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A lot of people believe that investment is for financial professionals, but it is actually part of everyone's daily life. Investment doesn't have to be predicting curves of the stock market. Actually, when you purchase a house, it is an investment; when transfer you money to your  Registered Retirement Savings Plans (RRSPs), it is also a form of investment.

In my padlet, I will compare two of most accessible forms of investment, RRSP and mortgage. I will try to explain what they are and which one we should choose.

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This image gives you a brief look of how you can save or profit from an RRSP account. It defers tax, holds different investments such as GICs and bonds.

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This short video is a RRSP 101. It is a basic yet comprehensive introduction of RRSP. It uses simple and clear language to explain how RRSP can save you on tax and generate income from interest. It also includes information on opening RRSP account, limit, contribution room, early withdrawal, penalty, and difference from TFSA.
It covers all the aspects you should know before investing in RRSP. If you want to invest, you need to do further research of all the pros and cons. It lays out the simple facts of RRSP without bias.

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RRSP is not for everyone. RRSP is probably not for you if you will be in one of the four situations listed in this video: modest income, having a pension, leaving Canada, and already in high RRSP balance.
Government started the RRSP program encourage Canadians to save for their retirement. However, this is not for everyone. When we look the the incentives given by the government, we have to look at the cons of the program. We have to know our situation and consider how RRSP may work against us, and this video is a good reminder.

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4 Reasons To Avoid RRSPs - RRSP vs TFSA vs Non Registered Account

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As we have already know from the previous videos. The main incentive to invest in RRSP is to save on taxes by deferring your tax in the high income years; then, you make a withdrawal at retirement when your income is expected to be lower. With the RRSP calculator generated by TurboTax, you will be able to calculate how much you can save on tax by entering your income and the amount you plan to contribute to RRSP.
This is a great resource, because there is no better place to estimate your RRSP tax saving than the software which does your tax for you. It is also up to date.

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Canada RRSP calculator 2020 | TurboTax® 2020 Canada

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Canada RRSP calculator quickly uses your RRSP contribution and calculates your 2020 income tax refund. TurboTax® 2020 official site

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Once you put your money in your RRSP account, you don't just let it sit there. There are many RRSP investments you can choose from to increase the value of the savings. This article lists the qualified RRSP investments, such as bonds, mutual funds, GICs, etc. It also reminds you some of the non-qualified RRSP investments, which are not permitted to be held in an RRSP, such as precious metals other than gold and silver or Commodity futures contracts. Now, you have some ideas of what investment options are available, you can research further.
When you search for RRSP investments, you will find many articles are biased. Most of them are either published or sponsored by the financial institutes marketing their products. This article is more objective by listing your options, so you can look further into the options you prefer.

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A registered retirement savings plan (RRSP) gives you a fair degree of latitude in how you financially prepare for your retirement. In this regard, the government permits Canadians to buy, sell, and hold a number of investments in their RRSPs. However, not all investments qualify, and it's important that a non-qualified investment not be purchased. Otherwise, there can be substantial tax penalties.

There are two basic varieties of RRSPs. The first is managed by an external party. In contrast, the second kind of RRSP is self-directed, in which the holder of the RRSP makes decisions about what specific investments to include in their account.

RRSP investment rules

The Canada Revenue Agency (CRA) sets in some detail the types of investments that are allowed to be held in an RRSP. These are known as "qualified investments." Here are some of the more common qualified RRSP investments:

Cash

Individual stocks, so long as they trade on a major domestic or foreign stock exchange

Government Bonds

Corporate Bonds

Savings Bonds

Mutual Funds

Index Funds

Exchange-Traded Funds (ETFs)

Mortgages and mortgage-backed securities

Shares in Canadian small businesses

Gold and silver

Here is a primer on some of the common RRSP investments:

Stocks

Many people hold stocks (also called equities) in their RRSPs. Stocks offer two main potential benefits. First, there is the potential for capital gains, where the price of a stock you purchase may increase. Second, many companies pay dividends to their shareholders.

Bonds (fixed income)

Bonds are part of an investment category often referred to as fixed income. Essentially, a bond is a loan to a corporation or a government. In exchange for the use of your money for a specified period of time, the borrower promises to pay you interest plus your money back when the bond matures. For the purposes of RRSPs, Canadians may buy and hold corporate bonds, government bonds, as well as government savings bonds (which will be eliminated in 2017).

Mutual Funds

Many Canadians hold mutual funds in their RRSPs. A mutual fund is an investment pool managed by professional money managers who oversee the assets of many different individuals and businesses. Mutual funds usually own a basket of stocks and/or bonds tied to either a particular market or a specific sector within a market. These funds charge unit holders an annual management fee, known as a management expense ratio (MER), which is expressed as a percentage of the money under management. For example, a fund with an MER of 2% will charge investors that percentage of their money every year based on the market value of the fund.

GICs

Guaranteed investment certificates are fixed-income investments offered by financial institutions in Canada. In exchange for the use of your money for a specified period of time, a bank, insurance company or other company will pay you interest. At the end of the GIC's term, you'll also get your principal back. The vast majority of GICs are insured by the Canada Deposit Insurance Corporation (CDIC) or provincial credit union equivalent.

Exchange-traded funds (ETFs)

ETFs are baskets of stocks or bonds that investors can purchase on an exchange. For instance, an ETF tracking the energy index of the Toronto Stock Exchange (TSX) will hold shares in many different Canadian energy companies. Unlike mutual funds, ETFs are typically "passively" managed. What this means is that there isn't a professional manager deciding what stocks to buy. Rather, the ETF provider simply buys shares and only makes adjustments by buying and selling as needed to keep the fund in line with the benchmark.

Self-directed RRSPs

Canadians can have their RRSP investments managed by an investment advisor in some form or another. However, individuals are also allowed to manage all their RRSP investments on their own. This can be done by opening up an online brokerage account and constructing a portfolio by buying and selling stocks, bonds and other securities. Only people with the time and expertise to do so should go down this route, however.

Non-qualified investments

Certain investment are not permitted to be held in an RRSP. These include:

Businesses in which you have an interest of 10% or more

Precious metals other than gold and silver

Commodity futures contracts

Shares in private holding companies and private foreign corporations

Debt you own

Personal property such as antiques or furniture

How to choose the best investments

Before you begin investing money in your RRSP, you'll first want to determine your investment goals and your risk tolerance. This will depend, in part, on your age and your level of investment knowledge. As a general rule, younger Canadians can afford to take more risks with money in their RRSP because they can ride out market volatility in the near term. However, as you get closer to retirement you'll want to be more conservative with the money in your RRSP so you can be more confident it'll be there when you need it.

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RRSP Investment Options - GICs, Mutual Funds, HISA | Ratehub.ca

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A registered retirement savings plan (RRSP) gives you a fair degree of latitude in how you financially prepare for your retirement. In this regard, the government permits Canadians to buy, sell, and hold a number of investments in their RRSPs. However, not all investments qualify, and it's important that a non-qualified investment not be purchased.

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By understanding the terms, we can also learn more about the costs such as interest rate, closing costs, etc.
When choosing between RRSP and mortgage, it is basically calculating if the money you save or profit from RRSP is more than what you save from the costs of the mortgage.

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Before putting your money in anything, it is always wise to understand what it is. Besides the basics of mortgage, this video contains information on interest rate, accelerated payments, and mortgage related fees such as mortgage insurance premium, appraisal fees, etc.
To compare the the return of RRSP and mortgage, we have to look at expenses involved in each investment. This video not only brings up the potential fees or expenses but also gives out some very important tips on paying less for your mortgage. A lot of people do not realize that you almost always pay less interests when you choose variable interest rate.

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Canada Mortgage: Learn The Basics - MORTGAGE 101 UPDATED FOR 2021

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Video#4 How to Calculate Mortgage Payment

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Video#4 How to Calculate Mortgage Payment

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Now, you have a basic understanding of mortgage. Let's look at the components of mortgage payments: principals and interests.
Figuring out the amount of interest you pay plays an important role in your decision on investing in RRSP or mortgage. The calculation is a little bit complicated, but the videos provide us with the framework and concept. We will have more understanding of where our pennies go.

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How to Calculate Mortgage Payments | BeatTheBush

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This calculator is provided by Financial Consumer Agency of Canada, Government of Canada. You can use it to calculate the monthly payment, interest you will pay over the term of mortgage and over your amortization period. If you click the "Summary Report", you will see how much interest and principal there are at each payment. This is very important, because the interest is reducing after each payment, which plays an important role in deciding whether to invest in RRSP or mortgage.
This is a reliable resource. Before you know which institute you are getting your mortgage from, you can have some rough ideas on how much interest you will be paying. You can also calculate how much money you will save on interest if you increase your prepayment by adjusting the number in the "prepayment amount" row.

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Over the 25-year amortization period, you will:

have made 300 monthly (12x per year) payments of $581.60.

have paid $100,000.00 in principal, $74,481.50 in interest, for a total of $174,481.50.

Over the 5-year term, you will:

have made 60 monthly (12x per year) payments of $581.60.

have paid $11,492.50 in principal, $23,403.80 in interest, for a total of $34,896.30.

At the end of your 5-year term, you will:

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personal finances; mortgage loans; borrowers; real estate; housing

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Over the 25-year amortization period, you will: have made 300 monthly (12x per year) payments of $581.60. have paid $100,000.00 in principal, $74,481.50 in interest, for a total of $174,481.50. Over the 5-year term, you will: have made 60 monthly (12x per year) payments of $581.60.

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This is a tool provided by Sun Life Financial. It has taken consideration of the money available for investment, your income, your RRSP return, your mortgage interest rate.
Even though it may be some biased on the analysis from Sun Life, it is still a good tool to quickly compare investment in RRSP and Mortgage. Just keep in mind that, Sun Life does provide products for RRSP investments, so you should do a bit more research before making your decision. For example, the calculation does not include the tax you will need to pay when you withdraw your RRSP.

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The power of RRSPs

The best strategy for you

Get RRSP advice

Learn more about how you can take advantage of the benefits of RRSPs to save for your retirement.

Registered retirement savings plan (RRSP)

Other helpful RRSP calculators to try:

RRSP calculator

RRSP loan calculator

Make an RRSP a key part of your retirement plan. Talk to your advisor about building an RRSP that fits your needs.

Speak with an advisor today

The power of RRSPs

Learn more about how you can take advantage of the benefits of RRSPs to save for your retirement.

Registered retirement savings plan (RRSP)

The best strategy for you

Other helpful RRSP calculators to consider:

RRSP calculator

RRSP loan calculator

Get RRSP advice

Make a RRSP a key part of your retirement plan. Talk to your advisor about building an RRSP that fits your needs.

Speak with an advisor today

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The power of RRSPs The best strategy for you Get RRSP advice Learn more about how you can take advantage of the benefits of RRSPs to save for your retirement. Registered retirement savings plan (RRSP) Other helpful RRSP calculators to try: RRSP calculator RRSP loan calculator Make an RRSP a key part of your retirement plan.

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1.What did you learn about your topic that surprised you the most?
I think the accelerated bi-weekly payment will save much more money than I thought. I did not really look into accelerated and unaccelerated payment, because I thought it would only save me very little money. I will do more research on it.
2. Provide a real-life example of how this topic is relevant or interesting for you.
I just renewed my mortgage agreement and I was discussing whether I should go for variable or fixed rate. Most of my friends get fixed rates, because it is predictable and they know exactly how much they need to pay. Also, the interest rate is very low now, so they want to secure the low interest rate.
After careful consideration, I still chose variable interest rate for my mortgage. First of all, I want to sell my property in the next few years, the penalty is much lower after third year into the contract. Moreover, as mentioned in Video#3, you always save more with a variable rate. The main reason is that your interest payment is always the highest because your principal is the highest at the beginning of your mortgage term. The interest payment proportion will decrease with time. Whether the interest rate is going up or down, you always take advantage of the lower rate when your principal is higher.
3. If you could pass on your knowledge to a family member or friend, what
do you think is the most important thing to pass on?
The most important thing I will pass on to my family or friend will be always do your research. Do not just follow others and hope you will get the same result. Everyone's situation is different. For example, RRSP works mostly for people with very high income now, but expect to have much lower income when retire.