How to Supercharge Your RRSP Fund as a Recession Looms

The recent bout of volatility shouldn’t derail your Registered Retirement Savings Plan (RRSP) fund if you have a long-term mindset. Remember, as an investor you sign up for the good days and the bad days. The 2022 bear market will not last forever. Chances are it will serve as a great entry point into the larger scheme of things. Well, that doesn’t mean you’re going to hit bottom.

This is practically impossible for anyone who cannot see into the future. With a dollar cost averaging (DCA) approach and a disciplined mindset, you can get a pretty good cost base on the way down. Heck, it might even be near bottom as you keep lowering your average price paid with every bigger leg in the markets.

Your RRSP is for retirement (or home purchase). So if you’re a young investor with many years or decades to invest, don’t let days like Tuesday get you down. For long-term oriented investors, such days are actually desired to get more of what you love at cheaper prices.

In fact, money managers who must report consistent earnings year after year will fear such big down days. But for RRSP investors, you should treat it like any big commodity sale. If you see something you like, pick up a few stocks. If not, there’s no harm in doing absolutely nothing while you wait for the storm to calm down.

How to increase your RRSP: Buy while others are selling!

To boost your RRSP, however, you should at least consider nibbling on quality blue-chip stocks that Mr. Market could potentially be dead wrong. You see, when panic and fear reign supreme in the Bay and on Wall Street, good commodities sometimes get unfairly dragged down.

What about the positive developments that triggered a rally the week before? These are too quickly forgotten by anxious investors. So, if you have the temper, buying sharp decline days can boost your RRSP’s long-term returns. But you have to be willing to endure a bit of pain and deal with the discomfort that comes with hitting the buy button when so many others are selling around you. It’s not easy being contrarian, especially when the markets are in free fall. That means it can be hugely rewarding.

At this point I’m a fan of NFI (TSX:NFI) on the brink.

NFI

NFI is a bus maker that’s under tremendous pressure, down 53% over the past year and down about 77% from its all-time high in 2018. It was a difficult strain for the company as orders were quite subdued. As a cyclical company, NFI will inevitably face continued selling pressure once the recession hits. With a boatload of debt ($950 million in net debt for a $1.07 billion company) weighing on its balance sheet, NFI is in a difficult position as interest rates rise and orders plummet.

In fact, things are looking bleak for the company. However, over the longer term, I think NFI will see better days as orders pick up and communities look to electrify their fleets. NFI is a stealth way to play the electric bus boom. Before it can boom again, problems in the supply chain must be fixed and the company must weather a year of recession.

In any case, the stock is only trading at 1.1 times book, making it a deep value play on the TSX. There’s a 1.53% dividend yield that I think management should cut if it sees through to 2023.