Should I continue my monthly contributions to my retirement savings plan in a volatile market?

One of the many benefits of working with us at Adamson Wealth Group is having a team in your corner during periods of market volatility. In the current environment, where you are grappling with higher inflation, rising interest rates, and market volatility, saving for the long-term can become more difficult. These factors may have you asking the question - should I continue my monthly contributions to my retirement savings plan?

The short answer is yes. We recommend continuing to invest consistently to take advantage of market conditions, especially for those with longer time horizons. In fact, you could even consider investing a lump sum if you have accumulated extra savings.

Here’s why…

Volatility =opportunity

Imagine you need to buy a new refrigerator and the model you want just went on sale. Would you wait until the price goes back up or take advantage of the temporary price drop? Few of us would be upset about the price drop on a major appliance purchase. It's helpful to look at short-term volatility as a long-awaited opportunity to buy something we want at a better price.

Keep calm and save on

If you contribute regularly to your retirement savings plan, then you're using the strategy of dollar cost averaging. Your contributions go toward buying fund units. When the unit prices drop due to market volatility, your money goes further because you get more units for the same amount of money.

A strong financial strategy will prevail

It's important to have a financial strategy that anticipates periods of market volatility. That means building a strong investment plan that encompasses your time horizon, income needs, desired returns, and tax situation, while reducing overall risk by diversifying your investment portfolio. It also means setting up an emergency fund and tracking actual income and expenses to determine cash flow needs in an inflationary environment.

An economic lookahead

While some volatility and slowdown in 2022 was expected, it has been exacerbated by causes we have mentioned before such as: higher than expected inflation and rising interest rates, supply chain issues and labour shortages, COVID-19 (particularly affecting China), and the Russia-Ukraine war and the resulting economic sanctions. On the bright side, Canada remains one of the stronger performers on the world’s stage, Central Banks are starting to take aggressive action to curb inflation, and fixed income returns are expected to rise as managers replace matured positions at higher rates. We will be watching rates carefully to determine when it is time to start tactically increasing our allocation to Fixed Income markets, and continue to have an allocation to dividend paying equities, which provide a yield, even during volatility or pull backs.  For more information, the iA Economic Update provides valuable insights about the current environment.

Still unsure how to navigate?

Please give us a call anytime you are feeling uncertain. We can provide guidance to give you greater peace-of-mind to stay focused on your long-term goals, without getting distracted by short-term volatility.

This information has been prepared by Jessica Mann who is an Associate Investment Advisor for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this email comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Investment Advisor can open accounts only in the provinces in which they are registered.

iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.

Sources: Manulife Investments, iA Clarington Investments