Tuesday, September 22, 2009

Investing again

One of the things I wanted to do after paying off the TD loan was to invest some more. At work I've now increased the RRSP deduction to 2% of pay. It used to be 1%. I started out at 1% around a year ago.

The company matches up to 3%. This is a great investment. For every dollar of my own I spend the company adds a dollar. Plus on the income tax you end up getting around half of it back due to the tax deduction. So matching RRSP is a good deal with 150% profit plus whatever returns the investments make.

The RRSP scheme is set up with manulife. They have a well designed web site with a login section specific to my company. It was easy to navigate around and see what I have there. Due to good luck my investments have done OK so far. As it happens I joined around the time of the TARP crisis last year when SPX was around 700, NASDAQ around 1400, DOW 6000 etc. Since then they have recovered a fair bit so that was timely for me.

I did change my investments though. Before it was a 'balanced' scheme based on allocation funds. I decided to change the percentages going forward to a more conservative approach. There's still some allocation, i.e. stock market, funds. But I've added more bond and fixed income.

Since I'm getting 150% profit anyway on money spent it's valuable to preserve those wins. Plus it would be nice to actually retire some day. So it would be unfortunate to have the account wiped out. Not that I'm anywhere near retirement. The other thing is I see the RRSP part of investing as safer and more conservative.

I'm also interested in making more speculative, unconventional, self directed 'investments' outside of RRSP. So I might be more willing to take risks outside of the RRSP and play it safer inside the RRSP. That kind of makes sense to me.

Hopefully this 2% deduction will go well. I'll plan to reevaluate in around 6 months or so and aim to set it to the max 3% deduction.


Anonymous said...

Max out to 3% ASAP. Eat Kraft Dinner every night if you have to, but every day that goes by is FREE MONEY you are missing out on. Surely one more per cent of your pay won't be missed, and you are able to automatically double that investment at no cost and no risk. Always always always contribute as much as the employer is willing to match. This is a total no brainer.

You: "Hey friend, I just put $10 into my savings account."
Friend: "Here's another $10 for you. Put that in too."
You: "Gee thanks! You're a great friend!"
Friend: "Yeah, I'm awesome. Listen. I have another $20 bucks. If you put another $20 in, I'll give it to you so you can save a total of $40 on top of the $20 you have. You squirrel away $30, but end up with $60. Sound good?"
You: "Yessssss... But how about I just put another $10 in and you give me just $10 of that $20 you're offering?"
Friend: "Sure, we can do that, but you're letting $10 go to waste."
You: "I realize that. I just want to see how this whole $40 thing works out for me."
Friend: "You want to see how free money is going to 'work out' before you let me give you more?"
You: "Yes."
Friend: "You're strange, but that's part of the reason I value you as a friend"

Don't wait another day. Max it out.

Rob said...

That's an excellent analogy. I wouldn't even be reduced to KD if I increased it again to 3%. Free money is even better than free food and liquor. So you're right I should go to max 3% right now instead of leaving 6 months of free money on the table.