Tag Archives: HISA

I’m Not Sure What to Do with My RRSP Money—What Should I Do Till I Decide?

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Well it’s January and “RRSP Season” is officially open. Banks will be angling for your business and offering all sorts of promises of high returns and low risks as tantalizing bait. You may be afraid they may hook and land you like a spring migration Sucker. If you’re not sure what to do with your RRSP money but you want to get it in by the end of February, what should you do?

Keep Your RRSP Funds Flexible and Accessible

Check Transfer Fees for RRSP Funds

What you don’t want to do is get rushed into a bad decision by an arbitrary deadline set by the government’s tax department.

Before investing anywhere, ask

  • can you can move your money in the future and
  • how much would a transfer cost

Many banks charge $25-150 to move your RRSP money to another financial institution. A very select few charge nothing.

UPDATE: Please be aware that as of January 2015, Tangerine has started charging a fee if you transfer your RRSP or TFSA from Tangerine to another bank, credit union, brokerage or financial institution.

Choose RRSP Investments That Don’t Lock in Your Money for the Long Term

Until you have time to make a strategy and plan your investment, you shouldn’t sign or buy anything that locks you in for a long term.

Beware of

  • regular GICs
    Most Guaranteed Investment Certificates can NOT be cashed before they mature. Only buy redeemable GICs or short-term GICS (6 months to 1 year) if you are still researching your long-term RRSP investment plan.
  • back-end-load mutual funds
    Some mutual funds charge a large fee if you sell them or transfer out of them within the first 5-10 years that you own units in the fund. These fees may be called Deferred Service Charges, DSC fees, or Deferred Sales Charges, etc. Only buy no-load funds while you are researching your plan.
  • cyclical stocks
    Some types of businesses are prone to boom–and-bust cycles. For example, the Canadian petroleum-producing companies often see their stock prices vary in a wavy pattern depending on the swings of the world price for oil. Be very wary investing in any shares or stocks if you are planning to only stay invested for a short time but be especially cautious with cyclical industries.

What Investments Are Good for a RRSP for a Very Short Term Investment?

If you’re committed to doing some research and making a plan for investing your RRSP money, you may need to park your contribution temporarily until you’re ready to start implementing your plan.

What can you invest in for a very short term?

  • A high interest RRSP savings account
  • A short-term GIC
  • A short-term redeemable GIC
  • A money market mutual fund
  • A money market ETF

None of these investments will give you a great rate of return. You are sacrificing yield to increase the safety and accessibility of your principal.

It’s important to remember that you can lose money in a money market fund. Personally, I would recommend the savings accounts or cashable GICs but not the money markets.

Don’t leave your money parked for too long! None of these investments will pay enough interest right now to keep up with the cost of inflation. They make reasonable spots to shelter your investment in the short term but they are not meant for long term use.

The Drawbacks of Transferring a RRSP Contribution to Another Financial Institution

You may have to pay a fee to transfer out your contribution.

It may take 4-8 weeks to move your money from one institution to another. And during that transit time, your money may be earning no interest, distributions, dividends or capital gains whatsoever.

Where’s the Best Place to Invest my RRSP Money in the Short Term?

I don’t know because I’m not you.

Here are some places to consider, though:

Tangerine, formerly called ING Direct
One place to consider is Tangerine.ca ING Direct.

UPDATE: Please be aware that as of January 2015, Tangerine plans to start charging a fee if you transfer your RRSP or TFSA from Tangerine to another bank, credit union, brokerage or financial institution.

From June 1 till July 31, 2014, you can earn 2.50% (That’s the annual rate!) on cash deposited in a RRSP Investment Savings Account at Tangerine ING Direct that increases your total in all savings type accounts at Tangerine above your balance on April 7, 2014. It has to be “new” RRSP money, not just a transfer from another Tangerine ING Direct RRSP product.

It’s important to understand that you are NOT earning 2.5% on your investment for only investing for 3 months. For example, if you contribute $1 000 to your RRSP on January 1, you will not get paid $25 on May 1; You would get a bit less than 1 /4 of that amount, or about $6.

After July 31, the rate will drop down like a rock, probably to the previous rate of 1.35% or less per year. So you will want to keep working on your investment plan and shift the money once you know where you want to keep it for the long term.

There are no fees or service charges nor is there any fee to transfer your RRSP money out of your Tangerine ING Direct ISA to another financial institution at the time this article was written in January 2014. (Always phone and check for changes to fees and transfer fees BEFORE making an investment! Things can change for the worse.)

I will no longer recommend Tangerine because it will charge a transfer fee.

Peoples Trust
Peoples Trust does have free transfers of RRSP funds to other institutions. (Although you should confirm this again before investing.) It only offers GICs, however. There is a 1-year-term non-redeemable GIC available with a minimum investment of $1 000. If you know you won’t be ready to invest the money elsewhere for a year, it is a possible choice to consider.

Home Trust
Home Trust also appears to have free transfers of RRSP funds. (Again, confirm before investing in case this has changed.) It offers 1-year-term non-redeemable GICs and also 90-364 day short-term investments. The minimum investment is $1 000 for a GIC and $2 500 for a shorter term investment.

PC Financial
PC Financial does not offer free transfers of your RRSP funds to other financial institutions. I won’t recommend them for that reason.

Other Institutions
I’m sure there are other places, especially credit unions or trust companies, that can offer similar benefits. If you use one, please share some information about it with a comment.

Where Do I Park My RRSP Contribution?

UPDATE: I no longer will use Tangerine as previously described because they now charge a transfer fee. I usually do drop our RRSP investment in to Tangerine ING Direct in January, and then move it by transferring it to one of our other planned investment choices. It’s worked very well for me in the past, especially since we can make the contribution online with a couple of mouse clicks, and can print off our official RRSP contribution tax receipts very easily. (No waiting for the mail!)

 

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Do you already have a RRSP investment strategy or are you still researching your options? Do you ever park your new RRSP money temporarily until you can use it effectively? If so, where? Please share your views with a comment.

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How to Buy Units in a High Interest Savings Account Fund at RBC Direct Investing

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UPDATE: This article is historical, from 2013. I no longer invest with RBC Direct Investing.

As I mentioned, if your minimum balance drops below $50,000 in market value at RBC Direct Investing, you will no longer qualify for $9.95 trades. That’s making me nervous about investing all of my money into an ETF or stocks quickly. While I’m dithering, I decided to park some of the money in a high interest savings account fund within my RBC Direct Investing RSP account.

For those who are investing in a non-registered discount brokerage account, please remember that transferring money out of a *registered* account at a brokerage to a higher-paying HISA at another financial institution is very cumbersome. It involves using a T2033 form and can often take 6-8 weeks to get the money moved in one direction. Buying units in a HISA fund is the only practical solution to this problem for registered accounts such as TFSAs, RRSPs, RRIFs, LIRAs, RESPs, RDSPs, etc.

What HISAs Can I Buy Within my RBC Direct Investing RSP?

According to information on the Canadian Capitalist website, the three Canadian dollar HISA funds available through RBC Direct Investing online are: RBF 2010, 2020 and 2030. They appear to offer the same terms.

It appears that you cannot buy units in high interest savings account funds offered by other financial institutions. A kind reader pointed out to me, though, that by speaking on the phone with BMO InvestorLine he was able to get access to other HISA funds there, as he had already bought the maximum CDIC-insured amount of AAT770, $100,000. It’s possible a similar reason might allow a customer to purchase other HISA funds by phone from RBC Direct Investing. Unfortunately, I don’t have enough funds in this RRSP to try to test this.

Buying Units of RBF2010 from RBC Direct Investing

  1. Sign in to your RBC Direct Investing account.
  2. Click on the Trade tab.
  3. From the horizontal list, click on the Mutual Funds link.
  4. On the Mutual Fund Order Entry Step 1 of 3 screen
    1. From the Account #: drop-down list, select the account within which you wish to purchase the HISA units.
      Check the Available Funds: number is what you expected.
    2. From the Action: drop-down list, select: Buy
    3. Beside the Amount: field click to select the radio button beside either
      • Dollars including Commission; or
      • Units

      Then
      in the Amount: field, type the number of dollars or units you wish to buy.

    4. In the Symbol: field, type: RBF2010
    5. Click on the Show Quote button.
      Check the details of the quote. Today for RBC Investment Savings Account Series A it says the NAVPS/Yield is 10.0000, the Currency is CAD, the Inv. Min. Initial is 500.00 and the RSP Min. Initial is 500.00.
      When I clicked on the RBF2010 link in the detailed quote, it opened a screen of information about the product. It states the fund is a No Load fund. It says to go to http://www.rbcroyalbank.com/products/isa/index.html to see the current rate.
      I did, and as of today in December 2013, the rate is set at 1.25% for the CAD funds.
      UPDATE: On March 18, 2017 RBF2010 is paying 0.75%.
      It also states that “Liquidity since your money is accessible when you want with no locked–in periods or maturity dates.”
      It all looks good, so I returned to the order entry screen.
    6. In the Contact Phone: field, type your phone number.
    7. Click on the Continue button.
  5. The Confirm Transaction – Step 2 of 3 screen opens.
    Review the details. Note it says subsequent investments can be $25 or higher. This is much, much better than InvestorLine.
    If you like what you read, click on the Confirm button.
  6. The Transaction Complete – Step 3 of 3 screen opens.
    Copy the Order ID number into a document and save it for future reference.
  7. I then clicked on the Order Status link from the horizontal list of links under the Trade tab. The order is properly recorded there.
  8. Under the My Portfolios tab, when I check the Available Funds, the amount I just spent has not been subtracted from my Available Funds. I will have to be cautious and not spend the same amount twice!

What Did I Learn From Purchasing Units in a HISA at RBC Direct Investing?

  • I found it very odd that I was not asked to enter my trading password to make this purchase.
  • I was not asked if I wanted the interest payments deposited in my HISA or paid back into my trading account cash balance. (InvestorLine asks this.)
  • I was pleasantly surprised to find that the minimum investment is $500 and the minimum additional contribution is $25. At InvestorLine and Investor’s Edge, the minimum investment is much higher.

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Do you park your surplus cash in a HISA in your online discount brokerage account? Does the phrase “high interest” make you laugh scornfully? Please share your views with a comment.