I meet several clients wanting to avoid any other downturn in the market. For their new RRSP contribution, they want to have something that won’t fluctuate much. While I am convinced that this is the right time to invest in the market in order to benefit from the 2008 drop, I also believe that the best investment strategy is the one that makes you sleep at night 😉 So here are a few options for people who want to secure their investment portfolio.
Make sure that you are well diversified in your investments
The very first thing to slow down the fluctuation from one investment statement to another is definitely to review your existing portfolio. Some people think that they have a well diversified portfolio because they have a balanced fund. Make sure that your fund is not only diversified among one country. I have seen many balanced portfolio showing 50% in Canadian fixed income and 50% in Canadian equity. If it’s your case and the Canadian market is not increasing next year but the American market is… you won’t feel any improvement in your investments 😉
Make a bond ladder
If you really want to go the fixed income route, you should not invest all your money within the very same GIC or bond. You should build an investment plan with at least 5 terms (1 year, 2 year, 3 year, etc.). Therefore, you will be able to renew a part of your portfolio every year and hope for better fixed interest rate (because they are pretty low these days!).
If you have enough money (more than 50K, but you are better off with 100K +), you may find a broker that will be able to offer not only GIC’s but provincial, municipal and corporation bonds. This should increase your overall return by at least .50% 😉
Then again, I am not a big fan of linked notes. However, if you can’t stand market fluctuations and you can’t stand low interest rate either, I would go this route. The linked notes guarantee your capital and offer a better yield potential since it is related to the market. It is possible that you don’t make a penny at renewal date. However, you have much better chance of hitting 5% to 7% return if you take it now for 5 to 8 years (regular terms for linked notes).
I already wrote about this investment strategy (just click on the paragraph title if you missed this post). This is a mutual fund that allows an investment plan B as the company is offering you the value of your fund or a life income based on your capital plus 5% per year with the company. While you will still see the fluctuation on your investment statement, you are guaranteed of a minimum pension at retirement.
I think this gives you a few good investment options. So if there is any other investment strategies that will reduce the risk or volatility, please share is with other readers 😀
|How I Suck at Not Paying Debts||Hitting 6 Figures Income at 28|
|How I Get a Huge Income Raise Each Year||Making $125K Online in 12 months|
|How I Buy Blogs||Most Debated Articles: The Primerica Saga|
|How I Have Survived My MBA||What is So Wrong With Making Money?|
|How I run multiples blogs and makes money without burning out|