10 Tips that every new investor needs to know

What you’ll learn:

• What you should know before you start investing
• How to invest in your comfort zone
• How to handle trendy investing fads

It’s always a good idea to be mindful and informed about your investing decisions, especially if you’re new to the markets. After all, the most efficient course of action will always differ based on your goals and the current state of the market, so it’s a good idea to do your homework.

While there’s no one-size-fits-all strategy, these 10 tips can help you to get started on the right foot.

1. Remember why you’re investing

Everyone has their own goals that they want to achieve. Your goals can also have a major impact on how you invest. For example, if you’re saving for an engagement ring, your timeline and target date will both be much different than if you’re saving for retirement.

When you’re investing, it can be very helpful to make sure that you have SMART goals that you are working towards, and a strategy that will accommodate those goals.

2. Choose an account that suits your goals

There are a number of different types of accounts that can help you to reach your goals, each with its own advantages:

• A Tax-Free Savings Account (TFSA) has a contribution limit that grows every year, and allows you to invest without having to pay taxes on your gains.
• A Registered Retirement Savings Plan (RRSP) account is tax-deferred, meaning that you can claim contributions on your taxes when you contribute, but you’ll pay taxes on funds you take out (ideally when you’re retired and your tax rate is lower).
• A First Home Savings Account (FHSA) allows qualifying first-time home buyers to combine the power of both RRSP and TFSA, where your contributions are tax deductible and any qualifying withdrawals from the account are tax-free.
• The profits in margin accounts are taxed, but there’s no contribution limit, and you are able to borrow money to invest more if you wish.

3. Understand risk and your tolerance of it

Investment always involves a certain amount of risk. Stocks are constantly fluctuating as people buy and sell at different prices. Even investment products considered to be lowest-risk carry a slight possibility of loss, so a major part of investing is understanding your own risk tolerance.

Risk tolerance has a lot to do with how you would react to seeing short-term losses. If seeing any red in your portfolio would cause you to panic-sell, then you may want to consider lower-risk investment types or a pre-built Questwealth portfolio.

4. Have a strategy

Self-directed investing is about more than just choosing one ticker symbol. When you invest, it’s always a good idea to stick to a strategy that suits your goals, needs, and risk tolerance.

A good strategy will apply everything you know about investing, and possibly adjust to accommodate any new lessons or considerations you pick up along the way.

5. Learn how to use the platform

The Questrade trading platforms are loaded with tools to help you to make informed investing decisions, from charts to data to news feeds and more.

You can find more in-depth platform walkthroughs in the Platform Tutorials section of the Learning Center.

6. Diversify your investment portfolio

Diversification is an essential part of most investment strategies. How diversified your portfolio is, or what exactly you’re diversifying across, will depend on your own investment strategy. Just keep in mind that there’s a reason we’re all familiar with the phrase “Don’t put all your eggs in one basket”.

Your diversity strategy can also include your asset allocation, meaning how your portfolio is diversified among asset types (such as stocks and bonds).

7. Keep your investments balanced

Not all investments grow at the same rate. If some of your investments see a period of unusual growth, their value may come to take up a greater percentage of your portfolio value than you’d like. This is a great problem to have but it may throw off your entire portfolio’s asset allocation.

To keep your strategy on track, you may want to go in and periodically rebalance your portfolio, by selling some shares that have grown out of proportion or purchasing some of the other shares to restore your allocations accordingly.

If you’re interested in keeping your portfolio balanced, you may want to consider Passiv, the investing tool that monitors your portfolio and warns you when it becomes unbalanced. Plus, as a Questrade customer, you get a free Passiv Elite membership, which lets you automate the rebalancing process.

8. Get your taxes in order before tax time

Tax time can get quite busy, especially if your investments have tax implications (like RRSP contributions or trades that occured in a margin account). To avoid any last-minute mistakes, it can be beneficial to make sure that you keep your tax strategy in mind when you’re making your day-to-day investment decisions. That way, when the tax deadline rears its head, you’ve already got all your ducks in a row.

9. Take investing fads with a grain of salt

The news loves to talk about investing fads that have made a handful of investors rich. The problem is, these fads often don’t see the headlines until the gimmick has run its course.

While some fads may pay off for early-adopters, it’s important to understand that investing isn’t meant to be a get-rich-quick scheme. If a fad seems tempting, make sure you do your research into what has made the strategy profitable, understand what caused the gains, and make an informed, educated investing decision.

10. Become a student of investing

It may seem redundant to say that you should know what you’re doing, but there’s always something new to learn with investing, so it can be difficult to gauge when you’re ready to start buying stocks.

As a rule of thumb, it’s best to make sure that you make sure that your investment decisions are as informed as possible. Always do your homework and make sure that you’re comfortable with the reasons behind the choices you’re making.

Also remember that there’s always more that you can learn to make yourself a more well-rounded, better-educated investor. After all, even the most seasoned investors are constantly researching and learning new things.

If you want to invest in the markets but aren’t yet confident enough to pick your own stocks, you can also consider starting with Questwealth Portfolios, which are pre-built portfolios managed by experts, and easing into self-directed investing when you’re ready.

There’s no single surefire way to invest, but these 10 tips can help make sure that your investment decisions are well-informed, helping you to make the most of your money.

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