For many investors, RRSP season has a definite beginning and end — Jan. 1 to March 1 every year. But numbers from the Investment Funds Institute of Canada indicate a growing trend in Canadians making investing a year-round proposition.

I say this because statistics on sales of mutual funds, which IFIC tracks, were relatively stable throughout 2005. Ten months of last year had net sales of more than $1 billion each, and that was outside the usually busy RRSP season. Although past purchasing habits are no indication of future purchasing habits, that trend appears to be continuing, with about $1.6 billion in net sales in the first month of this year.

This is good news for advisors, who can now count on receiving a more even income throughout the year.

It is also good news for investors who are — finally — taking heed of advisor and analyst advice that they can benefit big time from year-round investing by taking advantage of compound growth and dollar-cost averaging,

And TD Bank Financial Group recently released an eye-popping statistic to prove that point to those clients who still need a little nudge. The bank gave the example of a 35-year-old woman who takes her lunch to work three times a week, thereby saving herself $15 a week by not going out for her noon meal.

Brown-bag strategy

Using her automatic RRSP contribution plan, the lunch money is invested in an equity growth mutual fund, which earns an annual rate of return of 7.2%. She also takes the tax credit she gets from her RRSP and puts that back into her RRSP. The money she saves from brown-bagging, as well as the tax credit compounding in her equity fund, will give her a grand total of $94,658 when she retires at 65. That’s a lot of lunches.

A Royal Bank of Canada annual survey clocked in with the news that aging Canadians, now within easy sight of retirement, say funding their retirement is their top concern.

The interesting twist is that this is the first time since 1999 that the majority of those surveyed in this poll said they are more concerned about retirement than they are about “keeping their heads above water.” Perhaps the next step for them, in addition to making annual contributions to their RRSPs, is to make the contributions throughout the year.

A new push to get Canadians to invest may stem from a proposal in the new federal government’s election platform to eliminate capital gains taxes for individuals on the sale of assets if they reinvest the proceeds within six months.

This concept is still in the proposal stage, but IFIC, for one, is encouraging Finance Minister Jim Flaherty to give it serious consideration. The details have not been determined, but as they are developed they will need to take into account the fact that much of the investment in equities done today by Canadians of ordinary means is through investing in mutual funds.

But this proposal is nevertheless a tax policy that will be widely welcomed by Canadian investors who often take tax considerations into account before making investment decisions, to the detriment of their longer-term financial interests.

If the tax cost of reallocating assets is removed, Canadians can put their money where it will work most efficiently for them. And investing throughout the year may make even more sense to them. IE



Joanne De Laurentiis is president and CEO of the Investment Funds Institute of Canada in Toronto.