How do you invest in your RRSP while taking inflation

How do you invest in your RRSP while taking inflation into account?

Unsettled financial markets and inflation are worrying savers. We therefore need to adopt a slightly more combative mindset.

A survey conducted last year by the Quebec Institute of Financial Planning (IQPF) found that Quebecers are experiencing higher levels of financial stress (53% of respondents) than before due to inflation.

While stress can affect your quality of life, it can also negatively impact your investment decisions. Now more than ever, you must not allow yourself to be distracted by the ups and downs of the economy and the markets and stick to your savings goals.

Legendary investor Warren Buffett has repeated ad nauseam that he never consults stock indices and that he invests for the long term as if he were buying the company. It is the best way to combat stress.

Think first

In order not to give in to the pressure, you have to question your feelings!

  • Do you have the time or knowledge to build your portfolio yourself?
  • Why are you saving?
  • Do you have specific savings goals?
  • Is there a simple and effective way to save?
  • If your answer to question 1 is no, invest in Exchange Traded Funds (ETFs) or Balanced Mutual Funds. For example, $10,000 invested in the S&P 500/TSX composite index between 1986 and 2022 would have accumulated more than $177,000 at the end of that period, according to Refinitiv.

    If yes, you should have enough knowledge not to panic and be patient. They diligently follow Warren Buffett's maxim: “Be fearful when others are greedy, and be greedy when others are fearful.”

    Question 2 is important. Are you saving for retirement or to buy a house? Or both? You need to adopt a plan that fits your goals and stick to it. If you plan to buy a home in three years or retire in ten or thirty years, invest accordingly.

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    Your plan

    Question 3 requires you to set realistic amounts and adjust your savings accordingly. How much will my future house cost? How much money do I need to maintain my lifestyle and achieve my retirement dreams?

    The best way to do this is to have a plan. We do this with a planner or financial advisor. And we save accordingly. We must NEVER allow ourselves to be influenced by the stock market price: we implement our plan despite all odds.

    Finally, question 4 is intended to enable you to save without it hurting. Your best bet is to set up an automatic transfer to an RRSP or TFSA account (or both) on payday.

    Such a measure makes it easier to adapt your lifestyle to the remaining balance in the account. Small amounts make a big difference.

    For example, a weekly transfer of $20 over 30 years will earn $72,333.93, taking into account compound interest and an average return of 5%. An additional $100 will result in a war chest of $361,669.65 after three decades. Why should you give up on it?


    • Generally, the RRSP is for retirement and the TFSA is for special projects.

    • Are you a rational investor? Do you want to become one? Read the Financial Markets Authority's advice:

    • When investing for retirement, always aim for long-term returns to benefit from the magic of compound interest (interest added to previous years' returns). The earlier you invest, the higher the return! On the other hand, it's never too late to save…

    • A good way to combat stress is to know your investor profile and risk tolerance. Financial planners and advisors have tools to help you build your profile and invest accordingly.

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