Who’s minding your RRSP/RRIF money?
Mutual funds are especially well-suited for RRSP/RRIFs because of their low maintenance. You don’t have to worry about when to buy, when to sell, what sectors to overweight, and how to juggle the mix. The pros do that for you. Yes, you have to pay a fee for their services. So what? If you’re getting value for money, it’s well worth it. If you’re not, you can take your business elsewhere.
Some people like the idea of choosing all their securities and actively managing their portfolio. I have no problem with that, as long as they understand what they are doing. But many others would prefer to leave the details to someone who is well-trained, experienced, and has a proven track record. Enter the mutual fund manager.
When it comes to choosing a fund for an RRSP/RRIF, the manager is the single most important factor. Most people look at the performance record and hardly give the manager a thought. Big mistake! Choosing the wrong manager can expose your retirement savings to needless risk if markets dive. Think back to all the folks who focused on returns when they made their RRSP/RRIF investment decisions back in 1999 and 2000. They plunged millions of dollars into hi-performance technology funds, only to see their money drain away during the bear market like water from a bathtub.
Judge the candidate managers for your RRSP/RRIF mutual funds in the same way you would evaluate a pension fund manager. Look for the ones that make capital preservation a high priority and who aim for steady returns rather than trying to shoot out the lights in any given year. Give preference to managers with a long and proven track record as opposed to hot-shot newcomers. In the case of equity funds, choose value managers over growth managers – they tend to be more conservative by nature.
The performance of the manager during the bear market of 2000-2002 will tell you a lot about what might happen to your RRSP/RRIF money if stocks hit another downdraft. The Millennium Bear was the worst period for stocks since the 1970s. In the case of Nasdaq, it produced the biggest loss of any major index since the Great Depression. Equity managers who were able to withstand the selling binge and preserve unitholder value deserve special attention when you make your RRSP/RRIF choices.
Some value managers who merit serious consideration based on their track records include Kim Shannon (CI Canadian Investment Fund), Francis Chou (Chou funds), Gerald Coleman (CI Harbour funds), Eric Bushell (CI Signature funds), Jerry Javasky (Mackenzie Ivy funds), Peter Cundill (Mackenzie Cundill funds), and Leon Frazer and Associates (IA Canadian Conservative Equity Fund).
Remember, numbers are all well and good but they don’t tell the whole story. When you invest in a mutual fund for your RRSP/RRIF you are actually buying the services of someone to look after your retirement savings. When you think of it in those terms, it’s clear why you need to spend some time looking into the background of the fund’s manager before you put down your cash.
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