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Financial advice experts say it’s nearly impossible to predict when the markets have peaked.SamuelBrownNG/Getty Images/iStockphoto

It's safe to say most Canadians have been pleased when they have checked the performance of their investment portfolios of late. With major North American stock indices at or near record highs, it's been difficult for anyone to lose money over the past year or so.

But the record highs for equities has many market analysts predicting a challenging 2017, noting the market is overdue for a dip.

These forecasts are making many Canadians wary of putting more cash into the markets. This may be especially true for casual investors with smaller amounts at their disposal, who may be looking just to make their annual contribution to a basis investment vehicle such as a tax-free savings account (TFSA).

So is it time to hold off on investing your TFSA contribution for this year, and sit on the sidelines for the time being? The financial advisers we spoke to believe that would be a mistake.

Jason Pereira says it's difficult to know when stocks have gone as high as they are going to go. "Trying to pick a market top is as hard as trying to pick a market bottom," he says.

Mr. Pereira, senior financial consultant at Woodgate Financial in Toronto, notes that investors could wait a long time and could miss out on a continued rally while they wait. "At the end of the day it's about time in the market, not timing the market," he says.

Mr. Pereira recommends investors "should do what they should always be doing" – that is, investing in a diversified portfolio that exposes them to no more risk than they can bear. He notes that a traditional well-managed average risk portfolio will have 60 per cent linked to stocks and 40 per cent to bonds – and with typical geographic diversification, exposure to North American equity markets would total no more than 40 per cent.

Kim Inglis raises a different (but related) issue. "I find that investors who are waiting for the perfect time to buy never actually pull the trigger and then end up missing out on the biggest gains," says Ms. Inglis, a portfolio manager at Canaccord Genuity Wealth Management in Toronto.

She also notes the difficulty of successfully timing the market – and says investors shouldn't be afraid of a looming market dip. "If an investor has a long-term time horizon then a short-term pullback will be inconsequential by the time they need the money."

She says investors should remain focused on their long-term goals and ignore short-term noise.

In terms of a recommendation for this year's maximum contribution of $5,500, Ms. Inglis notes that depends on the specific goals, objectives and time horizon of the individual. She says if the investor has a long-term time horizon, a diversified mutual fund or ETF with a good long-term track record would be a good, cost-effective option.

Kerry Cockriell, senior financial planner at GP Wealth Management in Mississauga, has a different way to look at his 2017 TFSA recommendation. He tailors his advice depending on the purpose his client has for the funds.

For clients who wish to have emergency funds readily available, or if a client is saving to buy a car or home within the next year or two, Mr. Cockriell suggests a high-interest savings account within the TFSA so that the client is not exposed to any market risk.

If the client has a medium-term savings need, such as buying a cottage in three to five years, or a dream vacation, Mr. Cockriell suggests a conservative balanced mutual fund portfolio, with a bias toward income. He favours funds from Franklin Templeton, Fidelity and Mackenzie.

Mr. Cockriell also notes there is often a lack of basic understanding of the rules of the TFSA. "In my experience, it seems many investors are still not aware that their TFSA does not have to be a 'savings' account," he says. "Most of my clients who have opened their TFSA with me have been pleased to learn that a TFSA can hold mutual funds, ETFs, individual stocks or bonds."

Darren Farwell, director of wealth management at Scotia McLeod in Toronto, is effusive when it comes to the power of this investment vehicle. "The TFSA is simply the best thing since sliced bread and hassle-free coffee makers," he jokes.

As far as this year's recommended TFSA contribution, and worries about an imminent drop in stock values, Mr. Farwell notes that while U.S. equity indices are at record highs, the Canadian stock market has not yet returned to the levels reached in 2008. As well, he mentions the 10-year total return of the TSX is well below historic norms, so if you wish to buy into a stock market not at its highs Canada may be worth a look.

Mr. Farwell also does not recommend trying to "time" or anticipate the market. He uses a quote from a legendary investor to support his view. "As Warren Buffett said, 'the only value of stock forecasters is to make fortune tellers look good.'"

For investors whose objective is long-term growth and who have a tolerance for the ups and downs of owning stocks, Mr. Farwell recommends shares of quality, blue-chip dividend-paying companies such as Johnson and Johnson, Suncor and Nestle.

He also favours mutual funds and ETFs that invest in these kinds of companies, as well as specific sectors of the market such as financials, energy and U.S. technology.

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