The Four Golden Rules

Experienced investors take bear markets in stride, thanks to of retirement planning

The last official recession in Canada and the US was a decade ago. If you began investing in mutual funds after 1991, you participated in a long and fairly steady bull market. Investing for your retirement seemed easy.

The euphoria evaporated suddenly in 2000, and a gloom settled over financial markets. With continued volatility and uncertainty in 2001,2002, discouraged investors fled to the safety of money market funds. This RRSP season, you may find yourself with cash on the sidelines, wondering what hit you, and what to do next.

It was a bear market. They happen every now and then. Experienced investors take them in stride. Do what they do. Follow these four golden rules of successful retirement planning.

Create an investment plan.
A Mutual Funds Investment Specialist at your credit union can help you develop a financial plan suited to your unique requirements, your time horizon, and your tolerance for risk. With a plan guiding your investment strategy, you'll feel more comfortable today, and more secure about tomorrow.

Stick to the plan.
Short-term fluctuation in the value of your investments is normal. In fact, volatility is necessary to achieve higher returns with equity mutual funds over the long term. A proper plan is built to withstand those fluctuations. Impulse buying and knee-jerk selling are not part of the plan. Markets tend to rise over the long term. Rely on time, not timing, to reach your goals.

Invest regularly.
Skipping just one annual RRSP contribution of $5,000 could reduce the value of your retirement nest egg by more than $34,000 after 25 years (assuming an 8% average rate of return, compounded annually). If you've been holding onto your cash, it's not easy to plunge into the chilly bear-market water. Dip in a toe, and keep easing in, by setting up a Pre-Authorized Contribution Plan. You'll automatically invest a fixed amount of money every month in your chosen mutual funds. This graduated approach is called dollar cost averaging. This strategy helps you weather turbulent times. Your regular fixed dollar contribution naturally buys more units when prices are lower, and fewer when prices are higher. Dollar cost averaging minimizes risk and maximizes returns.

Diversify.
Different types of investments react differently to economic events. When you hold a variety of investments in your portfolio, you protect yourself against day-to-day fluctuations in any one category. At the same time, you'll get a piece of the best performing asset class.

A Mutul Funds Investment Specialist at your Credit Union can suggest a variety of investments to help you reach your retirement dreams. For more information contact Don Ecker at
905-774-7559.

Mutual funds are offered through Credential Asset Management Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise stated, mutual fund securities and cash balances are not insured nor guaranteed, their values change frequently and past performance may not be repeated.

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