Canadians licking their investment battle wounds should adapt to the volatile environment by basing their financial planning on a new set of principles this year: military principles, says TD Bank Financial Group.

The bank is teaming up with General Rick Hillier, the former Chief of the Defense Staff, who is now a senior advisor to TD, to provide investors with unique, battlefield advice for RRSP season.

“That ‘battle’ environment describes well how investors have been feeling in the past few months. And the applicable military principles are surprisingly appropriate for battle-weary investors contemplating this year’s RRSP contribution,” says Patricia Lovett-Reid, senior vice-president of TD Waterhouse.

In particular, Hillier offers five key military principles relevant to financial planning.

First, go back to the basics. “Soldiers need to conduct their basic drills first and foremost, otherwise they’ll lose the fight,” says Hillier.

For investors, this means reviewing their core financial plan and assessing their investment objectives, risk tolerance, and time horizon.

The second principle is thinking long. “In battle, it is essential to stay focused on the mission at hand, which means thinking about the long-term goal and not abandoning everything to overcome short-term setbacks. It is the difference between losing the battle and winning the war,” says Hillier.

The same strategy applies to investing, where a long-term strategy should prevail.

The third principle is to rely on “battle buddies,” who “get you through the worst and who are your trusted advisors,” according to Hillier.

For investors, this means relying on professionals to get through the tough times.

A fourth piece of advice from the battlefields is to always keep a reserve for flexibility or emergency situations.

“Make sure that you keep a reserve of cash in your portfolio,” says Lovett-Reid. “It will give you the flexibility to take advantage of buying opportunities when they present themselves.”

Finally, military principals call for investors to hold out for daylight.

“When you are in a siege, nights are the toughest, but in the morning, daylight will come and your confidence will increase dramatically,” Hillier says.

In the investment realm, this translates into refraining from overreacting to short-term volatility.

“It is likely going to be a tough year ahead, but history has shown it won’t last, so stay focused on the future: balance your expenses, find focused ways in your own household to reduce costs and continue to be growth-oriented by making your RRSP contribution,” says Lovett-Reid.

IE