While it was a turbulent, if not outright scary, last week in equity markets, this is not the time to jump up and start making drastic changes to a registered retirement savings plan, experts say.
But if you are inclined to tinker, get a good adviser and look for well-performing large cap stocks and other solid performers and keep in mind the time frame of your investments.
“Absolutely people are worried right now but what I’m trying to caution people is: don’t confuse short-term volatility in the market with your long-term planning goals,” said Patricia Lovett-Reid, senior vice-president with TD Waterhouse Canada Inc.
“You may have 10 to 15 years up to retirement and then 20 to 30 years in retirement, so you do have time for the equity markets to come back — a year from now, two years from now, we will be in a very different financial position and your portfolios will be up if you’ve got good quality investments and you didn’t try to time the market.”
For those approaching retirement, Lovett-Reid said, having a portion of their money in cash to satisfy inevitable income needs “is a good place to start.”
“What you’re going to hear a lot more about is this ‘high-grading’ of securities, and that is moving your portfolios over to really good-quality mutual funds and large-cap stocks,” she said.
Investors have been nervously selling off stock after several drops in global markets, including a massive selloff on the Toronto Stock Exchange Monday.
“People really have the tendency to want to do something when they’re faced with the type of news they’re getting these days and that first impulse is something that should be considered very carefully within your overall long-term context,” said Roland Chalupka, vice-president and portfolio manager at the Fiduciary Trust Company of Canada.
The key to an RRSP is to keep contributing, no matter what the market environment, said Chalupka. An RRSP can hold more than just the usual mutual fund — there are a large range of financial vehicles from cash to stocks and bonds that can be held in a RRSP account.
“If a client is very worried about where to put their money, they may want to look at shorter-term bonds or money-market type investments and then really establish a plan over the next few months on scaling into their overall long-term asset allocation,” Chalupka said.