Where to start when you want to manage your investments on your own? We explain to you.
Newbie investors have many free resources online to learn more and make their investments. Just be methodical.
Any seasoned investor will tell you that the financial markets are above all a matter of emotions for investors. You have to get to know them and manage them properly.
You must first establish your investor profile. What do you want to accomplish with your investments: become a millionaire at 30, buy a house or travel the world in retirement?
You must also establish your level of risk tolerance: are you the type to take refuge under your bed when the markets take a hit or, on the contrary, to buy new shares when things are bad on the stock market? Are you looking for the next Facebook or do you like well-established companies that deliver unadorned but steady returns?
Because many investors succumb to the “herd effect”: they buy and sell when the multitude does the same. However, success often comes when you do the opposite!
We must therefore not let ourselves be influenced by media noise or social networks. We set clear savings goals and let time play in our favour. Because the younger you are, the more you achieve good long-term returns thanks to the magic of compound interest.
Basic tools
The next step is to set up an automatic weekly or payroll transfer to your TFSA or RRSP account (or both, if possible).
Even small amounts can make you rich: saving $50 a week for 20 years will generate a war chest of $89,335.53 (with an anticipated annual return of 5%). An 18-year-old who contributes the annual maximum allowed ($6,000, or $115.38 per week) to his TFSA will be a millionaire at age 57.
On the other hand, to manage your investments yourself, you must open an account with a discount broker. Several have eliminated transaction fees, such as Desjardins (Disnat), National Bank Direct Brokerage and Wealthsimple.
Then, we acquire a starting capital. Most young do-it-yourself investors start with $500, $1000 or $2000.
Document yourself
Warren Buffett, who is considered the greatest living investor, repeats that he does not invest in companies whose business model, products or services he does not understand. This advice is worth gold.
Another key to success: we are constantly documenting ourselves. We consult the annual reports of the companies that attract our attention and websites or specialized media, such as SEDAR, EDGAR, Investopedia, The Motley Fool, Forbes, Bloomberg and the Autorité des marchés financiers (AMF)…
Tutorials offered by discount brokers are also used. You can also take courses, such as bourstad.ca or Bourse101.com.
Finally, you distribute your portfolio intelligently by applying the principle of not putting all your eggs in one basket. We distinguish between the different types of investments (stocks, bonds, mutual funds, ETFs, labour-sponsored funds, etc.) and we invest by applying a geographical and sectoral distribution to minimize the risk.
ADVICE
- The Canadian and American stock exchanges represent only a small part of the planetary financial markets. It may be alluring to invest in trendy companies like Tesla, Alphabet (Google) or Canopy Growth, or familiar brands like Metro or Quebecor, but the world is big. Companies based elsewhere in the world that we have never heard of often represent remarkable investments.
- Normally, at the beginning, we devote at least an hour a day to our investments. After a few months, you can allocate your Saturday morning, for example…
- You can also learn in a group, with an investment club like Actif.net. We benefit from specialist advice and the emulation effect is unparalleled!
- Read my guide Online brokerage, Small guide for independent investors at Editions du Log.