What is my timeline?
Your time horizon is the amount of time from now until you will need to access your investments. It's an important factor when considering risk and asset allocation. The key consideration is that the potential impact of market volatility is greater in the short term than it is over the long term.
For example, if you plan to borrow money from your RSP to buy a home within the next year, then you have a short-term time horizon, and safety of principal is paramount. You'll choose cash-based investments, even though the expected return will be low.
If you're building your RSP portfolio for retirement in 20 years, then you have a long-term time horizon. You can afford to be less concerned about short-term market volatility, and choose growth-oriented investments.
Even if you're approaching retirement, your time horizon could still be quite long. Canadians are enjoying longer and healthier lives. Today, a 65 year old is more likely than not to live well into his or her eighties. A typical retirement could last 20, 25 or even 30 years.
While safety of principal naturally becomes a higher priority at retirement, it still makes sense for most retirees to keep a portion of their RSP or RIF assets in longer-term, growth-oriented investments. In most cases, a balanced portfolio that includes equities, fixed income and cash makes the most sense.