Q&A: Seeking safety

Question: My wife and I are retired educators. I am 62 years old and my wife is 60. We keep hearing that our retirement benefits are guaranteed, which we obviously find comforting during the recent global economic problems. Both my wife and I have invested in RRSP mutual funds through a financial planner over several years. Our questions are:

1. What would be the cost to us, if we decide to move our mutual fund investments into GICs at our banking institution?

2. Should we consider a conversion from mutual funds to guaranteed investments at this time in our lives?

3. What would be our options in terms of trying to achieve more security of our mutual fund investments during these worrisome economic times? – John R.

Gordon Pape responds: There may be no cost in switching out of your mutual funds. It depends on the type of units you own. If they are deferred sales charge (DSC) units, then there may be a commission payable if you sell, depending on how long you have owned them. Ask the planner.

Should you move to GICs? It depends on the type of funds you own and how concerned you are. Short-term bond funds and money market funds are quite safe and pose little risk. Equity funds are a minefield right now. If you want to reduce risk, by all means consider putting some of the money in a GIC but be sure it is covered by deposit insurance.

If you stay in mutual funds and want a higher degree of security, bond and money funds are the place to look. You should also check out the Defensive Portfolio I created in my Mutual Funds Update newsletter.

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