The article “RRIF Management: Going it Alone” was originally published on MoneySense Magazine on January 13th 2015.

Keep your retirement portfolio simple and above all else, have a plan

Q: My questions are about my two RRIF accounts. I have too much money in the money market and GICs. I am also worried about the ETFs I purchased that are worth a lot less than what I paid for them. I have had the usual problems with financial advice, so I do my own investing. I went through a period where I was told I would profit from mutual funds that have high MER’s. I am now 72-years-old. I thought if I learned enough about the stock market, I would be able to manage my own investments. I feel tired from all of this and wonder if I should consider an investment adviser. My problem is I haven’t looked at asset allocation or drawn up a plan.—CL

A: There are a number of points that I want to touch upon, CL.

First, unless you have a RRIF and an LRIF (locked-in RRIF), I’d be inclined to consolidate your two accounts so that it makes things a bit cleaner. Simple is better, especially when managing your own investments.

Whether or not you have too much money in money markets or GICs is a matter of opinion. Without a plan, it’s hard to say what your asset allocation or required rate of return might be in the first place.

On the ETFs that have gone down in value, I wouldn’t be too focused on that, CL. I find that people are overly preoccupied with what they paid for an investment. In a non-registered account, there are tax considerations that need to be contemplated, but in a RRIF, that’s a non-issue.

When deciding when to sell an investment, I encourage investors to imagine that they had the value of the investment in cash. Forget the fact that you own the investment in the first place or what you paid for it. If you had that amount of money in cash, would you buy that same investment? If the answer is no, more often than not, I think you should sell. Tax considerations do come into play sometimes, but not in the case of your RRIF.

You’ve had problems with investment advice and presumably advisers in the past. So it sounds like you fired your adviser to go at it on your own. This is fine, but I think do-it-yourself investors are probably best to keep it simple.

My own bias for most DIY investors is a simple four security portfolio—a Canadian equity ETF, a U.S. equity ETF, an international equity ETF and a bond ETF. If you’re going to be your own investment adviser, be careful about trying to be an investment adviser by buying a bunch of individual stocks. Yes, you could—and it’s easier these days—but even though you could re-shingle your house, most people would probably hire a professional.

Your concern about high MER funds is valid. We have a largely ineffective mutual fund infrastructure in this country, in my opinion. Our average fees are high and many actively managed mutual funds are no more than expensive index funds that replicate their benchmarks, less a 2.5% fee.

If you go the mutual fund route, I think your best bet is index funds or smaller, truly active funds.

You might be well served to consider a robo-adviser firm that employs a passive strategy. This way, you’re hands-off and can reduce the anxiety of managing your own investments, but you’re doing so with ETFs and modest fees.

A small, private investment firm might be another option. They can be very un-mainstream, so you can avoid the disdain that lead you to become a DIY investor in the first place. Many of these firms are quite lean, so their fees can be reasonable compared to more expensive mutual funds or bank platform alternatives. Finally, their returns are often competitive, as they’re small and nimble enough to be able to buy more than just the handful of big Canadian stocks that most funds and firms end up owning in this country.

Your last comment is critical. You have no plan as to asset allocation or retirement funding. Without a plan, it’s hard to know what to do. It’s like going on a roadtrip without a map. Going to the cottage is one thing. But going into retirement isn’t quite the same. That is, you’ve never been there before.

Whether you do it on your own or you hire a professional is elementary, CL. It’s important to make financial decisions on purpose. If you get a sense of how much you can afford to spend in retirement, what rate of return you need and what your asset allocation should be, you can then overlay that onto your RRIF accounts.

If you continue to manage your own investments, keep it simple and remove the emotion. If you hire an investment adviser, just make sure it’s someone who can produce a reasonable value at a fair cost. You have to balance your previous bad experiences with advisers with your current potential need for help.

Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto, Ontario. He does not sell any financial products whatsoever.