Q: I’m wondering what type of securities you would recommend to hold within a non-registered account: stocks, ETFs, mutual funds, GICs?
A: It goes without saying, but I’m going to say it anyway: Regardless of where your investments are held, you need to ensure that you have a diversified portfolio, and a clear asset allocation. You want a mix between equity and fixed income that takes into account your risk tolerance and retirement plans. Now, with that public service announcement delivered, I’ll address your asset “location” question. Assuming your RRSP is maxed out, there is one overarching principle to keep in mind when deciding where to hold securities, says Matthew Ardrey, vice-president at Toronto-based wealth management firm T.E. Wealth: “Place the asset class that generates the most tax-efficient income in the non-registered account first, due to the dividend tax credit and capital gains treatment.” Essentially, that means placing equities in your non-registered account and fixed income in your RRSP because the latter is taxed at a higher rate. For instance, a Canadian equity ETF would be best in a non-registered account, and a fixed-income ETF would be best in your RRSP.