A Different Approach to My RRSP

The way I contributed to my RRSP has always been putting the money I got from my tax refund into my RRSP account all and at once. After I did it, I do not need to worry about my RRSP for a whole year. That worked fine when the money has been put into savings or GICs, but not a great strategy for buying mutual funds inside RRSP. This year I want to take a different approach.

For the tax refund I am getting, I will save it under my regular savings account until it hit the amount of $10,000. When I have $10,000, I will transfer the money into my Questrade account and balance my ETF holdings there. In terms of my RRSP, I have just called my mutual fund associate to set up a monthly contribution of $400. By the end of the year, I will have my RRSP being taken care of as well.

The major benefits of this approach are:

1. Dollar Cost Averaging for my RRSP mutual fund purchase. The stock market turbulence has shrunk many investors networth. I am not the exception. However, the Scotia Dividend Fund I purchased right before the stock market sink is still in green. How is it possible? Because I am doing dollar cost averaging and continue to buy it each month. I would certainly like to apply this technique and take advantage of it for my RRSP account as well.

2. Keep my ETFs transaction cost down. By saving the tax refund I got and investing it into my ETF portfolio when the amount hits $10,000 allows me to keep my total trading cost under 1% of the money added.

3. Mostly importantly, I will be saving $400 more per month instead of blowing it away by taking this new approach to my RRSP.

Have a great weekend! :)