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I started to contribute to company RRSP plan this March. Up till now I have been parking the money in a Bond fund. My expectation 8 months ago is stock market is in a downward spiral as we are at an early stage of a recession. Bond will go up as the central bank cuts the interest rates to boost the economy. ( You need a finance 101 course to understand the relationship between bond prices and interest rate). Uptill now the bond funds have been outperforming the stock funds. I didn't consider the money market funds (which invest in treasury bills), as the return is too low. Now the rate is already very low, I will probably look at some balanced funds(which hold equities, bonds and treasury bills). But I am not in a hurry to change my asset mix.
As you see I am trying to time the market, (guessing whether bonds will outform equity or vice versa). Most financial advisors will say this is against the diversification principle for long term investment, and they are right. Historically experts have been on the wrong side as much as the right side when they try to time the market. But I still did it because a little betting is fun, so long I am not taking too big a risk.
Asset allocation is the single most important factor (90%) in investment performance. You might want to compare the management fees of the funds before you buy it, as the fund manager are not contributing too much on the fund performance anyway. to me 1% difference is a lot.
Historical performance is often misleading. A star fund last year might be the dog this year. The reason is simple, it WAS the star because its holdings were overbought last year. So don't just look at the best performing funds of last year.
I have more questions than answers myself. Let's continue the discussion.
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