October is Investor Education Month
(image courtesy of news.com.au)
Do you want to invest but have no clue where to start? Have you ever wondered how to invest like the pros? Are you considering doing your own investing or do you want to use an advisor? Taking the time to learn the basics of investing will be worth the effort. After all, having worked so hard for your money, your money should work for you.
In a recent interview, Allan Small, a financial advisor with HollisWealth, listed five valuable investment tips for beginning investors:
Start now. You’re never too young to start putting away a small amount monthly after you get your first job and once you do your budget and figure out, "Hey, I can afford $25 a month to put away into an investment". The longer you invest for, the more money you’re going to make. You’re going to have your ups and downs; but if you invest from (the ages) 23 to 33 versus someone who starts at 33 and invests until they’re 53, the person who starts at an earlier age because of compounding rates of return will end up with more money.
Speak to someone who has the knowledge. Find out your options. Speak to an investment advisor at your bank for example, about whether you should open up a tax-free savings account (TFSA) or invest in your registered retirement savings plan (RRSP). Once you understand all the different types of accounts, the pros and cons, then you’re more educated to make those decisions.
Start with the familiar. An easy way to get into the stock market is by buying things that you’re familiar with and know. If you drink a beloved green tea latte everyday, buy Starbucks shares. But you have to separate that from more serious investing. If you are in your early 30s, you’re looking to perhaps buy a house…you want to invest more for the long-term when you’re investing with a certain goal in mind.
Diversify. Mutual funds and exchange-traded funds tend to be good products for young individuals who don’t have enough assets to create their own diversified portfolio. The best way to describe mutual funds is it’s a basket of investments. Everybody puts any amount of money they want into this basket. The average mutual fund basket might have $500-million or $1-billion. There’s this mutual fund manager whose job is to decide where to invest this basket of money.
DIY. Your bank may have a discount brokers division. Open up your own account and trade shares yourself. However, if you go through a discount broker, no one will tell you what to buy, when to buy or when to sell. You’ll have to do your own research.
There are also a number of online resources you can use to learn about investing. The Ontario Securities Commission (OSC) has, in time for Investor Education Month, launched InvestingIntroduction.ca, a new website that provides resources for investors in 19 language and provides introductory information on Canadian investment products and terminology, warning signs of fraud, the role of the OSC and a link to GetSmarterAboutMoney.ca, the OSC's investor education site.
Toronto Public Library offers a number of ways that you can become a savvy investor: attend one of the many programs offered at various libraries in the city, take a video tutorial through lynda.com or borrow one of the following books to help you get started on making your money work for you: