Episode #11 - Two Minutes to a Better RSP: Diversification is the Name of the Game
Announcer: Welcome to The Money Clip podcast series from The Vault, Scotiabank’s online guide to helping Canadians get ahead financially. Listen in to gain a deeper understanding of your personal finances and find out how a few small changes to the way you manage your money can make a big difference.Michael Seaton: Thank you for joining us on The Money Clip podcast series from Scotiabank. I’m your host, Michael Seaton, and with The Money Clip we provide Canadians with a deeper understanding of personal finance and money-related matters. This is our series titled “Two Minutes to a Better RSP”. We hope to put you on the path to understand how to maximize your retirement savings plan as the deadline approaches. This is our fifth episode in the RSP series, and our subject today is building a diversified RSP. Diversification is one of the principles of successful investing for the long term. You’ve probably heard the expression, “Don’t put all of your eggs in one basket.” Well, that’s diversification in a nutshell. It’s a way of protecting your overall portfolio from being over-concentrated in any one single type of investment. So what are the components of a diversified RSP portfolio? Well there are three main asset classes that you should review in your RSP investments. The first is stocks or equity mutual funds for their growth potential. The second is fixed income, such as savings bonds or GICs, for their stability. And the third is cash, such as money market funds and high-interest savings accounts, for their security and liquidity. Now holding a mix of cash, bonds, and equity-based investments will protect your portfolio from downturns in any one area of the market. For example, one year equities may do better than bonds. The next year, bonds may do better than equities. When you’re diversified, you’re not predicting which asset will do better, you’re simply taking part in market gains while reducing overall risk. The precise investment mix that’s right for you will depend on your individual goals, time horizon and tolerance for risk. Your financial advisor has the expertise and access to tools that can help you determine the mix that’s right for your personal goals. An advisor is a great place to start and can also provide a second opinion on your current investments.
This has been another Two Minutes to a Better RSP podcast. Keep listening for more in this series as we take two minutes to review tips and suggestions to reach your retirement goals. Thank you for listening.
Announcer: Do you have any thoughts on today’s show? We’d love for you to get involved and become part of the conversation. Send us your questions, comments or money management tips so that we can address them in future podcasts. Our email address is themoneyclip@scotiabank.com and our call-in number is 1-866-652-5333. The Money Clip is brought to you by The Vault at Scotiabank. Be sure to tune in again next time.