As any experienced gardener could tell you, growing a healthy garden is all about balance. If you only planted one type of flower, the whole garden is at risk of being wiped out by a single pest. The better approach is to add a variety of plants that have different growth periods, appearances, and types of resilience.
The same holds true for building your portfolio. Holding a diversity of savings vehicles will help you maximize your savings and protect you from the ups and downs of the market over time.
Building a strong financial future starts with a plan, and we believe that plan should include a diversity of savings vehicles, which will help you maximize your savings and protect you from the ups and downs of the market over time.
Exploring your investmment options
As you consider how to balance your portfolio, it’s important to understand what investments are available, and how they can benefit you.
Key benefit: Save more while still enjoying access to your money, any time you need it.
A HISA is a variable savings account that offers no minimum balance requirements, the ability to withdraw funds as needed, and typically a higher interest rate. If you need accessibility to your funds, this is a convenient, flexible option.
Key benefit: Grow your savings over time in a safe and reliable way.
A Guaranteed Investment Certificate (GIC) is a lower-risk investment that provides a guaranteed rate of return over a fixed period. Choose from convenient 1- to 5-year terms with a minimum non-redeemable investment of $500.
HOT TIP: At SCU, all deposits are 100% guaranteed by the Deposit Guarantee Corporation of Manitoba,* so you can have peace of mind that your savings are protected.
Key benefit: Enjoy tax-sheltered savings, whether you have a little or a lot to contribute.
A TFSA is a flexible, general-purpose savings vehicle that allows you to earn tax-free investment income to help you achieve your financial goals. There are no restrictions on the way you use your TFSA funds (contributions and earnings), so they are a great choice for your mid- to long-term savings goals. TFSAs are best used for savings that can grow over months and years, but with no tax at withdrawal and minimal fees, they are quickly accessible when needed.
Key benefit: Reduce your taxable income and set yourself up with a steady income after retirement.
An RRSP is a tax-deferred savings plan designed to help you meet your retirement savings goals. Contributions to an RRSP are tax-deductible, and investment growth within the account is tax-deferred. This is beneficial because you can reduce your taxable income now through tax-deductible contributions and defer paying taxes on your investment earnings until after retirement. At that point, you are typically earning less income and are likely in a lower tax bracket.
Key benefit: An RRIF is a plan that converts your RRSP savings into income after retirement.
Instead of cashing in all your RRSP savings at once (and paying income tax on the total amount), an RRIF allows you to make withdrawals as you need them and lets the rest of your money continue to grow, tax-sheltered.
Speciality registered accounts
Key benefit: Receive tax benefits and other credits for specific financial goals or life circumstances.
Depending on your individual situation, you may be eligible for other types of registered products, including:
An account designed to help you save for your child’s future post-secondary education with tax-deferred savings. Your savings grow even faster with government incentives, including contributions from the Canada Education Savings Grant (CESG) and Canada Learning Bond (CLB).
An account that allows you to get into your first home faster. Any FHSA contributions you make are tax-deductible and all withdrawals you use to purchase your first home, including the investment income, are non-taxable. This means the FHSA not only helps you save for your down payment, it also reduces your tax bill, saving you money in the meantime. Plus, if you save more money than you need in your FHSA, you can transfer any savings you don’t use to purchase your first home to an RRSP or RRIF. Annual contributions are capped at $8,000 with a lifetime contribution limit of $40,000.
A government program designed to help Canadians who are living with disabilities save for future financial needs. There are two government programs available to help you access extra funds for your RDSP: The first is the Canada Disability Savings Grant (CDSG), where the Government of Canada contributes up to $3 for every $1 you put into the fund (depending on your household income), up to a maximum of $70,000. The second is the Canadian Disability Savings Bond, which you can receive if you’re eligible for the Disability Tax Credit (DTC). Through the CDSB, the federal government will contribute up to $1,000 annually for 20 years to a lifetime maximum of $20,000 if you continue to receive the DTC — whether you contribute to your RDSP or not..
Other market instruments
Key benefit: Diversify your portfolio according to your needs and risk tolerance.
While market investments typically don’t guarantee your initial investment, they are a good way to diversify your portfolio by providing a higher potential rate of return. This includes:
Stocks: A share of ownership in a company. Stocks have historically had higher risk, but higher long-term returns than bonds or cash-based investments.
Bonds: Debt instruments that allow governments and corporations to borrow money from investors, rather than a financial institution. Bonds are generally less volatile than stocks but offer more modest returns.
Mutual funds**: A type of investment where multiple investors pool money to purchase securities like stocks, bonds, and other money market instruments.
HOT TIP: Have questions about investing in the market, or about your own portfolio? Our wealth advisors are here to provide expert advice so you can make the most of your money.
Learn more about our wealth management services. and
book an appointment today to take the next step.
Creating an overall strategy
Simply looking at the variety of investment options open to you can seem overwhelming. Which should you choose, and how should you allocate your funds? Here are a few general rules to keep in mind:
Remember it's about balance:
At the end of the day, you aren’t limited to just one type of investment. A healthy and diverse portfolio includes:
- A mix of stocks, bonds, and money market instruments
- Mutual funds that combine different types of securities with different investment styles like growth or value
- Avoiding heavy concentration in any one sector or industry
- Investments from a variety of geographic areas and currencies (international stocks)
- A combination of savings and investment products, including variable savings, RRSPs, TFSAs, and GICs
Keep your timeline and life goals in mind
What you hope to accomplish with your investments, and how far you are from those goals, will affect the level of risk you can handle. For example, if you’re getting ready to retire in the next few years, nearing a financial goal, or need a reliable stream of income from your investments, you may choose a more conservative investment mix. On the flip side, if you’re focused on growth, have a longer time horizon, and can endure volatility, you may want to consider an aggressive investment approach.
Know your risk tolerance
As an investor, you need to accept that some level of risk is inherent in most investments, and there will be ups and downs along the way. Your risk tolerance — whether aggressive, conservative, or somewhere in between — determines how you’ll diversify your portfolio. Your financial advisor can help you explore this by asking a series of questions to determine how much fluctuation in the value of your investments you are willing to accept.
Ready to start?
Meet with a financial advisor who can help make sure you have the right mix for your needs and risk tolerance. Even if you’re further along your investment journey, it’s a good idea to meet with a financial advisor every few years to re-evaluate your investment mix and rebalance your portfolio.
Take the next step
We can help! Fill out our contract form, call us today at 1.800.728.6440, or book an appointment to connect with a member of the SCU team of financial advisors.
And, try out our savings calculator to see how to reach your goals faster.
See how much more you can save
*Includes all savings and chequing accounts, RRSPs, RRIFs, TFSAs, FHSAs, and GICs.
**Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc
