When I started the Goodwill Investing Journal nearly one year ago, I was quite embarrassed hitting “send” to the first half dozen subscribers, wondering if I would quickly run out of things to talk about or if anyone would read my work. Fifty-one (51) journals in, +57,000 words written, and 900 subscribers later, we seem to have found a groove.

Thank you, my dear family and friends, you are the inspiration.

And happy new year!

Personal Finance

Question: When is opening an RRSP as opposed to a TFSA appropriate?

It boils down to a couple of key factors: your income, your goals, and tax (ugh).

If you’re earning a big salary, an RRSP can make good sense.

Why? Because every dollar you put in reduces your taxable income. That means a smaller tax bill and potentially a nice fat refund come tax time.

Example

• You earned $100,000 in 2024 and have $20,000 left over in cash.

• Tax man says that $100,000 equals a 21% average tax rate.

• So, net, you have to pay $21,000 in tax.

• But let’s say you take that $20,000 in cash and move it into your RRSP.

• Your ‘taxable income’ drops from $100,000 to $80,000.

• Now, your net tax owing is $15,000 instead of $21,000.

• The benefit shows up in the form of a cash refund of $6,000 when you file your taxes.

You can reinvest that refund or use it for other financial goals—preferably not gazelling.

Then there’s the retirement angle, it’s in the name: Registered Retirement Savings Plan. You’re deferring taxable income down the road to a point where, ideally, you’re retired and in a lower tax bracket. Less income means less tax when you start pulling money out. This is usually a financial ‘win’.

The most valuable reason, at least for me, to lean into an RRSP is Employer Matching. If your company has a matching plan, that’s free cash. For example, my previous employer used to match 50% of my contribution up to $4,000. Meaning, contribute $8,000 and get an extra $4,000 injected by the employer = $12,000 invested immediately. We always talk about the 10% return - but this is a 50% return on your money and should be prioritized if the company offers it.

Also, with the First Time Home Buyers Plan, you can take up to $60,000 out of your RRSP tax-free to fund the down payment. Tax free because you’re essentially borrowing from yourself, and you have to pay it back over time, but at no interest - a win because you reduce the size of the mortgage interest bill.

So let’s say you are 22 and starting to make some solid income, you invest $12,000 (your $8,000 and the employers $4,000) and do that for 10 years and earn an average of 8%/year. By the time you are 32, your RRSP could be worth $173,000. Pretty epic, and a useful source of cash for a down-payment.

One of the problems of the RRSP, however, is if you are in a pinch for spending money and you need to withdraw from your RRSP, those withdrawals get taxed as ordinary income. You could be ‘earning’ a lot of income, but gazelling big time and going into credit card debt, with no money for your upcoming Christmas vacation in Maui. So you are forced to pull cash from the RRSP, increasing your tax payable immediately to fund the trip. Here we see a spending problem—not an income problem—that creates a losing situation.

Also if you are an entrepreneur/ incorporated company, you don’t necessarily want to pull money out of your corp - which creates a taxable event - to then fund your RRSP just to get the tax refund. Tax wise, doesn’t make a lot of sense to do this.

Another issue I’ve witnessed is people nearing retirement with +$1,000,000 RRSPs and very small TFSAs or non-registered investments. Making bank and diligently contributing to RRSPs, but otherwise spending exactly what they earn and not building any other means of spending liquidity. I knew a Doctor in his 60s making $1,000,000/year, but spending every penny of that $1,000,000/yr on a high flyer lifestyle (including 50% tax). He was forced to take money out of the RRSP to fund his kid’s house purchase. And guess what? That extra $1,000,000 just withdrawn from the RRSP get’s taxed at over 50%. Having a million dollar RRSP is obviously a ‘good problem’ to have—cry me a river mister millionaire!—but you can see where it can become a major issue. This highlights that the Doctor here, too, has a spending problem, not an income problem.

Now, when would a TFSA be better?

Well, if you’ve been following this Journal for a while, you know much I pound the table on max funding your TFSA (props to everyone that has already contributed the $7,000 TFSA limit for 2025). It is literally the most powerful and simple wealth building tool we have at our disposal, and there are no penalties or tax consequences. Please see The Goodwill Investing Journal - Issue #38 for further discussion, this was by my most popular issue, FYI.

You can see much of the above re RRSP is lengthy and not always advantageous. The answer is, it depends. But if your income isn’t sky-high, or you require spending flexibility, skip the RRSP for now.

I would much rather you have a $1,000,000 TFSA than a $1,000,000 RRSP.

Sum total, order of operations for most people could be as follows:

1. pay off credit card debt

2. build 3-6 months cash emergency fund

3. max fund RRSP up to employer match limit

4. max fund your TFSA

5. then consider topping up RRSP up to allowable limit

6. start building up your taxable brokerage account

Stock Markets

Question: what are my favourite ETFs, stocks or investments?

US Equities: XSP—iShares S&P500 ETF

• Objective: long term capital gains

• Expected return: 8-10% on average

• Dividend yield: 1.26%

• 2024 performance: +23.40%

• 10 year compound return: 11.54%

• Management fee: 0.08%

US Equities: XUS—iShares S&P500 ETF  

• Objective: long term capital gains

• Expected return: 8-10% on average

• Dividend yield: 1.22%

• 2024 performance: +35.95%

• 10 year compound return: 15.15%

• Management fee: 0.08%

→ these are identical ETFs, except XSP is hedged to CAD while XSP is unhedged - meaning, exposed to the change in the Canadian/USD exchange rate. Because the Canadian Peso has declined this year, XUS has gone up by more than XSP. I like to buy 50% XUS and 50% XSP because I try not to make a market call on the direction of the currency.

Bonds: XBB—iShares Canadian Bond ETF

• Objective: income / portfolio stabilizer

• Expected return: prevailing 5 year interest rate

• Distribution yield: 3.34%

• 2024 performance: +4.12%

• 10 year compound return: 1.82%

• Management fee: 0.10%

→ Bonds don’t “go up” like stocks do, they are basically loans that pay you income. The price of a bond can fluctuate with changes in interest rates, but generally less much volatile than stocks. This is for investors that want a ‘portfolio stabilizer’ based on their risk tolerance. I don’t talk much about bonds in this Journal—maybe I should—but I do cover them more in depth in the Simply Investing course.

Global Equities: XEQT—iShares Core Equity ETF Portfolio

• Objective: long term capital gains / some income

• Expected return: 8-10% on average

• Dividend yield: 3.27%

• 2024 performance: +24.67%

• 5 year compound return: 11.66%

• Management fee: 0.20%

→ this is a one-stop-shop for diversified global equities, not just US stocks. It includes 45% US stocks, 24% Canada, the rest international (Japan, UK, Germany, China, etc). Slightly higher cost that S&P500 ETF because of the diversification and rebalancing. This too is covered as an option in the course.

Cash: HISA—High Interest Savings Account Fund

• Objective: income

• Expected return: prevailing short term interest rates

• Distribution yield: 3.08%

• 2024 performance: +4.53%

• 5 year compound return: 2.67%

• Management fee: 0.15%

Note: I do not own XBB or XEQT, only XSP and XUS, because of my long time horizon and satisfaction with US Equities, though the former are both great ETFs and can make sense for many investors.

Other than the above, I invest heavily into private real estate, a little bit of Bitcoin, and short term cash via HISA above that pays 3.08% interest, and my wealth simple cash account that pays 2.75% interest.

Hope this helps, Cesar!

Real Estate

Condition waiver coming soon on our Industrial investment opportunity, and equity box is filling up 🚀 

1 Quote

A Question

What, if anything, are you going to do to improve your financial situation this year? Let me know!

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Thank you

Eddie Gudewill, CFA