Adrian Mastracci, president of KCM Wealth Management, says “Adopting these five tips will not only freshen the RRSP. They also help avoid getting stuck in the mess of RRSP investments."

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Vancouver, BC (January 17, 2005): Every now and then even investment plans are in need of a little refreshment. Including the venerable RRSP, and others like the RRIF, DPSP, RCA or IPP.

Adrian Mastracci, investment counsel at Vancouver's KCM Wealth Management, comments, “The big question this year is why are you doing what you're doing in the RRSP? Conducting a complete refreshing of the RRSP need not be difficult. It avoids getting stuck in the mess of RRSP investments.”

“This is that season when much is written about which investments to select for the RRSP,” remarks Mastracci, “The headlines may read ‘the top 10 funds’, or ‘the best 10 stocks’, or ‘the top picks for 2005’, perhaps ‘the 5 must have’, all seeking your serious attention.”

“However, the smart money dismisses those tempting headlines,” mentions Mastracci, “But I have to admit that they seem very convincing.”

“I have two observations about RRSP investing,” notes Mastracci, “First, investors spend too much time selecting every stock and mutual fund. Second, investors spend too little time on investment strategies they ought to follow to reach their unique RRSP goals.”

“If the RRSP investments were selected from the school of ‘stuff happens’, some work has to be done,” says Mastracci, “Especially, when no one can explain why they were bought in the first place.”

Mastracci’s 5 tips work very well to freshen up this year’s RRSP planning:

1. Establish realistic RRSP goals

Consider what the retirement nestegg is to do for you. The RRSP portfolio is influenced by the closeness to retirement, ongoing saving capacity, appetite for risk and investor personality. It’s also affected by the rate of return required to achieve or sustain your retirement goals.

Therefore, measure your investment success against your required personal rate of return. Not against other benchmarks you have no control over. That’s a mug’s game.

Treat your personal rate of return as your minimum investment benchmark. Is yours 3%, 5%, 9%, 15% or have you reached your goal?

As an example, a male age 50 wishing to retire at 60 with $60,000 of before-tax annual income, in today’s terms, needs to accumulate about $1,450,000 by age 60. A woman needs about $150,000 more because she lives longer.

2. Determine the appropriate investment mix

Studies show that investment mix decisions have the biggest impact on portfolios of any single factor. The mix is the combination of asset classes, such as cash, bonds, and equities. It’s also about choices such as large versus small companies.

The mix of appropriate investments for you considers not only your goals, but also to your investment time horizon. Even at age 65, your investment horizon could easily be 15 to 20 years.

Do yourself a favour. Make the appropriate RRSP deposit and park it in a short-term vehicle, say a treasury bill. Then take a month or two to do some homework before making the investment bets.

3. Stop chasing yesterday's winners

Too many investors are preoccupied with accumulating a portfolio full of yesterday's winners. It’s an excellent strategy on how to get burned.

My suggestion is to stop chasing the best performing stocks and mutual funds. A portfolio with emphasis on consistent returns will serve you better than one which emphasizes hot performance.

It has been argued that a selection of yesterday’s losers can yield surprising results.

4. Know when to cut the losers

Making RRSP portfolio selections is not about always being right. Part of investing is about coming to grips with the prospects of being wrong.

Astute portfolio managers admit to being wrong. What is most detrimental to RRSP portfolios is not incurring losses. Rather, it’s keeping them far too long.

Be objective, know when to fold and cut your losers. It’s easier said than done, but successful investors have learned not to get emotionally attached to their investments. The sooner, the better.

This has particular ramifications in the RRSP. Capital losses become “real losses” because there is no offset against gains for tax purposes.

5. Accumulate, accumulate, accumulate

Here is my sage advice. Accumulate as much as you can inside your RRSP, keeping in mind your risk tolerance. Yes, you'll face a tax bill down the road. It will be a nice problem to have!

Buy the investments because they have a place in your portfolio. Never put tax merits ahead of investment merits.

As an overview, the table below illustrates the RRSP limits introduced in the 2003 Federal Budget.

“Adopting these five tips will not only freshen the RRSP,” suggests Mastracci, “They also help avoid getting stuck in the mess of RRSP investments.”

Mastracci summarizes, “Investors who concentrate on RRSP strategies make better portfolio selections. They are also rewarded with returns more in keeping with expectations.”

NOTE: The information provided above is intended for general informational purposes only. It does not constitute advice for anyone's specific situation. Everyone should always first consult directly with their advisors to determine the appropriateness of any information contained above before taking any action. KCM Wealth Management Inc. assumes no responsibility for any loss or damage arising from the use of, or reliance upon the above information.