Money RRSP investments to buy before the 2019 deadline

19:30  14 february  2020
19:30  14 february  2020 Source:   fool.com

Canada Revenue Agency 101: Avoid This Fatal Tax Season Mistake!

  Canada Revenue Agency 101: Avoid This Fatal Tax Season Mistake! If you want to hold index funds like the Vanguard S&P 500 Index ETF (TSX:VFV) in your RRSP, make sure you contribute on time.Contrary to popular opinion, there’s a lot more to keep track of during tax season than just getting your returns in on time. There are a number of steps you need to take in the lead up to filing that can make life harder on you if you neglect them.

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We’re halfway through February and you have just over two weeks to make your final 2019 RRSP contributions. If you’re looking to get an extra RRSP tax break when you file in April, this is your last chance to get it.

Making RRSP contributions is one of the easiest ways to lower your tax bill without any creative accounting. Investing in your RRSP gives you even more benefits in the form of tax-deferred gains and dividends.

Canada Revenue Agency: Important RRSP Rules You Need to Know

  Canada Revenue Agency: Important RRSP Rules You Need to Know The RRSP comes with rules that you need to follow if you don't want to pay penalties or taxes.The deadline to contribute to an RRSP to receive a tax deduction for 2019 is March 2, 2020. Before contributing to your RRSP, however, you should know the rules of how it work in order to benefit the most from your RRSP and avoid paying additional taxes.

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Once you’ve got your final RRSP contributions in for 2019, you’ll need to buy some quality investments to maximize the tax benefits you enjoy. With that in mind, the following are three great investments to buy if you’re planning on making RRSP contributions before March 2nd.

Brookfield Asset Management

Brookfield Asset Management Inc (TSX:BAM.A) is a massive asset management firm with over $500 billion in assets under management (AUM).

The company has investments in real estate, infrastructure, renewable power, private equity and alternative investments. Many of Brookfield’s companies are themselves publicly traded, with Brookfield owning the majority stake.

3 big mistakes to avoid with your RRSP

  3 big mistakes to avoid with your RRSP The RRSP contribution deadline is March 2, 2020. Be wary of these mistakes if you are making a last-minute investment decision.Although waiting until the last minute to top up your RRSPs is not a mistake in itself, the rush to contribute can lead to hasty decisions. At times, this haste can also lead to poor decisions. If you are one of those last-minute investors be mindful of the following pitfalls.

While it may be an unconventional structure for an asset manager, it’s certainly worked: Brookfield’s AUM has grown by 16% CAGR over the last decade. In the most recent quarter, the company nearly doubled its net income and grew its FFO by 16%.

iShares S&P/TSX 60 Index Fund

The iShares S&P/TSX 60 Index Fund (TSX:XIU) is Canada’s most popular index fund. It’s based on the TSX 60, an index composed of the 60 largest publicly traded Canadian companies by market cap.

The TSX 60 is a subset of the TSX Composite Index, which is made up of 250 stocks. You can buy the composite index through XIU’s sister fund, XIC. However, the TSX 60 has a slight tendency to outperform the TSX Composite, with the former up about 2% more than the latter over five years.

Whichever TSX index fund you buy, you can expect moderate gains and high dividend income, with XIC and XIU both yielding about 2.8%.

Vanguard S&P 500 Index ETF

The Vanguard S&P 500 Index ETF (TSX:VFV) is one of the most popular index funds in the world. It seeks to replicate the returns of the S&P 500. The best-known ticker symbol for the fund is VOO, but you can buy it on the TSX as VFV.

Canada Revenue Agency: 1 Huge Deadline to Remember Today!

  Canada Revenue Agency: 1 Huge Deadline to Remember Today! The RRSP deadline is fast approaching, and investors may want to make a move on stocks like BCE Inc. (TSX:BCE)(NYSE:BCE) and Royal Bank of Canada (TSX:RY)(NYSE:RY).That’s right, if you hadn’t guessed, I’m talking about the RRSP deadline set for March 2, 2020. This is the final deadline to contribute to your RRSP for the 2019 tax year.

In terms of capital gains potential, however, it’s hard to beat VFV. Over the past decade, the S&P 500 has absolutely crushed Canadian markets, and with the U.S. being home to most of the world’s big tech companies, that’s likely to continue over the long term.

Conversely, Canadian markets have higher average dividend yields, so it’s a good idea to hold both VFV and XIU in a diversified portfolio to get a mix of gains and income.

Either way, when you buy VFV you get an ultra-low-fee fund with 0.08% MER and considerable potential for gains. Honestly, who wouldn’t want to own this fund?

Just remember that if you buy it in an RRSP, you should buy the U.S.-listed version, as it pays no withholding taxes.

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RRSP versus TFSA: Here’s what you need to know

  RRSP versus TFSA: Here’s what you need to know With the start of the new year, many of us likely have a variety of resolutions on our minds. You may want to work out more, seek a new job, or finally take the trip you’ve been planning for years. No matter what your priorities are, the start of the new year is also the perfect time to review your finances and budget, and consider contributing to a savings plan such as RRSPs or TFSAs. While both can be valuable savings tools, understanding the intricacies of these investment vehicles — ideally with the help of an adviser — is essential in determining which is right for you.

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More reading

  • Tax Season 2020: 3 Canada Revenue Agency Changes You Need to Know!
  • TFSA Investor Stocks That Generate Permanent Income
  • Retirees: CPP Enhancement Will Cost You Money in 2020!
  • TFSA Investors: 3 Reasons You Also Need an RRSP
  • Retirees: Beat Inflation by Buying Dividend Stocks!

Fool contributor Andrew Button owns shares of iSHARES SP TSX 60 INDEX FUND. The Motley Fool owns shares of and recommends Brookfield Asset Management. The Motley Fool recommends BROOKFIELD ASSET MANAGEMENT INC. CL.A LV.

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TFSA Investors: 1 Fatal Mistake to Avoid During RRSP Season .
To avoid getting hit with RRSP taxes, have your TFSA well funded with ETFs like iShares S&P/TSX Capped Composite Index Fund (TSX:XIC).If so, it’s worth being reminded of these accounts’ dos and don’ts. As I’ve written in the past, it’s easy to kill your returns by over-contributing, holding prohibited investments, or day trading in your registered accounts. These are all fairly well known and well publicized “no-nos.” However, there’s another big trap you can fall into that’s not as well publicized — an account action that might seem logical but could actually hit you with a massive tax bill.

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