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New year's resolutions that could boost investment returns in 2024

As the calendar flips to 2024, the glow of a stellar 25 per cent rise in the U.S. benchmark S&P 500 Index in 2023 casts its brilliance on global stock markets, including Canada's own TSX Composite. For Canadians investing for retirement, the prospects are promising. Corporate earnings are poised for double-digit growth, and guaranteed investment certificates (GICs) are boasting yields over five per cent. As we step into the new year, here are four practical and risk-free resolutions to amplify investment returns in 2024.

1. Taming the Debt Dragon

While investing for the future is a common goal, debt often lurks as a silent hindrance. The Bank of Canada's benchmark interest rate surge by five per cent in less than two years has inflated monthly debt payments for many Canadians. The prudent move for 2024 is to crack down on debt, starting with high-interest obligations like credit cards, where rates can climb above 25 per cent. No investment offers a comparable risk-free return.

Homeowners can seize an opportunity by consolidating high-interest debt into a single low-interest loan, leveraging mortgage rates against other unsecured debts.

2. Crafting a Fixed-Income Shield

The spike in borrowing rates brings a silver lining for investors eyeing fixed-income options. After three decades of lackluster yields, guaranteed investment certificates (GICs) are now returning over five per cent annually. This surge in fixed-income yields allows investors to dial down portfolio risk without sacrificing returns. A strategic approach involves staggering maturities across various periods, ensuring the best going rates and a steady income stream, particularly crucial for those nearing retirement.

3. Tax-Smart Investing

Harnessing the power of tax perks can significantly boost investment returns. Canadians can contribute an additional $7,000 to their tax-free savings accounts (TFSAs) starting January 1. Gains on TFSA investments remain untaxed upon withdrawal, making them an excellent complement to RRSP savings, which are fully taxable upon withdrawal. Savvy retirees can optimize their tax bills by withdrawing RRSP savings at the lowest marginal rate and tapping into their TFSA for additional cash needs.

With RRSP contributions being tax-deductible, making contributions before the February 29 deadline can generate substantial refunds in the spring, providing additional funds for TFSA contributions.

4. A Fee Check-Up

Like debt and taxes, fees can be a stealthy drag on investment portfolios. While professional management and diversification often come with unavoidable fees, a thorough review can ensure you're getting optimal value for your investment dollars. Many Canadians opt for mutual funds, which can carry annual fees above 2.5 per cent. Considering alternative options such as basic market-weighted exchange-traded funds (ETFs) with lower fees can be a prudent move.

Engaging in a conversation with a financial advisor about fee structures ensures transparency and aligns with your investment goals. As you embark on your investment journey in 2024, these resolutions offer a roadmap to navigate the financial landscape, making your path to financial success clearer and more achievable.

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