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Dale Jackson

Personal Finance Columnist, Payback Time


Here we go again. Stock markets are down and many retail investors are in a panic.

A recent survey conducted by personal finance website Finder suggests about a quarter (24 per cent) of Canadians are losing confidence in the stock market and looking to cash out of their investments.

The survey cites household budget constraints as the main reason. But we’ve seen this movie over and over when markets swoon. It seems like the end of the world at the time, but it never is.

Each time an “end of the world” market event occurs, U.S.-based Ritholtz Wealth Management circulates a long-term chart of the S&P 500 index marking historic “reasons to sell.” The events highlighted include the 2010 “Flash Crash”, the 2011 earthquake/tsunami in Japan, the 2013 “Taper Tantrum”, the Ebola virus outbreak in 2014, the Brexit vote in 2016, and the China-U.S. trade war that started in 2018.

More recently, the chart marks the global pandemic’s onset in 2020, the storming of the U.S. Capitol in 2021, and the second wave of the pandemic shortly after.

In all those events, the S&P 500 regained its losses and advanced to record territory 100 per cent of the time.  

That’s not to say the world won’t end tomorrow, but the odds are pretty slim. As the standard investment disclaimer says: “past performance is not indicative of future results.”



No doubt some investment portfolios are doing better than others in this latest market storm. The S&P 500 is used as a benchmark because it reflects a diversified portfolio of stocks spanning the major sectors and geographic regions. Canadian investors would normally sprinkle in some big Canadian stocks but the overall losses and returns are similar.

Diversification is one of the best investment hedges available to limit losses while casting a wide net for the best investment opportunities.

A qualified investment advisor will tailor a diversified portfolio to match the risk tolerance and return expectations of a client. They don’t always pick winners — but the winners should far outpace the losers. A really good advisor will build a portfolio that rides the market when it goes up and stem the losses when it goes down. 

Investors who don’t need the full upside of equity markets can lower risk by allocating some of their portfolio to fixed income to cushion the downside. With guaranteed investment certificates (GICs) paying a 4.5 per cent annual yield, it’s a safer way to reach overall portfolio return goals.



If you’re investing for retirement, it’s important to view equities in five-year increments. Good companies that grow their earnings often need time to prove their worth. They might take a hit in market downturns through no fault of their own and impatient investors could regret pulling the plug before those stocks rebound stronger than ever.

Investors who save for retirement through registered retirement savings plans (RRSPs) could also regret cashing out after getting their income tax bill.

RRSP withdrawals are fully taxed. If you are working full-time, they will be taxed at your highest marginal rate for the year the withdrawal is made. In other words, a contribution that resulted in a 40 per cent tax savings could be taxed at 50 per cent.    

It gets worse. Any RRSP withdrawal made by a plan holder under 65 years old is subject to an immediate withholding tax as high as 30 per cent. The maximum withholding tax applies to withdrawals over $15,000. It’s less for smaller amounts and residents of Quebec.

If an early RRSP withdrawal pushes your marginal tax rate over thirty per cent, you will owe more than the 30 per cent withholding tax come tax time.

One more thing. Once you make an early RRSP withdrawal, you lose that allowable contribution room. You could be out of luck if you are looking for a tax shelter in future, higher-income years.