The threat of tariffs, the back-and-forth negotiations between governments, and the markets’ ups and downs have meant a bumpy start to 2025. Canadian investors are concerned and looking for ways to mitigate risk and weather this latest economic storm.
Just like in life, there’s no surefire way to eliminate all risk, but there are guidelines you can follow that may futureproof your portfolio.
Have a Plan
The first step is working with your financial advisor to develop a solid financial plan. The investment world is complex, and they can help. The benefits of working with an advisor include:
- Personalized Investment Strategy: By assessing your financial goals, risk tolerance, and timeline they’ll help you create a tailored investment strategy that aligns with your long-term objectives.
- Tax Optimization: Your advisor can help you navigate tax-deferred accounts like RRSPs and tax-free accounts like TFSAs and recommend strategies to minimize capital gains tax and maximize your returns.
- Estate Planning: Planning for the transfer of wealth is a key element of futureproofing your portfolio. Advisors can help with estate planning, ensuring your assets are passed on efficiently to beneficiaries while minimizing taxes.
- Retirement Planning: Advisors can also ensure you’re on track for a comfortable retirement by helping you optimize your contributions to retirement accounts and picking the right investment vehicles.
Diversify Your Investments
Diversification remains one of the most effective ways to reduce risk. Chat with your advisor to ensure your portfolio includes a mix of stocks, bonds, real estate, and alternative assets. Diversifying across different asset classes also cushions against market swings and ensures your portfolio can weather different economic climates.
This may also be a great time to embrace sustainable investments — Canada is home to many companies leading in clean energy, technology, and sustainable agriculture.
Mitigate Currency Risks
As Canadian investors, we face potential currency risk due to investments in international markets. The value of the Canadian dollar fluctuates, impacting the returns of foreign investments. To hedge against this, talk to your advisor about currency-hedged investment products or allocating more of your portfolio to Canadian-based assets, such as the TSX (Toronto Stock Exchange), which provides exposure to both domestic and international markets.
Time Is Your Friend
Now is NOT the time to panic. Similar challenges have existed in the investment world in the past, and we’ve learned that focusing on the long term is the best course of action.
Let’s be clear, what’s changed for most of us is the influx of constant information, whether it’s via social media or 24-hour news channels. That overload of media can be overwhelming, and that’s where we come in to help!
Think of the Opportunities
Ask your advisor about the potential opportunities in this current market climate. It may be a good time to pick up some market bargains that fit into your financial plan.
Talk to Your Advisor
Their expert guidance will be key to building a resilient portfolio and a financial plan that works for you now and in the future.