April 14, 2024

The Queens County Citizen

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Investing beyond the RRSP and TFSA

Un couple de premiers acheteurs

Diversify your portfolio by investing in asset classes like commodities, artworks, precious metals, forests… (Photo: 123RF).

Guest Expert. You just received a tax refund and you want to invest it, but all your registered plans (RRSP, TFSA, RESP, etc.) are maxed out. You are entering a complex territory where there are many investment options. It is also necessary to fully understand the tax implications before making an investment decision, otherwise the tax bill could be steep. Here are some possible solutions for you.

Invest in unregistered investments

Investing in a non-registered account is probably the easiest option because it allows you to keep the same types of investments you have in your registered investments. Investments in a non-registered investment account include stocks, bonds, mutual funds, exchange-traded funds (ETFs), guaranteed investment certificates (GICs) and more.

You can choose investments that suit your investor profile and financial goals.

The main disadvantage of a non-registered account is that it comes without the tax benefits of registered plans. Therefore, you have to declare the yield generated (interest, dividend, capital gain etc.) when you file your income tax return and you have to pay tax on this amount.

Invest in real estate

Real estate is a popular area of ​​investment because it provides steady cash flow and capital appreciation while diversifying your portfolio due to its low correlation with other asset classes such as stocks and bonds.

However, getting into real estate investing is expensive and requires active asset management. Additionally, real estate is often illiquid because property cannot always be sold quickly.

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If you want to avoid some of these pitfalls, you can invest in real estate by participating in real estate investment trusts (REITs) or by investing in real estate mutual funds or exchange-traded funds (ETFs).

Invest in unconventional assets

You can diversify your portfolio by investing in asset classes like commodities, artworks, precious metals, forests etc. Non-traditional assets have different characteristics from traditional assets and can offer advantages such as low correlation to stock markets, protection against inflation, higher returns and opportunities for diversification.

However, it is important to note that unconventional assets are riskier and illiquid than traditional assets and often require larger investments with higher fees.

Life Insurance

Taking life insurance can sometimes be an attractive option for people looking to diversify their portfolio and protect their wealth while benefiting from tax benefits. However, it should be understood that life insurance is not an investment but a financial protection.

Because claims are paid tax-free, a life insurance policy, whether whole, universal or participating, is sometimes considered a tax-efficient investment, especially in the context of estate planning. This approach is intended for the tiny minority of individuals who have used all other methods to manage their tax bill, such as RRSPs, TFSAs, RESPs, etc. These people must pay off all their non-exempt debts, pay a very high marginal tax rate, and make sure their retirement is well-funded so they can distribute their surplus wealth to others.

Finally, other types of insurance can be considered, especially for shareholders in a company.

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Invest in your image

As you can see, the choice to invest outside of registered investments is wide. It is important to note that all investments have risks and rewards; A thorough analysis of your financial goals and risk tolerance is essential before deciding where to invest. A financial planner can help you develop an investment strategy that suits your specific financial situation, because in this area, expert advice can make all the difference.

Pascal Duguay, Pl. Fin.

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