Home / Insurance Tips / What you should look for when picking stocks to hold in your RRSP

What you should look for when picking stocks to hold in your RRSP

It used to be that investors take their bonds into RRSPs to capitalize on the zero tax rate provided by these makes up about income-producing along with other securities, keeping their equities outside of registered accounts to consider benefit of Canada’s Dividend Tax Credit.

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These days, however, dividend paying stocks offer much higher yields than most bonds do. The TFSA has additionally changed the way in which investors think about assembling their broader portfolios, as investments there are never after tax.

What everything boils down to is personal choice. Based on your short- and long-term goals, income and retirement needs and tax situation, a stock may be most suitable for your cash account, TFSA or perhaps your RRSP or RRIF.

It’s also important to note that since U.S. regulators consider RRSPs and RRIFs to become pension funds, U.S. stocks in those accounts aren’t susceptible to withholding taxes. In other words, investors obtain the full dividend payments.

That said, investors tend to trade less in their RRSPs, looking for steady equity investments that offer long-term stability and growth – whether they pay a dividend.

“Each one of these conventions should be broken when the right opportunity arrives,” said Norman Levine, managing director at Toronto-based Portfolio Management Corp. “What you want in your RRSP are things that are likely to increase your profits – a total return – that’s capital appreciation, interest and dividends.”

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