Every year, the Registered Retirement Savings Plan (RRSP) season brings on a last-minute scramble by investors to maximize available contributions and tax benefits. Companies offering investment opportunities know this and advertise in full force to secure a piece of your financial pie.
Guaranteed returns, RRSP-eligible, tax-free... the promises are plenty. Although you may feel pressured to meet the RRSP deadline, it’s important to take some time to carefully consider where your money is going and what you would do if you lost your investment.
In particular, if you consider yourself to have a low or medium tolerance for risk be wary if someone offers you a “speculative” or “risky” investment opportunity. An investment should always fit your risk tolerance and investment goals, not the other way around. You owe it to yourself and your family to be clear about your financial goals and avoid investment opportunities that aren’t a good match.
If you are considering a last-minute investment, here are three things you should know:
- Determine your risk level and stick with it. When assessing your level of risk tolerance, look at the big picture - your entire investment portfolio as a whole. Your overall level of risk is an important factor in choosing your investments as there are certain types of investments that are riskier than others. There is the potential that you could lose all your money - is this a risk you can afford to take?
- Ask about the liquidity of the investment. How easy is it to liquidate your investment in case you need the money? Some investments have conditions that make it difficult, if not impossible, to get your money out sooner than the agreed upon term of the investment. Make sure you know the specific terms around liquidating the investment you’re considering.
- Check if the individual or company offering the investment opportunity is registered to do so. You can Confirm Registration on the ASC website, email firstname.lastname@example.org or call toll free 1-877-355-4488 to check registration and find out if there is any disciplinary history that you should know about.
Remember, even if an investment is advertised as RRSP-eligible, it doesn’t mean the investment is “fail-safe” or protected from loss.
When it comes to last-minute investing, apply the same level of scrutiny that you would when making investment decisions at any other time. It’s your money, so do your research and make an informed investment decision.