Glen Korstrom
Northern News Services

INUVIK (Feb 12/99) - Though many residents are betting that much of their retirement income will come from hitting the jackpot in a major lottery or through a prolonged good-luck streak at the bingo hall, professional money managers have a different strategy.

"People don't really need to have a whole lot of money to start investing," says CIBC manager and mutual fund representative Terry Fisher.

"You can start off with as little as $25 per month."

And for those who are keen to transfer gambling money into a more formalized plan, the key word Fisher uses is "balance."

For starters, tax-deferred retirement savings plans (RSPs) are popular investments near tax time, and any RSPs bought before the end of February can be applied to the buyer's 1998 tax return.

That is why this is a good time to think about RSPs.

Any contributions made to an RSP count as a deduction on a person's tax return, so it lowers their taxable income and the amount of tax they have to pay.

The tax is eventually paid when the RSP is cashed, but by then, the person is likely retired and paying a lower rate of tax.

When it comes to other investments, Fisher suggests mutual funds for longer-term investors while those who are closer to retirement may benefit from guaranteed investment certificates which lock money into an account for anywhere from two months to five years.

This is because she believes mutual funds will outperform GICs in the long term but not necessarily in the short term.

"That's really for the conservative investor," she says of GICs with interest rates from about three to four-and-a-half per cent.

"This way they know what their return is and what they're going to receive at the end."

She divides less predictable mutual funds into three components within which to obtain a balance: savings group, income group and growth group.

"More and more people are going into mutual funds because the potential for return is so much higher," she says.

The growth group is essentially stocks or "equities" while the income group could include long-term GICs of one year or longer, mortgage funds, Canada savings bonds or global bonds.

The savings group is not a savings account as such, but rather short-term GICs of less than one year, treasury bill funds or money market funds.

"For someone who is 25 years old and wants to retire at 65, then the biggest portion would be in equity because over the long term equity tends to outperform any other investment," Fisher says.

"But when we're discussing different options, we find some young people who are very risk-averse and just want something very, very safe so just go with it."

Fisher says many customers know little about investing so "it's a big education process and basically we try to build a balanced portfolio for them, but every individual is different so every individual is going to have a slightly different plan."

For those tempted by mutual-fund hype but skittish about losing it all, one of the hottest marketing promotions in mutual funds this year is guaranteed funds which are sold as protected funds.

The promise of these funds is that no matter what happens during the next decade, investors who throw in their savings will, at least, get their initial investment back.

But, with less risk comes more built-in fees.

Every fund has built-in fees to cover its management and expenses, reported to investors in the form of a management expense ratio and subtracted from the fund before its performance is calculated.

This way a fund earning a 12-per cent gain, with fees of, for example, two per cent, would be reported as being up 10 per cent.

And the chance of eroding an initial investment in a mutual fund covering the bases around the stock market after waiting it out 10 years has been estimated at a slim two per cent by those who study the market.