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5 Dos and Don’ts of Investment Planning

There’s a lot of information out there, and while it’s not all investment related, it often feels like it’s nothing but opinions on the stock market. The important thing to remember is: information is not knowledge.

Be aware of the websites and media broadcasts that are trying to get your attention with sensationalism versus providing knowledge. Negativity has always been a big information grabber and not everyone is qualified to give advice. Sift through what’s important and credible so you’re equipped to make educated decisions on how to keep you and your family healthy and safe.

Your workplace retirement plan

After seeing all of the sensationalized headlines, many Canadians are feeling concerned about their investments and wondering what they should do, if anything. They are confused as there is an overwhelming amount of economic and investment information out there.

However, a workplace retirement plan provides somewhat of a safety net because you are using the services of professional fund managers. They are the experts and are paid to manage the risks and return in a portfolio. The insurance carrier watches them to ensure they do exactly what they promised. Diversifying is very important, and most funds available to you in your group plan are well diversified.

Further, by contributing through payroll you are using a strategy called dollar cost averaging.  This means you are buying into the market at all times through the peaks and valleys. When the markets are down, as they have been, you have been buying your investments on sale and getting more units for the same dollar invested. 

And last, as part of a group plan at work, you are paying lower fees than you would normally pay as an individual investor in a mutual fund. Low fees help you save more of your money.

Dos and Don’ts

Now for some important Dos and Don’ts around your investments:

  • Don’t Panic. Multiple studies show that investment decisions based on emotion lead to lower returns, compared to a well-thought-out plan.
  • Don’t try to time the market. You would have to get it right twice; when to get out and then when to get back in. History has shown it’s impossible to get this right and any investment professional will discourage you from trying.
  • Don’t take advice from someone who isn’t a licensed financial advisor or who doesn’t have your best interest in mind. 

The dos are financial de-stressing homework for you. Visit your group retirement service provider’s website to use two important tools: 

  • Start with establishing or revisiting your investment personality through the risk profile questionnaire. It will tell you what category you are in from conservative to aggressive or somewhere in between. You can then compare your risk profile to your investment allocation to ensure your investments match your tolerance. Having your risk profile in line with your investments will relieve a lot of worry.
  • You can also do a retirement projection. By entering some basic information, you will get an estimated income at retirement. You will then know where you are going and can make adjustment to your path if needed.

By doing these two simple tasks, you go from worrying about the world around you, to focusing on your own investment world as it relates to you and your own personal journey. You will feel more in control and will begin to think long-term about your retirement goals versus the news of the day.

In part three, we’ll show you how to assess your financial risk and create a plan to ensure you’re on the path to peace of mind.

Chris Walker is a Senior Consultant at People Corporation.

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