Keeping taxes to a minimum

Don’t pay any more taxes on your mutual fund profits than you have to.

One way to cut the tax bill is to rationalize your registered and non-registered portfolios. Use your RRSP or RRIF to hold mutual funds or other securities that attract the highest rate of tax. In the case of mutual funds, that would include any fund that’s designed to generate interest as the prime source of income. This includes money market funds, bond funds and mortgage funds. Keep funds that enjoy a tax advantage outside the retirement plan. These include stock funds (dividends and capital gains), dividend income funds (dividends) and real estate funds (rental income). It won’t always be possible to set up your portfolios in a such a perfect way, but apply this principle whenever it’s feasible.