered investment accounts.

CASH.to is eligible for placement in registered accounts such as TFSAs and RRSPs, as well as non-registered investment accounts. Your brokerage may charge a commission for executing the trade, though many platforms now offer commission-free ETF purchases.

Important limitation: Certain financial institutions restrict access to this ETF. TD Direct Investing currently blocks clients from purchasing CASH.to, which appears to be a business decision rather than a regulatory restriction.

Before placing your order, verify that your brokerage permits CASH.to transactions. If your current platform doesn’t support it, you may need to transfer funds to a different brokerage that allows High Interest Savings ETF purchases.

CASH.to vs. GICs

CASH.to and GICs represent two distinct approaches to cash management in Canada. GICs are fixed-term products offered by banks and trust companies that lock in a specific rate of return for a predetermined period.

The yield structure differs significantly between these options. A GIC provides a fixed interest rate that remains constant throughout its term, whether that’s one year or longer. CASH.to distributes monthly dividends that fluctuate based on prevailing market conditions and short-term interest rates.

Liquidity is another key distinction. GICs typically require you to commit your funds for the entire term, restricting access until maturity. You can trade CASH.to shares during Toronto Stock Exchange hours, providing the ability to access your capital when needed.

Protection and costs also vary. Eligible GICs qualify for CDIC coverage up to $100,000, safeguarding your principal. CASH.to does not carry this insurance protection. Additionally, CASH.to charges management fees that reduce your net returns, while GICs have no associated fees.

Overall, CASH.to gives you more flexibility than GICs since you can withdraw your funds at any time. However, you need to pay fees for CASH.to and there’s no CDIC insurance.

Comparing CASH.to with Other Options

Besides GICs, there are a few other alternatives to CASH.to that are worth considering:

High Interest Saving Accounts

ou can bypass CASH.to entirely by placing funds directly into a high-yield savings account. The returns from CASH.to typically exceed what most banks offer on standard deposit accounts.

Higher rates may be available through promotional offers for new deposits, but this requires effort on your part to transfer money between institutions and open multiple accounts. A key benefit of direct deposits is CDIC protection, which covers your money if you open an eligible account with a member institution of the Canadian Deposit Insurance Corporation.

CASH.to does not provide CDIC coverage, making direct savings accounts more secure for those prioritizing capital protection.

Money market funds

Money market funds are funds that invest in short-term bonds. They typically invest in bonds that have a maturity of less than 30 or 60 days so their yield can follow the interest rate movements. This can be a decent alternative to CASH.to, but investors should look at the quality of all bonds within the funds to make sure they match their risk profile.

What Happens to CASH.to if Interest Rates Drop?

When interest rates decline, your CASH.to distributions will decrease accordingly. The fund generates returns by depositing cash into Canadian bank accounts, and these earnings fluctuate with prevailing interest rates.

Your monthly payouts will shrink as the fund earns less on its holdings. During periods of historically low rates, distributions can fall significantly—potentially to levels similar to 2021 when yields hovered around 0.6%.

Key impacts on your investment:

• Lower monthly distributions
• Reduced annual yield percentage
• Decreased passive income generation

The fund’s performance remains directly tied to what Canadian banks pay for deposits. You won’t receive fixed returns, as the yield adjusts continuously based on market conditions.

Is CASH.to Safe?

CASH.to does not carry CDIC insurance, which distinguishes it from GICs or traditional high-interest savings accounts. This lack of insurance coverage applies to all ETFs, stocks, preferred shares, and bonds, not just CASH.to specifically.

The ETF deposits funds into accounts at major Canadian financial institutions, including National Bank, Scotiabank, and CIBC. Canadian banks rank among the most secure financial institutions globally, which provides a degree of safety for your investment.

While you cannot consider CASH.to 100% safe due to the absence of CDIC protection, the risk remains relatively low. If one of Canada’s major banks were to collapse, the resulting economic crisis would likely overshadow concerns about individual deposit losses.

Key Safety Considerations:

• No CDIC insurance coverage
• Funds held at multiple established Canadian banks
• Canadian banking system has strong stability record
• Risk comparable to other ETF investments

Your money faces minimal risk under normal economic conditions, though you should understand the differences between ETF holdings and insured deposit accounts.

Final Thoughts

CASH.TO stands out as a practical choice for parking funds you want to keep accessible. You won’t be locked into your capital for months or years, as you would with fixed-term products. The ability to trade during market hours gives you flexibility that traditional savings products can’t match.

You can hold this ETF in your TFSA, RRSP, or any other account type you already have. This means you won’t need to open additional accounts or juggle multiple institutions. The competitive interest distribution makes it worth considering, though you should weigh the absence of CDIC coverage against your own risk tolerance and financial goals.

The popularity of this fund reflects its usefulness for investors seeking liquidity combined with reasonable returns on cash holdings.

An RRSP is a government-registered account. It was designed to give you a tax break for your contributions, and could potentially lower your taxable income when you withdraw from it. Since RRSPs have a lot of rules, including the RRSP deadline, contribution limit, withdrawal penalties and more, many people often get confused. This RRSP guide will help explain the basics of RRSPs so you can get the most out of your account.

RRSP deadline 2024

The deadline for contributing RRSPs is 60 days after the end of the year. However, since that falls on a weekend this year, the 2025 RRSP deadline is Monday, March 3, 2025. Note that even though the deadline is 2025, you can use any contributions made before February 2025, for your 2024 tax year.

Keep in mind that RRSPs have an age limit. The RRSP deadline is December 31 of the year in which you turn 71. After this point, you have three options:

1. Take it out in cash as a lump sum
2. Purchase an annuity
3. Transfer into an RRIF

RRSP contribution limit

On top of the RRSP deadline, there is also an RRSP contribution limit that you need to be aware of. Your RRSP contribution limit is 18% of the total income you earned the previous year, up to a specific limit set by the CRA- whichever is the lower of the two options. The RRSP deduction limit for the 2024 tax year is $31,560.

If you go over your contribution limit, you will have to pay a penalty, which is one RRSP mistake you want to avoid since the penalty is 1% per month. That said, the CRA does give you a grace amount of $2,000 if you accidentally over contribute.

Keep in mind that you can carry forward any accumulated contribution room after 1991. So, if you are unable to max out your RRSP contribution this year, you won’t lose it. You can make up that difference later. You can find information on any unused contribution room online on your CRA account.

What is an RRSP?

RRSP stands for Registered Retirement Savings Plan. It’s a government-registered account that allows you to contribute a certain amount every year up until the age of 71. The big draw with RRPs is that they are tax-deductible, which makes it an attractive savings vehicle for those planning for their future retirement.

Since an RRSP is designed to be a retirement account, there are penalties for withdrawing from your RRSP early, except under specific circumstances which will be discussed later on in this article.

RRSP tax deduction

As mentioned above, your RRSP is a tax-deductible account which is its big draw. So, what does this mean?

When you contribute to your RRSP, that money will be deducted from your income, which reduces your tax burden. For example, let’s say you made $50,000 this year and you contributed $5,000 to your RRSP. Your contribution would lower your taxable income to $45,000 for the year.

Most people typically have their taxes taken off at the source by their employer. Since your taxable income gets lowered due to RRSP contributions, you’d likely get most of the taxes you already paid back in the form of a tax refund.

Now, keep in mind that an RRSP is not tax-free like your Tax-Free Savings Account. You do have to pay tax eventually. However, any income earned will remain tax-free until it comes time to withdraw the money. At this time, you will likely be retired and have no regular income, so even though you will be taxed on RRSP withdrawals, your tax rates shouldn’t be too high.

How to open an RRSP

Opening an RRSP is easy. You can open one at most financial institutions in Canada, including banks, online banks, and credit unions. Once you have chosen which financial institution you would like to open your RRSP and completed the application process, you can contribute to it.

RRSPs can hold all kinds of investments, including:

• Guaranteed Investment Certificates
• Savings Deposits
• Stocks
• Exchange-Traded Funds
• Mutual Funds
• Bonds

You can hire a financial advisor to help you create your portfolio. However, you don’t need to. If you are financially savvy, you can invest yourself through index investing. There are plenty of online DIY platforms for this, and it’s the option with the lowest fees. Obviously, you need to know what you are doing, but this option works well for some people.

If you don’t want to do it yourself, I recommend looking into a robo advisor, which does the work for you at a fraction of the price a financial advisor would charge. I suggest Justwealth if you are looking for a robo advisor. You can read my review here. Anyone who needs a bit more handholding could consider the services of a financial advisor.

*Note that you can move your RRSP to another financial institution later on if you wish. For instructions on how to do that properly, look at this article.

Using your RRSP for the Home Buyer’s Plan

I mentioned earlier that you will be penalized if you withdraw early from your RRSP except for specific circumstances. One of these circumstances is the Home Buyers’ Plan. Here’s how that works.

The Home Buyer’s Plan (HBP) is a government program that allows you to withdraw from your RRSP to buy or build a qualifying home for either yourself or a related person with a disability.

To qualify, you must meet the following requirements:

• You must be a first-time home buyer
• You must have a written agreement to buy or build a qualifying home for yourself or a related person with a disability
• You must be a resident of Canada
• The qualifying home must be used as a principal residence for yourself or a related person with a disability and the home must be occupied within 1 year after buying or building.

If you meet the program requirements, you can withdraw up to $35,000 from your RRSP for the down payment, tax-free. If you are purchasing with someone else, they can also take advantage of the HBP allowing you a total of $70,000 towards the down payment on the home.

However, the HBP is considered a loan and must be paid back to your RRSP within 15 years. If you don’t repay it, the amount is taxable and you lose the RRSP contribution room permanently.

Tax-Free First Home Savings Account contributions

In 2023, the Tax-Free First Home Savings Account (FHSA) was introduced. This allows first-time homebuyers to contribute up to $8,000 per year with a total contribution room of $40,000 available. Any unused contributions get carried over.

The FHSA can be incredibly handy since contributions lower your taxable income and any capital gains or interest earned within your account are tax-free. You essentially get the benefits of an RRSP and TFSA. With the FHSA, there’s no deadline. You just need to be mindful of the maximum contribution space each year and overall.

Using your RRSP for the Lifelong Learning Plan

Another specific scenario where you can withdraw from your RRSP without penalty is for the Lifelong Learning Plan (LLP). This government program allows you to temporarily withdraw up to $10,000 per year ($20,000 total) from your RRSP to pay for full-time education or training for yourself or a spouse/ common-law partner. It cannot be used for your children. It is similar to the Home Buyers’ Plan in that the money does have to be repaid back into your RRSP. In the case of the LLP, you have 10 years to pay back the funds.

What happens to an RRSP when you die?

One of the biggest questions about RRSPs is what happens to it when you die? Generally, the value of the RRSP needs to be included in the income of the deceased for the tax return of the year of death. However, there are three exemptions in which it can continue to be tax-deferred.

1. If the beneficiary is the spouse (or common law partner)
2. If the beneficiary is a financially dependent child or grandchild under 18 years of age
3. If the beneficiary is a mentally or physically infirm child or grandchild of any age

It’s important to remember your RRSP in your estate planning because it can be subject to taxes and probate fees depending on who the beneficiary is. For example, if you list the estate as the beneficiary then it’s subject to probate fees. But, if you specifically list your adult children, they still have to pay the tax, but no probate fees.

Final thoughts

An RRSP is a smart investment tool Canadians should consider using to help save for their future. Just make sure to take the time to understand how it works because there are a lot of rules to be mindful of such as RRSP deadline, contribution limits and more. It may be a bit intimidating at first, but once you understand the basics, an RRSP will make saving for retirement a breeze.

Have you ever found yourself thinking, “I really want to start investing, but where do I even begin?” It’s easy to feel overwhelmed – between all the jargon, acronyms, and that mysterious “ticker talk” (yes you got it, those ETF symbols), it can seem like a lot to handle. Figuring out what to invest in, how much of each asset to hold, and when to rebalance? It’s enough to make anyone feel stuck, even the most analytical among us.

But here’s the thing: investing doesn’t have to be intimidating. BMO’s Asset Allocation ETFs are designed to take the complexity out of the equation, giving you an all-in-one solution that balances your portfolio without all the stress and second-guessing.

What are Asset Allocation ETFs?

Asset allocation ETFs are portfolios built with a pre-determined asset mix. Within that mix, you’ll find a variety of asset classes, like fixed income and equities, across various indexes, sectors, and countries. Instead of having to manually automate and rebalance your portfolio, these ETFs have an automated re-balance set to bring it back to your determined asset mix, for a low cost.

For example, the BMO All-Equity ETF (ZEQT) focuses on growth by allocating a higher percentage to equities, while the BMO Conservative ETF (ZCON) has a conservative approach with a higher allocation to fixed income securities. This flexibility means that investors, whether just starting out or nearing retirement, can find a product that matches their goals.

Asset allocation ETFs provide a one-stop-shop for those looking for broad diversification, considering each investors unique goals and desired asset mix.

Solving a Problem: The Origins of Asset Allocation ETFs

To understand the popularity and importance of asset allocation ETFs, it can help to look back in time to how these useful tools came to existence. The concept was born out of a problem faced by many investors: managing a diverse investment portfolio, while sticking to their chosen asset allocation.

Imagine an investor in the early 2000s with a mix of individual stocks, bonds, and perhaps some mutual funds. Every year, they had to review their portfolio and adjust the weightings to match their evolving goals, all while considering tax implications, trading costs, and time constraints. Not only was this time-consuming, but there was also room for human error—sometimes leading to portfolios that were overly concentrated in certain sectors or regions.

The financial crisis of 2008 further highlighted the need for better portfolio management. Investors who had failed to properly diversify or rebalance suffered significant losses, while those who had a more disciplined approach weathered the storm more effectively.

Recognizing these challenges, ETF providers like BMO saw an opportunity to create a product that simplified the investment process. The idea was simple but powerful: create an all-in-one ETF that would offer diversification, automatic rebalancing, and cost efficiency. By using ETFs as the building blocks, providers could offer exposure to global markets and different asset classes at a fraction of the cost of traditional mutual funds. Thus, the asset allocation ETF was born.

Source: BMO Global Asset Management, BMO Growth ETF (ZGRO:TSX), as of September 18^th 2024 

The portfolio holdings are subject to change without notice and may only represent a small percentage of portfolio holdings. They are not recommendations to buy or sell any particular security.

Why Does the Mix Matter?

The famous Brinson, Hood, and Beebower (BHB) study, published in 1986, found that over 90% of a portfolio performance variability is driven by asset allocation, not stock picking or market timing.

This shifted how investors approach portfolio management, emphasizing the importance of diversification across asset classes for long term success. Most asset allocation ETFs, or funds for that matter, are now built on this principle. Reinforcing the idea that asset allocation, rather than stock-picking or timing, drives the bulk of long-term investing success – a perfect fit for investors looking for a hands-off “couch-potato” way to build their wealth.

Why Asset Allocation ETFs

Simplicity and Convenience

With asset allocation ETFs, they take care of the heavy lifting. With automatic rebalancing and built-in diversification, you get a hands-off investment strategy.

Diversification

These ETFs provide exposure to a broad mix of global stocks, ensuring you’re well diversified across sectors and regions, whether you prefer a conservative, growth, or somewhere in between approach.

Cost-Effective

One of the biggest advantages of ETFs is their cost-effectiveness, and BMO asset allocation ETFs are no exception. Additionally, with fewer transactions needed to maintain the portfolio, investors can avoid high trading costs.

Long-Term Focus

Asset allocation ETFs are designed with a long-term perspective in mind, making them ideal for investors focused on building wealth. By keeping a steady asset mix and rebalancing regularly, these ETFs help investors avoid emotional decision-making that often leads to buying high and selling low.

The T Series: A Tailored Solution for Retirees

One of the newer innovations in BMO’s lineup of asset allocation ETFs is the T series¹, specifically designed for retirees and those nearing retirement. Retirees often face the challenge of generating a steady cash flow from their investments while minimizing the risk of running out of money. The T series solves this problem by offering a systematic withdrawal plan, allowing investors to receive monthly cash flow helping to ease retirement planning.

For example, the BMO Balanced ETF (T6 Series) (ZBAL.T) is a T series ETF designed to provide steady cash flow by investing in a balanced mix of equities and bonds. The fund pays out fixed monthly distributions (6% annualized)² that are a blend of income and return of capital, which is especially valuable for in retirement.

Final thoughts

BMO Asset Allocation ETFs offer a simple, diversified, and cost-effective solution for investors at every stage of life. Whether you’re just starting out, looking for steady growth, or planning for retirement, these ETFs provide the perfect blend of convenience and financial security. For retirees, the T series includes the benefits of consistent cashflow, making it easier to manage withdrawals during retirement.

With BMO’s asset allocation ETFs, investors can feel confident in their financial future, knowing they’ve chosen a product that aligns with their long-term goals and offers peace of mind in any market condition.

For more information visit BMO Global Asset Management to learn more.

^{1 T series – These units are Fixed Percentage Distribution Units that provide a fixed monthly distribution based on an annual distribution rate of 6%. Distributions may be comprised of net income, net realized capital gains and/or a return of capital. The monthly amount is determined by applying the annual distribution rate to the T Series Fund’s unit price at the end of the previous calendar year, arriving at an annual amount per unit for the coming year. This annual amount is then divided into 12 equal distributions, which are paid each month.}

^{2 Standardized Performance: ZBAL.T, BMO Balanced ETF (T6 Series) 1 Year: 15.91%, Since Inception: 5.96% as of August 30th, 2024.
ZGRO.T, BMO Growth ETF (T6 Series) 1 Year: 18.78%, Since Inception: 14.61% as of August 30th, 2024.}

^Disclaimer:

^{This article has been sponsored by BMO ETFs.}

^{All investments involve risk. The value of an ETF can go down as well as up and you could lose money. The risk of an ETF is rated based on the volatility of the ETF’s returns using the standardized risk classification methodology mandated by the Canadian Securities Administrators. Historical volatility doesn’t tell you how volatile an ETF will be in the future. An ETF with a risk rating of “low” can still lose money. For more information about the risk rating and specific risks that can affect an ETF’s returns, see the BMO ETFs’ prospectus.}

^{This article is for information purposes. The information contained herein is not, and should not be construed as, investment, tax or legal advice to any party. Particular investments and/or trading strategies should be evaluated relative to the individual’s investment objectives and professional advice should be obtained with respect to any circumstance.}

^{The viewpoints expressed by the author represents their assessment of the markets at the time of publication. Those views are subject to change without notice at any time. The information provided herein does not constitute a solicitation of an offer to buy, or an offer to sell securities nor should the information be relied upon as investment advice. Past performance is no guarantee of future results. This communication is intended for informational purposes only.}

^{Any statement that necessarily depends on future events may be a forward-looking statement. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Although such statements are based on assumptions that are believed to be reasonable, there can be no assurance that actual results will not differ materially from expectations. Investors are cautioned not to rely unduly on any forward-looking statements. In connection with any forward-looking statements, investors should carefully consider the areas of risk described in the most recent prospectus.}

^{Distribution yields are calculated by using the most recent regular distribution, or expected distribution, (which may be based on income, dividends, return of capital, and option premiums, as applicable) and excluding additional year end distributions, and special reinvested distributions annualized for frequency, divided by month end net asset value (NAV). The yield calculation does not include reinvested distributions. Distributions are not guaranteed, may fluctuate and are subject to change and/or elimination. Distribution rates may change without notice (up or down) depending on market conditions and NAV fluctuations. The payment of distributions should not be confused with the BMO ETF’s performance, rate of return or yield. If distributions paid by a BMO ETF are greater than the performance of the investment fund, your original investment will shrink. Distributions paid as a result of capital gains realized by a BMO ETF, and income and dividends earned by a BMO ETF, are taxable in your hands in the year they are paid. Your adjusted cost base will be reduced by the amount of any returns of capital. If your adjusted cost base goes below zero, you will have to pay capital gains tax on the amount below zero.}

^{Cash distributions, if any, on units of a BMO ETF (other than accumulating units or units subject to a distribution reinvestment plan) are expected to be paid primarily out of dividends or distributions, and other income or gains, received by the BMO ETF less the expenses of the BMO ETF, but may also consist of non-taxable amounts including returns of capital, which may be paid in the manager’s sole discretion. To the extent that the expenses of a BMO ETF exceed the income generated by such BMO ETF in any given month, quarter, or year, as the case may be, it is not expected that a monthly, quarterly, or annual distribution will be paid. Distributions, if any, in respect of the accumulating units of BMO Short Corporate Bond Index ETF, BMO Short Federal Bond Index ETF, BMO Short Provincial Bond Index ETF, BMO Ultra Short-Term Bond ETF and BMO Ultra Short-Term US Bond ETF will be automatically reinvested in additional accumulating units of the applicable BMO ETF. Following each distribution, the number of accumulating units of the applicable BMO ETF will be immediately consolidated so that the number of outstanding accumulating units of the applicable BMO ETF will be the same as the number of outstanding accumulating units before the distribution. Non-resident unitholders may have the number of securities reduced due to withholding tax. Certain BMO ETFs have adopted a distribution reinvestment plan, which provides that a unitholder may elect to automatically reinvest all cash distributions paid on units held by that unitholder in additional units of the applicable BMO ETF in accordance with the terms of the distribution reinvestment plan. For further information, see the distribution policy in the BMO ETFs’ prospectus.}

^{Index returns do not reflect transactions costs, or the deduction of other fees and expenses and it is not possible to invest directly in an Index. Past performance is not indicative of future results.}

^{The Index is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”), and has been licensed for use by the Manager. S&P®, S&P 500®, US 500, The 500, iBoxx®, iTraxx® and CDX® are trademarks of S&P Global, Inc. or its affiliates (“S&P”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”), and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by the Manager. The ETF is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the Index.}

^{The ETF referred to herein is not sponsored, endorsed, or promoted by MSCI and MSCI bears no liability with respect to the ETF or any index on which such ETF is based. The ETF’s prospectus contains a more detailed description of the limited relationship MSCI has with the Manager and any related ETF.}

^{Commissions, management fees and expenses all may be associated with investments in exchange traded funds. Please read the ETF Facts or prospectus of the BMO ETFs before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all dividends or distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Exchange traded funds are not guaranteed, their values change frequently and past performance may not be repeated.}

^{For a summary of the risks of an investment in the BMO ETFs, please see the specific risks set out in the BMO ETF’s prospectus. BMO ETFs trade like stocks, fluctuate in market value and may trade at a discount to their net asset value, which may increase the risk of loss. Distributions are not guaranteed and are subject to change and/or elimination.}

^{BMO ETFs are managed by BMO Asset Management Inc., which is an investment fund manager and a portfolio manager, and a separate legal entity from Bank of Montreal.}

^{BMO Global Asset Management is a brand name under which BMO Asset Management Inc. and BMO Investments Inc. operate.}

^{“BMO (M-bar roundel symbol)” is a registered trademark of Bank of Montreal, used under licence.}

As Canadians, we don’t have many options when it comes to investment services. 

So, I took it upon myself to have a look at one of Canada’s leading investment platforms, along with one of Canada’s fastest growing in recent times, Motley Fool and Stock Trades Premium.

Both the Fool and Stock Trades offer a Premium subscription service whereby investors can sign up for an annual fee – is paying for these investment services worth it? 

Let’s compare these two leading Canadian investment services, because they have enough differences that make them completely unique platforms.

Let’s start with the basics, website navigation and move our way through both platforms.

Stock Advisor Canada Vs Stocktrades Premium Review

When looking at Stock Advisor Canada and Stock Trades Premium, the platforms are directed at Canadian investors who are looking to either start building a portfolio, or earn more from their current portfolios.

While Stock Advisor Canada focuses on Canada and U.S. stocks, Stocktrades Premium is a platform that exclusively focuses on the Toronto Stock Exchange and Canadian stocks. This is the only platform in the country that does this, and as a result, it has gained a ton of popularity over the two years it’s been around.

Website Navigation

When it comes to an online service, ease of use and online navigation is incredibly important. When members first log in, members are greeted by two very different dashboards.

Immediately, StockTrades slicker and more modern platform is noticeable. The platform is simple to navigate and very intuitive. You get all the important information up front on the Dashboard, and you can immediately get caught up on any new information.

The Fool’s dashboard looks like a typical ‘blog’ site. Although not necessarily a bad thing, it does look dated and you have to go searching for most of the information.

Outside of the Dashboard and the look of the sites, navigation is pretty self explanatory on both sites.

If someone were to ask me what website would get me where I need to be faster, Stocktrades is the clear winner here.

Verdict: StockTrades edges out the Fool thanks to its modern design and informative Dashboard.

Similar features

Let’s get into the specifics of what the services offer. These platforms are very different, however they both have a few similarities at their core that I’m going to discuss.

Beginner stocks

Both services offer a basket of stocks tailor made for a beginner investor. These are intended to be strong ideas for those just starting out or new to investing. Stocktrades titles their 10 annual picks “Foundational Stocks” while Motley Fool has no specific name.

Out of respect for the effort and research put into these ideas, I will not comment on the picks themselves outside of the fact they were well thought out and presented on both sites. 

Neither site tracks the performance of their beginner stocks. Although Stocktrades Premium has stated they will release and track returns on an annual basis.

Verdict: Tie – nothing in this area sets either service apart.

Top picks

With an investment service, naturally investors will be looking for top picks. You’d think it would be a simple explanation, but the delivery and detail of these top picks are very different.

The Motley Fool’s “Recommendations”

They offer 1 Canadian recommendation and 1 U.S. recommendation per month.

One of the issues that present itself with the Fool is the confusion around these recommendations. 

It was not immediately clear to me if every pick on the list was still a buy and although they have taken steps to clean up their list by introducing categories, it still was a very confusing experience for me.

Compounding the issue, once a stock is recommended there are no consistent updates provided by the team. 

As I navigated the list, many had not had an update since the original recommendation. In some cases, it had been more than a year since the last update.

As someone who is looking for guidance on what stocks to buy, looking at a year old report doesn’t exactly provide me with a ton of confidence.

Overall, it was a very difficult list to navigate and members are left to discuss among themselves (in the forums) whether previous recommendations were still in fact buys.

In terms of the company reports, these are once again structured like a blog post. Although quality is not an issue, the presentation of these reports lack consistency and varies from company to company. 

At times, I could easily see it being overwhelming for beginners. It is unclear how these picks are made exactly, but they appear to be a mix of growth, value and income plays.

They have their list of historical picks and display a running average all-time return. You can also see the individual’s pick’s performance in relation to the TSX Index.

Stocktrade’s “Bull List” picks

At Stock Trades, the top ideas take the form of what they like to call “Bull Lists”, which take the form of the Growth and Dividend Bull Lists.  

They also add two TSX-listed stocks a month to their Bull Lists, one growth and one income. One particular thing I noticed is that the Motley Fool charges a separate subscription fee for income stocks. So, this was a huge positive for me.

Their lists and investment thesis behind them are quite clear. 

Those on the Growth Bull List are added as a result of strong growth prospects. Those on the Dividend Bull List are added with income in mind.

Unlike the Fool’s top recommendations, the team at StockTrades is diligent in their updates. Each report is updated quarterly, within days of the latest quarterly report. 

And, I was pleasantly surprised to see a recent email about a stock they’ve decided to remove from their list due to what they felt was an excessive run up in price.

This gave me confidence in the idea that they truly do mean that if a stock is on one of their Bull Lists, they still have confidence in it. 

They have a unique and well-structured format for both types of Bull List stocks (Growth & Dividend). They are easily digestible by both experienced and beginners alike and the investment thesis is made clear.

Furthermore, each report is supported by their unique ranking system (more on that later). There is no confusion around the list – if a company is on the Bull List, then they believe in the long-term prospects of the company.

Where Stocktrades comes up short, is in keeping a visual running tally of the performance of each of their Bull List picks. 

Although they keep members informed via monthly updates, it is not front and centre on the site itself. The results are there, but a bit of digging is required.

Verdict: StockTrades with a slight edge – Surprisingly, both the Fool and Stocktrades have similar outperformance metrics relative to the TSX Index. And by the way, the results are honest, from both platforms.

However, the Motley Fool runs a bit of a different system as they tend to “double down” on their losers, which gives the illusion that a stock they’ve highlighted has gone up in price, when in reality it could still very well be a losing highlight since they first mentioned it.

Stock Trades on the other hand, tracks a pick against their results indefinitely, regardless of price movement or if they’ve removed it from their lists.

Both offer two stocks a month, and the research behind each is sound. So why does Stocktrades come out on top?  

Two reasons. First, the Stock Trades reports are more engaging and can appeal to investors of all types. 

Secondly, and more importantly, StockTrades is committed to updating each report quarterly, there is nothing stagnant on the site. As a result, there is no confusion around which stocks they consider to be good opportunities today. 

Question and answer segment

Once again, not surprised that both had a Q&A section where members could ask questions. 

However, the quality of the Q&A sites was vastly different. 

While the Fool has an active forum, many of the questions are answered by members themselves. It also can take days, if not longer to receive a response directly from the Fool team.

In contrast, I’ve never waited longer than 24 hours to receive a response from either Mat or Dan. And, the vast majority of the answers went above and beyond what the members question was initially about.

The one thing I did notice was that on Stock Trades Q and A, there was next to no member to member communication. Which, in my eyes, is a positive. 

I don’t doubt that both platforms have some relatively experienced investors, but if I’m paying for an investment platform, I want answers from the brains behind the operation.

In my opinion, Motley Fool’s Q&A platform comes well, well short of Stock Trades Premium. In fact, I would argue in many instances that the Q&A over at Stock Trades Premium is worth the price of admission alone.

The only reason I don’t give it a 5/5 is the fact that sometimes the navigation can be a pain, as all of the buttons like back, forward, edit etc. are found inside of the website. Clicking back on the browser window doesn’t work. It’s taken some getting used to.

This is where the similar features end

That is about all that the Motley Fool and Stock Trades Premium have in common. Both offer stock picks, and a question and answer segment. However, even though these are similar features, as you’ve read, how they’re handled is very different.

But now, let’s move onto the features that are unique to Stock Trades Premium. 

And be aware, there are a ton of them.

Stocktrade’s Dividend Safety Screener

This was a feature I found incredibly useful over the course of 2020, especially navigating a stock market where dividend cuts were happening all over the place.

Stocktrades has an in browser stock screener that analyzes the quality of a company’s dividend. The companies are then ranked on a grade of 0-5 and updated every single week. 

The tables are easily sortable, readable on both mobile and desktop (although a little clunky on mobile) and from a single page I can see dividend growth streaks, growth rates, payout ratios in terms of earnings and cash flows and more.

Stocktrade’s Growth Stock Screener

These guys call their growth stock screener the “backbone” of their whole service, and it essentially ranks Canadian stocks on their forward growth potential.

They say the screener ranks stocks on safety, growth and valuation, and spits rankings out on a weekly basis.

In turn, they e-mail out the stocks their screener highlights on a weekly basis. One thing you won’t be left without is constant e-mail contact from the guys at Stock Trades.

More impressively, at the time I’m writing this they say their screener has outperformed the TSX index in over 83% of the weeks they’ve been tracking it. I verified this, as they have all of the data available, and it is correct.

Custom stock research on request

This is something I am truly amazed they have time for. But, you can request an in-depth report from the guys at Stock Trades. This isn’t an add on, this just comes with your membership. One a month, however.

But, the one report I did request, I received within 4 business days and it was in just as much detail as a Bull List report. All of these reports are available to all members as well.

9 Model portfolios

I’ve never followed Stocktrades model portfolios, but there’s no doubt they’re outperforming in a big way. They’ve got 9 portfolios, all aligned with different age groups, risk tolerances etc.

As I’m writing this, all 9 of them are outperforming the TSX since inception, with a couple portfolios posting over 100% gains since December of 2018. Impressive, considering the crash and all.

IPO Centre

This is a new feature they’ve introduced over at Premium (they’re constantly adding new features) and it highlights all of Canada’s major IPOs. They dive into news, produce stock reports on recent IPOs and are constantly answering questions on them via the IPO.

They invest in the IPO’s themselves as well, and are fully transparent about doing so. All they state is that you should be doing so with capital you can afford to lose. You won’t see any IPOs on their Bull Lists, due to the high risk nature of them, but this is a really cool feature nonetheless.

Marketing and upsells

This is a critical component for me. When I purchase something like this, I do expect to have access to the full platform.

With Stock Trades, marketing is completely transparent. You sign up, and you get absolutely everything they’ve indicated inside the platform. They promise, under no circumstances will you be upsold to another more expensive platform once they’ve got you in the door.

Motley Fool on the other hand, after a few days of being inside of Stock Advisor Canada, I was hit with upsells. More expensive platforms offering more explosive stocks.

The issue I had with this right away, is the fact they promised me the most explosive stocks for the initial price I paid.

There is a type of “get rich” style atmosphere with a lot of the content Motley Fool produces, and pitches to prospective and current members, including the fact they just have to pay a little more to finally get there.

I don’t get this with Stock Trades. 

In fact, once I got inside of Premium the only emails I ever received were helpful emails to navigate the platform, e-mails about tutorials, new stocks, strategies and other Premium related content.

Price

Let’s get down to the brass tacks shall we? Pricing.

Pricing is huge when it comes to the selection of an investment service. A platform can make you money, but it needs to be able to cover the costs of the platform and also help you earn a positive return. 

If it doesn’t, you’re better off giving your money to a fund manager.

Stocktrades Premium comes in at $249.99 a year. I was given an initial 30% discount so I got in for around $175. Stock Trades states that the price you pay when you sign up (full price) is the price you’ll always pay, if they decide to raise prices.

And, this isn’t an empty threat, the company went ahead and raised its service from $199.99 to $249.99 this past October. So, those who got in before October were locked in to the $199.99 rate.

The Motley Fool’s pricing structure is just downright confusing to be honest. Prior to signing up, I was hammered relentlessly with random discounts that “only lasted 24 hours”.

Typically, they offer their platform for $99 for the first year. They say this is $200 off, so you’d think that the platform would cost $299 annually right?

Wrong. It’s actually only $199. So, they’re essentially stating their membership is worth more than it is, to make you think you’re saving more.

Overall, the extra $50 for Stock Trades Premium is well worth the cost, especially considering the plethora of extra features. However, I’m going to give a tie to both, as they’re both extremely affordable.

Stock Advisor Canada Vs Stock Trades Premium final verdict

Overall, these are both two solid services for long term investors who don’t have the time to do the research, don’t have the knowledge, or need some extra tools.

But overall, I have to give a large edge to Stock Trades. While the Motley Fool labels themselves as a stock picking service, Stocktrades Premium is a complete investment platform, and I’ve found myself logging in multiple times a week to use their tools to better my portfolio.

With the Motley Fool, I’ve essentially read their stock picks when they were emailed to me, and that’s that. They don’t really offer much more than this.

The information on Stock Trades Premium is updated frequently. I have significantly more confidence using their information over the Fools. I’ve seen some reports on Stock Advisor Canada that were more than a calendar year old. The oldest report from a stock pick you’re going to get on Premium is 3 months.

You pay $50 more a year for Stock Trades Premium, but that $50 is easily justified by the amount of features they offer.

Looking at Motley Fool’s other services, they charge separate subscriptions for dividend picks, IPO research and model portfolios. 

So if you include what you would have to pay with Motley Fool compared with what you get at Stock Trades Premium, you’d be paying thousands at the Motley Fool.

The guys over at Stock Trades claim to have started the service and website because of a lack of quality Canadian stock information. For years the landscape has been dominated by sites like the Motley Fool. 

In my eyes, they’re doing a hell of a job. I’m going to be picking one service to renew next year, and it will be Stocktrades Premium.

The good news is that this is avoidable and it doesn’t have to happen to you. Here are the common mistakes that DIY investors make and tips on how to stay on track so that you can reach your financial goals.

What mistakes do DIY investors make? 

Over the years, I’ve seen many DIY investors who wanted to take the shortcut to get rich. Perhaps they could get away with it a first, but over time it catches up with them. 

I always find it interesting when you see people brag online about their short-term “wins”, but they go radio-silent after a few months when they’ve lost money. If you’re truly a long-term passive investor, here are common mistakes to avoid as a self-directed investor. 

Not paying attention to your fees 

If you’ve chosen an online brokerage or robo-advisor, you’ve already done a great job at eliminating fees. However, depending on which type of product you buy, you could be paying unnecessary fees. The investors that build a large nest egg are able to keep their hard-earned money in their own pockets—not transferring it to portfolio managers. Before you buy any product (such as a mutual fund, index fund or exchange-traded fund), find out what the fees are and see if you can find a comparable product for less fees. 

Making too many trades 

Online brokerages may incentivize you to make a certain number of trades in a quarter and offer you a discounted price. Don’t be fooled by this! That’s not for your benefit. It’s actually in the brokerage’s best interest because they earn money every time you make a transaction. The more trades you make, the more fees you may incur which will eat away at your portfolio’s performance. 

Letting FOMO get the best of you 

Do you remember the days of cannabis stocks, NFTs, meme stocks and cryptocurrency were all the rage? I admit, it was challenging not to feel any FOMO when you see clickbaity headlines about everyday people making a ton of money in a short amount of time. Look, I totally get it. I even dabbled in a Bitcoin ETF myself with my “fun” money. But before you take on speculative and volatile investments, be sure to do your research and ensure that it’s a logical decision—not an emotional one. 

Focusing on the short-term

There’s no need to get caught up in the stock market news since it’s normal for the market to fluctuate. In fact, the stock market will go through a correction roughly every two years, lasting about four months on average. When you’re worried about a dip in the market, just picture yourself walking up a staircase, and when you reach the end, you’ll be at the top. 

What is a monthly contribution plan (MCP)?

Once you’ve created your investment portfolio, you’ll want to continue making regular contributions. The more money you add to your portfolio, compound interest can help grow your net worth. Plus, every year, Canadians have the opportunity to contribute to their investment accounts, such as their Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA). 

Here’s an example of how you can carry out the monthly contribution plan in your TFSA:

In 2024, the TFSA annual contribution limit is $7,000. It may sound like a huge amount, but if you divide $7,000 by 12 months, it works out to be $583.33 per month, $134.62 per week or $19.23 per day. I’m pretty sure most of us can think of a few ideas to save up $20 a day. Even if you can’t, start small and work your way up. If you don’t max out your contribution room for the current year, you still can catch up in future years. 

By contributing $583.33 per month to your TFSA, say if you’re invested in an index fund, you can buy shares every month (since there are usually no commissions charged on buying or selling). 

However, if you have an ETF, you’ll incur trading fees (usually up to $10 per transaction). So, you may want to accumulate a larger amount so that you can buy more shares and save on trading fees. 

What is dollar cost averaging?

Dollar cost averaging is a strategy for investors to divide up a large sum of money to spread out their purchases over a period of time. The benefit of dollar cost averaging is that you’re able to buy at the highs and lows of a particular fund and over time, it will average itself out. This way you don’t have to worry about timing the market. 

If you’re following the MCP discussed above, then it may make a lot of sense to do dollar cost averaging since you’re already contributing money into your investment account on a monthly basis. 

What are dividends?

Whenever you buy shares of a company, they may distribute their earnings in the form of dividends to their shareholders. Most of the time they are paid out quarterly, but they could be monthly or special one-time payments. 

For example, when you buy a share of Toronto-Dominion Bank (TD), at the time of writing, their quarterly dividend amount is $0.96 per share. So, if you buy 10 shares of TD Bank, in one quarter, you’ll receive $9.60 in dividends. In a year, you’ll earn a total of $38.40 in dividends ($9.60 in dividends x 4 quarters). 

How does the dividend reinvestment plan (DRIP) work?

When you receive dividends from your investment holdings, you may be able to enroll in a dividend reinvestment plan (DRIP) which allows you to take the cash dividends and automatically purchase more shares. It’s a great way to do dollar-cost averaging without paying any fees or commissions.

Tracking your performance

As tempting as it may be to monitor your portfolio’s performance daily or weekly, there’s really no need to. Especially when you have years before you need to withdraw your investments, such as for retirement. For most DIY investors, checking quarterly, semi-annually or annually should be sufficient. 

How to rebalance your portfolio

So, when you do look at your portfolio, what exactly should you be looking for? Well, you’ll want to determine if your portfolio’s asset allocation needs rebalancing. 

For example, if you have a portfolio with 80% stocks and 20% bonds, but over time it’s changed to 85% stocks and 15% bonds (because your stocks went up in price, but the bonds went down), then you’ll want to rebalance it so that your risk tolerance and asset allocation is back to normal. 

The simple way to do this is by selling the funds that have gone up in price and buying the funds that have gone down in price. 

Personally, what I like to do is take the money I’ve been contributing to my RRSP and TFSA all year long (plus any dividends that don’t have a DRIP option) and buy the funds that have gone down in price so that I don’t need to sell any funds. 

Learning from your investing journey

As humans, it can be easy to let our emotions get the best of us. When it comes to investing, it’s vital to control them so that we don’t get sidetracked from reaching our financial goals. Even if you do get off track, you always have the opportunity to make adjustments. 

Even as an experienced investor, I’ve made plenty of investing mistakes myself. As long as you take them as learning lessons, you can become a better investor and achieve your dream lifestyle. 

This is a first article of a six-part DIY Investing series, which will span over the course of a few months. As a self-directed investor for a dozen years, I’ll be sharing some of my experience and expertise to guide you to become a DIY investor. 

Why you should invest in the stock market 

If you haven’t already started investing in the stock market, there are plenty of reasons why you should start now. If you have some money that you’ve saved up that’s sitting in a low-interest savings account that you don’t need to touch anytime soon (and you’ve got your emergency fund topped up), then you may benefit from investing it. That way, you can earn interest on your money and it will help you reach your financial goals much faster through compound interest and dividend payouts.

Before you start investing, it’s important to think about what your financial goals are. Perhaps you are looking to save for retirement, achieve financial independence/retire early (FI/RE), quit your full-time job, or start a family. Whatever your reason, investing your money is a great way to have money work for you and to grow your net worth.

3 ways to invest your money in the stock market 

Here I’ll explain the three common options for you to start investing your money. 

Using a financial advisor

If you’ve received an inheritance, windfall, or have a complex financial situation, going with a financial advisor may be helpful. They can sit down with you and provide advice on how to invest your money. However, be sure to check if they are tied to specific institutions or products and they should disclose upfront what their fees are. A fee-only advisor can be a good option if you want unbiased advice. 

Since it’s not an entirely regulated industry yet (anyone can give themselves a fancy title to sound legit), you’ll want to check that they have the proper credentials and can suit your needs. Since they make a living from fees, they typically only work with high net worth clients ($250K to $1M+) and their fees can be quite high. Ask for recommendations, referrals and interview several candidates before you make a decision. 

Going with a robo advisor 

With as little as $1,000, you can start investing with a robo-advisor. Typically you’ll fill out a questionnaire and an algorithm will assemble your portfolio. The fees are in the middle of the road: you’ll still need to pay the management expense ratios (MER) of the funds you buy and the cost of having a robo-advisor manage your portfolio for you. For some high-net worth investors, the provider may offer services of a human advisor. This option is a good choice for those who want to be more hands-off with their investments but don’t want to pay high fees with a financial advisor. 

DIY investing 

Becoming a self-directed investor can be a suitable choice for individuals who feel like they have good investing knowledge and want to have full control over which funds they hold in their portfolio and save on fees. Since you’re responsible for your performance, it’s important to keep your emotions out of the equation so that you don’t start tinkering with your portfolio. Your success will be based on your own decision-making ability. 

If you’re looking for a discount brokerage where you can start investing with low fees, consider opening a Qtrade Direct Investing account where you can get up to $150 in bonus cash.

What is compound interest?

Remember when you were a kid and you built a huge snowball? At first, it takes a lot of effort to get the ball going, but once it gets bigger, it gets easier to roll. That’s the same way compound interest works in the stock market. 

When you first start investing with a small amount of money, you’ll see your account grow slowly. Then the pace picks up and the money will accumulate at a faster rate over the long term.

In this chart below, you can see that if you were to invest $6,500 a year (the current annual TFSA contribution limit) with an annual interest rate of 6%, after 10 years it will be worth $85,675.17 when compounded yearly. Even though your total investment will be $65,000, you will have earned $20,675.17 in compounded interest. That’s why Warren Buffett called “compounding interest the 8th wonder of the world.” 

Year	Total investment	Yearly interest	total interst	Total value
1	$6,500	$0	$0	$6,500
2	$13,000	$390	$390	$13,390
3	$19,500	$803.40	$1,193.40	$20,693.40
4	$26,000	$1,241.60	$2,435	$28,435
5	$32,500	$1,706.10	$4,141.10	$36,641.10
6	$39,000	$2,198.47	$6,339.57	$45,339.57
7	$45,500	$2,720.37	$9,050.94	$54,559.94
8	$52,000	$3,273.60	$12,333.54	$64,333.54
9	$58,500	$3,860.01	$16,193.55	$74,693.55
10	$65,000	$4,481.62	$20,675.17	$85,675.17

How compound interest can help you grow your portfolio

Here’s a comparison chart showing how much your investment will grow annually, based on a certain monthly contribution and a certain annual interest rate. 

Please note: the following is for illustrative purposes only. There is no guarantee when it comes to investing as there are always risks involved. 

Amount per month	40 years @ 4% interest	40 years @ 6% interest	40 years @ 8% interest
$100	$116,106.38	$190,767.78	$322,107.93
$500	$580,531.88	$953,838.88	$1,610,539.67
$1,000	$1,161,063.76	$1,907,677.76	$3,221,079.35

In the diagram above, if you had a monthly investment of $100.00 at an annualized interest rate of 4% will be worth $116K after 40 years when compounded yearly. 

Bumping this up to $500 per month, at a 6% interest rate, your investment will be worth $953K.

For the super savers, if you invested $1,000 per month, at a 8% interest rate, you’ll have a jaw-dropping net worth of around $3.2 million after 40 years. 

You can use this compound interest calculator and plug in your numbers to see how much your investments can grow. This goes to show that the longer your time horizon (the amount of time you have to invest your money), then the more time for compounding interest to work its magic! 

The benefits of switching to DIY investing

As humans, it can be easy to sit on the fence and not make any changes. However, as I’ve illustrated above how much money you’re wasting on excessive fees, may be the tipping point for some of you to make the decision to become a self-directed investor. Plus, if you want to be in the driver’s seat to select your funds, then it’s a good reason to hop over the fence. 

When I decided to switch my mutual funds from one of the big banks over to an online brokerage, all it took was a few hours of my time filling out some paperwork, and mailing it in. Again, that was over a decade ago and technology has made it a lot faster and easier. 

Nowadays, you can fill out the paperwork online to expedite the processing times. Once you open an account with your new online brokerage, you’ll be able to transfer your money from your existing RRSP and/or TFSA. 

There are several ways to bring your money over. The most common method when you fill out the transfer form, is to checkmark the box to transfer in-kind so that it ports everything as-is to your new brokerage. It may take a few weeks, so you’ll have to be patient. Once this is complete, you’ll be able to start managing your investment portfolio and save on fees immediately. 

Make the switch and get started

There are many benefits when it comes to DIY investing such as minimizing your fees and being in control of your investment decisions. For those of you who are making the switch from a financial advisor or robo advisor to an online brokerage, then you’ve got your work cut out for you. If you’re willing to make the commitment to learn (which is why you’re here reading this!), then soon you’ll be able to reap the benefits of becoming a self-directed investor. 

Remember, you don’t need to know everything about investing—just the basics to get you started. 

You’ll always have the opportunity to make adjustments as you become a more experienced investor. Unlike a decade ago, there are so many options available to you. The key is to get started early so that you can take advantage of compound interest. 

The next part of this DIY Investing series focuses on learning about your investor personality type.

One of the most common questions I get is what happens to your deposited money if a bank fails? Well the good news is that you’re covered up to $100,000 thanks to the Canada Deposit Insurance Corporation (CDIC). To explain what deposit insurance is, I partnered directly with CDIC who provided this guest post on how your money is protected.

We all work hard to save money for our future – to buy a home, to pay for our children’s education, for retirement or for a dream trip. And we keep these savings in banks and other financial institutions across Canada. But have you ever stopped to wonder what would happen to your money if the financial institution holding it were to fail? Enter the Canada Deposit Insurance Corporation, a federal Crown corporation that protects deposits in all its member banks in the event of a failure.

If you’ve never heard of CDIC or deposit insurance, you’re not alone. Just over half of all adults in Canada are aware of CDIC, and even fewer millennials are aware. But deposit insurance is an integral part of our country’s economic system and it contributes to our overall financial stability. Those who know how deposit insurance works can trust CDIC to make sure their hard-earned savings are there when they need them.

Here are 6 things you need to know about CDIC deposit insurance:

It’s free and you don’t need to sign up

CDIC protects eligible deposits in its member institutions, up to a maximum of $100,000 per coverage category. You do not need to sign up or pay any premiums. Anyone with eligible deposits in one of CDIC’s member banks is protected, as long as these deposits are in Canadian funds. Citizenship or country of residence of the depositor doesn’t impact coverage.

Banks can fail and they have

In CDIC’s 50-year history, they’ve handled the failures of 43 of their members! These failures affected over 2 million Canadians, but not a single dollar under CDIC protection was lost. The most recent failure was in 1996. While it hasn’t happened in decades, it can happen and CDIC works hard to be ready for this possibility.

CDIC has over 80 members

From Canada’s biggest banks, to small trust companies across the country, over 80 financial institutions are members of CDIC. This means that savings in each of these members are protected separately from the other members. Curious if your bank is a member? You can see the full list here. Alternatively, you can look for CDIC’s membership sign on your bank’s web site. Note: some CDIC members have trademark companies which are not distinct members, but which may fall under the coverage of their parent company (Such as EQ Bank falling under Equitable Bank). If your financial institution isn’t on this list, you can contact them and inquire about their CDIC membership.

Not everything is covered

While deposit insurance protects eligible deposits in your own name, joint accounts, trust accounts, TFSAs, RRSPs, RRIFs and more; not everything is covered. CDIC does not protect investment products like stocks, bonds and mutual funds. Here is a full breakdown of what is and isn’t covered.

The “limit” really isn’t the limit

CDIC protects up to $100,000 (including principal and interest) per deposit category in each member. There are 7 categories. For example, deposits in your own name are protected separately from joint accounts. Deposits in RRSPs, TFSAs and more also each receive their own coverage. If you have a chequing account, a joint savings account with a spouse, a joint account with a parent, a TFSA and an RRSP, you could have protection of up to $500,000 – and this assumes all these accounts are with the same member. If you also have a TFSA and a savings account in another member bank, that’s another $200,000 of protection! So there are endless ways to ensure your money is protected by CDIC. Here’s a detailed breakdown of how CDIC covers various accounts.

You can calculate your coverage

So you have several financial products in one or more member banks. Now you want to know how much of your money is safe? No problem. CDIC has an online estimator to help you calculate your coverage. Try it out!

Learn more about CDIC

Now that you’ve learned a little about CDIC and deposit insurance, you’ll be better informed when making financial decisions for yourself and your family. You can follow CDIC on Twitter, Facebook and LinkedIn for more coverage info, helpful tools and videos. Happy saving!

While the concept of an RRSP is simple, what confuses people are the rules that come with the account. Yes, you get some great tax advantages with the account, but you also need to be aware of your contribution limits, withdrawal rules, and how the account works before you start investing.

What is a RRSP?

An RRSP is a registered account that Canadians can open and contribute to for retirement savings up to the age of 71. What makes RRSPs appealing is that for every dollar you contribute, your taxable income is reduced by an equal amount.

For example, let’s say that your taxable income for the year is $70,000 and you contributed $10,000 to your RRSP for the year. That means your total taxable income would actually be $60,000. 

Since RRSP contributions lower the income tax you owe, you would likely get a tax refund from the Canada Revenue Agency (CRA).

Additionally, any capital gains or interest earned within your RRSP are completely tax-free. You would only pay taxes when you withdraw the funds. The assumption is that you would only withdraw money in your retirement years after you’ve converted your RRSP to a Registered Retirement Investment Fund (RRIF). Most people are in a lower tax bracket when they retire, so their overall tax burden would be lower since they had invested in their RRSP in earlier years when their income was higher. 

RRSP vs. RSP

Some financial institutions use the term RSP (Retirement Savings Plan) when referring to an RRSP. They’re the same thing as both are registered with the Federal Government. Just because they don’t use the extra “R” in their documentation doesn’t mean it’s not registered.

What investment products can be purchased in a RRSP?

Some people that research what is a RRSP are surprised to find out that you don’t buy RRSPs. Think of your RRSP as an investment vehicle. You would then purchase investment assets that would be held within your RRSP account. These types of investments could include:

• Cash – You would deposit cash into your RRSP before making your investment decisions. Some people will leave some cash in their RRSP to take advantage of any buying opportunities that come up. 
• Guaranteed Investment Certificates (GICs) – GICs are a very safe product where your principal investment is guaranteed.
• Mutual funds – This investment product pools money from different investors. The fund manager then uses the money to purchase different investment securities based on the goals of the mutual fund.
• Government and corporate bonds – Bonds are another relatively safe investment since they can give you a fixed rate of return. That said, there are some poorly rated bonds that could be risky. 
• Stocks – You can purchase individual stocks within your RRSP that could give you growth and dividends. That said, there’s always a chance that stocks could decrease in value.
• Exchange-traded funds (ETFs) – ETFs are similar to mutual funds in the sense that it’s a single product that has different investments inside it. The major difference is that ETFs track an index instead of using a fund manager. With this strategy, ETFs charge a lower management expense ratio (MER) compared to mutual funds.

How to open a RRSP

An RRSP can be opened through a bank, credit union, or insurance company after you’ve earned income and have filed a tax return. There’s no minimum age requirement to open an RRSP, but many financial institutions do require you to be the age of majority. The only other requirements are that you’re a Canadian resident.

Most people set up an individual RRSP. However, it is possible to open an account for your spouse or common-law partner. This is known as spousal RRSP. This is beneficial to couples where one partner has a significantly higher income than the other.

To open up your RRSP, you can do one of the following:

• Go to a branch – All financial institutions that have a physical location will have staff available to help you open an RRSP. They’ll also be able to recommend some funds so you can start investing right away.
• Call your financial institution – You can open an RRSP over the phone. Note that you would have to be an existing client at the financial institution first. 
• Do things online – Some digital banks operate online only. You could still open an RRSP with them online, but you’d likely have to scan and send over some documentation to open your account.

Once your account is set up, you can contribute money to it. Some people will opt to set up pre-authorized debits so they’re regularly investing. Alternatively, you can make lump sum deposits whenever you have some extra cash available. 

It’s also worth mentioning that you don’t have to use an investment advisor to manage your RRSP. You can open an account online with a discount brokerage and go the do-it-yourself route. This has become a very popular method as of late since it can lower your management fees significantly. Admittedly, this option is often better for people who have some experience investing.

RRSP contribution room

RRSP contribution room is only earned after you’ve worked and filed your taxes. The amount of RRSP contribution you earn is based on 18% of your earned income from the previous year. 

For example, if you earned $50,000 in income, your RRSP contribution room earned for the next year would be $9,000.

Also, note that there is an annual RRSP limit. For the 2021 tax year, the annual limit was $27,830.

Besides the annual contribution limits, there are a few things to consider when understanding what is a RRSP.

RRSP contribution limit carry forward

Any unused contribution room is carried forward indefinitely. For example, let’s say you didn’t use $5,000 of your contribution room. The following year you earned an additional $10,000 in contribution room. That would give you a total of $15,000 in RRSP contribution room available.

RRSP over-contribution

In the event that you over-contribute to your RRSP, you have to pay a tax of 1% per month on the excess contributions until you withdraw the excess amount. That said, you can exceed your RRSP deduction limit by $2,000 without having to pay any penalties. 

RRSP pension adjustment

Employees with a defined benefit pension will get a pension adjustment. This adjustment would reduce the amount of RRSP contribution room you have available. While this may seem unfair, it’s actually meant to make things fair for people who don’t have a pension.

RRSP deadline

The deadline to contribute to your RRSP is 60 days after the end of the year. That typically means the RRSP deadline falls on March 1. Any contributions made during the first 60 days of the year can be used for the previous tax year or your current tax year. 

For example, let’s say you contribute $5,000 to your RRSP on February 1, 2022. You could claim that amount when filing your 2021 taxes or you could claim it on your 2022 tax return.

RRSP withdrawal rules

Technically speaking, you can withdraw your funds at any time, but there may be tax consequences involved. Generally, most people will only withdraw from their RRSP after they’ve converted it to a Registered Retirement Income Fund. You have until December 31 of the year you turn 71 to convert your RRSP to an RRIF.

Once you’ve converted to an RRIF, you’re obligated to withdraw a minimum amount from your account each year. The amount withdrawn would then be considered income and taxed and your marginal tax rate.

RRSP Withdrawal withholding tax

In the event that you need to withdraw funds from your RRSP early, your financial institution would be required to withhold the following amounts for tax purposes:

• 10% (5% in Quebec) on amounts up to $5,000
• 20% (10% in Quebec) on amounts over $5,000 up to including $15,000
• 30% (15% in Quebec) on amounts over $15,000

The above applies to Canadian residents. If you live in Quebec, there would also be an amount held for provincial taxes. For non-residents, a 25% withholding tax is applied on all amounts.

Even though money will be held for taxes, you may still owe additional taxes depending on your tax obligations for the year when you file. In addition, you would lose the contribution room permanently for any early RRSP withdrawal you make.

Home Buyers’ Plan

If you’re a first time homebuyer, you can withdraw up to $35,000 from your RRSP tax-free to help pay for your home thanks to the Home Buyers’ Plan (HBP). That said, the money does need to be repaid over 15 years. Any amounts that don’t get repaid would count as income and you’d lose the contribution space permanently.

Lifelong Learning Plan

The Lifelong Learning Plan (LLP) allows you to withdraw up to $10,000 tax-free in a calendar year to help you pay for your full-time students. You do need to pay the funds back over a period of 10 years.

Transfer to Tax-free First Home Savings Account

Another option for your RRSP is to transfer it to your Tax-free First Home Savings Account (FHSA). Although the program doesn’t launch until 2023, you’ll be able to transfer up to $8,000 a year from your RRSP until you reach the cap of $40,000.

The benefits of investing in a RRSP

By now you likely know what is a RRSP, but you’re probably wondering if it’s right for you. To simply put it, an RRSP is an excellent account since it provides the following benefits:

• Tax-deductible – For every dollar you contribute to your RRSP, you get an equal tax deduction. This can lower the amount of tax you pay and may even result in a tax refund
• Tax-deferral – Interest and capital gains made from your investments within your RRSP are tax-free until you withdraw the funds.
• Contributions carry forward – Any unused RRSP contribution space gets carried forward to future years.
• Can be used for other things – You can use the money within your RRSPs to fund the purchase of your first home or pay for continuing education.
• Income splitting – A spousal RRSP could help couples reduce their overall tax obligations.

RRSP alternatives 

There’s no denying the advantages of an RRSP, but it’s not the only account you have access to. Which account you use should be based on your individual circumstances and goals.

Tax-Free Savings Account

A Tax-Free Savings Account (TFSA) is something that Canadian residents that are at least the age of majority have access to. You don’t get a tax deduction on contributions, but all investment earnings are completely tax-free. That means when you withdraw your money, no taxes are paid. There will always be a debate between RRSP vs TFSA, which is better. Generally, if you make less than $50,000, you’re better off investing in your RRSP instead of your TFSA. That’s because the tax benefits you get from an RRSP contribution don’t benefit you much when you have a lower income. You’re better off contributing when you’re in a higher tax bracket. 

Tax-free First Home Savings Account

If your goal is to buy your first home, the FHSA is arguably the best account to use. That’s because the FHSA combines the tax benefits of an RRSP and TFSA. You get a tax deduction on contributions and any capital gains you make are completely tax-free. The catch is that you can only contribute $8,000 a year up to $40,000. Unused contributions do not carry forward. You also have 15 years from the time you open the account to use the funds. The FHSA becomes available in 2023.

High-Interest Savings Account

A High-Interest Savings Account (HISA) shouldn’t be used for retirement savings since the interest you’ll earn likely won’t be inflation. That said, if you’re looking for a place to park your money with no risk of it declining in value, then a HISA might be the best option. 

What is a locked-in RRSP?

A locked-in RRSP is more commonly known as a locked-in retirement account (LIRA). A LIRA is required if you leave an employer that has a defined benefit pension plan. Basically, a portion (or all) of what you’ve accumulated in your pension would be transferred to a LIRA. Once the money is in a LIRA, you would purchase investment products.

This is required since a DB pension is a type of locked-in retirement account. Although a LIRA won’t give you a fixed payment when you retire, you can use the account to invest your retirement savings.

Is an RRSP worth it?

Now that you know what is a RRSP, you’re likely wondering if an RRSP is worth it. In most cases, opening an RRSP is a great idea. Not only will it help you save for your future, but you’ll also get a tax deduction for your contributions. To maximize your RRSP, you should contribute regularly and invest your money. Over time, your savings will grow which will fund your retirement years.

At first glance, switching your Registered Retirement Savings Plan may appear difficult. If you’re not careful, you could end up making withdrawals that could trigger tax implications. You would also likely have to pay a fee when you close your accounts. However, porting your Registered Retirement Savings Plan to somewhere else is a surprisingly easy process. Generally, all you need to do is sign one form with your new financial institution, and they’ll take care of the rest. It’s that easy!

How to transfer your RRSP

• Open a new RRSP at another financial institution or discount brokerage
• Fill out the paperwork and have the new financial institution request an RRSP transfer from your old financial institution
• Choose between transfer in kind or transfer in cash
• Initiate the transfer
• Wait for the funds to arrive at your new financial institution

To get your RRSP transferred to another financial institution or discount brokerage, all you need to do is fill out the paperwork to authorize them to move the funds over. This sounds simple enough, but you should do a few other things to prepare for the transfer.

First, grab the most recent statement from your investments and bring it to the new financial institution. They’ll basically want to know if you want to do a transfer “in kind,” where you can literally just move your investments to them as is (when available) or if you want them to “sell” all your investments so you can start fresh with the “cash” from the sale. An “in cash” sale is mandatory if you’re moving your money to a financial institution that doesn’t offer the same investments as your previous one. You’d basically sell your old investments at fair market value and then reinvest in something else at your new financial institution.

This in kind or in cash transfer is arguably the most important part. Since the new financial institution is requesting a transfer from your old RRSP to your new RRSP, no taxes will apply. What that means is that you can’t just withdraw your finds on your own and then redeposit it into your new accounts. There’s a specific process that needs to be followed. If you did it any other way, it would trigger withholding taxes that would affect your income tax return.

Now the institution you’re leaving won’t be happy once they find out you’ve triggered the transfer, but they really have no say at this point. What they can do is charge you a transfer fee which should be posted on their website. The good thing is that the receiving institution will usually cover that fee for you up to a certain amount so ask them about it before you sign.

The transfer can take some time but you still want to ask your new financial institution about when you should expect your funds to arrive. Monitor your account and if your money hasn’t arrived by the time they said it would; make a follow-up call. While rare, your old financial institution may be holding things up.

Once your money is in your new account, you can start investing. Alternatively, your new institution can start investing on your behalf. Be mindful of the RRSP deadline if you want to transfer things in advance. The deadline is 60 days after the start of the new year, but transfers can take weeks to complete.

Note that since you’re just transferring funds, your available RRSP contribution room is irrelevant. You’re not adding any new funds to your RRSP, so there’s no to worry about how much space you have left.

Should you transfer your RRSP?

People who are seriously considering transferring their RRSP (or any investments, for that matter) usually aren’t satisfied with how their money is currently being handled. Making a switch just because your investments haven’t been performing well is probably a bad idea. Why? Because markets change all the time, so you need to stick to your plan (assuming you’ve got an actual investment plan).

Admittedly, changing financial institutions just to lower your management expense ratio (MER) is often worth it. For example, let’s say you’re paying an average MER of 2.5% for a mutual fund. If you switched to an all-in-one ETF, the MER is usually below .50%. That’s a 2% savings that could translate to tens, if not hundreds, of thousands of dollars over the course of your investment life.

Questrade’s entire marketing campaign is based around lower fees, and I admit, it’s probably worth making the switch. That said, you need to have the right mindset before you make any changes. Switching just because your investments haven’t been performing well in the last few months is a bad idea. Why? Because markets change all the time, so you need to stick to your plan (assuming you’ve got an actual investment plan). However, if your investments are constantly performing below market averages, then you should switch.

Another instance where you may need to transfer your RRSP is when you’re changing employers. If you were part of their group plans, you likely wouldn’t have access anymore if you leave the company. This would require you to move your money out. Fortunately, as you’ve already, it’s easy to make a transfer since it can be done in a lump-sum.

Note that if you’re looking to transfer your Registered Pension Plan (RPP) to your RRSP or you want to convert your RRSP to a Registered Retirement Income Fund (RRIF), it’s a slightly different process that requires a bit more paperwork. Basically, when you leave an employer with a defined benefit pension plan, your plan administrator will provide you with different options for your money. How much you can transfer to your RRSP/RRIF/LIRA will depend on your years of service, a formula that determines your pension income, and what contribution room you have available. The paperwork you get after leaving will be quite clear, so there shouldn’t be any confusion. 

When should you transfer your RRSP?

Let’s assume that you’ve already decided you want to switch. There’s really no reason to delay things. Don’t try to time the market so you’re selling high and then buying low after the switch. Just stick to your investment plan, whatever that may be.

One thing that might hold you back is any fees associated with transferring your funds. Some mutual funds have deferred sales charges which will cost you a percentage of your portfolio when you make the transfer. There’s no denying that these fees suck, but the amount you’ll save in the MER difference could pay for itself after a few years. Note that DSC fees have been banned in Canada, so they’re no longer a major concern.

If you’re switching from an employer plan, you may have a set deadline to move things out, which is why you don’t want to delay things.

Before you make the switch, you’ll need to decide where you’re sending the money. Is your goal to use a robo-advisor since it’s a low-maintenance, no fee solution? Justwealth has become one of the most popular robo advisors in Canada, and they’ll even give you up to $500 for free if you sign up with my referral link. Wealthsimple gives people $50 when they sign up. What’s great about robo advisors is that they’re transparent and don’t require any effort on your end.

Some people will prefer to manage their finances on their own, but that will require you to know what you’re doing. This may sound intimidating, but if I learned to manage my finances on my own, so can you.

When not to transfer your RRSP

In a few situations, you might not want to transfer your RRSP or you might not be allowed to at all.

If your employer offers some kind of RRSP matching program or has a group rate for investments, there’s a good chance that you’ll be forced to keep your money invested with a specific financial institution or brokerage. This may be annoying, but considering you’re getting a match or access to funds which cost less, I think you’re actually coming out ahead.

As mentioned above, you shouldn’t transfer your RRSP just because you’re disappointed with the performance. I did this years ago before doing my research and ended up with an advisor with a financial institution that put me in overpriced mutual funds.

Finally, if you recently purchased investments that have a holding period, you shouldn’t make a transfer right away. Just wait for the holding period to end so you can avoid paying any additional fees. For example, with the Home Buyers Plan, you need to have your money in your RRSP for at least 90 days for it to qualify. If you need that money, you’re better off leaving it in.

Final thoughts

Transferring your RRSP to another financial institution is simple; you just want to make sure you’re doing it for the right reasons. Once you’ve committed, take the time to ensure that everything is the way you want it to be so you don’t end up switching again in a few years. Note that if you’re looking to transfer your TFSA to another financial institution, it works in a very similar way, but you have a few additional options.

As you can imagine, it follows a similar model to the Savings Plus Account. As in, you’ll get a simple account that pays a respectable amount of interest with no monthly fees. Read my EQ Bank Retirement Savings Plan review now for everything you need to know about the account.

EQ Bank RSP features

• RRSP Savings Account
• 3%* everyday interest rate
• RRSP GIC

The EQ Bank RSP is pretty basic and comes with two features. You can deposit money into your RRSP Savings account, which pays you a decent amount of interest. You also have the option to purchase RRSP GICs. The interest rates for GICs mirror the existing EQ Bank GICs.

You’re unable to purchase ETFs, mutual funds, stocks, etc., within your EQ Bank Retirement Savings Plan, so it’s really meant for people who are looking for fixed income investments. That could be for people who plan on using some money for the Home Buyers Plan or even people who have retired and want to earn some interest on their cash that’s sitting in the RSP.

Contributions are made online, but you need to reach out to the contact center if you need to make any withdrawals. You can also link your RSP to your Savings Plus Account.

You can only have one RSP plan set up with EQ Bank, and currently, there are no Spousal RSP and Locked in RSP/Retirement Accounts (LRSP/LIRA) available. There is a plan limit of $1,000,000.

To open an account, you must have an Savings Plus Account, which also has no monthly fees.

EQ Bank RSP contributions

The only way to make contributions to your EQ Bank RSP is to do it online from your Savings Plus Account, Joint Account, or via an electronic funds transfer.

You can also transfer funds from another RRSP account that’s with another financial institution but it requires a few steps. First, you need to initiate the transfer-in process online through self-service. After that, the contact center will complete the interbank process manually. Here’s a more detailed guide on how to transfer your RRSP to another financial institution if you’re interested.

EQ Bank RSP withdrawals

If you need to withdraw from your EQ Bank RSP, it needs to be done through the contact center. There is no online self service. Standard tax rules do apply. That said, you can withdraw from your RSP without having to pay taxes for one of the following reasons:

• Home Buyers Plan (HBP)
• Lifelong Learning Plan (LLP)

Any funds withdrawn would be sent to your Savings Plus Account or Joint Account. You can then transfer the money to wherever you’d like.

Tax documents

T4RSP and contribution receipts are typically available to clients in January. They are available online only, so you can just download them if you need a physical copy. All contributions and withdrawals are reported to the Canada Revenue Agency.

How does the EQ Bank Retirement Savings Plan compare to others?

Comparing the EQ Bank Retirement Savings Plan to others is not really easy to do as it depends on your goals. It’s fair to say that the EQ Bank RRSP Savings Account pays more than other savings accounts that can be held within an RRSP at other banks. Some people may also prefer the EQ Bank RRSP Savings Account over a money market fund since the interest rate is more predictable.

However, if you’re looking to invest in equities such as ETFs, stocks, and mutual funds, you can’t do it with the EQ Bank Retirement Savings Plan.

Why use EQ Bank?

Since the EQ Bank Retirement Savings Plan focuses on fixed income investments, it’s ideal for people who want to invest their money in low risk products. For example, if you’re planning to buy a home in the near future and plan to use the Home Buyers Plan, parking your money in the EQ Bank RRSP Savings Account guarantees that the money you have in won’t go down in value.

Now let’s say you’re approaching retirement and you want to ensure that your nest egg is safe. Many people start dedicating a portion of their portfolio to fixed income investments. The EQ Bank RRSP Savings Account or RRSP GICs are a great option to put your money.

Is EQ Bank safe?

Some people aren’t familiar with EQ Bank, so they wonder if the company is safe. In case you didn’t know, EQ Bank is a trademark of Equitable Bank, who’s a Member of the Canadian Deposit Insurance Corporation (CDIC). That means each eligible account is protected up to $100,000.

Under CDIC, your personal account, joint account, and RSP are all considered separate accounts. That means if you had all three, you would have up to $300,000 in coverage.

Final thoughts

When you look strictly at what the account is intended for, my EQ Bank Retirement Savings Plan review is positive. People who want to put their RSP in fixed income investments should consider opening an EQ Bank Retirement Savings Plan.