Bear markets: What’s a long-term investor supposed to do right now? + MORE Jul 13th

My husband is retired and concerned that his money that is invested in his RRSP and TFSA is fluctuating too much. He is retired and is wondering if his funds should be in a GIC account as it’s paying 4% and not losing principal. He’s concerned in this volatile market.—Rodeen

Are GICs a good idea for retirement?

As you noted, Rodeen, guaranteed investment certificate (GIC) rates have risen to levels we have not seen in over 10 years. There are one- to five-year rates that are between 4% and 5%. You may not get these rates at major banks, though, where rates are about 2% lower than that, but credit unions and trust companies generally offer a healthy premium.

Are GIC rates going up in Canada?

A year ago, GIC rates were less than 2%. The reason they are so much higher now is worth considering. The May year-over-year inflation rate was nearly 8% so the Bank of Canada (BoC) has raised interest rates to slow down spending and price increases. So, while a 4% GIC rate may seem enticing, it represents nearly a 4% negative real rate of return when adjusted for 8% inflation…

My mutual funds are doing terribly, and I know they always say that it is better to stay the course and ride out this market crash and whatever. But I’ve been thinking about divorcing my big bank for awhile now. I have RRSP with mutual funds that have high management fees with RBC, slightly better ones in Tangerine, as well as robo-advisor RRSPs in WealthSimple. If my RRSPs are tanking in RBC now anyway, is this a good time or a terrible time to divorce them and move all of my money to a robo-advisor ETF or something somewhere else?

Otherwise, I am resigned to just leaving my money there. They’re taking less now anyhow, since I’ve lost like $9,000 already. I would be grateful for any advice or any resources you could recommend to make an informed decision. I’ve been enjoying your newsletters for a long time.

—Miki 

How to remain a long-term investor in a bear market  

Miki, after reading your question I am a little concerned for you.

The way you’re describing things it sounds like you’re getting poor or quick advice with very little explanation…