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Building a Diversified Retirement Portfolio


Saving for retirement through a Registered Retirement Savings Plans (RRSP) is a long-term commitment, with a typical investment horizon of at least 10 years.

There are three primary reasons why Canadians use RRSPs to save for retirement:

I. Contributions are tax-deductible;
II. Potential for capital appreciation through compounding; and
III. The option to choose from a wide variety of investment products

With an RRSP, you can deduct your contribution from your income on your tax return, saving on taxes in the year you make the deduction. If your income is lower in a particular year, you can carry forward the contribution deduction to a future year when your income is higher, in order to realize a larger tax saving.

When you invest your RRSP contributions you do not have to pay taxes on any investment income or capital gains as long as they remain in your RRSP. This allows your savings to compound tax-free in your RRSP.

Compared to other alternatives, such as a public pension plan, RRSPs provide investors with the flexibility to invest in a broad range of investment products. Mutual funds are a particularly attractive option as they can grant investors exposure to markets and asset classes that are not normally readily accessible to retail investors.

Primary Considerations When Saving for Retirement

Investment Time Horizon
An investors time horizon is how long you will be saving for retirement. Typically, the longer your time horizon, the more time you have to ride out cyclical market fluctuations and the greater the potential for compounding gains.

Risk Profile
Risk profiles are unique to each investor. Your risk profile determines how much risk you can tolerate, that is, the risk of losing money in down markets. Generally, investors are classified as being conservative, moderately aggressive or an aggressive investor. The greater the amount of risk an investor can tolerate, the greater the potential returns he or she can make on their investments.

Asset Allocation Mix
Your asset mix is the amount of different types of investments that you hold in your portfolio to generate your desired returns (eg., equities, fixed income and other specialty investments).

The Role of Diversification

Diversification is important when investing. Through including a wide variety of investments in your RRSP portfolio, investors can dampen volatility and smooth out their returns.

RRSP contributions can be placed in different investment products, including emerging markets mutual funds. Depending on risk profile, investors typically hold a greater portion of equity investments in their portfolio if they are aggressive, and conversely less equities and a greater portion of fixed income investments if they are risk-averse. A moderately aggressive investor, will lean towards holding a balanced portfolio with an equal percentage weighting of equity and fixed-income investments.

The key to diversification is holding assets that are not correlated to each other, that is, they do not move in sync during different market cycles.

Why It Makes Sense to Hold Emerging Market Mutual Funds in Your RRSP

Emerging markets, as an asset class, have outperformed developed markets over the long-term and are uncorrelated with the U.S. and Canadian markets.¹ By holding emerging market mutual funds in an RRSP, investors gain diversification benefits and capital appreciation that may potentially lead to having a larger nest egg at retirement.

Emerging market mutual funds offer exposure to macro themes in sectors such as healthcare, infrastructure and technology, that are in an early stage of development and may be poised for future growth. Leading emerging market nations such as India and China are ahead of the pack in this sector.

RRSP Investing and Excel Funds

When investing in an RRSP the goal is to maximize the tax-free growth of your investments. The higher the growth rate on the investments, the more money you will have to help ensure a comfortable retirement.

Excel Funds offers an award-winning suite of emerging market strategies, catering to a broad range of investor profiles and objectives. Ask your advisor for more information on how to build a diversified retirement portfolio with Excel Funds.

¹ Bloomberg data, total annualized return in CAD terms, December 31, 1999 to December 31, 2015. Emerging markets represented by MSCI Emerging Markets Index. Developed markets represented by MSCI World Index.

Frequently Asked Registered Retirement Savings Plan (RRSP) Questions

Contact your financial advisor for more information on RRSP investing with Excel Funds!


Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.