A non-registered investment plan allows you to invest in a wide range of assets where you are required to pay taxes on growth or income generated. There is no limit to deposits and losses can also be claimed for tax purposes.
While borrowing to invest can be a powerful means to build wealth, the risks involved make it a strategy that is not suitable for everyone. Leveraging magnifies gains or losses. Markets fluctuate, so, in some years the value of the investments will rise and in some years the value will fall. With a No-Margin Call Option, the investor only has to make the agreed upon interest payments each month and doesn’t have to worry about a margin-call if the value of the investments temporarily dips below the amount of money borrowed.
Borrowing to invest harnesses the full power of compound returns by allowing a single, large contribution on day one to compound for the full investment period. The strategy also allows the investor, in most cases, to deduct the amount of interest paid from taxable income. Borrowing to invest is most appropriate for investors with a higher risk tolerance and a long-term investment horizon. Terminating a plan prematurely can subject the investor to a potential loss from a sudden downturn in the market or to the fund’s back-end fees and, any such client direction may take a few days for the transaction to be completed.