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Think back to the very first time you contributed to a registered Retirement Savings Plan (RSP). It was probably a simple saving-type account. Then, as you accumulated cash, you may have purchased a GIC RSP. As you became more sophisticated, you probably added one or more mutual fund RSPs, to begin exploring the opportunities of the stock and bond markets.
That's the path most Canadians follow with their RSPs - simple cash to start, gradually moving into more sophisticated investments.
At some point, you may want to make the move to a single RSP that can hold all these types of investments - and more. You might be ready to take control with a self-directed RSP.
To find out more, click through the links below:
What is a self-directed RSP?
A self-directed RSP is not an investment, per se. It's more like a way of investing.
Think of it as a tax-sheltered container into which you can put a number of different investments, including:
- Canadian, U.S., and international stocks
- Mutual funds
- Federal, provincial, and corporate bonds
- Stripped bonds and coupons
- Mortgages and mortgage-backed securities
- GICs and Canada Savings Bonds.
Did you know? You can hold your own mortgage in your RSP. It must be set up as a legitimate "arm's-length" arrangement, however, and at current market rates. In addition, the mortgage must be insured under the National Housing Act.
The advantages of a self-directed plan
So, why would anyone want a self-directed plan in the first place? Consider the following benefits:
More diversification. With a self-directed plan, you can hold any qualifying investment you want. You're not limited to one type of asset, such as GICs, or to the products of just one institution.
Control. You call the shots. You can take on as much risk, or as little, as you want.
Easier monitoring. With all your registered assets in one place, you'll get one statement. It's easy to see at a glance how your portfolio is doing and to calculate your current asset mix.
Of course, there's a cost to all these benefits - in the form of an annual administration fee. Typically, these run from about $25 to $125.
Tip: Many institutions will waive the self-directed RSP administration fee provided you maintain a minimum balance in the account (usually $15,000 or $25,000).
Is it right for you?
If you answer yes to one or more of the following questions, you might want to consider a self-directed RSP.
- I want to hold mutual funds and GICs from a number of different issuers in my RSP.
- I want to hold stocks and bonds in my registered plan, as well as cash and mutual funds.
- I want to make my own investment decisions. I want to be able to monitor and track my portfolio myself so I always know exactly how I'm doing.
- I have a number of different RSPs that I'd like to consolidate into one. That way, I'll need to review only one statement instead of a mittful.
- I am comfortable paying the annual administration fee, or I can maintain enough assets in my account that the administrator will waive the fee.
Tip: "Self-directed" doesn't necessarily mean "self-managed." You can set up a self-directed plan with a full-service broker if you want ongoing investment advice. Just remember that the commissions and administration fees will probably be higher.
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