Risk vs. return
- Generally, the higher the return potential, the riskier the investment.
- The opposite also tends to be true: the safer the investment, the lower your return potential.
Market up and down
Unless you’re investing in GIC, your investments will fluctuate over time. Historically, equities have outperformed fixed-income, but equities tend to be riskier.
- The further you are from retirement, the more equities you should have in your portfolio, since you’ll have time to ride out the ups and downs of the market and end up in a growth position.
- The closer you get to retirement, the more fixed-income securities you should have, so you can hold on to the capital you’ve accumulated and not get caught by a market downturn.
Your risk tolerance
A number of factors influence your risk tolerance:
- Your lifestyle, your financial situation and where you live
- Life events like having children or buying a house
The best strategy is to invest according to your
investor profile External link. Opens in a new window., which you should re-evaluate every couple of years or whenever your situation changes.