Starting your RRSP portfolio may seem like a daunting task to some.
But if you’re a millennial investor, especially a young one, you are in a very good spot. You have time on your side, and you may not have many of the expenses of life wearing you down.
Wouldn’t you like to set yourself up so that your money works for you now and well into the future?
Breaking it down into smaller parts, you will see that setting up your RRSP portfolio is, in fact, a totally achievable and common sense exercise that will leave you well set up for your future.
Start with regular monthly contributions
Setting an automatic, monthly withdrawal of say 10% of your gross income (which is the rule of thumb, but do more if you can), will help you to accumulate your savings in a way that is automatic, so you won’t have to think about it. And you will learn to live on what income is left over after the contributions.
This ensures that your RRSP portfolio builds over time, and if you start young (like when you land your first job), you will not regret it.
Max out on taking advantage of company matches
Some companies have group RRSP programs in place that contribute a percentage of what you contribute up to a maximum amount.
Max out on this if you can, as the company match is free money that will add to your returns and your savings for years to come.
Choosing the right investments
Choosing the right investments is partly about asset mix and partly about building a well-diversified portfolio that will perform well in all the different economic cycles.
For young millennial investors, the asset mix will include mostly equities, as the higher-risk, higher-return profile of equities is well suited to young investors since they have time on their side.
To build a diversified portfolio of equities, we can look to different sectors to achieve the best performance possible under different economic scenarios.
So, we should look to include stocks from defensive sectors, growth sectors, financials, energy, and emerging sectors, to name a few.
Here are a few stocks to get you started.
Northland Power (TSX:NPI), currently yielding 5%, remains a top dividend stock for investors looking to gain exposure to the renewable, clean energy industry.
This independent power producer is dedicated to developing, building, owning, and operating facilities in Canada and internationally.
The company is expected to continue to reduce its debt in the next couple of years, thereby lowering the risk profile of the stock and increasing its multiple. And with strong insider ownership of approximately 17%, it is clear that management’s interests remain well aligned with shareholders’ interests.
Toronto-Dominion Bank (TSX:TD)(NYSE:TD) stock remains a good stock for dividend income and long-term growth, with a dividend yield of 3.93% and a solid position in the very profitable and stable Canadian banking industry.
A cannabis stock would also be a good addition for exposure to the high-growth cannabis industry, but be careful in your choice and your timing. Stick with the best.
