Joanna Saar, a Mississauga, Ontario-based financial adviser with CIBC Imperial Service and certified financial planner (CFP), sites some of the most common mistakes people can make when investing in RRSPs.

Parking your money in money markets. When markets are volatile, investors often flock to the perceived security of short-term investments. People often "park" their capital in a safe low yielding investment such as money market funds until the markets settle down. But too often, they wait too long. "This is your hard-earned after-tax income," explains Saar. "You have earmarked it for retirement so why not get it working for you? By investing in money markets, you forego the potential returns that a well-developed investment plan and diversified portfolio can help deliver."

Investing in the current mutual fund 'stars'. "Often people will see a product that won Fund of the Year last year or they will see a fund that has received good coverage in the news and they will

invest based on a short-term history of performance," says Saar. "Yet if you look at the subsequent performance of funds such as these, you will see that this is not always a good strategy. In fact, the top-performing fund can change each year. A sure way to ensure you participate in market growth is to build a diversified portfolio including funds with different management styles, geographic mixes and asset classes."

Not sticking to your plan. The market has been up and down in recent years and this makes people very emotional with their investments and jittery about short-term losses, says Saar. The result for some has been to 'cash out' of poorly performing

To avoid falling into these and other RRSP investing traps, it is important to take the time to develop a good financial plan. Whether you use a financial adviser or invest on your own, planning and research are essential to creating a successful RRSP strategy for the long term.

This article is intended to provide general information and should not be construed as specific advice. This article is not applicable in Quebec.

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