Starting an investment is one of the best ways to secure your financial future. It’s no doubt that every Canadian is an investor, but not all of them are successful investors. That’s because they use different strategies to start and grow their investments.
In this guide, we explore some of the most useful tips that can help you start and build your investment. You will also get to understand the resources that can help you maximize your investment options and achieve your financial goals.
Investment Tips for Canadians in 2020
To become a successful investor, you need to come up with strategies that can help you grow and maximize your investments. We have already done that for you. Here are some best investment tips that can help you grow your wealth significantly.
1. Diversify Your Investments
Investing in a vast range of options (diversification) can help you build your portfolio and secure your financial future. Thankfully, there are many investment options in Canada, such as stocks, exchange-traded funds, mutual funds, real estate, and bonds.
Each investment option has its unique ups and downs. So, you need to evaluate the risk tolerance of each option before investing your funds in any of them. You should maximize the investment options that have low risks and promises huge returns.
2. Invest in the Tax-Advantaged RESP
Taking advantage of tax-deferred savings plans is one of the most effective ways to invest successfully. A Registered Education Savings Plan (RESP) is one of the tax-advantaged plans that can help Canadians save money for their kids’ post-secondary education.
When you save money in RESP, your investment will be secure and grow tax-free during the entire period of savings. Besides, you automatically become eligible for the Canada Education Savings Grant (CESG) when you open an RESP account.
The government will offer you a 20 percent CESG for contributions up to CA$2,500 every year. That’s around CA$500 annual CESG entitlement per child. However, the maximum CESG a beneficiary can receive in a lifetime is CA$7,200.
To make the most out of your RESP, you should open an account at a reputable company. Thankfully, the Heritage RESP Reviews can help you find the best RESP provider.
3. Maximize the Benefits of TFSA
A Tax-Free Savings Account (TFSA) is another tax-deferred savings plan that Canadians use to save money without getting taxed. All the investment in a TFSA account will grow tax-free, including capital gains, interests, and dividends.
One good thing about TFSA is that it’s highly flexible. You can save for various purposes, including weddings, birthday parties, vacations, and home down payment. Besides, you can withdraw funds at any time, making it ideal for saving for emergencies.
However, a tax-free savings account has a contribution limit/room of CA$6,000 for the year 2020. Saving more than the contribution limit may attract penalties. You will pay a one percent monthly penalty on the excess amount.
4. Contribute to Your RRSP Account
An RRSP is a Registered Retirement Savings Plan that helps Canadians invest in their life after retirement. It’s also a tax-advantaged plan that will allow your investment to grow tax-free during the whole period of savings until you reach the retirement age.
Once you open an RRSP account, you need to contribute some money every year when you file your tax return. You may contribute 18 percent of income earned in the previous year or use the limit set by the Canada Revenue Agency (CRA) for the current tax year.
If you contribute more than what you ought to, the CRA will subject the excess amount of money to a one percent penalty every month until the day you’ll withdraw it.
5. Invest in What You Understand Best
While diversifying investment options is vital, it’s also essential to clearly understand the kind of business that you plan to venture into, whether real estate, stocks, or mutual funds. Most investors have become successful by focusing on what they know and do best.
For instance, if you understand how the real market operates and feel comfortable with it, you can focus on it instead of spending more time trying to understand other investment options. Come up with novel ideas that can boost your business to become successful.
Final Words
If you have always dreamt of being a savvy investor, you should establish strategies that can help you achieve your financial goals. Also, learn how to save as it’s always a prerequisite to successful investment. Finally, perform market research to determine the investment options that are more profitable and reliable.
