Q: I am a regular RSP contributor and I have always leaned toward conservative investing with some emphasis on growth. I am a do-it-yourself investor, and I have been watching the markets closely and see the value of stocks declining.
I know this is cyclical and am not worried, but rather wondering if this is the time to be more aggressive.
Should I be buying more and should I be looking for investments that are going to yield a higher return when the market starts to go back up?
– Toni J.
A: Your comments indicate that you have a very good understanding of the cyclical nature of the markets.
A down market is a great environment to acquire investments because the prices are much lower and you can capitalize on great deals if you know what you are purchasing.
That however, should not be your only motivation for buying investments in this market. A well thought out strategy for investment acquisition should be in place.
This strategy needs to take into consideration your overall financial goals, your risk tolerance and the length of time you are willing to invest your money for. It should be part of your overall financial plan.
Since you’ve been a conservative investor in the past, there is no need to become aggressive because the market is down. By doing so, you might make decisions that are not compatible for your risk tolerance and time horizon.
There is no guarantee that purchasing investments at a lower price will be beneficial. No one can guarantee that funds invested will go up in value. In fact the total opposite can happen and you could lose your hard earned money.
On another note, you need to look at your contribution room for RRSPs to determine if you can purchase additional funds for your RRSP without over contributing. Speak to your financial advisor at your bank and, if you haven’t already, create a financial plan that will meet your goals both short and long term.
– Chris Alexander, MBA, BBM, PFP, FICB
