Fact of life No. 1: We all age.
Fact of life No. 2: Saving for our later years is a long-term commitment and requires patience.
Fact of life No. 3: The current, crazy-making market is trying that patience.
Investment advisers invariably offer calming, level-headed pronouncements in times like these. Look beyond the cyclical troughs. Ignore short-term investment worries.
But there are lots of worries: the ailing oil and commodity sectors, the low loonie, low bond yields, low economic expectations, higher prices for food and other essential imports, high real-estate prices ... say "when."
In this climate, and as we approach the RRSP contribution deadline of Feb. 29, even the most stable, long-term retirement strategies may require tweaks. At the very least, buy-and-hold investors might consider a change in perspective.
Dylan Reece, a financial adviser and associate portfolio manager at Nicola Wealth Management in Vancouver, said the investors he sees haven't been overly concerned.
He tells them to think like a pension fund.
"What pension plans do is they first have to acknowledge the minimum rate of return they actually need to achieve to secure retirement – or in the pension plan's case, to fund the retirement income of all its pensionees," Mr. Reece said.
In other words, investors should concern themselves less with market turbulence and instead focus on an asset mix that will fulfill their future income needs. In light of recent turbulence, this could include investments other than stocks and bonds that will produce a steadier cash flow, such as exchange traded funds (ETFs) that invest in real estate.
Investors can use online tools or work with a financial adviser to make projections for their rate of return. In the end, the needed rate might be "very different from what one might desire. Our experience is that investors, in fact, generally need a lower return than what they might think" for retirement, Mr. Reece said.
"Clients may only need a return of 5 to 6 per cent before inflation, or 3 to 4 per cent after inflation, which is different from the returns we may actually try to achieve," he added.
With more realistic goals in mind, investors may get away with taking on less risk in times like these. Stick to your investment plan and tweak when necessary.
"When you have volatility like we're going through now, then you should be constantly rebalancing back to your target mix" in your well-balanced portfolio, he said.
One problem with this is that investors often don't know what exactly lies in their mix of investments, "and that can cause uncertainty at the first strike of volatility," he said.
The mood among investors is cautious, said Gareth Watson, director of investment management and research at Richardson GMP in Toronto. "That's probably going to be something that doesn't go away for a while."
The sliding Canadian dollar and low investment returns may still spook investors from topping off retirement savings.
Worries about the loonie may be overblown, however. "If you're investing for retirement, I find currency becomes less of an issue, because over the long run, usually you 'net out,'" that is, over time the dollar's value rises and falls against the U.S. dollar and the overall, long-term effect is nil, Mr. Watson noted.
"With a lower loonie, people say, 'Should we look at the United States because the loonie continues to weaken?' Well, you should have been looking at the United States four years ago, five years ago. That trade has been extremely kind to many Canadian investors who invested in the United States," Mr. Watson said. He also doesn't see U.S. stocks rising at the pace they had been.
He stressed that the loonie's value shouldn't be the ultimate determinant when making investment choices. "I wouldn't necessarily commit a lot of money to the market just based on expectations of where the dollar is going. It should be more on the actual companies that you're buying and the fundamentals of those companies," he said.
Still, looking farther afield than North America may help mitigate risks in the Canadian market over the long term.
"From a longer-run point of view, I think many Canadians tend to be overweight in local [domestic] stocks and bonds," said Todd Mattina, chief economist and strategist with Mackenzie Investments in Toronto.
His views, he stressed, are from a more global perspective than others within Mackenzie. Nevertheless, he generally sees risks with Canadian stock prices.
"While valuations are getting more attractive, they haven't become so attractive that they outweigh some of the headwinds coming from very negative market sentiment and the adverse macroeconomic environment," Mr. Mattina said. "So at this point, we're still underweight Canadian equities, waiting for an opportunity to look for more tactically attractive timing to get into the market."
That's his Bay-Street-strategist side talking. For ordinary, long-term investors saving for retirement, he repeated the same advice as the others, that the aim should be setting a good asset mix and sticking to it.
"I think the danger is responding excessively to volatility in the markets," he said. "It's important to keep an eye on, tactically, trends in the market, but to remember that the strategic asset mix that they've decided with their advisers probably reflects more of a longer run outlook," Mr. Mattina said. "It's sometimes dangerous to overreact to short-term developments."