RESP Strategy

[jason]

Hi I was wondering if anyone had a specific strategy for their children's RESP.  Obviously the amounts if youre just making the full $2,500 to get the $500 from the government limits a lot strategies.

 

I was thinking of looking at a strategy of investing the full $3,000 in something like Berkshire Class B, Fairfax, Markel or something along those lines each year for my kids.

 

 

[longlake95]

My plan has been to just slowly build an all stock portfolio, until they are 16 or so, then reduce equity exposure. I have my kids in a "group" RESP, so I only have one account to deal with. I put things in there like AIG, BAC, GM-WTB, PWT.TO and C.

 

 

[jason]

Thats an interesting strategy.  My only concern is that if I had a diversified portfolio of 8 or so stocks since the amounts were talking about are so low annually ~ $3,000 trading commissions would eat up a lot.

 

Thats why for these smaller accounts I'm thinking to essentially subcontract the investment decisions to a pro and keep trading costs down  ;)

[bizaro86]

I've just started, but I'm operating my son's RESP as mini special situations fund for now. The amounts are so small (as noted) which is a big advantage for things like odd lot tenders. I'll probably do that until there is a correction from the market's current levels, and then buy whatever compounder-type companies are on sale.

[jason]

Thats an interesting idea.  Any issues tendering shares in a RESP or other special situation investing issues with an RESP you would be able to share?

[KinAlberta]

My plan has been to just slowly build an all stock portfolio, until they are 16 or so, then reduce equity exposure. I have my kids in a "group" RESP, so I only have one account to deal with. I put things in there like AIG, BAC, GM-WTB, PWT.TO and C.

 

That might be wise for a retirement portfolio where you have other streams of cashflows and hopefully lots of time on your hands to decide to either liquidate or hold securities longer to meet your current expenses, but with an RESP doesn't the withdrawal window narrow substantially?  So, I'd be concerned that in a recessionary pricing environment your two year advance conversion (at age 16 for your eldest) might not be early enough to prevent some liquidation at poor market pricing levels. Thus the first child's educational needs might drain assets ahead of a price recovery and so drain away growth potential from subsequent childrens' allotments.  Maybe not, but I'd want to run some worst case price scenarios well in advance - or be prepared to fund some education from other, non-RESP cash flows.

[bizaro86]

Thats an interesting idea.  Any issues tendering shares in a RESP or other special situation investing issues with an RESP you would be able to share?

 

Hasn't been an issue so far, although the broker I'm using for the RESP requires me to call in, which is a pain compared to the online tool at Interactive Brokers.