Going down down

Due to the economic problems that are occurring in the US, the Canadian economy is being affected as well. I thought that the bailout was supposed to smooth things out but it looks like the problems are still there. Even with the bailout, there are issues of executives wasting money and taking advantage of the money. The financial industry is in deep waters and really needs a life line right now. Stocks are plummeting and a lot of people rushing to the banks to withdraw money so they won’t lose it.

In the last week or so, my RRSP account has dropped at least 10% and it has not gone back up yet. Both of my accounts have been affected but one more than other. The RRSP account with RBC suffered the most lost but I’m not sure exactly why since it’s the conservative account. The RRSP account with Sun Life Financial dropped a few hundred dollars and it’s the aggressive account. I would have thought that it would have been more impacted.

Before After Change
RBC $8,145.16 $7,154.61 -$990.55
Sun Life $8,255.26 $7,842.33 -$412.93
    Loss: -$1,951.86

With every investment that you make, there are risks involved and if you’re lucky, there will be returns as well. At the moment, I’m not getting too much on the return side but none of this is considered risky either. I thought I understood the risk involved in investing but right now I’m not too sure anymore.

My RBC account, being conservative should be investing mostly in fixed income and the remainder in equity which leads me to assume that I shouldn’t be losing so much. If I understand this correctly, having most of the investments in fixed income would resist major changes in the market meaning that I wouldn’t lose too much. That’s the whole purpose of selecting conservative over aggressive.

I opened my RBC when I was a young man and I didn’t have much to invest but the money that I invested, I didn’t want to lose so I told them to make my portfolio a conservative one. It was a safe invest profile for me because I was willing to risk a lot. Once I learned more and more about investing, I was willing to take a higher risk which is what I’m doing with my Sun Life account.

The higher the risk that I am willing to take means the higher the potential loss. I’m willing to take a higher loss with the Sun Life account because my work place has an RRSP Matching plan where they’ll match my contribution by a certain amount. The amount is a high percentage but it’s enough for me to play around with.

With the market going down, it looks like it’s better to invest in fixed income. I changed the numbers around for the Sun Life account so that I would be investing mainly in equity with 0% in fixed income. So within the last three months I’ve lost 8.8% of my investment. As for my RBC account, I’ve lost 12.8% in the last three months.

Right now, I have a couple of options. I can either take advantage of the low market values or I can continue and invest the same amount. My RBC investments went as high as $8,507.80 in May before declining to its current value. My Sun Life investment was as high as $8,255.26 at the end of September and dropped to $7,842.33 as of today. I think that once the funds becomes available, I might max out my RRSP and contribute more while things are low and hopefully I’ll be rewarded when the market starts to stabilize.

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