Updated March 2025 · 8 min read

Best Investments for Your RRSP in Canada 2025

Key Principle: Your RRSP is best used for assets that generate heavily-taxed income — like bonds, GICs, and U.S. dividend stocks — since tax is deferred until withdrawal, typically at a lower retirement rate.

Choosing what to hold in your RRSP is as important as how much you contribute. The RRSP shelters investment income from tax until withdrawal — making it ideal for assets that would otherwise face the highest tax drag outside a registered account.

RRSP vs TFSA: Asset Location Strategy

The general rule of asset location:

RRSP: Interest income (bonds, GICs), U.S. dividend stocks (no withholding tax under Canada-U.S. treaty), high-income assets
TFSA: High-growth equities, Canadian dividends, REITs (gains are tax-free, not just deferred)
Non-registered: Canadian dividend stocks (dividend tax credit helps), capital gains assets (50% inclusion rate)

Best RRSP Investments 2025

Investment	Why It Belongs in RRSP	Expected Return
All-in-one index ETFs	Simple, diversified, low MER	6–9% avg annual
U.S. index ETFs (VFV, XUS)	No 15% dividend withholding (treaty)	7–10% avg annual
Bond ETFs (ZAG, VAB)	Interest income sheltered from tax	3–5%
GICs	Guaranteed return, interest tax-deferred	3–5% (2025)
International ETFs	Diversification, growth	5–8%

1. All-in-One Index ETFs

For most investors, a single all-in-one ETF is the simplest and most effective RRSP investment. Options include:

VGRO — 80% stocks, 20% bonds (Vanguard, MER 0.24%)
XGRO — 80% stocks, 20% bonds (iShares, MER 0.20%)
VBAL — 60% stocks, 40% bonds (more conservative)
VEQT / XEQT — 100% equities (maximum growth, higher volatility)

These funds automatically rebalance, hold thousands of global securities, and charge under 0.25% in annual fees — far cheaper than mutual funds charging 2%+.

2. U.S. Index ETFs — The RRSP Advantage

The Canada-U.S. tax treaty exempts RRSPs from the 15% dividend withholding tax on U.S. stocks. This makes the RRSP the ideal location for U.S. equity ETFs that pay dividends.

Top choices:

VFV — Vanguard S&P 500 Index ETF (CAD, MER 0.09%)
XUS — iShares Core S&P 500 Index ETF (CAD, MER 0.10%)
ZSP — BMO S&P 500 Index ETF (CAD, MER 0.09%)

RRSP Advantage: Holding VFV in an RRSP rather than a TFSA saves you 15% on all U.S. dividends. For a $100,000 position yielding 1.5%, that's $225/year in saved withholding tax.

3. Bond ETFs and Fixed Income

Bond interest is taxed at your full marginal rate outside a registered account — making bonds an excellent RRSP candidate. Sheltering interest income inside an RRSP defers that tax until retirement withdrawals, ideally at a lower rate.

Popular Canadian bond ETFs:

ZAG — BMO Aggregate Bond Index ETF (MER 0.09%)
VAB — Vanguard Canadian Aggregate Bond Index ETF (MER 0.09%)
XBB — iShares Core Canadian Universe Bond Index ETF (MER 0.10%)

4. GICs in an RRSP

GIC interest is fully taxable as ordinary income — one of the highest-taxed investment types. Sheltering GICs inside an RRSP defers all that tax. With rates from EQ Bank, Oaken Financial, and credit unions often at 4–5% in 2025, RRSP GICs are compelling for conservative investors nearing retirement.

GIC Liquidity: Non-redeemable GICs lock your money until maturity. Ensure you won't need early access. For more flexibility, use TFSA GICs or cashable GICs.

What NOT to Hold in an RRSP

Canadian dividend stocks: The dividend tax credit is lost inside registered accounts. Better held in non-registered accounts.
Flow-through shares: Tax benefits are already received outside the account; holding inside an RRSP wastes the deductions.
RRSP mortgage: While technically possible, the administrative complexity rarely makes sense.

RRSP Contribution Strategy

The most tax-efficient approach for high earners: maximize RRSP, invest the tax refund into a TFSA. You're effectively getting sheltered growth in both accounts funded by one income stream.

For help choosing between the two, see our RRSP vs TFSA comparison.

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