by Tom Bradley

I had a request from one of my media contacts this week. He was looking for specific stock ideas for people who are making RRSP and TFSA contributions. I gave him my best shot, but it ended up on the cutting room floor.

Nonetheless, my response went like this:

With the market declines, we like all three of our equity funds a lot. What we like more, however, is a client’s existing asset mix. Let me explain.

Investors are often looking for something new when it comes time to make contributions to their RRSP and TFSA. A new stock or fund may be the answer, but their existing portfolio should be the first place they look.

New contributions are a great way to rebalance a portfolio back to its intended asset mix. For instance, if an investor hasn’t done anything in the last few months, their portfolio is likely underexposed to stocks relative to their long-term target (stocks are down while cash and bonds have held up). The security or fund that’s down the most may be their best bet.

RRSP and TFSA contributions are a great way to stay on your strategic asset mix (SAM). This is great advice for any investor although it won’t show up in the many articles that will be recommending specific stocks and strategies.

A note for Steadyhand clients: If the Founders Fund makes up all or most of your portfolio, you have done something in recent months. Over the last month, Salman and I have used down days in the market to increase the fund’s equity content from 55% to 60%. Stock valuations have improved, and we could no longer justify being below our long-term target of 60%. For more on our approach, I encourage you to read a recent post about our game plan.