RRSP | What to have on the radar screen at 45

In your mid-forties and planning to take a well-deserved retirement in 20 years, how can you be sure to accumulate the necessary funds to carry out this project? Although this moment may seem very far away now, we are always surprised to see how time flies. Expert advice.

Posted at 9:00 a.m.

John Gagnon
special cooperation

During this period of accumulation, the only certainty is that things will change, explains from the outset Fabien Major, senior partner, Équipe Major Gestion Privée | Assante. For example, interest rates. At times, bonds are an attractive investment. At other times, like now, much less.

The first thing to do is to define what your needs will be at the time of retirement, and then to check at a certain frequency if the goal is in sight. The choice of assets that will make up the RRSP will depend on this.

This choice of asset allocation must be based on a good methodology, adds Fabien Major. Several products such as private placements, alternative investments, dividend funds or covered options funds, to name a few, make it possible to adjust the portfolio to these changing conditions. Being well advised then becomes an essential asset.

The stock market place

Currently, equities are proving to be the portfolio’s best growth vehicle, according to Guy Côté, portfolio manager at National Bank Financial. It is very likely that equities already occupy a large place in your asset allocation.

And this may well remain so throughout the process of accumulation for retirement, because the idea of ​​returning to more secure investments when one approaches retirement also involves a risk, namely that of not fail to achieve its objectives because the return on investment will have been too low.

If you have to focus on equities to achieve growth objectives, you have to do it the right way, explains Guy Côté. “It is important that the shares held in the RRSP be of very good quality so that none of them cause substantial losses, because we must not forget that the investor will not be able to take advantage of the deduction for capital losses. These will be net losses,” he says.


PHOTO ROBERT SKINNER, LA PRESSE ARCHIVES

Guy Côté, portfolio manager at National Bank Financial

It is therefore necessary to target companies with good capitalization, a good track record in terms of their results and preferably paying a good dividend. These are the securities that generally have the best long-term performance. The RRSP is not a place to speculate.

Guy Côté, portfolio manager at National Bank Financial

Turbulent period

It would be quite surprising if, over a period of 20 years, we did not have to experience moments of great turbulence. “The start of the year has demonstrated this to us,” says Fabien Major. For three years, many people had forgotten what their risk tolerance was.

You have to be ready to face these situations, and even take advantage of them, by adapting your asset allocation as needed.

Fabien Major, Senior Partner, Major Private Wealth Team | Assante

Large pullbacks are generally the result of markets appreciating too quickly and moving away from their long-term growth rate. “They then perform a return to the mean,” says Guy Côté. “It’s usually during these turbulent times that the best opportunities to buy high-quality stocks at good prices arise,” he recalls.

Risk tolerance nevertheless remains a very abstract concept, according to the manager of the Financial. “A good risk tolerance is an attitude that develops over time,” concludes Guy Côté.


source site-55