What the experts do with their RRSPs - JEFF BUCKSTEIN

ADRIAN MASTRACCI, 60

Position: Founder and portfolio manager, KCM Wealth Management Inc., Vancouver

RRSP portfolio: Approximately 90 per cent in fixed income investments, 10 per cent equities.

Mr. Mastracci's RRSP allocation over most of the past decade has comprised about 80 per cent in fixed income instruments, such as treasury bills, banker's acceptances (commercial paper guaranteed by charter banks), and strip coupons.

The remaining 20 per cent is in equities, including blue-chip corporations, which he holds in baskets of Canadian funds, such as exchange-traded funds (ETFs) and indexed funds. He has four baskets of funds that contain equities of firms in sectors such as financial services and the oil industry, among others.

In response to current "wobbly markets," he has temporarily increased the ratio of fixed income in his RRSP portfolio to 90 per cent, with a corresponding decrease in equities to 10 per cent. (Most of the equities he holds are outside his RRSP, to maintain a highly conservative retirement plan of what he calls his "pensionable assets.")

Target rate of return: Mr. Mastracci predicts his RRSP will provide a return of about 5.5 per cent in 2008, a bit below what he might have expected "if this was a normal year" that didn't feature difficult economic conditions and turbulent markets.

He notes that there is currently an inverted yield curve - with the rate of return for certain short-term investments exceeding those over the longer term - which should also have a negative impact on his RRSP.

Forecast: He expects stock markets to ride a "roller coaster" this year, with the TSX bouncing between a low of about 11,000 and high of nearly 15,000. In the United States, he sees the Dow dropping to about 10,500 and up to about 15,000.

Though he believes the United States is into at least a major slowdown, he remains bullish on commodities.

"Even if the consumer slides back a little bit in the United States, the population in China wants more goods and services, so they're going to take up some of the slack," Mr. Mastracci says.

He is also optimistic about the long-term prospects for sectors such as financial services, as well as real estate and industrial stocks, when the economy starts to pick up again in both Canada and the United States. However, he believes consumer-related stocks may experience "a bit of a pause this year, especially if the U.S. consumer keeps his hands in his pockets for a while."

"I'm cautious," he says, but he thinks there are going to be "some opportunities to look at some time this year - probably in the first half, maybe more in the second half."

Basic strategy: Mr. Mastracci, who usually contributes to his RRSP as early as possible in the year to maximize compounding interest, describes himself as a "growth business risk type of person - more of a buy-and-hold" investor. He has no immediate plans for retirement and doesn't intend to draw down his RRSP until age 72, after the proceeds are converted into a registered retirement income fund.

He maintains liquidity in his RRSP portfolio in the form of short-term instruments such as banker's acceptances, which make up about 25 per cent of the overall value and which can be "sold at a moment's notice."

By investing in baskets of equity funds such as ETFs and indexed funds, he counts on a hedging strategy so that even if certain sectors falter in bad times, it is unlikely the value of the whole basket will drop significantly enough to trigger a sale. He holds about 60 per cent in equities and 40 per cent in fixed income throughout his entire portfolio, including both RRSP and non-RRSP investments.

Mr. Mastracci tries to keep fixed income investments inside the RRSP, and dividend-paying securities outside where he can utilize the dividend tax credit.

The whole philosophy behind his RRSP is to keep things simple with quality, diversified investments. That way, he figures, "there's not a lot that's going to bite me hard" in difficult times.

BRIAN GOODING, 44

Position: Senior vice-president, alliance distribution, Fidelity Investments Canada ULC, Toronto

RRSP portfolio: Approximately 80 per cent in equities and 20 per cent in fixed income instruments.

Mr. Gooding values consistency and sticking to a game plan when it comes to his RRSP, which is split into a ratio of approximately 50 per cent Canadian equities; 30 per cent international equities and 20 per cent fixed income instruments - one that he has maintained for about a decade.

He prefers mutual funds to provide the diversification he wants in his portfolio. These include his largest Canadian holding of Fidelity True North Fund. In terms of international equities, instruments such as the Fidelity American Disciplined Equity Fund and Fidelity International Disciplined Equity Fund "give me exposure to all sectors," he says.

On the fixed income side, Mr. Gooding holds instruments such as the Fidelity Canadian Short Term Bond Fund and Fidelity Canadian Bond Fund in his RRSP.

Target rate of return:

"I like to think that on a five-year rolling average, my overall RRSP portfolio will [return] 9 per cent or 10 per cent."

Forecast: Mr. Gooding expects Canada's economic performance in 2008 to continue to rank at least near the "top of the group" compared to the United States and western Europe. While he expects at least a major U.S. slowdown, if not outright technical recession (defined as two consecutive quarters of negative growth), "I think our dollar and its growth over the last year suggests we are on our own trajectory and don't think you'll see us slide into a recession in Canada."

"I think there are some very good long-term fundamentals behind why the Canadian market will continue to do well. We're in a long-term cyclical bull market in commodities, and there will still be a large demand globally for the rich resources we have," he predicts.

Mr. Gooding, who has been in the financial services business for 21 years, says there is a familiar feeling about the current economic slowdown. "What I see consistently is that there's always something that creates havoc somewhere in the world. ... Each year, there are sectors and businesses that get themselves in trouble. They have short-term ramifications on markets," which tend to recover over time.

Basic strategy: Mr. Gooding likes to make his RRSP contribution early in the calendar year, as he has already done for the 2008 tax year, to capitalize on compound returns as early as possible. This strategy has made a substantial impact on the size of his RRSP portfolio over the long term, he says.

His basic investment strategy for the RRSP is driven by expectations of moderate growth; a well-diversified portfolio; and a buy-and-hold philosophy.

He knows that markets will occasionally decline, and that his portfolio will reflect that; by investing well, however, he hopes any drop in value will be mitigated.

When selecting mutual funds, he seeks fund managers who have "a proven track record," and can provide continuity in their investment philosophy.

He reviews his basic RRSP investing strategy every year; he also rebalances his portfolio annually. This year, for example "Canadian equities strongly outperformed fixed income and international equities, so I'd gotten a little overweight in Canadian equities, which went up to 59 per cent [from 50 per cent]."

On the other hand, "international equities went down to 25 per cent [from 30 per cent]; and fixed income went down to 16 per cent [from 20 per cent]."

Therefore, "I'm rebalancing a bit and putting more of [the excess Canadian value] back into international mutual funds and Canadian fixed income instruments."

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LAURIE STEPHENSON, 46

Position: Co-founder and principal, Stephenson Daigle Financial, Halifax

RRSP portfolio: Approximately 90 per cent in mutual funds, 10 per cent in individual equities.

About 90 per cent of Ms. Stephenson's RRSP portfolio comprises mutual funds - most of them equity-based, along with some dividend funds. About 70 per cent of her mutual funds are Canadian-based, with the remainder split roughly evenly between the United States and other international sources.

Examples of Canadian holdings include Mackenzie Maxxum Dividend Fund, Mackenzie Maxxum Canadian Equity Growth Fund, Quadrus AIM Canadian Equity Growth Fund, and Mackenzie Universal Canadian Resource Fund. "Like many Canadian stock holders, I have resources, because I expect resources to continue to do well," she explains.

Her U.S. and international holdings include Mackenzie Universal U.S. Growth Leaders Fund and Mackenzie Maxxum Focus Far East Class. She is looking to increase her U.S. equity portion; "I think this is a great time to buy U.S. I think we're going to be buying at a discount over the next 12 months."

The remaining 10 per cent of her RRSP portfolio is in individual stocks such as Great West Life Assurance Co., Manufacturers Life Insurance Co., and Power Corp. of Canada.

Target rate of return: Ms. Stephenson always sets long-term, rather than short-term, goals for her RRSP return. She uses an 8 per cent return in her estimates, even though "I think that is fairly conservative for equities over the long term [and] since 1989, I've received a return of over 12 per cent in my portfolio."

She is also conservative when it comes to estimating what she will need in retirement. "Say I retire between 58 and 60; I expect I'll probably live 25 years after that," she says, but she is planning her retirement finances as if she will live to 100.

Forecast: Whether or not a technical recession occurs in 2008, investors still need to take a long term view, she says; she remains bullish over the longer horizon.

Referring to the damage caused by the sub-prime crisis, "I think it's pretty easy to take a negative view right now." However, she doesn't see economic weakness as being universal, even south of the border. "I know balance sheets are weak on U.S. financials right now," in response to the housing crisis, she says, but balance sheets in other sectors in both Canada and the United States still look strong. "I still think the resource sector in Canada has some legs, for sure."

Basic strategy: She tries to contribute to her RRSP portfolio as close to the start of the calendar year as she can, to take advantage of maximum compounding. Otherwise, she contributes on a regular, usually monthly, basis. "My portfolio has looked pretty good over the last couple of years, and I think part of that is because I've bought fairly regularly, regardless of whether the market was up or down."

She describes her basic investment style as being "highly aggressive," at least in part because "I think equities will outperform pretty much any other investment over time ... I'm not a big fan of fixed income. I just don't see any kind of yield."

She reviews her basic strategy annually with the assistance of business partner Trevor Daigle.

Furthermore, "every year, I do a rebalancing to make sure I'm still asset-allocated the way I'd like to be."

Ms. Stephenson recalls a past mistake that taught her a valuable lesson. "One year I didn't rebalance because frankly I'd done so well ... then the next year, after the funds had done beautifully well, they crashed."

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BOB GORMAN, 53

Position: Chief portfolio strategist, TD Waterhouse, Toronto

RRSP portfolio: Approximately 80 per cent in equities and 20 per cent in fixed income instruments.

"I've probably got a higher tolerance for volatility than most, and a fairly long horizon. So my RRSP and related pension-type investments have always had a pretty high equity weight; I'm about 80 per cent equity and 20 per cent fixed income," Mr. Gorman says.

On the equity side, he selects individual shares of companies he expects will "grow faster than the economy in general," and has chosen Canadian-based stocks such as Research in Motion Ltd., Manufacturers Life Insurance Co. and Shoppers Drug Mart Corp. From the United States, he has equities such as Oracle Corp., Cisco Systems Inc., Microsoft Corp.; Procter & Gamble Co., and Colgate-Palmolive Co.

The fixed income portion consists primarily of Canadian bonds, including funds such as TD Private Canadian Bond Return Fund, along with government bonds. He also holds global bonds through TD Global Bond Fund.

Target rate of return: Mr. Gorman expects to see a return of about 6 per cent or 7 per cent on his RRSP portfolio in 2008, in response to current market conditions, compared to the 8 per cent and 12 per cent return rate that he received from his high equity weighting over the years.

"I think this is going to be a year that's characterized by single-digit returns on the equity side - probably mid- to upper-single digits for the most part," he predicts. "After a pretty strong run in recent years, it's going to be more subdued."

Forecast: "We've had a sell-off in the market, which is really reflecting the current slowdown in growth in the economy," he says. However, "I think we'll see some sort of bottom in the coming months and still end up in positive territory for the year as a whole."

He expects a TSX gain in the 5 per cent to 7 per cent range for all of 2008. "I suspect the U.S. will do a tad better; six to eight per cent is what I suggest for the S&P 500."

Basic strategy: Mr. Gorman describes his investment style as "long-term growth-oriented," but emphasizes he is "not an extreme risk-taker." His RRSP is managed by Private Investment Counsel, TD Waterhouse's discretionary management arm for private clients, which he helped establish several years ago. His holdings are heavily weighted in what he refers to as "very high-quality equities;" selection is based on factors such as comparing stock price to earnings and corporate cash flow, as well as an assessment of management performance.

He reviews RRSP strategy about every six months. "My strategy is a long-term one, so it's unlikely I'm going to make a lot of changes. But I review it to see if there are any I want to make."

Mr. Gorman set up his RRSP about 30 years ago and feels he may have been too conservative during the early years. "When I was very young, I didn't avail myself of all the investment options that I could have. If I knew then what I know now I would probably have adopted a higher equity weight right from the beginning."

The experts caution readers that the financial decisions they make with respect to their own RRSPs are personal decisions that might not be relevant to the situation of others.