Submitted by nsscadmin on
As we’ve mentioned in several of our blog posts, the Nova Scotia Securities Commission does not provide investment advice. That means we can’t answer questions that ask, “should I choose investment A or investment B?” or make recommendations on investments or investment strategy. What we can do is provide investors with information and knowledge to help them make informed and safe investment decisions. This post will attempt to help investors that are just getting started, to get off on the right foot.
If you’re ready to take the leap and get started in investing, there’s no cookie cutter, one-size fits all investment plan for everyone. There’s also no 100 percent guarantee that every investment you make will be successful. However, there are steps you can take before starting your investing journey that will help you invest wisely and safely.
Here are five questions to ask yourself, and to answer truthfully to help you get started:
- What are your investing goals?
Before you get started with investing it’s helpful to know where you want to go. This includes looking at your short-term and long-term investing goals. A short-term investing goal might be a down payment for a new car or saving for vacation. Your long-term investment goals could include saving for post-secondary education, a house, or your retirement. Make sure you know what you’re investing for before you start investing.
- What is your investment time horizon?
How old you are when you begin investing can greatly affect how you should invest. For example, if I begin to invest for retirement at 25 years of age, how I invest will probably be different than if I start investing for retirement at 50 years of age. When are you going to need the money you’re investing? If you need it in five years your risk level and investments will differ than if you need it in 35 years.
- How much do you have to invest now, and how much could you have in the future?
What is your current investment cash flow? In other words, how much can you afford to invest without it affecting your day-to-day living expenses and finances? How might this change over time? If you’re just starting out and beginning your career, your income will likely rise in the future. Just because your income will likely rise doesn’t mean you will necessarily have more to invest. Your income isn’t the only thing that changes as you get older. Your expenses will also change. If you have children, buy a house, or move to a different city, it can drastically affect your expenses. Think about how your investing cash flow may change over time and how it could affect how much you can reasonably invest now and in the future.
- Are you a DIY investor or will you need help?
Thanks to online investing platforms and smart phones, DIY investing is becoming more popular. However, that doesn’t mean it’s for everyone. How much do you know about investing? Do you know what you should invest in for short-term and long-term goals? How much time do you have to devote to managing your investments? Many investors get help from an adviser because they either lack the knowledge, time, or interest to manage their own investments. Don’t bite off more than you can chew when investing and get help if you think you’ll need it.
- What is your risk tolerance and how much can you afford to lose?
At the Commission we often tell investors, “Don’t invest more than you can afford to lose.” All investments have risk, and you could lose some, or potentially all of your money when investing. Determine what your risk tolerance is and stick to it. Don’t take on more risk than you can comfortably carry both financially and mentally.
One of the best things you can do when getting started with investing is educate yourself about investing and continue to educate yourself. Learn as much as you can about what you’re investing in and keep a close eye on your money. If you’re a DIY investor know what your money is doing. If you work with an adviser, read your statements and ask questions. Being an informed investor and educating yourself is the best way to stay on track to reach your financial goals and protect your investments.