Companion Advisor: Retirement
RSP Investing Strategies
Monthly Investing Works
One of the best ways to maximize your RSP contribution
each year is to set aside a specific dollar amount every month. Many people
refer to this strategy as "paying yourself first". All you have to do
is set up a monthly pre-authorized chequing plan. Your bank account will
be debited on a monthly basis and the money directed to one or more mutual
funds. You will be surprised at how quickly your retirement nest-egg starts
accumulating. Consider the benefits of this strategy:
Easy to Budget
For most investors, investing in a mutual fund monthly
is often the easiest way to budget for their maximum RSP contribution.
After all, budgeting $417 a month can be much easier than contributing
a lump sum of $5,000 once a year. And, if your earned income changes,
you can simply adjust your monthly contributions accordingly.
Dollar-Cost Averaging Instead of Market Timing
Making monthly contributions, regardless of market
activity, is called dollar-cost averaging. By buying mutual fund units
at regular intervals, you will purchase more units when prices are low.
Once unit prices trend upward, you will purchase fewer units each month
but the units you already hold will increase in value. This disciplined
strategy takes the guesswork out of investing.
You May End up With More
Monthly contributions get more money working
for you faster than contributions made at year-end. Studies have shown
that monthly investing can be more advantageous because your money is
working for you throughout the year and you are purchasing more units
when prices are low.
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