Angela Iermieri, financial planner at Desjardins, knows about the pitfalls that can keep us from saving. Here are 5 she recommends you avoid to grow your investments and achieve what’s most important to you.
1. Contributing at the last minute
Do you always wait until the last minute to make your registered retirement savings plan (RRSP) contribution? During that final sprint, you’re left scrambling and might feel overwhelmed by all the options. And you might not have the funds to invest as much as you’d like. Fortunately, there are some good options available.
Contribute well before the deadline
For your RRSP contribution to be deductible for a given year, you need to contribute by the deadline. To get a tax benefit for 2023, for example, you need to contribute to your RRSP by February 29, 2024. But it’s always a great time to contribute! So why get caught in the rush at the end of February when you can spread out your investment over time?
By contributing to your RRSP throughout the year, you’ll quickly amass tax-free funds, accumulate regular interest and continue to participate in the market.
Invest through automatic deposits
You set the amount and frequency of the deposits, which automatically come out of your account. Instead of contributing $1,500 all at once in February, you could see $30 taken from your chequing account or paycheque every week and go straight into your RRSP. Life can get hectic, and automatic deposits mean you have one less thing to remember. It’s also a great way to manage your finances.
Besides making your life easier, automatic deposits:
- Can be easily worked into your budget
- Help you develop good savings habits
- Become part of your routine without a sense of deprivation
- Can be deposited in various investment vehicles
2. Waiting to invest
By getting into the habit of regularly saving small amounts, you build up funds for retirement, a down payment or any other goal, without barely noticing it. If you start by setting aside money as soon as you start working, you give yourself more freedom to enjoy the life you want.
We’ve done the math! The sooner and more often you contribute, the more your savings have time to grow. Take a look below to see what $50 a week can become over time.
3. Using a TFSA like a savings account
Even though its name might suggest otherwise, the Tax-Free Savings Account (TFSA) is much more than just a savings account. First and foremost, you should think of it as an investment vehicle. Using it as a savings account is fine for building a financial cushion, but for your medium- or long-term goals, grow your savings by adding investments in line with your situation. If needed, an advisor can help you choose from many investment products eligible for TFSAs (like Desjardins Funds, market-linked investments and term deposits), with good return potential.
Enjoy all the benefits of a TFSA:
- Generate tax-free returns
- Help you achieve your savings goals more quickly
- Diversify your portfolio, based on your investor profile, and enjoy good return potential
4. Cashing in when the markets fluctuate
No one likes stock market fluctuations, and most investors get anxious when the markets go up and down like a yo-yo! That’s completely natural. Remember, what they say, though: what goes up must come down, and the opposite is true, too. If you pull out of the market when it’s volatile, you could jeopardize your long-term return potential.
A few important things to keep in mind:
- Left unchecked, emotions can lead to impulsive decisions, but if you learn to manage them, you’re more likely to reach your goals.
- The biggest gains often follow market corrections. Pulling your money out early can hurt the long-term performance of your investments.
- Staying focused on your long-term strategy puts you in a better position to achieve your objectives.
5. Not sticking to your investment strategy
As you know, all portfolios are based on a long-term investment strategy that takes your objectives, investor profile and risk tolerance into account.
All investments should be selected depending on whether they’re right for you or your investment strategy, not your parents or anyone else. Here are a couple of things to help you and your portfolio:
- Take a long-term view and don’t be tempted to jump into or pull out of the markets on a whim.
- Remember, complexity isn’t necessarily an indicator of diversity and doesn’t always add value to your investment strategy.
It pays to talk to your advisor!
To discuss your investment strategy, savings vehicles, investment products, or anything else related to your personal finances, speak to your advisor.