What to think about before you start investing

Has investing been on your mind? It makes sense if it has. In market conditions that feel like they’re changing non-stop, it’s natural to crave security for the future. 

There’s a good chance you’ve heard success stories about how investing is a foolproof way to grow your wealth. While investing can be a powerful tool in your financial journey, just like many things in life, having a plan will work much better than going in without one. 

What to consider before you start investing

Whether you want to have a reliable retirement fund, build your wealth, save for a dream home, or keep up with inflation, you will want to put thought into several parts of your investment plan before making it a reality. 

Here is what to do before you start investing to help you make educated investment decisions.

Identify your financial goals

The first part in any great plan is to identify the goals you’re trying to reach. It could be as detailed as your dream trip in retirement, or as high-level as just keeping your savings ahead of inflation. But in either case, you will have an endpoint in mind to steer your investments. 

Giving more thought to the timeline of your financial goals is important because knowing how long you plan to invest impacts what type of account you get to invest with. Choosing a registered plan can have its benefits, but also its drawbacks, depending on when you want to take that money out and what the plan allows.

For example, if you have short-term investing goals investing in a TFSA may make more sense if you want to cash your investments out tax-free after 5 years. But for a longer-term investment, an RRSP might be a better choice if you want to access that money after retirement as a Registered Retirement Income Fund (RRIF).  

Understand risk tolerance

Understanding your risk tolerance is key to making informed investment decisions. The best investment for you will be an investment you feel confident and comfortable in making. 

There are three levels to risk tolerance: conservative, moderate, and aggressive

Some investors are more comfortable with market volatility, while others like to stay well within their means, and some are right in the middle of the road. There is no right or wrong risk tolerance, but there are investments that fit better depending on whether you are a more conservative, or aggressive, investor.

Set an investment budget

A key part of any financial strategy is finding the perfect balance of saving enough while having enough for everything else. 

Give some thought to your income, budget, and the pace you want to keep. It could be every payday, on the last day of the month, or maybe a lump sum payment at the end of the year—as long as it’s a pace you can sustain. 

You don’t have to invest big numbers into your funds to see them grow. Even small, but frequent, investments can amount to great returns—every little bit helps.

You don’t necessarily have to invest the same amount in each fund, either. In fact, having a unique plan for each fund will mean you’re getting the most from your investment. You can make investing automatic using pre-authorized contributions (PACs). If you have plans to make more than one investment, set up multiple PACs to go to multiple accounts, like your high-interest savings account or to your mutual funds.

Choose investments funds

Think about what types of funds you want to invest in. You get to be in the driver’s seat; you can choose funds that align with your values and help make a difference with your money.

Take time to consider all sorts of investments, and don’t put all your eggs in one basket. If you only invest in one stock, the return will be fantastic if that stock performs well. But there is always a possibility that it may not.; 

A great way to avoid this is to diversify your portfolio, which means spreading your wealth across different investments—like stocks, bonds, ETFs, index funds, and so on. When you diversify your portfolio, you help protect it from market volatility.

The next step in your investment journey

Now, it’s time to talk to a financial expert. If you have never invested before, you probably have a lot more questions about how to get started—and who better to ask than your advisor? 

They know your current situation and where you want to be in the long run, so they make for a great teammate to have while you embark on this journey. With their help, you can work together to build out an investment plan that considers your risk tolerance, budget, and timelines.

Let’s talk about your investment plan—Book an appointment with an advisor today to get started.

Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments.  Please read the prospectus before investing.  Unless otherwise stated, mutual funds, other securities and cash balances are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer that insures deposits in credit unions. Mutual funds and other securities are not guaranteed, their values change frequently and past performance may not be repeated.