Top 10 Investment Tips

1. Don't try to time the market.
2. Keep tax consequences in mind.
3. Set up a regular contribution plan.
4. Start saving as early as possible for children's post-secondary education.
5. Consider your whole family in your investing and financial planning.
6. Make sure you have a will and keep it up to date.
7. Set life goals for investing, know your objectives and risk tolerance.
8. Avoid overreacting to the recent short-term behaviour of your investments.
9. Select the right investment advisor.
10. Invest globally.
    

• Don't try to time the market by jumping in when you think it's going to go up, and out when you think it's going to go down. The odds for success are low, even for the experts. People tend to have the most confidence to buy at market highs, and the strongest tendency to sell at the lows. By the time they feel comfortable buying back in, the market is well on its way up again and they've missed much of the gains. Decide how much of your savings you feel comfortable investing in stocks or stock funds, then make a commitment.
• Keep tax consequences in mind. For example, interest from bonds or GICs is fully taxable as income, while only one-half of capital gains on stocks are taxable. Dividends are also taxed less than interest, making preferred shares a good alternative. If you hold both interest bearing securities and stocks, you may want to consider holding a good part of your interest-bearing securities in your RRSP, where taxes are deferred.
• Set up a regular contribution plan. If you find it hard to come up with your RRSP contribution at deadline time, make regular monthly contributions, automatically deducted from your bank account. This is known as "paying yourself first." Money that you never see is much harder to spend, and you get used to living without it. This avoids having to come up with a lump sum, especially in February when Christmas bills are coming in.
• Start saving as early as possible for children's post-secondary education. Compound growth can make a huge difference over time. If you invested $10,000 at your child's birth and never added another cent, with an average 10% annual compounded return it would grow during 18 years to more than cover the estimated $70,000 cost of a four-year post-secondary degree.
• Consider your whole family in your investing and financial planning, taking into account such issues as the financial situation of your parents, any assistance you may want to give your children for various life events – including post-secondary education, weddings or home-buying – and estate planning concerns. Saving and wealth issues usually cross intergenerational lines, so don't plan in isolation. Talking about money can be awkward, but it can help everyone.
• Make sure you have a will and keep it up to date. Why should your assets go anywhere except where you want them to when you are no longer around to have a say?
  Set life goals for investing, know your objectives and risk tolerance. Before deciding if a particular type of investment is right for you, consider whether you will need the money in the short, medium or long term. Also consider whether you are looking for income, or for growth. Equity investments can fluctuate in the short-term, although they offer the best long-term returns.
• Avoid overreacting to the recent short-term behavior of your investments. It usually results in selling last year's loser after it's had most of its losses, and buying this year's winner after it's had most of its run, or vice versa. Choose your investments wisely to begin with, and weather the ups and downs. Investors who sell during temporary periods of underperformance miss out on subsequent recoveries and long-term gains.
• Select the right investment advisor. Managing your investments and your financial plan is more complex than ever. With so many products to choose from and so many important decisions to make, even seasoned investors find the task difficult and time consuming. A competent, experienced advisor will ease your burden and help you reach your long-term financial objectives.
• Invest globally. The Canadian market represents only a fraction of global markets, so if you’re limiting your investments to Canada, you are missing out on a world of opportunity. Investing globally provides your portfolio with the advantage of geographic and sector diversification to help you reduce risk and increase long-term returns. Invest in the best companies, wherever they may be.
  For more information, please call 1.800.874.6275.

Sphere: Related Content