Comments on: How Much Of An RESP Should Be Invested In Fixed Income?

By: stock tips

stock tips — Wed, 25 Nov 2009 14:26:15 +0000

i like your idea.Thanks for the mention Preet. I’d agree with Ken that the key question is this: how many years does DJ’s child have until University?

By: Linkstuff Feb 13

Linkstuff Feb 13 — Fri, 13 Feb 2009 10:02:10 +0000

[...] Preet at Where Does All My Money Go discusses How Much of an RESP Should Be Invested in Fixed Income. [...]

By: Book Winner and Weekend Links - Feb 6, 2009 | Income Trust | Personal Finance | Real Estate SEO

Fri, 06 Feb 2009 12:27:59 +0000

[...] Where Does All My Money Go tries to answer a reader question on how much of an RESP should be invested in fixed income? [...]

By: This and That: Falling BRICs Edition

This and That: Falling BRICs Edition — Fri, 06 Feb 2009 02:53:25 +0000

[...] Preet answered a reader question on how much of a RESP should be invested in fixed income. [...]

By: Preet

Preet — Wed, 04 Feb 2009 05:10:25 +0000

@ Ken Hawkins & Michael James – I agree, the extra costs of target date wraps make them a poor choice for anyone who can manage their own money. For those who cannot, they may be of appeal to those willing to pay for some peace of mind when it comes to rules of thumbs.

@ Patrick – you are quite right. The transactional costs would be higher with what I proposed, and lower with yours if managing your own money. If using mutual funds from the same provider, switching fees would be zero, and it would be less cumbersome from a paperwork point of view (just keep the PAC running and make a switch once a year).

@ Traciatim – thanks for the note about those group plans, totally agree. If you ever want to write a guest post on your experience, please submit at your convenience, happy to post it.

By: Canadian Capitalist

Canadian Capitalist — Tue, 03 Feb 2009 17:04:46 +0000

Thanks for the mention Preet. I’d agree with Ken that the key question is this: how many years does DJ’s child have until University? If there is five years or less, I’d go very light on equities. My kids are three and a good case can be made that their entire fund should be in equities but boy am I glad that I kept some in bonds and rebalanced when the market turned down.

By: Traciatim

Traciatim — Tue, 03 Feb 2009 16:01:14 +0000

What I use in the RESP for my son is to have it 100% in equities up until age 10, and then will be balancing from age 10 – 17 to reduce the exposure and have nearly all fixed income by the time he is 17. It’s as good a plan as any, and he will have more for education from me than I did from my parents (None, other than housing, which is HUGE anyway).

For my daughter a couple of years earlier when I was young and naive I trusted a CST rep to set my daughter up with their group RESP. Please for the love of anyone in your life avoid group RESPs like the plague. It’s the worst decision I ever made financially.

By: Patrick

Patrick — Tue, 03 Feb 2009 13:36:57 +0000

What difference does it make whether you rebalance using existing funds or new contributions? I see no need to keep contributing to equities if you’re simultaneously shifting some of those equities into fixed-income. Just apply enough of your new contributions to fixed-income to keep the asset balance you want, and when you can’t do that anymore, then you can start moving the existing funds to make up the difference.

By: Michael James

Michael James — Tue, 03 Feb 2009 12:53:11 +0000

Thanks for the mention. The older I get, the more I realize how we are all driven by our emotions. From a purely logical point of view, there probably is a “best” answer to the question of how to invest RESP funds, but it doesn’t matter much if it causes the investor to lose sleep at night, or worse to sell in a panic at the wrong time. I’m an advocate of using reason to overcome emotional reactions to the extent possible, but not many people seem willing and able to do this.

I’d be more inclined to agree with Ken Hawkins’ comment about target date funds if I was aware of even a single target date fund that didn’t charge outrageously high fees.

By: Ken Hawkins

Ken Hawkins — Tue, 03 Feb 2009 11:54:20 +0000

In theory the asset allocation of fixed income and equities in a RESP should change as the date at which the funds start being withdrawn approaches. The closer one gets to using the funds the greater the portion in fixed inccome and the more conservative a portfolio become. Because of this, target date funds whcih are used for retirement are quite appropriate for RESPs as well.