Finding yourself wondering whether you would be better off to invest your excess cash, tax return or proceeds from other windfall in a Registered Retirement Savings Plan (RRSP) or a non-registered portfolio is a nice problem to have.
But if today’s market volatility has you vexed about when to invest, that’s another issue altogether says Andy Beer, Manager of Portfolio Strategies at Investors Group. However, he offers some straight forward guidance: “The sooner you get your money working for you, the better.”
Beer says there are a number of sound reasons to get into the market sooner than later.
While most seasoned investment professionals say it is nearly impossible to time the market, “They will also tell you that ‘time in the market’ is much more valuable than attempting to time the market,” says Beer.
He adds that while markets naturally fluctuate, the historic trend is upwards. As such, adhering to a long-term investment strategy delivers higher returns than periodically entering and exiting the market.
Investing regularly also accomplishes three important investment goals, notes Beer.
Firstly, investing in equities over time helps average out high and low price ranges. Over time, implementing this strategy – known as dollar-cost averaging – reduces the average cost of investments while improving the potential for longer-term returns, says Beer.
Secondly, the fact that money held inside an RRSP grows in a tax-deferred manner means that regular contributions have an opportunity to combine with compounding gains to significantly boost a retirement nest-egg.
Lastly, while it’s nice to experience a financial windfall, finding a lump sum to invest once a year can be tricky. As such, it’s wise to make investing for your future a habit by allocating an affordable amount monthly for investment purposes – for example, through a Pre-Authorized Contribution plan. Even if you invest $100 or $200 a month the long-term results add up.
While noting that it’s important to consult a professional advisor to help set up an investment plan that fits your budget and dreams, Beer says the bottom line is that maintaining a steady and balanced investment strategy will help ensure you achieve your financial goals.
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Written and published by Investors Group as a general source of information only. Not intended as a solicitation to buy or sell specific investments, or to provide tax, legal or investment advice. Seek advice on your specific circumstances from an Investors Group Consultant.