RRSP | A good time to invest in the stock market?

This question inevitably comes up at this time of year when you think about contributing to your RRSP. The decision to invest or not in the stock market, when one has just gone through a period of severe turbulence, certainly requires being able to rely on a good approach. Expert advice.

There are several approaches when talking about RRSPs. Some investment strategies are mainly based on a good selection of securities, while others are simply based on the evolution of stock market indices.

Evaluation

Philippe Hynes, president of Tonus Capital, favors an investment style focused on value rather than growth. “The returns are less spectacular, but much more consistent,” he says. But after having selected the titles that he deems interesting, he tries to determine the favorable moment to buy them.

“We invest in healthy companies led by competent managers, but only when their shares are undervalued by the market. We thus obtain a margin of safety in the event of the deterioration of certain internal or external variables”, says Philippe Hynes. It is by the evolution of certain financial indicators, such as the price/earnings ratio, that we determine whether a security is cheap or not.

stay cautious

But also, Philippe Hynes does not hesitate to increase or decrease his positions depending on the outlook for the economy and the markets. And although the stock markets start the year 2023 on a good momentum, for him caution remains in order at present.

First, many market participants are counting on an end to interest rate hikes and even the announcement of a few cuts at the first sign of recession. Moreover, the consensus of analysts predicts that the companies that make up the S&P 500 on the New York Stock Exchange will achieve attractive profit increases in 2023. Both of these factors seem somewhat optimistic to him. The absence of interest rate cuts and worse-than-expected profits could tip the markets again, according to Philippe Hynes. Hence the importance of good stock picking and active portfolio management.

Invest when you have money

Philippe Leblanc, chief investment officer at Cote 100, a personalized portfolio management boutique, also insists on the need to make a good selection of securities, while keeping an eye on the valuation of these securities. However, he believes that trying to predict short-term stock market fluctuations to determine when to invest is an exercise in futility.

In the long term, it is profitable to be invested in the stock market at all times. Numerous studies demonstrate this. “But of course we want to take advantage of the volatility and not simply suffer the repercussions. The way to do this is by investing systematically, at regular intervals,” says Philippe Leblanc. We will thus take advantage of dips to establish an interesting average cost. “This approach also takes the pressure out of decision-making,” adds the manager. He also believes that it is a good selection of stocks that will ensure the growth of the portfolio.

Use Exchange Traded Funds

For savers with more modest investments, investing in a few exchange-traded funds (ETFs) that track stock market indices is a good way to go, explains Philippe Leblanc. And he suggests using the same systematic investing approach. We will also benefit from the volatility, which will promote the long-term appreciation of our assets. And, again, without the pressure of having to decide whether or not the time is right to invest.