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self-directed accounts

New Westminster, B.C., residents Robin Glover and Bernadette Amiscaray, pictured with 14 month-old daughter Gwyneth, have opted to go the DIY route with their portfolio.Rafal Gerszak

Robin Glover wanted to expand his investment portfolio beyond the funds offered by his financial adviser. So after hours of online research and numerous trips to the bookstore, the 39-year-old Vancouver real estate developer sat down in front of his computer and opened a self-directed RRSP account with Toronto-based Questrade Inc. "Our financial adviser is excellent, but she represents a limited number of funds," says Mr. Glover, who is married and has an infant child. "So we decided that we would maintain the investments we have with her and supplement that with self-directed RRSPs."

Designed as trust accounts that can hold a variety of investments – including mutual funds, guaranteed investment certificates, bonds and exchange-traded funds – self-directed RRSPs have become a popular retirement savings vehicle for many Canadians. Edward Kholodenko, president and chief executive officer of Questrade, a Toronto-based online trading service, says the expansive breadth of investment choices, combined with comparatively lower administration fees and the convenience of online access, makes self-directed RRSPs highly attractive to investors.

"Anecdotally, we're seeing a move toward self-directed RRSPs," Mr. Kholodenko says. "People love the convenience of being able to place their trades and check their portfolio online."

Another advantage to do-it-yourself RRSPs? For Canadians whose retirement savings are all over the place – GICs and mutual funds at a couple of banks, and perhaps other investments through an independent wealth management firm – a self-directed RRSP can serve as a catchall basket where they can hold and manage all of their registered investments.

This gives investors greater control over their funds; with a self-directed RRSP, it's easier to move investments between financial institutions, monitor multiple maturity dates and track returns from individual investments or from the entire portfolio.

To ensure this increase in control translates to a healthy RRSP portfolio, it's important for investors to be well prepared, says Rowena Chan, vice-president at TD Waterhouse. "You need to get all your information together – your goals, your current financial situation – and be willing to do some research so you at least know the basics of investing," she says.

Most online investing services provide educational material on their websites, and many offer free seminars for novice and experienced investors, Ms. Chan says.

"And don't hesitate to pick up the phone to ask for help, because even in self-directed channels there are all kinds of help," she says.

First-time online investors might want to start with a small portfolio, Ms. Chan says. It's also a good idea to do a test drive with a practice portfolio.

Investors getting ready to switch to a self-directed RRSP should cast a critical eye on their current investments, says Silvio Stroescu, head of mutual funds for ING Direct Canada.

"This is a good time to list all the investments you hold and take a good look at the big picture," he says. "I've seen clients with 15 to 30 mutual funds, which may not necessarily be in their best interest."

When it comes to deciding the right mix of assets within a self-directed RRSP, it's best to follow the primary rule of thumb in portfolio management, says Odette Morin, a Vancouver-based financial adviser with You First Financial & Benefits Consultants Ltd. "You want to have a high degree of diversification, geographically and by sector," she says.

For example, a 40-something investor who wants to retire at age 60 might build a portfolio with 20 per cent to 30 per cent fixed income investments and the rest in equities.

"We tend to recommend managed funds, whether they're exchange-traded mutual funds or regular mutual funds," says Ms. Morin, who is Mr. Glover's financial adviser.

As investors buy and sell assets throughout the year, it's easy for their self-directed RRSP portfolio to become unbalanced, Ms. Morin says. She recommends a thorough portfolio review at least once a year.

While many self-directed investors prefer to do this annual review themselves, some do turn to financial advisers for help in rebalancing, Ms. Morin says. "We have clients who like managing their accounts on their own but still come in once a year for a portfolio review," she says. "And we're happy to do that because we think it's good for self-directed investors to have someone they can check with and bounce off ideas."

Ongoing education is a must for self-directed investors, says Cesar Rainusso, vice-president of strategy and product development at BMO InvestorLine. This is why it's important to choose a brokerage that offers plenty of research tools, market reports, tutorials and webinars.

"Online brokers are not allowed to provide investment advice," Mr. Rainusso says. "But what we can do to support our customers is provide as many resources as possible to help them educate themselves about investing."

Three months after he opened his self-directed RRSP with Questrade, Mr. Glover says he continues to learn about investing. He's a regular visitor to blogs such as Million Dollar Journey and Canadian Couch Potato. He stays in touch with Ms. Morin and intends to see her for a portfolio review toward the end of the year.

"I'm feeling quite comfortable now managing my own RRSP, knowing that we are in it for buy-and-hold," he says. "If you are in it for the long haul, it's actually not that scary."

Special to The Globe and Mail

For tips, stories, videos and live chats ahead of this year's RRSP contribution deadline, check the Globe Investor 2012 RRSP season section for daily updates.