I was having lunch at a nearby sushi restaurant last week and overheard two ladies talk about their RRSP contributions . One says to the other, “I am not going to be putting my RRSP in my regular mutual fund account this year. I am losing money in this account, this is ridiculous. I am putting my contribution in a GIC”.

How many of us are thinking just the same thing. It has been a tough few years and we all suffer from market loss fatigue. This is a normal reaction to have. But before capitulating and jumping ship, one must understand that there are also risks involved with low risk investments. The biggest risk being not meeting inflation over the long-term.

A recent survey from CIBC suggests our collective risk aversion might be putting our retirement dreams at risk. The survey found that 57% of respondents were most interested in low risk, guaranteed or no-risk investment options. While we are avoiding risk, 45% don’t even know what kind of investment returns they need to achieve their retirement goals.(1)

Interestingly enough, we have our best RRSP seasons at YOU FIRST when the markets are peaking and the worst when the markets have been dropping. 2009 was our absolute worst RRSP season in 20 years. While it would have been the very best year for market opportunity, resulting in the biggest investment gain in our 20 years history at YOU FIRST.

Investor psychology is key to investment success. Seeing the opportunity in the gloomiest times is no easy task.

If fluctuation makes you nervous, speak with us first. It may be best to review your tolerance and adjust your asset allocation when the time is right. Instead of making the mistake of investing when the markets are up and going to GICs when the markets are down, opt for a slightly more balanced asset allocation if it makes you more comfortable. Increase your fixed-income or bond fund exposure slightly and adopt a long-term approach.

If we find that your allocation is right for your objectives, staying the course is the best solution . Consider dollar cost averaging your investments by making monthly contributions. These regular investments will help smooth out volatility and insure that you buy more units when the markets and low and less when they are high.

In all cases, “Be fearful when everyone is greedy and greedy when everyone is fearful” ~ Warren Buffett .
(1) Advisor.ca Risk aversion putting retirement at risk.