If you have converted your rrsp into a self directed rrsp account, congratulations! You have taken the first step in empowering yourself to build wealth. But where do you go from here?
Once the initial excitement has worn off, we understand that taking direct ownership of your financial future is a big step that can leave you feeling stressed out. This where some careful planning could make a world of difference to your long term investment returns. If you are stressed out trying to decide how to invest in your new or pre-existing self directed rrsp account then click here to find out about a program that is empowering individuals across the country.
When evaluating your options of how to invest in your rrsp, you commonly find tips that tell you to balance your portfolio between stocks, bonds, and mutual funds. This is really just another way of saying to have a diversified approach to investing, which we believe is an important element to building long term wealth. However, diversification is only one element to achieving success. An even more important element is knowing when to take profits and losses.
What Works
It is just human nature that when an investment begins losing value, rather than take a small loss we would rather hold on to it “hoping” it will come back. It’s this buy-and-hold approach that caused many investors to take on large losses during the 2008 crisis. In the meantime, during the recovery in 2009, these same investors have had to wait things out, and in the process, missed out on some great investment opportunities. So what’s the common sense approach?
The common sense approach is to develop an investment plan that accounts for market corrections by following the prevailing trend (note: this is not about timing market tops and bottoms).
The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.
Rudiger Dornbusch
MIT Economist
This quote perfectly illustrates the fact that as investors, we are provided with some early warnings signs that markets could be in trouble (enough time in fact to protect ourselves from experiencing large investment losses). But the caveat is that if you fail to take action during this warning period, prepare to be blindsided by the market.
If you don’t want to experience losses like 2008 in your rrsp account, having a game-plan to protect yourself from large market losses should be at the top of your list. To empower you to build wealth with confidence, we have created a system of investing that captures large market gains and avoids large market corrections. Click here to discover how you can build wealth with confidence using our Elevate Investment System.
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