Investing: What to know before you start

 Investing: What to know before you start

 
The world of investing can often seem daunting when starting out in this business. Here are some things to think about, alone or with your advisor, in order to get started with confidence.

Set your investment goals

Choosing a goal is essential because it will guide your entire investment strategy. You will be able to establish the required amount as well as the timeline to achieve this goal. Whether it's a short-term trip or buying a longer-term property, you need to consider all aspects of your current situation: age, marital status, salary, financial commitments, etc. Indeed, it is by considering all the factors that can influence your financial situation that you will be able to achieve realistic goals.
Define your investment horizon

Over what period of time will you need to invest your money to reach your goal? Obviously, buying a car and retiring will not require the same investment strategies. Once the investment horizon is well defined, you will be able to choose the appropriate types of investments. For short-term goals, it is better to focus on less volatile investments. For longer-term goals, the choice of investment widens and the possibility of return increases as well. However, you will need to stay focused on your horizon and not give in to worry or panic in the event of negative fluctuations: this will help you achieve your goals.
Know your risk tolerance

Risk tolerance is the extent to which you are prepared to take risks and manage fluctuations in the amount you have invested. Some securities, such as stocks, can be volatile and therefore experience highs and lows, which could affect the returns of your portfolio. Some people have a low tolerance for risk and therefore prefer more stability, although this can lead to moderate returns. To help you define your tolerance for risk, the Government of Canada recommends that you ask yourself the following questions [Note 1]:
When will you need the money?
Do you have enough money set aside for emergencies and to pay off your debts?
Do you have a stable job?
Can you tolerate investments whose returns are unpredictable or change in value quickly?
How would you react if your investments lost value?
Your risk tolerance combined with your investment objectives and time horizon will determine your investor profile and guide you towards the investment choices that are appropriate for you.

There are a number of resources available to begin to familiarize yourself with investing. The Government of Canada has also set up a website devoted to the subject and its jargon External link. Opens in a new window. Finally, if you have any doubts or concerns, don't hesitate to ask your advisor any questions, they are there for you.

Other articles that may interest you:

Three tips for diversifying your investments
What to do with an unexpected payoff
Three pillars to reduce your financial stress
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