Smart Investing – Principles

Effective investing involves making choices that meet your unique needs today and your financial goals for the future. Your personal conditions will affect your decisions. Be it you  save for a home, retirement, or your child’s education, you want a plan that will help your money grow. Below are some investing principles you can adopt.

• Understand yourself. All  have different investing goals and different time periods to achieve them. There are short-term like saving for a vacation, while others are long-term, like retirement. Also every investor has a different comfort level with investment risk. Identify a balance between risk and reward that you’re comfortable with which suits  your investment time frame (e.g Short Term, Medium Term or Long Term) is an important  step to be  successful in investing.

To better understand yourself as an investor think your; Acceptable risk level, investment information, investment objectives, gross annual income, level of return you expect and investment time period.

• Have an early start. Take benefit of  “compounding” which is best way to make your money work for you. Compounding is money multiplying itself by earning a return on the return.  By early start you can achieve a grater return by way of compounding.  

 • Frequent Investment. It is easy to invest on a monthly or weekly basis than to make a large, lump-sum contribution. Enrol to a regular investment plan which allows you to choose when and how often you make contributions – By which make investing a priority. Most of the banks offer Investment plans where money is automatically withdrawn from your account and invested in a investment solution.

• Form a diversified portfolio. Diversify your assets across a wide range of investments. This is an effective way to reduce risk and increase potential returns over the long term. Having a mixture of different types of investments will help protect your portfolio from downturns, as the value of some investments may go up while the value of others may go down. Meaning of ‘asset allocation’ – Mix of investments within your portfolio known as your portfolio’s asset allocation. A diversified portfolio typically holds a combination of savings, income and growth investments.

• Have an eye on your portfolio. Re-visit your portfolio at least once a year to ensure that it continues to meet your needs.

• Arrange your investments with your time horizons. Type of investments depend on whether you’re saving for long-term or short-term goals. For long-term goals, you may want to consider long-term, growth-oriented investments. For short-term goals call for investments that are more conservative, and more accessible  

Short-term   goals Long-term   goals
What are they? These are less   than 5 years away, for which you’ll need a significant amount of money. For   example:

  • Vacation       
  • House down payment
  • New roof
  • Planned expenses
That are 5 or   more years away. For example:

  • Extended travel
  • Cottage       
  • Children’s  post-secondary education
  • Retirement
What to invest in: To save for the short term, consider   investments that are more conservative in nature and more easily accessible. To save for the long term.