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

It was once that investors take their bonds into RRSPs to capitalize on the zero tax rate provided by these makes up about income-producing and other securities, keeping their equities outside of registered accounts to take advantage 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 you will find never after tax.

What it all 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 appropriate for the cash account, TFSA or perhaps your RRSP or RRIF.

It’s also important to notice 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 get the full dividend payments.

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

“Each one of these conventions are meant to be broken once the right opportunity comes along,” said Norman Levine, md at Toronto-based Portfolio Management Corp. “What you want in your RRSP are stuff that are likely to increase your profits – an overall total return – that’s capital appreciation, interest and dividends.”


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