Learn How to Build Wealth Volume 3–Parking Investments
When building wealth with paper assets, fees and taxes play an important role. Whether we pay an ongoing yearly fee to have our funds professionally managed or pay a transaction fee to buy or sell stock shares the affect these “friction costs” have on our returns can be drastic. Likewise, the amount of taxes we pay as a result of our investments making money can be substantial.
Although the fees often associated with working with financial professionals can be costly, the amount paid in taxes is usually higher. Choosing the right garage to park our investment vehicles will help control costs.
The three most common investment garages are Registered Retirement Savings Plans (RRSP), Tax Free Savings Account (TFSA), and non-registered savings account (Open). Each program offers a variety of benefits when it comes to taxes.
Choosing the appropriate garage
will usually depend upon which financial goal we are trying to accomplish. Regardless of whether we use a RRSP, TFSA, or an Open (non-registered) account, these programs can house almost all forms of asset classes.
Tax Free Saving Account
Registered Retirement Saving Plan