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Started with a new employer recently and they have a Group registered Retirement Savings plan they offer through RBC. I am 20 years away from retirement and not afraid to take risk in my choices. I would like to pick three or four funds from RBC to have. What 3 or 4 funds do people recommended and what diversification would you guys recommend? Or do I go withe the ETF funds through RBC. Appreciate whatever help/guidance people can give me. I am new to this as my wife has been primary breadwinner till now. I realize I am starting late, so please any advice would be beneficial to me. Thanks
 

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ranman: Best wishes with your investments. I have covered the ground you are about to traverse. My first suggestion would be to consider a laddered bond investment plan for a fairly large percentage of your your savings . You might like to read : " In Your Best Interest : The Ultimate Guide to The Canadian Bond Market " W.H. Cunningham 2006. Good luck
 

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Started with a new employer recently and they have a Group registered Retirement Savings plan they offer through RBC. I am 20 years away from retirement and not afraid to take risk in my choices. I would like to pick three or four funds from RBC to have. What 3 or 4 funds do people recommended and what diversification would you guys recommend? Or do I go withe the ETF funds through RBC. Appreciate whatever help/guidance people can give me. I am new to this as my wife has been primary breadwinner till now. I realize I am starting late, so please any advice would be beneficial to me. Thanks
Take any advice from an open forum like this, including mine, with a grain of salt. I think you need to step back and take a look at your overall financial situation before plunging into a group RRSP with RBC. Do you have high interest debt? If so, paying off that debt, esp. credit card debt, is likely to yield a better after-tax return than any investment. Do you or your wife contribute to a defined benefit plan? If so, then your risk tolerance can be higher than someone who is funding his retirement by himself.

I'm a little bit disturbed by the tone of your post. You say that you're "starting late" and "not afraid' to take risks. Being able to take risk and being willing to take risk are very different. It sounds like you're willing to take extra risk because you're "starting late." I'm going to assume you're in your 40s if you have 20 years to retirement. Actually, you're starting to save at the time most Canadians do. Now you may be starting later than some of the people on this forum, who started to save for retirement in the womb :), but you're not late compared to most Canadians.

I know it may be sacrilege to some of the do-it-yourself people here, but if investing is new to you then it may be prudent for you to get some good advice before investing. The trouble is getting good advice. I've heard some good things about Edward Jones, though I don't use them myself. Avoiding paying a few hundred dollars for good advice is a false economy if you blow tens of thousands of dollars through your own ignorance.

That you hesitate between mutual funds and ETFs tells me you need some help with your investments. If Canadians knew the true cost of average mutual funds, they would never buy them. One of the sure rules of investing is that higher costs lead to less money for you. The average retail investor can build a portfolio with just ETFs and a few stocks.

Do you want to invest with RBC? I suspect it's a good deal for your new company, but is it a good deal for you? Does RBC offer the funds that you want? Are their ETFs the lowest cost? If you can't answer these questions then you're not ready to take the plunge yet.
 

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I don't share the same prejudice against bank mutual funds. They are at least no-fee funds, and RBC has about the largest choice of the banks (or maybe it's a toss-up with TD). You haven't said whether the employer is also making matching contributions, but if he is this would far outweigh any minor differences in MER from different institutions.

Also see replies to the same question you posted as "javaboy" on Moneysense Forum.
 

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I don't share the same prejudice against bank mutual funds. They are at least no-fee funds
No such beast as a no-fee fund! All funds, even ETFs, charge a fee. The question is, how much? RBC may not charge a fee to buy or sell, but it definitely charges a fee to manage. RBC's fees are lower than its peers, but still higher than most ETFs. RBC's index funds charge 0.5% (0.17% for XIU) and ~ 1.0-1.5% for most others.

Also, money contributed by the employer isn't "free money." It's part of your taxable income. Some advantages of group RRSPs include getting lower administrative costs, dollar cost averaging, and reducing payroll withholding. Disadvantages include having limited investment choices. The OP needs to answer some basic questions before even contemplating a group RRSP.
 

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No such beast as a no-fee fund! All funds, even ETFs, charge a fee.

Pardonnez-moi. I should have said No-Load.

Also, money contributed by the employer isn't "free money."

Maybe, maybe not. There is a detailed list of the options by cardhu in a MoneySense thread at http://forums.canadianbusiness.com/message.jspa?messageID=293946

For a Group RRSP he notes that, while employer's contribution is a taxable benefit, you are entitled to deduct both your contributions and the employer's on Line 208 of the Tax Return.
 

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No such beast as a no-fee fund! All funds, even ETFs, charge a fee.

Also, money contributed by the employer isn't "free money." [/I]
Maybe, maybe not. There is a detailed list of the options by cardhu in a MoneySense thread at http://forums.canadianbusiness.com/message.jspa?messageID=293946

For a Group RRSP he notes that, while employer's contribution is a taxable benefit, you are entitled to deduct both your contributions and the employer's on Line 208 of the Tax Return.
Actually, not. Yes, the employee can deduct both amounts because he pays tax on both amounts. The employer's contribution is added to the employee's taxable income. If the employee is in the 40% tax bracket, and the employer contributes $1,000 on the employee's behalf, the $1,000 is added to pre-tax income but also receives a deduction worth $400. The effect of a group RRSP is no different than contributing the extra income ($1,000) yourself into your own RRSP. No free money! :mad:
 

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avoid the rbc funds
avoid the etf's
over 20 years i would build up a drip portfolio with regular contributions
keep your costs as low as possible
i would avoid all big bank investment products ..... period
 

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Actually, not. Yes, the employee can deduct both amounts because he pays tax on both amounts. The employer's contribution is added to the employee's taxable income. If the employee is in the 40% tax bracket, and the employer contributes $1,000 on the employee's behalf, the $1,000 is added to pre-tax income but also receives a deduction worth $400. The effect of a group RRSP is no different than contributing the extra income ($1,000) yourself into your own RRSP. No free money!
Which is true when you receive the income whether you contribute or not, but some places, such as where my sister works, only give you that money as a match, so if your salary is $50,000 before the match, you only get that extra $1,000 if you contribute. This means you're comparing a gross salary of $50,000 to a gross salary of $51,000... still not "free" money as you're locking up your RRSP into something that will have higher fees for it's entire existence than something else you could choose, but definately not a zero-sum.
 

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Although there can be exceptions, joining a GRSP is usually a no-brainer ... Ranman hasn’t specified whether his particular GRSP involves employer matching, and if so, by how much ... I presume it does because there is very little reason for a GRSP to exist otherwise, so the only question is how much does the employer kick in? ... Dollar-for-dollar matching is not uncommon.

While I don’t dispute the value of having a detailed financial plan, and I agree that paid advice is often worthwhile, the OP would have to be in extraordinarily dire straits to justify (for financial reasons) not joining the GRSP, if the employer is matching dollar for dollar.

Larry said:
money contributed by the employer isn't "free money.” .... The effect of a group RRSP is no different than contributing the extra income ($1,000) yourself into your own RRSP.
Of course its free money ... this “extra income” you speak of doesn’t exist unless one joins the GRSP.

Do you have high interest debt? If so, paying off that debt, esp. credit card debt, is likely to yield a better after-tax return than any investment.
That depends ... if the employer offers a full dollar-for-dollar match, then joining the GRSP is likely to yield a better after-tax return than even high-interest credit-card repayments ... if the employer offers only a partial match, then it would depend on the applicable interest rates.

The average retail investor can build a portfolio with just ETFs and a few stocks.
Not in GRSP [ usually] ... it is true there is a higher MER cost when you’re limited to MF ... but there is also a cost when you abandon the free money (employer contributions) of GRSP in order to pursue ETFs and a few stocks ... the question is, which is the lesser cost? ... with a decent employer match, and reasonable MF fees (which RBC has), it could take multiple decades for an ETF strategy to catch up to a corresponding mutual fund GRSP, let alone to surpass it ... the OP may not live long enough to see that tipping point.

fatcat said:
i would avoid all big bank investment products ..... period
In the case of a GRSP with employer matching, you’d be throwing money away.
 

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Discussion Starter #11
Thanks for everyone help. Yes the RRSP is matched by my employee to a limit. Between myself and my employer approx. $200.00 is put in bi-weekly. Right now I have my money going into the O'Shaughnessy Canadian Equity Fund, O'Shaughnessy US Value Fund and the O'Shaughnessy International fund. After reading about the Couch Potato method though i would change to the RBC index funds. On the Money sense site this was suggested to me.


1. RBC CDN Bond Index Fund (for income asset allocation)
2. RBC CDN Index Fund (For CDN Equity allocation)
3. For US Equity component you have choice of either US Index or US Index Currency Neutral (formerly RSP). I prefer the Currency Neutral to avoid currency risk, but that's my personal preference.
4. RBC International Index Currency Neutral Fund.

The funds have to be at RBC. What do others think of these funds and what kind of allocation. Also should I transfer the money out of all the O'Shaughnessy funds I do have and put in these Index funds? Thanks
 

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Good job on starting to save for your retirement ranman44.

The RBC Index funds are an excellent choice and I think they will serve you well. Theses funds are included on the Canadian Couch Potato website (http://canadiancouchpotato.com/) which also offer Model Portfolios you can use and rebalance to.

To save on investing costs, you may switch your O'Shaughnessy funds to your index funds - however, make sure you've held onto them for longer than 30 days (since your last purchase) or you would be charged a frequent switching fee (usually 1-2%).

Index investing is a great strategy - just make sure you don't sell out at the wrong time. Remember to rebalance annually - happy saving!
 

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O'Shaughnessy

Ranman,
Not sure what you decided (it's been a year) but I thought I would put my two cents in.

The O'Shaughnessy system works through a highly impartial system. it is sometimes difficult to be in an O'Shaughnessy fund, as his system does not work in a fad time (like a dot.com bubble, for instance) but all his RBC funds have beaten the index over ten years. His funds will tend to do this, (caveat, I am not a finance professional, but I did get interested in O'Shaughnessy).
 
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