When it comes to choosing how to invest your pension funds, there is no right answer. Much depends on your age, your other assets, your planned retirement date and your comfort with risk.
We encourage you to review your personal circumstances with a CSS Pension Plan Consultant or a qualified financial advisor at your financial institution to make a decision that's right for you.
You can choose how to invest your pension funds in the CSS Pension Plan, though you're not required to.
The CSS Pension Plan offers
four investment funds – a Money Market Fund, Bond Fund, Balanced Fund and Equity Fund. Each fund – or combination of funds – has different levels of risk and expected returns.
How you choose to invest your pension funds can impact your retirement plan.
To make an informed choice, you should consider the following questions:
1. When will I retire?
2. How much pension funds will I need?
3. What type of retirement income do I want?
Your answers to these questions will affect how your pension funds should be invested. For help answering these questions, you should consult a CSS Pension Plan Consultant or a qualified financial advisor at your credit union or bank.
"Market timing" is the strategy of moving pension funds among the Plan's investment options in response to short-term market conditions.
Although you are free to do so, here are some things to think about before you take action.
The classic "market timer" attempts to move a portfolio in and out of the markets in response to short-term market conditions. The objective is to be fully invested when markets are rising, and safely out of the markets just before the market begins to decline. There is only one problem – it can't be done consistently.
No matter how long or how hard you study investment markets, it is impossible to forecast the peaks and valleys of market performance accurately. Every investor would like to be in the market during rallies and out of the market just before each correction or crash. The problem is that markets can move suddenly, and by large amounts, in response to unforeseen events.
No one can tell in advance when the markets will rally or decline. Even professional investment managers can only make educated guesses. They often get it wrong.
If you try to move into low risk/low return investments when markets decline, and then move back into higher risk/higher return investments when markets rally, you could actually underperform compared with an investor who stays fully invested and rides out the ups and downs in a well-diversified portfolio of high quality stocks and bonds.
There are several reasons for this:
Mistiming the market's highs and lows could seriously impact your investment returns.
time in the markets - not timing the markets - that gives you the best chance of investment success.
The annualized return of the S&P 500 over this 31-year period was 13.5%. If you missed only the 40 best days during this period, your average annual return for the whole 31 years falls to 7.8%.