Bonds are relatively safer than stock prices because of their fixed interest rate.

However, a company can still default on its obligations and not pay back the bond or the interest rate.

This risk would be reflected in the interest rate. The higher the interest rate, the higher the risk associated with that company or government.

If Google was a relatively new company with not a long history of making money, the interest right might be higher.

As it is today, they are a mature company with a strong track record of paying its debts.. 

All touting that they are the best of the best trying to attract more investors and their money.

A mutual fund is a collection of investments, managed by a team of fund managers, sold as one stock or unit. A mutual fund might be a basket of 100 stocks, a mutual fund with only bonds in it, or a mutual fund with a combination of both stocks and bonds.

Whatever the mixture, you as an investor can buy it as one single stock price or unit price.

This idea is beneficial if you don’t have a lot of money to buy 50 stocks on your own. Rather you can buy a mutual fund and get exposure to all of its underlying stocks and bonds for as little as $25 in some cases.

This provides investors with diversification for a low upfront commitment. It also transfers the responsibility of research and due diligence from you to the fund manager.

However, not every mutual fund is built the same. They all have different mandates for the types of companies and different types of fund managers who have different theories on how to pick the best investments.

There are thousands of mutual funds in Canada to choose from. All touting that they are the best of the best trying to attract more investors and their money.

ETFs have many similarities to mutual funds just with fewer people involved.

Like mutual funds, ETFs offer diversification to stocks and bonds but as a whole market instead of just one individual stock.

A mutual fund manager will try and pick out the best companies in the best sectors in the best countries.

An ETF will just track the entire industry rather than trying to pick out who’s going to outperform who.

Alternatively, choose an ETF that tracks the S&P 500 and accepts the average of the top 500 companies in the U.S. as a good enough rate of return.

The result of an ETF strategy over periods of a decade is that they tend to deliver the same or better returns than most of their mutual fund rivals because ETFs have substantially lower fees.

Mutual fund fees are typically over 2% (if you use an advisor) of your account value whereas a complete ETF portfolio charges only 0.30% or less. A difference of 1.7%. That’s $170 for every $10,000 invested every single year.

That means, if you have money in a mutual fund, you better make sure they’re outperforming their ETF counterparts. Otherwise, you’re just wasting money on the expertise you’re not getting.

You, myself, and many industry experts don’t know how the market is going to perform over the next year and every year after that. We can make our best assumptions on inflation, governments, supply chains, the way the stars are aligning and so forth..but we can’t predict how a company's stock price will perform.

It takes a tremendous amount of knowledge to study a company's financials, it takes a tremendous amount of resolve to not sell the stock when it occasionally plummets in value, and it takes a tremendous amount of time to monitor all your stocks daily.

Therefore, you should start with an investment plan that can deliver you diversification for the lowest cost possible and continue to expand from there.

That’s why I recommend you start with a Done For You ETF strategy.

ETFs give you all the same diversification features as mutual funds, just without the fees associated.

All you need to do is figure out your TFSA or RRSP strategy, which online platform to use and how much you want to start investing.

The number one question I receive when a new client comes to me and wants to save for retirement, is “Which is better, the RRSP or TFSA?” to which I reply “It depends”.

I wish all Canadian families could maximize both the power of the Tax-Free Savings Account (TFSA) and the Registered Retirement Savings Plan (RRSP), but the fact is life is expensive and families can’t afford to maximize both options.

Families have mortgages, vehicle payments, daycare costs, child activities expenses, utilities...the list goes on. There’s just not a ton of money left over to save for retirement.

Therefore, you’re left with a choice. Which of the RRSP or TFSA will provide you with the best short and long-term returns for your situation?

This is a complex subject so I will summarize it below.

The easiest way to determine your tax strategy is to first decide if RRSPs offer any value to your situation now or in retirement.

With an RRSP, you get to deduct any contributions from your income in the year of contribution. That contribution grows tax-deferred. Then when you withdraw the money, you will claim that as income and pay taxes according to your marginal tax rate in that year.

The whole premise of RRSPs is the belief that you will be in a lower tax bracket in retirement than you are during your career. That's because you're expected to be debt-free and not have any dependent children sucking your bank account dry. Therefore, you should require less money.

Perfectly fair assumption.

What many Canadians don't realize is how hard it is to drop into a lower tax bracket. In 2023, if you earn less than $106,717 annually, you will have to reduce your retirement income below $53,359 in retirement to save any money on taxes.

That means RRSPs are best suited for individuals earning more than $106,717. Because you have a better chance of realizing tax savings.

Secondly, if you run into an emergency where you need money, RRSPs are not a great place to withdraw from, especially while you're still working.

That's because you have to claim RRSP withdrawals as income which could mean paying higher taxes.

Therefore, invest in an RRSP if: