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Tips for new investors


You’ve been saving your money but now don’t know where to invest it. Mutual funds? ETFs? GICs? Stocks? Deciding how to invest your savings can be daunting if you’re a first-time investor. Couple that with recent stock market fluctuations, and the thought of investing your money may be stressful.

Advisor to Client spoke with three financial advisors about how first-time investors can overcome their uncertainties.

Bev Moir, senior wealth advisor, Scotia Wealth Management, Toronto

Moir recommends budgeting, saving on a regular basis and living within your means if you don’t think you have enough money to invest.

A person “is not going to achieve their financial goals if they don’t have something to save,” says Moir, who’s also a director of wealth management.

How long you’ll be investing a particular sum—known as your time horizon—can be also be important if you don’t have a lot of money with which to start investing. Knowing your time horizon will help you make an informed decision about what to invest in: if it your time horizon is short, you may be better off with lower-risk but lower-yielding investments, such as bonds. If your time horizon is long, you may be able to handle higher-risk (but usually higher-reward) investments, such as stocks.

As such, Moir says she explains the major asset classes (cash, bonds and stocks). In particular, deciding to invest in equities (another name for stocks) also means understanding that stock markets aren’t linear. In particular, new investors “need to understand if they’re going to invest in equities, volatility will happen,” says Moir. “They need that education, because the worst thing is if someone puts their hard-earned money in an investment and they see it going down in value […], that would [otherwise] be devastating to them.”

Julia Chung, partner and senior financial planner, Spring Financial Planning, Vancouver

Chung agrees that first-time investors must focus on education—whether through learning by themselves or finding someone to help them.

“Start with research,” says Chung, but figure out why you need to do research. For example, are you investing for retirement? Or is there another reason?

“Understand yourself first, and then start looking into the basics: types of accounts (RRSPs, TFSAs, etc.), types of investments (mutual funds, ETFs, stocks, bonds, etc.) and different types of service firms (banks, mutual fund companies, brokerage firms, etc.),” says Chung.

She also stresses the importance of using educational resources that aren’t trying to sell you something. She suggests books such as Worry-Free Money by Shannon Lee Simmons, Wealthing Like Rabbits by Robert Brown and The Value of Simple by John Robertson. (She also recommends Robertson’s blog, Blessed by the Potato, which is popular in the personal finance community.)

For anyone concerned about volatile markets, Chung suggests you learn about the products you are investing in and decide the time frame for your investment.

“Understand why you are investing, what you’re investing in and what your long-term approach is,” says Chung. “Am I investing for three, five or 20 years? And then look at volatility with a more realistic lens.”

Anyone investing for three years may not be able to handle a lot of ups and downs, while someone who doesn’t need to touch their investment for two decades can likely handle a fair bit of volatility.

“Start slow and build up your understanding,” says Chung. “If you’re really afraid of volatility, start with something that’s fairly safe and doesn’t have a lot of fluctuations while you’re learning. You might lose out on some growth, but [at least] you’re okay.”

Nancy Grouni, financial planner, Objective Financial Partners Inc., Toronto

Grouni says one of the biggest barriers to investing is a lack of knowledge about the different types of investment products available in Canada. She recommends using the Get Smarter About Money website from the Ontario Securities Commission as a starting point.

“It talks about investing basics, but it also has some calculators and resources available for consumers,” says Grouni.

If you’re nervous about investing, Grouni says a fee-only, advice-only financial planner can help you figure out your options. She says you can expect to work with such a planner for four to eight weeks at a cost of $2,000 to $5,000, depending on the complexity of your situation.

“I think it’s helpful to step back and consider all your options,” says Grouni. “Then you can make an informed decision about what’s best for you.”

Once you have a sense of how you’ll invest, she says it’s important to choose products with low fees if you don’t have a lot of money to invest. Grouni recommends using a robo-advisor or investing in ETFs to minimize fees.

Regardless of how much or how little you start with, starting is most important, she points out.

“It’s time in the market, not market timing that counts,” she says, sharing a classic investment adage.