The risks of playing it too safe

Saving for retirement requires a growth component typically provided by equity investments.

Can a "play-it-safe" investment strategy involve risks? It definitely can. That's because a safe approach may not provide your portfolio with the growth it needs to stay ahead of inflation and reach your retirement targets.

Retain your purchasing power. A cautious approach can have repercussions years into the future. For example, if your safety-oriented portfolio doesn't earn more than the annual rate of inflation, the future purchasing power of your money will decline.

Stay on track for the retirement. If you're investing for retirement, an overly cautious approach may mean difficulty in reaching your financial goals. Successfully saving for retirement requires a growth component that typically, for many investors, is provided by equities and equity mutual funds.

For example, investing $5,000 a year at the end of every year in a registered Retirement Savings Plan (RSP) earning 2% a year for 30 years will generate $203,000. Including some equities and earning 6% would give you $395,000 after 30 years — almost double the earnings in the same time span.

Stick to your plan. Cash does have a role to play in your portfolio, but it should be part of a larger asset allocation plan that also includes an equity component for growth and a fixed-income component for stability.

For some ideas on how to anchor your portfolio with equity investments, see "The dividend advantage". To discuss your overall portfolio, contact an Investment Representative at 1-800-465-5463.

Commissions, trailing commissions, management fees, and expenses all may be associated with mutual fund investments. Please read the prospectus, which contains detailed investment information, before investing. Mutual funds are not guaranteed or insured, their values change frequently, and past performance may not be repeated.

The information contained herein is current as of June 15, 2010.

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