Making Good Decisions

I’m putting this column together on the day after Canada just beat Russia to advance to the gold medal game of the World Junior Hockey Championships. It was an amazing game.

Many of you will remember this game. It’s the one where Russia scored with less than 3 minutes left in regulation time to take a 5-4 lead in a game where the winner gets a chance to compete for junior hockey supremacy, while the loser can finish no higher than third. It’s been a see-saw battle all game long, and this late goal finally puts Russia in the driver’s seat to seal the deal.

Canada has pulled the goalie for the extra attacker, and is pressing, but the Russian defenders are up to the task. Then, with only about 40 seconds left in the contest, a Russian player gets possession of the puck with a bit of open ice ahead of him and Canada’s net empty. This should be the final nail in Team Canada’s coffin.

Now, every hockey coach in the world tells every hockey player in the world, don’t ice the puck with an empty net. But that’s exactly what the Russian player did. With the game on his stick, he took a shot at the open net from his own end, and he missed. The resulting icing call not only brings the puck all the way back into the Russian end, but also stops the clock, allowing Canada to reset its attack.

And then, with just 5 seconds left in the game, Canada scores the game-tying goal! After a tense sudden-death overtime, Canada wins the game in a shoot-out! It’s Canada – not Russia – that will be playing for the gold medal!

But let’s look for a moment at that Russian player who iced the puck, costing his team their chance for glory? What was he thinking when he took that shot at the empty net from inside his own blue line instead of skating the puck up ice?

Was this Russian player caught up in the emotions of the moment? In all likelihood, he sure was. Here he had a golden opportunity to be the hero in a tight game. The temptation was just too much, and he took the shot.

Now, the smart thing to do would have been to lug the puck out of his own end, all the while killing precious seconds of the remaining time left on the clock, and get the puck deep in Canada’s end, far from danger. If there was a shot at goal to be had, he should have waited until he was in a position where he didn’t risk an icing call if he had missed the net. Every armchair hockey strategist that watched the game knew that Canada dodged a bullet when that puck slid past the unguarded net, and the linesman’s whistle blew to bring the puck back into the Russian end.

And that’s what this column is all about. The difference between an impulsive decision and a smart decision.

2008 was a rotten year for most investors. Real estate, pension plans, mutual funds – just about everything took a beating over the last year, and there will be more than a few people whose net worth on January 1, 2009 will be less than it was on January 1, 2008.

It’s not an easy thing to do to keep your composure during times like this. When you find yourself reaching for your investment statement with one hand and the antacid tablets with the other, it’s tough to keep a level head.

I make very few predictions, but here’s an easy one for me to make. In the next few weeks there will be thousands of Canadians who should put money into an RRSP before the March 2 deadline, and they won’t do it because of what happened to their investments in 2008. But that’s like icing the puck when you are up by a goal with 40 seconds left in the game. It’s likely to be an impulsive decision, not a smart one.

Some people are scared about putting some money to work because they look at their investment statements and see the carnage from 2008. These people are forgetting something, though. Your investment statement only tells you what has already happened. It can’t tell you what’s going to happen next, and the events of 2008 are not likely to be duplicated in 2009.

So what is going to happen next? Obviously nobody can predict the future with certainty, but personally I’m thinking that 2009 is going to be a pretty solid year. If we look at times of historical turbulence in the financial markets the severe declines, such as what we saw in 2008, are usually followed by impressive recoveries. In other words, when things turn around from pessimism to optimism, they tend to turn fast and they tend to come back big. Will the markets recover in 2009? I don’t know for sure – markets are significantly harder to predict than human behaviour. Regardless, I’d say that the odds of a recovery in 2009 are pretty good. And I’m not the only one saying that.

The point is, if you should be getting some more money into your RRSP before the March 2 deadline, then do it. Don’t be impulsive. Make the smart play. Keep your perspective through the downturn and get yourself positioned for when things inevitably turn around.

This article was posted in All Columns, Money Management.
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