The Beginner’s Blueprint

Avoiding Pitfalls and Maximizing Your Returns.

TFSA

A Tax-Free Savings Account (TFSA) is an account that allows Canadians to earn tax-free growth on their investments. Contribution limits are based on the year you turn 18. Here’s a calculator to determine the amount available for you. All withdrawals are penalty-free with no consequences.

RRSP

A Registered Retirement Savings Plan (RRSP) is an account that allows Canadians to deduct pre-tax dollars from their taxable income. All growth inside the account is tax-deferred, meaning interest, dividends, and capital gains aren’t taxed until withdrawal. Contribution limits are based on your previous year's earned income, allowing contributions up to 18%, with a maximum limit of $31,560 (2024). It’s important to note that all withdrawals are taxed as income.

FHSA

The First Home Savings Account (FHSA) is an account designed to help first-time homebuyers save for a home. It combines the benefits of tax-free growth from a TFSA and tax deductions from an RRSP. You have a maximum contribution limit of $8,000 per year, with a lifetime limit of $40,000. Withdrawals are tax-free as long as they are used for a down payment on a primary residence. See eligibility requirements here.

Brokerage

I recommend Wealthsimple Self-directed investing as a brokerage for free trades on Canadian equities, including ETFs, stocks, and bonds. It’s user-friendly for beginners with no account minimums and offers fractional shares, allowing you to buy a portion of an ETF for as little as dollar. A general rule for opening accounts is to prioritize FHSA > TFSA > RRSP, but your individual situation may vary.

Investments

I invest in the S&P 500 using a straightforward long-term strategy: dollar-cost averaging, which involves consistently investing a fixed amount each month. I believe this approach offers the highest yield with the least risk. For short-term investments, I buy GICs (Guaranteed Investment Certificates), which provide guaranteed interest with no risk, locked in for 1 to 5 years. It's not sexy, but keep in mind: the tortoise beats the hare.