In stormy markets, portfolio solutions shine

In recent years, the importance of taking a portfolio approach has taken centre stage and become a focal point for the advice that we at RBC have delivered to clients, including your employees. With your ongoing support, your employees have benefited from this focus.

In fact, most of the new investments being made today are directed to portfolio solutions like the RBC Select Portfolios because they tend to produce a more consistent investment experience, especially in volatile markets. This is also a key reason why most people who have invested in such solutions have stayed invested over the sometimes tumultuous markets of the past three years - something that is critical for achieving long-term success.

The chart below highlights how the RBC Select Portfolios have helped clients to achieve a more consistent investment experience in up and down markets. This performance has been captured using a hypothetical $10,000 investment within the context of broader market activity, in this case what was happening in the Canadian equity market.  Note that even if a person invested in one of the specified RBC Select Portfolios at the highest point prior to the onset of global financial crisis, the overall experience through the downturn and the subsequent recovery heading into the spring of 2011 would have been characterized by less volatility . Although markets have pulled back in recent months, built in diversification in the RBC Select Portfolios allowed investors to participate when markets were rising but also muted the impact of weakness in the broader markets. That’s really where the “rubber hits the road” when it comes to investing portfolio solutions.

Source: RBC Global Asset Management

* An investment cannot be made directly in an index. Performance does not reflect transaction costs, investment management fees or taxes. If such costs and fees were reflected, returns would be lower. Past performance is not a guarantee of future results. Performance data as of August 31, 2011. For illustrative purposes only.

Something else, your employees can feel good about is the fact that they are making regular, ongoing contributions to the plan. In essence, they are in regularly investing. This “strategy” not only ensures that there’s some discipline but also can potentially accelerate wealth building by taking advantage when investments go “on sale”.

For example, in the case of the RBC Select Balanced Portfolio, someone who invested an initial amount of $500 and started to regularly invest $100 each month in October 2008 as markets were falling would have seen their account value grow to $4,120 by August 31, 2011. While the initial investment would have only increased by $38 over that period, the $100 monthly contribution and cumulative growth on those contributions would have accounted for the remaining $3,582. 

With solutions like the RBC Select Portfolios, your employees can, and should feel confident about their investments and their long-term financial well being. The recent market volatility has been unsettling and uncomfortable. if there’s a silver lining however, it’s that the choppy markets allow your employees to validate the investment choices that they have made with the help of our advisors. Most importantly, it is times like these when you are able to highlight the value of the plan options you make available to them – a key factor in positioning your company as an employer of choice.