Contributing to an RRSP
By Jasmine Miller • Bankrate.com

There are no decisions to make. You simply transfer cash into the account, and wait for the interest to build. You don't decide on mutual fund units, T-bills, GIC terms or stocks. "It's a good entry-level move for a recent university grad just getting his first job, for example," says Smilestone.

"To set up an RRSP is straightforward whether you do it at your bank or with an [investment] company," says Shanna Rosen, a financial planner with Investors Group in Toronto. "Be prepared to provide your name, address, date of birth and Social Insurance Number."

You might also need to offer up your bank account information if you want money transferred on a regular basis.

Remember, though, that having your investments registered is not your only goal. "There are two big benefits of the RRSP," explains Rosen. "The first is tax-deferred growth until age 69, the second is tax deduction. The [freshman-level] strategy meets the second goal but not the first, and the first is more important."

That means this stage should be temporary. "Everyone should have some money in cash," says Smilestone, "but you want to get past this stage as quickly as possible because you're not making your money work for you," says Rosen.

Junior-level RRSPs
The next stage of investing is to buy prepackaged mutual funds through a bank or financial adviser.

"Once people have some stability in their life, like a regular income, they should do this," says Smilestone. "In the long term, the (difference in) growth potential between this strategy and the first is exponential." That difference is especially significant if you invest on a regular basis.

This move is your introduction to the market, where real gains can be made. But it can be costly, especially if you want to buy individual stocks. Smilestone offers an example.

"Royal Bank stock costs $65 as share and you usually have to buy 100 shares at once," he explains. Not many people can afford that, but the junior-level strategy lets you get in on the action by holding units of mutual funds that own Royal Bank stock.

"When you have tons of money, you can choose individual stocks or mutual funds, but most people want diversification without a huge cost," says Rosen.

You can buy mutual fund units through your bank or a financial planner, where Rosen says you'll have to fill out a questionnaire to determine your risk tolerance. Besides regular statements of your account's activity, expect to review your account once or twice a year with the representative who sells you the products.

You can invest this way with a one-time payment, but to make the most of this level, you should make regular contributions. "Ideally you'd settle on x dollars each month, based on your pay frequency, to be taken out of your account," says Rosen. "The benefit is dollar-cost averaging, meaning you are buying shares when the price is down and realizing gains when it is up. But the other benefit is you get into the habit of saving."

Senior-level RRSPs
The next stage of investing is opening a self-directed portfolio.

Like the other levels, you can follow this one through your bank and some financial advisers. You can also open a self-directed plan with a brokerage firm. You choose what goes into the plan -- stocks, bonds, mutual funds, options, anything really -- and you decide when to buy and sell.

You can expect to pay an annual fee of about $150 for your account unless its holdings are significant. At Investors Group, for example, fees are waived for accounts with more than $100,000 in assets.

However much money you have in your RRSP, make sure there is enough to make the fee worthwhile. "You wouldn't want a self-directed fee with a $1,000 plan," says Rosen. You'd be paying a 15-percent service charge for the plan.

The advantage of a self-directed plan is that you have complete control over its holdings. But that doesn't mean you can't get advice along the way, by consulting with a financial adviser and the research available to her. The main difference here is that you have more investment choices with a self-directed than with a prepackaged portfolio.

You can also move any existing investments into your RRSP, self-directed or not. But that isn't a junior move. Rosen says moving assets around often triggers a capital transaction, meaning a gain or loss that must be reported on your tax return.

"Let's say you have a nonregistered mutual fund that cost $300 when you bought and is worth $1,000 now. You want to get the tax deduction for that $1,000 by moving it to your RRSP," says Rosen.

You can do it, but here's the tax implication: "You have a $700 capital gain. Fifty percent of that is taxable, so you're paying tax on $350." Depending on your tax bracket, that probably isn't a huge amount. It might be worth it to pay the capital gain and get the RRSP tax deduction.

"But what if you added a zero to that investment?" asks Rosen. That would be a $7,000 capital gain. "You would have to pay the tax, but you don't have any disposable cash because you already put it in the RRSP."

Graduate-level RRSPs
The last stage is to turn your finances, including your RRSP and all other investments, over to a pro.

Managed accounts are for people with at least six figures to invest, says Smilestones. And having a managed account will cover more than your RRSP.

"I sit down and do a complete financial overhaul with my clients," says Smilestone "We do a net worth statement and budget. We look at life insurance and past tax returns to see if people are paying the right amount ... It's like having an all-encompassing financial manager."

That may sound overwhelming, but building wealth takes time, strategy and commitment. And that's true for whichever level of investing you're at.

Jasmine Miller is a freelance writer in Toronto.