When markets turn negative, our instincts often tell us to sell now and buy again later. That may seem logical, but how do you pick the right time to exit or re-enter the market? Because rallies can sometimes come in surges measured in days not weeks, being out of the market for even a few days can cause lasting damage to your portfolio.
If I’m not invested how do I reach my financial goals? One way to answer that question is to look at what would happen if you simply ignored all the end-of-the-world headlines and stayed invested. Clearly, you would have come out further ahead. In fact, even with 30 years of ups and downs global stocks have returned 9.3% annualized – and that’s with three bear market declines of as much as 51.7%.
January 1985 - August 2015
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There is no way to predict when markets are going to fall. But it is possible to play defence for when they do. By investing in a number of different asset classes, you may offset the risk that comes from being heavily invested in one or just a few of them.
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If sudden ups and downs in the stock market are keeping you awake at night, it might be wise to build a balanced portfolio that combines a mix of stocks and bonds. Stocks offer growth potential, while bonds help protect against losses and dampen volatility in your portfolio.
It’s a market-tested strategy that proved itself yet again in the financial crisis. During the downturn, a balanced approach did far better than a stocks-only strategy, demonstrating the diversification benefits of bonds. During the rebound the opposite occurred, with stock gains in the balanced approach more than offsetting falling bond prices. And while it did underperform stocks, the balanced strategy still delivered the positive returns with lower volatility that many investors are looking for.
RRSP deadline: February 29, 2016Contribution limit: 18% of earned income reported on your tax return last year up to a maximum of $24,930 – less any pension adjustments Carry forward: RRSP contribution room accumulated after 1990 can be carried forward indefinitely to subsequent years Age: You can contribute to your RRSP up to December 31 of the year you turn 71. After that, you must withdraw the money in cash, convert to a registered retirement income fund (RRIF) or purchase an annuity.
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This information is a guideline only and not intended to provide specific financial, tax, investment legal or accounting advice.
For more information, see the Canada Revenue Agency website.
Getting sound advice is critical to making informed financial decisions – whether it’s to help buy a new car or take a dream vacation. And when those decisions involve building your net worth, protecting your savings, taking care of loved ones and retiring with confidence, the advice you want is from a trusted advisor. See how financial advice makes a difference.Helping you plan for your needs and manage risk is part of Money for Life – Sun Life Financial’s customized approach to financial and retirement planning*. Learn more about Money for Life.
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