By Scott Ronalds

It’s that time of year: holiday bills, new diets, bleak weather, and RRSP contributions. Not exactly exciting stuff. Bruce is a little more jazzed than many investors though. He reviewed his account statement last week and found that his portfolio at Steadyhand was up nearly 12% last year (since starting with us two years ago, his portfolio has gained approx. 6.5% per year).

“Grinning ear to ear”, he noted in an email to us. While we love his enthusiasm, we reminded him that he shouldn’t get too excited over one good year. He needs to stay on track with his savings and investment plan and be prepared for some more inevitable bumps down the road. We also reiterated our cautious views on the bond market and stressed that the Small-Cap Fund isn’t going to return 17% every year. Probably not what he wanted to hear, but again, it’s that time of year.

Bruce and his wife Courtney plan to contribute $20,000 to their RRSPs this week ($12,000 Bruce; $8,000 Courtney) and they asked us for our advice. We reviewed their fund mix and noted that while their portfolio is still in-line with their strategic asset mix (SAM), there are a few minor adjustments they could make. Strong performance from the Equity Fund has meant that it has crept higher in their mix, and their weighting in fixed income has declined modestly (due in part to a redemption from the Savings Fund last year). They can use the contributions to bring their mix closer to its target.

Bruce has a few biases that he wanted us to consider in our recommendation: (1) He’s wary of bonds, (2) he’s been disappointed with the Global Fund, and (3) he loves the Small-Cap Fund. We took this into consideration, while also stressing the importance of diversification.

We felt it would be appropriate to hold some more cash (Savings Fund) in lieu of bonds (Income Fund), but also recommended that the couple not shy away from global stocks. We suggested they allocate their contributions as follows:

$6,000 – Savings Fund
$4,000 – Income Fund
$6,000 – Global Equity Fund
$4,000 – Small-Cap Equity Fund

This would bring their fund mix to:

Savings Fund: 7%
Income Fund: 29%
Equity Fund: 26%
Global Equity Fund: 25%
Small-Cap Equity Fund: 13%

Bruce and Courtney agreed with our recommendation (even the Global Fund, reluctantly) and plan to make their contribution later this week. They’re also looking forward to our upcoming client presentation on February 6th. Bruce, in particular, hopes to score some more Steadyhand swag this year.

More on Bruce:
Meet Bruce
Trimming Bonds with Bruce
RRSP & TFSA Contributions 2012
California Dreaming

Management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns.