Episode #16 - Two Minutes to a Better RSP: Should Your Manage Your Own RSP Investments?
Announcer: Welcome to The Money Clip podcast series from The Vault, Scotiabank’s online guide to helping Canadians get ahead financially. Listen in to gain a deeper understanding of your personal finances and find out how a few small changes to the way you manage your money can make a big difference.Michael Seaton: Thank you for joining us on The Money Clip podcast series from Scotiabank. I’m your host, Michael Seaton, and with The Money Clip we provide Canadians with a deeper understanding of personal finance and money-related matters. This is our series titled “Two Minutes to a Better RSP”. We hope to put you on the path to maximize your retirement savings plan as the deadline approaches. For today’s tenth episode, we will explore the topic of self-directed investing. I spoke with John Ballard of ScotiaMcLeod Direct Investing and asked him to explain what self-managed investing is all about and how to assess if it’s right for you. Here’s his answer.
John Ballard: Should you manage your own investments? Now, having worked in the direct investing business for a number of years, a lot of people ask me that question; whether they should get into it themselves. And what I like to do for them is try to break the question down into four elements. The first one is, do you have the interest to manage your own money? Are you the sort of person who likes to take control, likes to know exactly where they’re going, how they’re going to achieve their financial objectives, whether it be for education, whether it be for a future purchase, or whether it be simply for retirement planning purposes? If you’re the sort of person who likes to be in charge and likes to be in control of those particular aspects, then you should certainly consider direct investing. At the end of the day, nobody is more preoccupied about your financial future than yourself. Secondly, do you have the time? And, certainly, you should be aware of the fact that to manage your own money is going to require a certain amount of time. Now, we have some customers who will spend every single day looking at the marketplace, looking at opportunities to invest, and actively managing their account. On the other hand, we have an awful lot of customers – in fact the vast majority – who perhaps make a contribution to their account once or twice a year and then simply spend perhaps a Sunday afternoon once a month, once a quarter, making sure that their investments are on track and looking at the opportunities in the marketplace for potential future investments. The next question, of course, is do you have the knowledge necessary to manage your investments? These days there is such a huge amount of information available – on the Internet, maybe in the newspapers or investing magazines, certainly on the television – that acquiring the basic information in order to successfully manage an investment portfolio is not the enormous task that it used to be many years ago. Certainly, if you have the interest and you have the desire to want to manage your own money, it is not difficult to acquire the necessary knowledge. One small tip that I’ve seen: a number of people join something called an “investment club”, which is nothing more than a group of friends, a group of acquaintances, who get together – maybe once a month – discuss markets, discuss investment opportunities, and basically learn together and share their ideas amongst themselves. Remember, investing is not a competitive sport, and everybody can end up a winner. The final question, of course, is can you save costs? And the bottom line is, most probably, yes, you can. However, saving costs alone is not sufficient reason to want to manage your own investments. You need to be confident that you can answer in the positive to the first three questions before you make the decision based on cost alone. I hope these four ideas will help people to decide whether they’re a good candidate to manage their own investments.
Michael Seaton: Well thank you, John. And this has been another Two Minutes to a Better RSP podcast. Keep listening for more in this series as we take two minutes to review tips and suggestions to reach your retirement goals. Thank you for listening.
Announcer: Do you have any thoughts on today’s show? We’d love for you to get involved and become part of the conversation. Send us your questions, comments or money management tips so that we can address them in future podcasts. Our email address is themoneyclip@scotiabank.com and our call-in number is 1-866-652-5333. The Money Clip is brought to you by The Vault at Scotiabank. Be sure to tune in again next time.