Andreas Kaspar
Tom Tabor has three words to describe the state of his retirement fund: "It's not good."
The 64-year-old Toronto retiree, a former director of the Canadian Standards Association, watched his portfolio drop 50 per cent by the time the market bottomed in March of 2009, but has seen it recover about 30 per cent since then.
Mr. Tabor is not ready to stick his money under a mattress, however. Instead he's sticking to his guns, patiently waiting for a market recovery, which he expects within the next three to four years.
According to his financial adviser, Scott Ward of Edward Jones, Mr. Tabor is doing the right thing.
"It always makes sense to stick to your plan and don't let your emotions make you make a decision," says Mr. Ward, who has fielded calls from many anxious clients since the recession began.
According to a recent Leger Marketing survey of 1,000 Canadians, those who are saving for retirement are less confident that their retirement savings will recover in short order than they were this time last year.
In 2009, 31 per cent of Canadians said they expected it to take three years or less to recover their retirement savings losses of the previous year. Now, a year later, only 19 per cent feel they will recover their losses within the next two to three years.
"People are definitely concerned about the recovery, definitely concerned about retirement," Mr. Ward said.
Kate Warne, Canadian market strategist for Edward Jones, which commissioned the survey, says Canadians need to be patient like Mr. Tabor and realize that the economy is actually recovering quite quickly.
"People are still a bit traumatized by the magnitude of the downturn and they have not paid a lot of attention to how well things have been performing since then," Ms. Warne said.
"We saw a severe recession, both in Canada and in the U.S., and the rest of the world, but the North American economies are actually coming back quite quickly, with more than 6-per-cent growth in the first quarter in Canada. That's a very positive sign."
Edward Jones offers the following tips for investors trying to get on the path to recovery:
Choose high-quality, long-term investments. Invest in long-term opportunities instead of playing the guessing game. It's hard to guess which countries, companies or industries are likely to lead or lag in the short term.
Diversify your portfolio. Owning a few different investments doesn't mean your portfolio is properly diversified. You could be missing out on opportunities for growth. While having fixed-income vehicles is one part of a balanced portfolio, being too heavily weighted in fixed-income products can significantly impede recovery.
Avoid taking risky shortcuts. Don't look at the market downturn as such a fantastic buying opportunity that you risk too much trying to make up for losses. Aggressive investments are much more volatile.
Be patient. Since nobody can say with certainty that the current market downturn has ended for good, investors need to be patient and take any necessary steps to improve their portfolios.
Don't be too safe. Some investors may have turned to short-term GICs to avoid risks, but putting too much money in this kind of investment may mean facing risks that are less visible. Not only will your portfolio be slow to recover, your returns may not be enough to meet your financial goals in the future.
Understand the risks. Look at your current investments and assess how risky they are. Ask yourself if you're comfortable with the level of risk in your portfolio.
Dianne Nice