Tuesday, January 16, 2007

Investing in the Home over an RRSP

This recent article in the Globe and Mail gave me a small pause. The author was suggesting that you should forget about your RRSP's and instead concentrate on improving your home as a safer rate of return.

I think he is forgetting one very important thing: in order to get any gains out of your home you have to change markets to try and maintain your lifestyle. Otherwise any gains you have made in your home will get consumed as you buy into another home in the same market.

One other thing that got me was the sales pitch that your home is a safer way to invest over the stock market. Which if you live in Alberta right now this may not apply at all. Home real estate is famous for being very subjective and unstable in the short term.

The last thing that put my guard up on this idea that investing in home improvements will produce a rate of return. This depends on what you do as an improvement (see this article for ideas) some may actually cost you some house value.


Jackson99 said...

"Jim Stanford is an economist with the Canadian Auto Workers union."

That says it all about this article. Totally biased. Plus he's probably got a nice fat defined benefit pension at the end of it all.

For the little guy, the real working class. We need to take retirement in our own hands and RRSP are a great way of doing it. Who says it MUST be in mutual funds or stocks. Even fixed income securities will grow - tax sheltered and tax effectively.

Canadian Dream said...


Very true, you don't have to have your RRSP's in mutual fund or stocks. Actually it best to have your fixed income securities in an RRSP to avoid tax and let compounding do its magic.

But that said, if you want some real estate expousure a REIT is a good idea. That way you get to be part of several properties in a commerical market which tends to be a bit more stable than residental.


the money diva said...

Don't trust someone who uses "instead" when talking about two very standard, viable wealth-building approaches. Both will help your retirement and therefore both should be considered. (Of course, I recognize that sometimes you must choose to focus on one first but that's another issue.)