If you are not very familiar with how RRSPs work, check webpage of any major bank and surely enough they will have RRSP Q&A. But what happens to your RRSPs after you deposited them?
There are 3 main strategies with RRSP investments:
1. Various savings account, including GICs. The only difference from regular savings accounts is no tax (at least until you cash your RRSPs). These are usually low single digit returns.
2. Mutual Funds. A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities. You returns can be higher, sometimes even in double digits, but its hit or miss. Also you have to remember that everyone is buying their share of mutual funds this time of year. Simple law of supply and demand dictates prices to be high. Which means you are buying when price is high. You probably will have better returns buying same funds any other time of the year and selling them now.
3. Self directed RRSPs. This is when you (not a fund managing team) decides where your money is invested. In could be specific stocks again or you can invest in mortgages. If you have enough to give yourself a mortgage, your interest may become tax-deductible even if you are not self employed. Talk to your accountant as there are some requirements for this. Or you can lend money to someone else who will use it as a down payment or a mortgage on a property. Returns on such investments are closer to double digits and usually are guarantied.
So think for yourself what you want to do. And let me know if Real Estate is your way to wealth.
Disclaimer: I am not a financial adviser or accountant and you should consult with professionals before making your mind where and how to invest
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