Patience Rewarded for Those Who Wait

by Rick Sutherland, CLU, CFP, FDS, R.F.P

Welcome to 2011. We trust you had an enjoyable and relaxing holiday season. Well it’s time to get back to work and planning for your future. More specifically your retirement future, as you have until March 1, 2011 to top up your RRSP and make a deduction on your 2010 tax return. How will you invest your RRSP this year?

Many have avoided equity investing over the past two years and opted for the safer alternatives of bonds and guaranteed investments. This was done at historic lows in interest rates. Yes you are safe but have you met your retirement savings return on investment objectives? Let’s recap where we have been over the past few years and speculate on what the future may have in store for us.

It wasn’t that long ago, the fall of 2008 and winter of 2009, when investor emotions were being tested at extreme levels. The media would have had us believe that it really was different this time and the sky really was falling. The world as we knew it would never be the same. Many panicked out of the market and will forever question that decision.

At the time of writing, mid December 2010, we are seeing the losses of the past couple of years erased and indexes are tapping new all time highs. The market has once again rewarded patience for those who stayed the course and stayed invested. And those who continued to invest, because that was their long-term financial plan, have been in a profit position for some time now.

We are not economists and cannot comment on how economic factors will impact your savings and investments going forward. What we do know is that corporate earnings, cash flow, profits and liquidity (cash available) are at all time highs. This is very positive for equity investing.

So how do you feel now about your RRSP investment for the winter of 2011? We cannot guarantee that what happened in the fall of 2008 and winter of 2009 will not happen again. In fact we can almost guarantee that it will happen sometime in the future, but we don’t know when. As an investor you must be emotionally prepared for a market decline about once every four to five years. The average decline, historically speaking, is about 30%. Be emotionally ready for this magnitude of decline at any time and you will be prepared for almost anything the media can throw at you.

The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., to discuss your particular circumstances or suggest a topic for future articles at 613-798-2421 or E-mail Mutual Funds provided through FundEX Investments Inc.

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