It’s always the right time to consider taking three valuable steps to keep your RRSP (Registered Retirement Savings Plan) portfolio in top shape — review, reassess and rebalance.

The pandemic has put the need to reconsider your portfolio more sharply into focus. After all, we’ll be feeling the aftermath for years to come.

While we’ve seen some stock market highs, the rollercoaster ride that many equities have taken over the past year and the churning, hard-to-predict impacts of COVID-19 on global financial markets can test the resolve of even the steadiest investors.

Some investors have been big winners and others have been losers with this volatility, at least in the short term. Some investments soared, others crashed, and some have done both in a relatively short time frame.

Review your RRSP investment horizons

Of course, markets always go up and down. The uncertainty posed by the pandemic, including massive fiscal stimulus by worldwide governments, and uneven vaccine rollouts fuel the turbulence.

How does this all impact you and your RRSP?

You want to look at today and tomorrow within the context of how your investments and money can work best to help you achieve your goals. Your expectations 10 years ago may differ substantially from your circumstances and dreams today. Your investment choices should evolve alongside your life’s changes and goals, so make a habit of reviewing them regularly.

The goals and investment horizons for someone at or nearing retirement will be markedly different than a younger, growing family entering the real estate market, or a middle-age family with teens still at home, or a family in a small town that’s mortgage-free.

How you allocate a mixture of cash, equities, bonds*, dividend items and mutual funds* should depend on your focus and what you want to achieve, rather than just on picks of current market winners and losers.

Though markets around the world are expected to rebound to a degree in 2021 and the following year, the back-and-forth shifts that have kept investors on their toes over the past year will likely continue now and into the future.

Reassess your RRSP asset classes

To begin your reassessment, ask yourself if your current RRSP holdings reflect your preferred asset mix. Ask whether your RRSP portfolio is adequately diversified among the three main asset classes: equities, fixed income and cash. And if you’re unsure, set up a time to speak with your financial advisor.

As each asset class performs differently over time, your original asset mix may need to shift. You don’t want to get hung up on how investments performed in the past. What did well previously might do the opposite in the future.

An illustration of some money flying into an RRSP piggy bank. Surrounding the piggy bank are 3 stacks of coins, a pencil, and an indoor plant.

Your tolerance for risk plays an important role in how your portfolio is balanced. So does your time horizon for determining when you might need to spend money from any of your investments, or even use it as emergency or consistent income.

Discuss your risk tolerance related to your RRSPs with your advisor even if you have an idea of your general risk tolerance from past experiences. In doing so, remember that your RRSPs are a long-term play and all profit is tax-deferred, therefore it’s worthwhile exploring taking on even a bit of added risk. Even just a little could equate to several more years of retirement income down the road.

Regardless, you should be rebalancing your portfolio at least once a year.

One portfolio-balancing strategy to consider is picking investments that won’t go up and down in price at the same time, so that if one drops, it will be counterbalanced by another rising.

Whether you’re a passive investor who prefers to have your money managed, or an active investor who likes to always check the markets, an advisor can help you to find the right balance.

Here are some tips to rebalance and strengthen your RRSP:

  • Assess your current asset mix any time you’re planning to make new contributions to your RRSP.
  • Take advantage of the opportunity to top up your regular RRSP contributions.
  • Allocate any new lump-sum contributions toward an asset category that’s underweighted.
  • Target a higher percentage of your regular RRSP contributions toward those underweighted investments that may deserve revisiting with renewed attention.
  • Look for opportunities to strengthen the quality of your portfolio as you choose specific investments within an asset class. For example, within equities, you may want to increase your holdings in certain geographic markets for greater stability and performance in the longer term.
  • Consider reallocating new RRSP contributions to investments that will help you reach your new targets.
  • Maximize tax-efficiency according to your tax bracket by incorporating a TFSA into your strategy.

Adjusting your RRSP asset mix

An easy way to re-establish the right mix of investments in your RRSP is to allocate any new lump sum contributions toward assets that haven’t performed well this year, or to target a higher percentage of your contributions toward those investments.

Whether you’re redefining your preferred asset mix or bringing your RRSP portfolio back to the desired balance, make sure your asset mix will provide the growth you need to meet your retirement goals.

Our wealth advisors are here to discuss your options and get your RRSP portfolio in top shape.

*Mutual funds and related financial planning services are offered through Credential Asset Management Inc. Mutual funds, other securities and related financial planning services are offered through Credential Securities. Credential Securities is a division of Credential Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc. Financial planning services are only available from advisors who hold a financial planning accreditation through applicable regulatory authorities.