I started investing on my own a year ago. Before that, I had my funds invested in a too conservative portfolio for me, with a financial institution paying a 2% portfolio management fee. This experience led me to do some research and was the catalyst for me to start investing independently. This post is for anyone new to investing or thinking about investing on your own.
I wanted to share what I’ve learned this past year; I am not a financial planner, and you should always do your research. It is also important to note that if you aren’t comfortable with the markets’ volatility, then perhaps investing on your own isn’t for you, and it would possibly give you peace of mind to have someone else do it for you.
With that, here are five things to consider before investing independently.
5 Things to Consider Before Investing Independently
1. Ask yourself, What Kind of Investor are you?
It would be best if you answered this question before you commit your money.
Consider your investment goals, how much risk you are willing to take on and your time horizon.
2. What is your Time Horizon?
This ties into the first point—short term investments, which are meant to be sold within a year. Long-term investments are assets you plan to hold for longer than a year. With long-term investments, there is an opportunity to take on more risk for higher rewards. The benefit of having stocks for the long term is that they almost always outperform the market.
There is also the opportunity to ride out the highs and lows. Past results do not indicate future returns; it suggests that long-term investing generally yields positive results with enough time.
For instance, my RRSPs are in the market, and I have no intention of selling for a long time, over 20 years. With my time horizon being reasonably long, it allows me to take on more risk.
3. What Are Your Preconceived Notions of Investing
The word investing can mean many things to different people.
Some people may interpret it as a get quick rich scheme. Some may think of it as a form of gambling, which it can be. Or that it’s only for a specific demographic, such as your parents.
As a reader, understand that it is a long term game. And yes, I get that it’s not a game, it’s your money.
4. Are you Financially Healthy?
You do not need a lot of money to get started with investing.
However, if you are holding a balance on your credit card with high interest, it would be advisable to pay that off first.
5. If Your Portfolio Went Down by 20%, How Would You React?
For example, when COVID struck, I lost 20% of my holdings in a couple of weeks, which was very stressful. However, I knew what my long term goals were and didn’t panic sell. Fortunately, the market has since then recovered and recently hit new all-time highs. Ask yourself, do you have the resilience to ride out the highs and the lows?
I believe everyone can achieve their financial goals, and I hope this post helps you out if you are thinking about investing on your own.
Thanks for reading,
Michelle
