Saving for retirement is something most people think about very regularly. You are doing it on your own or using a financial advisor or planner. Every time you sell something, you sit in cash analyzing what to buy next. When a stock goes up, you agonize about when to sell. When a stock goes down, you agonize about when to sell or perhaps buy more. How much should you have in Canadian stocks, International stocks, bonds, cash? How do you rebalance the assets? Monthly, quarterly, never?
It gets complicated and it is almost impossible to execute. Lifecycle funds are simple to understand and take the guesswork out of when to invest and when to reallocate. The portfolios are designed based on when you plan to retire. The closer you get to retirement, the less equity you have in your portfolio. Most people get more risk adverse as they get older. They can’t handle large fluctuation in their portfolio but rebalancing at the right time is difficult to do on your own.
Lifecycle funds do the rebalancing on a quarterly basis ensuring that the asset allocation is done regularly. As well, this strategy ensures that the fund is buying low and selling high which is something that most people are incapable of doing over the long term.
Companies like Fidelity, Mackenzie, Franklin Templeton have programs in place to take the worry away from making the right investment decisions. The approach seems simplistic but it works.
Here is a link to our site with articles and more information.
http://rothenbergcapitalmanagement.com/index.php?id=199
What are your thoughts on this approach to investing?
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