or "The problem with Mutual Funds"

Ahhh... RRSPs. I could chat for a long time on this, but here's my 'short' version of it;

RRSPs serve only one purpose: To reduce your payable taxes in the year you make the contribution (including up to Feb). Nearly everybody thinks there is *no* taxes on RRSPs, when in fact you only defer the taxes until you take the money out.

For example, instead of paying income tax on the $10,000 you put into an RRSP in 2008, you pay income tax on the $50,000 that that contribution grew into when you take it out (in 2040, let's say).

But - you get a tax credit NOW. that's the good thing. I invest in RRSPs for a tax savings. it's a good strategy to reduce your taxes, to be sure.

BUT - and here's where I get a bit passionate - if you're contributing to RRSPs because you want to retire wealthy, you're likely to be very disappointed come retirement time.

The reason very simply is that when you buy $100,000 of RRSPs, you only own $100,000 of RRSPs. One dollar in = one dollar of savings.

Real estate is how *real* wealth is created.

When you have $100,000 and want to buy a property, can you only buy a $100,000 house? hell no. The bank will easily loan you the rest. Using a conventional mortgage (that means a mortgage that is not insured by CMHC), you only need to put 20% down. So with $100,000 you can buy a $500,000 property.

now, if you own $100,000 of RRSPs (as in mutual funds), and a $500,000 property, and they both increase in value by 10%, what are they worth? Well, the RRSP is worth $110,000 and the house is worth $550,000.

With the EXACT same investment, and the EXACT same increase in value, one investment made you $10,000 and the other made you $50,000. by buying real estate, you made a five fold increase on your money compared to an RRSP.

And as they say on TV "But wait - there's more!"... Buying revenue real estate also provides you with another TWO sources of profit; One is that as your tenant pays down your mortgage, you owe less on the property - that's the mortgage pay down profit.

And the coolest past of real estate, the third source of profit, is monthly cash flow. That's the money left over from the rent after you pay all the expenses. That's called passive income, and frankly it's the best kind of income there is - imagine getting a cheque every month for doing nothing.

So let's Fast forward 40 years when you plan on retiring, and compare real estate to RRSPs. When you start redeeming your RRSP, the value goes down every month. If you live long enough (or don't have enough in your RRSP), you eventually run out of money to live on, and you're broke (living in a crusty old-folks home, eating oatmeal every day).

With real estate, in 40 years the property will be paid of fully (courtesy of the tenants), and your monthly cash flow will be HUGE (since rent goes up every year), and the property will be worth millions.

The longer you hold revenue real estate, the richer you get.

I like to say that real estate is not a 'get rich quick' investment, it's a 'get REALLY rich slowly' investment.