my a glance Life s brighter under the sun Helping you save and plan for your future at every stage In this issue...

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1 my a glance Helping you save and plan for your future at every stage What s your risk personality behind the wheel? If you invest like you drive, you may want to hit the brakes If someone asks what s your risk personality as an investor, you may respond conservative or aggressive without much thought to your reply, or the pros and cons of your style. It can be helpful to think of your risk profile like your driving style. For example, are you a bold, aggressive motorist or an overly cautious slowpoke? You may find similarities between your driving and investment styles. You may also realize that it s time to rethink your habits, to improve your daily commute and your journey to retirement. This is a great exercise as you think about what to do differently in The aggressive, fast lane driver: Do you race to beat traffic lights, change lanes often and seek hidden short cuts? The corresponding aggressive investor likely opts for riskier investments, makes bold choices in hopes of quick rewards and possibly switches holdings frequently. This profile might get you to your destination faster or reap high returns. However, the chances of an accident, speeding ticket or poor performing investment are high. We may admire this investor for their confidence in taking calculated chances, but they could also benefit from taking their time and thinking more to reduce risk. In this issue... What s your risk personality behind the wheel? If you invest like you drive, you may want to hit the brakes my plan Perform a magic rebalancing act my money Keeping track of risks & rewards my life Are young investors too risk averse? The risk-avoiding, slow lane driver: Do you take your time on your commute, hug the slow lane and only choose familiar routes? The equivalent low-risk, cautious investor is someone who prefers guaranteed or fixed-income investment products, choosing safety over potential growth. This investor may earn a medal for not gambling with their savings. However, they may also deserve demerit points for not considering whether their conservative style keeps them from building a sufficient nest egg. They may need to think about their biases, whether their fears are rational, and if they need to change their habits. Perhaps they could diversify their portfolio with a few growth-oriented investments to grow their retirement plan faster. The steady, attentive driver: Are you an alert, careful driver who adjusts your speed based on road conditions? Do you shift thoughtfully into the passing lane, when it makes sense? This type of driver corresponds to the balanced investor who is informed about investment choices, balances growth and fixed income products and fine-tunes their portfolio occasionally. This investor may be rewarded with a good driver plaque for being informed of their investment options, receptive to growth opportunities, but careful to offset risks with a diversified investment mix. They are the type of driver who plans extra time to get to their destination, reacts intelligently to traffic reports, and gets to work on time. Life s brighter under the sun

2 [continued from page 1] my plan Look in the rear view mirror Take a good, hard look in the rear view mirror to identify what type of driver you are. Next, think about whether you have that same personality when investing. Do you make bold, speedy investment decisions in hopes of big investment returns or do you favour cautious, guaranteed investments and avoid risks? Of course, we are who we are and we can t change our style completely nor should we. However, it s good to assess our habits to see if they are the right approach. The timid investor might benefit from being a bit more growth-focused, as we discuss in the adjacent my life article. The aggressive investor could be more conservative, or at least rebalance their portfolio regularly, as we discuss in the my plan story. One last point: while it s fun to think of investing like driving a car, you should accurately pinpoint your actual risk tolerance profile with the tools available to Sun Life Financial plan members on mysunlife.ca. By completing the quick and easy Investment risk profiler, you ll get a clear assessment of your comfort level with risks. You ll also receive a recommended asset allocation, to help you choose the right mix of products for your retirement savings plan. By knowing your own risk personality as a motorist and an investor you can be confident in the driver s seat, whether travelling to the market or steering towards retirement. Perform a magic rebalancing act The New Year is a good time to take stock of our lives, including our workplace retirement savings plans. That s especially true for investors whose portfolio grew nicely over the past year, since it might be time to perform a rebalancing act on your investments. It s a magical way to build a healthy nest egg. What exactly is rebalancing? It complements the investing principle of don t keep all your eggs in one basket by spreading the risk among your investments. Rebalancing helps you stay diversified over the years and ensure that your eggs remain in different baskets. This is how it works: if you used the tools on mysunlife.ca, including the Investment risk profiler, you likely received a recommended asset allocation for your workplace savings plan, which tells you what percentage of your savings should be in each asset class. For example, it might recommend 50% Canadian equities, 40% fixed income and 10% cash. As a smart investor, you chose investments that matched that profile. But over time things likely changed. For instance, perhaps your Canadian equity fund rose in value over the past year to represent 75% of your portfolio. It s nice to see a fund increase in value, but that also throws off the carefully diversified portfolio designed to meet your retirement goal. If you think your portfolio might be off-balance, it s probably time to sell some of the fund(s) that exceed the recommended percentages. In the example above, you could sell some of your Canadian equity fund and move the proceeds to the other funds in your portfolio to restore balance. At this point you might wonder, Why would I sell an investment that is going up? While it might seem counter-intuitive, it s definitely a sound strategy to keep your savings plan aligned with your financial goals and your comfort level with risk. Coincidentally, rebalancing your portfolio helps you buy low and sell high, since you re selling investments that have risen and you re buying others that could rise next. Although it s impossible to time the market without a crystal ball, regular rebalancing perhaps at the same time each year helps you fine-tune your portfolio so it can continue to grow. Ready to perform your own magic rebalancing act? Just log in to mysunlife.ca and select the Accounts menu in my financial centre to view your investment accounts, statements and account balances. Select Investment mix charts to see your current Investment Mix Summary. This summary is a custom pie chart that illustrates how your assets are 2 Sun Life Financial

3 [continued from page 2] my money allocated by major asset class. Also, the summary provides you with a chart that breaks down by asset class the percentage of your total assets and an estimated dollar value by investment type. After reviewing this information, it s a good idea to use the Asset allocation tool to ensure your investment mix aligns with your risk profile. Once you ve re-established balance in your investment portfolio, you can tackle the magic act of balancing other parts of your life like relaxing on the couch after your work is done and the kids are tucked in bed. Keeping track of risks & rewards Life is full of risks including health, career and financial fears but, you can overcome many of these worries by staying informed to make the best decisions. This advice also applies to your workplace retirement savings plan, which you may sometimes feel is beyond your control, due to daily market gyrations or the challenge of saving enough. The New Year is the perfect moment to review your accounts and statements to see how things are going. While you might be tempted to file your my statements without opening them, it s better to review them regularly. You may be pleasantly surprised by the progress you re making, little by little, to your retirement goals. Or, at least you ll know where things stand and what you need to do that s knowledge that can calm your worries. At the same time, don t obsess over your accounts either. When investing for the long-term, we must expect our investments to fluctuate in value, so don t worry about daily changes. Instead, focus on your long-term path to retirement and carefully review your plan a couple times per year. What to review? Once you sign in to mysunlife.ca, you can choose the Accounts drop-down menu and view details like your account balances and transaction history. You can also select Statements to view or download your my statements. Here are a few key things to note: How my plan s value changed this period: This shows how your plan changed in value for a specific time period, including investment gains or losses. Personal rates of return for my plan: This shows the net returns for your investments for your plan over various time periods, including three months, the year-to-date, and one to five years. My plan profile: Check to ensure your beneficiary information is current and review the accuracy of your recent transaction history. My investments/how ongoing contributions are invested: See which funds you hold and how your regular contributions are allocated. my work 3

4 [continued from page 3] my life My financial future: This section helps answer the question Will I have enough to retire? It measures your progress against your desired monthly income in retirement. It shows your estimated monthly income after you retire, based on your current savings, plus benefits you ll receive from the Canada/Quebec Pension Plan. It may also suggest ways to accelerate your progress, like saving more or changing your investment mix. Once you ve seen the facts, you may want to make changes to your plans, such as increasing your automatic monthly contribution or double-checking your risk tolerance to find the right asset allocation for you. On mysunlife.ca, you ll find the my money tools, including my retirement plan and Retirement planner, to learn more, make the best decisions, and discover ways to beat the risks and worries of saving for retirement. Are young investors too risk averse? We often picture young people as daredevil risk takers, seeking excitement over safety. But, that s not always true, since many younger investors today behave very cautiously. While your grandmother may endorse that investing style, it might be too conservative to reach your distant retirement dreams. Where did the thrill seekers go? Why is it that many young people love fast cars, roller coasters and caffeine-fuelled social lives and yet, they are nervous, risk-wary investors? Perhaps this is a logical response to the global financial crisis they witnessed six years ago, when stocks plunged and a recession darkened the job market. It s natural to be careful with your cash when you lack job security or carry a ton of debt. As well, Generation Y has a healthy degree of skepticism to financial markets, corporate corruption and marketing hype about investing. While it s good to have your eyes open, the downside is that many younger savers are choosing highly conservative investment products, like savings accounts, guaranteed investment certificates and fixed income funds. These products barely earn more than the rate of inflation. That may work for your grandparents who are just trying to preserve their existing savings, but it won t get you far if you re aiming for long-term goals like retirement. A better approach So, what should you do if you realize you need to grow your savings but don t want to invest like one of those professional poker players on late night TV? Remind yourself that you are saving for the long-term goal of retirement. You don t need the cash in the immediate future (create a small emergency fund or high interest savings account for near-term objectives). By recognizing that your time horizon is far off, you can choose investments that will grow and compound over many years. There will be market ups and downs, but they won t impact you over the long run. Next, develop an investment strategy, so you ll have specific goals to aim for, and you ll be prepared to take appropriate risk to meet those targets. The interactive resources on mysunlife.ca, including the Retirement planner and Investment risk profiler, will help you make smart choices, likely based on a diversified portfolio that balances risks and opportunities. 4 Sun Life Financial

5 [continued from page 4] If you re still skittish about risk, channel that instinct into other parts of your life. Pay down your debts, set a household budget and avoid impulsive spending. But, don t remove all risk from your investment portfolio when you ve got another 20 or 30 working years before you need the funds. Finally, if you currently invest conservatively because you don t feel you understand the markets, dedicate a little time to get informed. Don t just tune out the investment world educate yourself about investments, read money advice blogs, and keep up with financial news. With these tips, a younger investor can find the right investment mix to save for retirement without assuming excess risk. Your grandmother will be proud of your sensible approach, even though you may not share her preference for low interest savings bonds. i If you have a general question or suggestion about this newsletter, please send an to grsmarcom@sunlife.com or write to my work Newsletter, Group Retirement Services Marketing, Sun Life Financial, 225 King Street West, Toronto, ON M5V 3C5. This bulletin has been created exclusively for you. It addresses issues to help you with your financial planning and investments, and cannot be reproduced in whole or in part without the express permission of Sun Life Financial. my work 5