It is currently no doubt a trying time for anyone paying attention to market fluctuations. You may still be shocked by the drop in portfolio values you saw on your recent statement.
Please remember this: Even though this time is difficult, your plan is built to last through market corrections like this and if you are in your saving years, situations like this are actually an excellent opportunity for the future.
Let me explain: When markets are riding high, each dollar you invest buys fewer mutual fund units or company shares, because each unit costs more. When the market falls, it takes unit prices with it.
Compared to last year, shares are cheap, making this an excellent opportunity to buy and invest for your future. Those of you who invest automatically every month are already taking advantage of this opportunity: Dollar cost averaging is a strategy that allows us to acquire more shares while prices are low. It also means that we invest when prices are high, but the regular habit o f automatic deduction guarantees that we don’t miss buying opportunities like this one.
Whether you’d like to make a year-end contribution to your RRSP or even use some leverage to invest, the conditions today are good. We may look back in a year or two and realized how low and affordable equities around the world were.
It is especially important to see the big picture in time s like these and seized the opportunity. Buying low will speed up the recovery process. The timing of this year’s RRSP could not be better.
Of course, your contribution needs to be considered within the context of your overall financial plan. If you were uncertain of whether you should make an extra RRSP this year, be contrarian, see the big picture and the long term opportunities. Here is a historical graph of the Dow Jones Industrial Average from 1900 to now.