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Investing beyond the RRSP and TFSA

Diversify your investment portfolio by investing in asset classes such as commodities, artwork, precious metals, forests… (Photo: 123RF)

guest expert. You just received a tax refund and want to invest it, but your registered plans (RRSP, TFSA, RESP, etc.) are maxed out. You are entering a complex area, where there will be many investment options. It will also be necessary to fully understand the tax implications before making an investment decision, otherwise the tax bill could be prohibitive. Here are some possible solutions for you.

Invest in unregistered investments

Investing in an unregistered account is probably the easiest option, as it allows you to keep the same types of investments that you have in your registered investments. Investments in an unregistered investment account can include stocks, bonds, mutual funds, exchange-traded funds (ETFs), guaranteed investment certificates (GICs), and more.

You can choose investments that fit your investor profile and financial goals.

The main disadvantage of an unregistered account is that it comes without the tax benefits of registered plans. Thus, you will have to declare the resulting return (interest, dividends, capital gains, etc.) when you file your tax return and you will have to pay tax on that amount.

Invest in real estate

Real estate is a popular area of ​​investment because it can provide steady cash flow and capital appreciation while diversifying your portfolio due to its low level of correlation with other asset classes, such as stocks and bonds.

However, getting into real estate investing can be costly and requires active property management. In addition, real estate is often illiquid since real estate cannot always be sold quickly.

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If you want to avoid some of these drawbacks, you can invest in real estate by participating in real estate investment trusts (REITs) or by investing in real estate mutual funds or exchange-traded funds (ETFs).

Invest in non-traditional assets

You can diversify your portfolio by investing in asset classes such as commodities, artworks, precious metals, forests, etc. Non-traditional assets have different characteristics than traditional assets and can provide benefits such as lower correlation with stock markets, protection from inflation, higher returns and diversification opportunities.

However, it is important to note that non-traditional assets can be riskier and more illiquid than traditional assets and often require larger investments, with higher fees.

life insurance

Taking out life insurance can sometimes be an attractive option for people looking to diversify their portfolio and protect their wealth, while taking advantage of tax benefits. However, it is important to understand that life insurance is not an investment in itself, but rather a financial protection.

Because claims are paid tax deductible, a life insurance policy, whether whole, comprehensive, or share, is sometimes considered a tax-efficient investment, particularly in the context of estate planning. This approach is aimed at a small minority of people who have used all the other methods to manage their tax bill, such as RRSPs, TFSAs, RESPs, and so on. These people must have paid off all their non-deductible debts, pay a very high marginal tax rate and ensure that their retirement is well funded, leaving them with the possibility of distributing their surplus wealth to others.

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Finally, other types of insurance may also be considered, especially for shareholders of a company.

Invest in your image

As you can see, the choice is wide for investing outside of registered investments. It is important to note that all investments have risks and rewards; It is essential to thoroughly analyze your financial goals and risk tolerance before deciding where to invest. A financial planner can help you develop an investment strategy that fits your particular financial situation, because in this area, a professional’s advice can make all the difference.

Pascal Duguay, but. where.