Sorry for getting so upset there. It’s just that today, January 4th, 2014, I’m feeling particularly passionate about how procrastinating is such a bad idea. Like just get crap done, y’know? Geez.

(two years passes)

Okay, I guess it’s about time I write my annual RRSP guide for you last minute procrastinators, a group I totally don’t belong in. Totally.

(six more weeks passes)


It isn’t just procrastinators who need this last minute RRSP guide. You might not know what to invest in. Lots of people just stick their money in something, content to know it’s at work and a big tax refund is on the way. What to invest it in isn’t as important as just getting it invested.

This guide is for you. Here’s what to do with your last minute RRSP contribution.

Be patient

Let’s cover the guy (or lady who makes me pie I’m not sexist) who has the cash but doesn’t know what to invest it in first.

Here’s what’ll likely happen. You’ll go in to your bank all in a rush, and the nice girl who looks DAMN HOT in her professional attire will start telling you to put that cash in the market, yo. It’s not going to grow in a savings account, she purrs. 20 minutes later you’re out the door after investing in a mutual fund with a 3.7% MER, smoking a cigarette after getting screwed so hard.

This is when a redeemable GIC becomes your best friend. Sure, you’re getting basically bugger all in interest (0.5% annually if you’re lucky, more like 0.25%), but you’ve ensured a contribution was made and a tax refund is heading your way. You can then take a week and make up your mind as to what to put it in.

If you have a self-directed RRSP account at one of the online brokers (Questrade, represent!) you can just make the contribution in cash and have it sit in your account, just waiting for you to touch it ever so softly and coax it to work. No, you’re weird.

Invest it

Allow me to start this section off with some links to stuff I’ve written in the past about strategies that’ll work for the more general investor before delving off into stuff a little more specialized.

You can easily build your own balanced fund using ETFs.

Or you can invest it using a robo advisor, which will recommend a good asset allocation using cheap ETFs.

If you insist on going the mutual fund route, my top choice for a fund manager would be Francis Chou. He’s worth the fees you pay. These other mutual funds have a history of trouncing the market over long periods of time too.

Here are some specific ideas I like as investments today.

Invest in oil without investing in oil

I wrote about this in more detail over at Motley Fool. Basically, you’re looking to play an eventual recovery in oil by investing in Alberta-based businesses that don’t produce oil or directly service energy companies.

I used Westjet and Boardwalk REIT as examples in the article. Any help Westjet has gotten from low oil prices has been more than offset by decreased traffic out of Calgary and Edmonton, two of its main hubs. And Boardwalk has ~60% of its apartments in Alberta. There are plenty of stories of rents softening in Calgary. This will obviously hit Boardwalk, sooner or later.

Gamehost is another example of a company getting hit. It owns three casinos and two hotels in Alberta. The gambling business remains solidly profitable, just a little less so than 2014. It currently pays a 10.7% dividend.

These businesses are good businesses. They’ll remain easily profitable, even during bad times. They have the balance sheet strength to make it through an even prolonged downturn. There’s basically zero risk of them going bankrupt, but they recover nicely when crude recovers. These are a much better way to play an eventual comeback for oil than a producer. Most producers have serious bankruptcy risk.

If you insist on investing in oil…

Buy an ETF. Don’t bet on individual oil companies. I made that mistake, assuming crude couldn’t possibly stay below $50 per barrel for years. We’re now approaching 15 months later, and people are now saying they don’t know when (or even if) oil will recover.

Buying the ETF allows you to bet on the sector without having to analyze many balance sheets. I wrote about four of the major energy ETFs here, each with its own special flavor.

If you do insist on picking individual oil companies, I’d probably recommend Baytex over Penn West, one long-term readers will remember me being pretty bullish about. Baytex has no debt coming due until 2021, while Penn West still needs an asset sale or two to stay alive past 2016.

Preferred shares

I’ve bought a bunch of preferred shares over the last year. Each gives me at least a 6% yield, and I don’t think I’m taking on too much specific company credit risk. Some of these companies are a little iffy, but should pretty easily survive unless we really go down the toilet.

I own:

  • Shaw Communications  (SJR.PR.A)
  • Fairfax Financial (FFH.PR.C)
  • Enbridge (ENB.PF.E)
  • Dundee (DC.PR.D)
  • Aimia (AIM.PR.C)

These are all down between 10-20% from where I bought at, but I’m not stressing. I’m getting an average yield of approximately 7.5%, and these all have capital appreciation potential when the market starts to recover.

Or, if you don’t want to screw around with individual preferred shares, buy either the Claymore preferred share ETF (TSX:CPD) or the BMO Laddered Preferred Share Index ETF. Both yield around 6.1% with a reasonable expense ratio of approximately 0.5%.

And that’s about it. If you can’t figure out how to invest your cash after reading this RRSP guide, maybe you’re the problem. Check back next year, when all the things I talk about are the only things down while the rest of the market is rocking. It is my gift.

Tell everyone, yo!