Posted at 4:00 p.m.
“My grandson turned 2 recently. Since he was born, on his birthdays and at Christmas, we put money in an RESP for him. For several years, we have heard that it was one of the best investments with the contribution of the government. But is this still the case? Given the economic situation, should we favor another investment for its future? —Lison Bouchard
The Registered Education Savings Plan (RESP) should be favoured, according to portfolio manager Thierry Tremblay, because it is a tool that not only defers taxes, but thanks to generous government subsidies (from 30 to 50 % according to family income), it allows you to obtain a “risk-free” return, which is rather difficult to obtain at present.
“So if your budget allows it, I suggest continuing with good savings habits by maintaining contributions,” says this expert affiliated with iA Private Wealth Management.
That being said, a bigger question is how to invest the contributions and grants once they are in the RESP.
In an environment where stock markets and the value of bonds have fallen considerably, investment opportunities, in general, have become more interesting than they were at the start of the year, maintains Thierry Tremblay.
The most important point to consider, according to him, is the degree of tolerance for volatility.
“If you don’t currently feel comfortable with the stock market or any other more volatile investment, you can make your RESP contribution and keep it all in cash. You can also invest in guaranteed and liquid products that will earn you a little interest until the risks go down. »
A showdown
Currently, he says, we are witnessing a standoff between central banks and inflation.
“For several years, governments did not need to worry about it, because inflation remained within the tolerated range of 1 to 3%, which allowed them to concentrate their efforts on growth and full employment. Looking back, it now seems obvious that the efforts to stimulate the economy have not only been too great, but above all have lasted too long. »
Leading economic indicators (new building permits, consumer confidence, new industrial orders, etc.) point to a rapid slowdown in the economy and the stock market seems to be anticipating this scenario, underlines Thierry Tremblay.
He argues that stock market declines allow investing to be at more attractive levels and that there is never a perfect time to invest. “For the first time since the 1970s, inflation is a problem and the cycle of rising interest rates does not appear to be over. »
However, says Thierry Tremblay, since our reader’s grandson has several years ahead of him before dipping into the RESP account, allocating some capital to the stock market is not a bad idea. But in his opinion, going gradually would be more prudent.
“If you drive in a snowstorm, do you keep the same speed as in summer or do you slow down? Why not do the same with your portfolio and reduce your exposure when the risks increase? »
Do you have questions about personal finance, the world of work, the stock market, finance, technology, management or another related subject? Our journalists will answer one of them every week.