Investment Advice
With the RRSP deadline for 2006 come and gone, it is important to make investing for retirement more than just a once per year event. You may have read an article in your local newspaper about why contributing into your RRSP on a monthly basis is a bad idea. In my opinion here is the top 3 reasons why contributing into your RRSP monthly is an EXCELLENT idea.
- It allows you to earn interest on your interest or the entire year. What this means is that for a $1000 monthly contribution with a 7% annual return you will have a $1005.83 contribution by month two.
- In layman’s terms, you made an extra $5.83 in month one that you can now earn interest on in the next month. It allows you to dollar cost average. If you were to make a 1 time RRSP contribution yearly in February, more than likely the market isn’t going to do you any favours and drop down to its lowest point of the year. By making regular monthly contributions you are able to buy into the market at some of its lower points and at some of its higher points. This removes the risk and worry of timing the market perfectly.
- You have the money available. Work your monthly contributions into your budget. Make it as simple as every time you get paid have a certain percentage of your income automatically transferred into your RRSP. Chances are that if you can’t budget a contribution monthly you won’t find yourself with a few extra thousand dollars ready to contribute at the end of the year.