Ready to invest? Your questions, answered

10 August 2017 by National Bank

Think you might be ready to invest? Whether you’re starting a project or planning your retirement, you need money. And if you want it to grow rather than lie dormant in a bank account, your best bet is to invest it. Do you have questions? Worried that this might not be the best solution for you, or that you might lose everything? Annamaria Testani, Vice President, National Sales at National Bank Investments, answers your questions. 

Whether you’re starting a project or planning your retirement, you need money. And if you want it to grow rather than lie dormant in a bank account, your best bet is to invest it. Do you have questions? Worried that this might not be the best solution for you, or that you might lose everything? Annamaria Testani, Vice President, National Sales at National Bank Investments, answers your questions.

Is this the right time to invest?

It’s always the right time to invest! You can start to make investments as soon as you have a project in mind. Ideally, you’d invest with a goal: to buy a car, plan your retirement or accumulate a down payment for a property, for example.

But there’s no one way to do it, which is why it’s a good idea to meet with a financial advisor who can propose personalized solutions, adapted to your needs. He will analyse your situation and help you make the best choices based on your revenue, tax rate, budget, debts, etc. You should know that it’s often preferable to pay off high interest debts before thinking about investing the money you’ve managed to save. For example, with interest rates as high as 19.9%, liquidating your credit card debts will win you immediate surplus.

How can I invest if I don’t have a lot of liquidity?

You don’t need to be rolling in money to start investing. A few hundred dollars is enough to get started. A financial advisor can help you make the right choices, even with a small budget. Don’t forget: time plays in your favour, and small investments made regularly over the long term can have big returns.

If you’re a more experienced investor and know your risk tolerance and investment goals, a hybrid approach that combines the assistance of an advisor with discount brokerage could be profitable. The best of both worlds!

Another option? Online brokerage, which lets you manage your portfolio yourself online. Because you don’t get the benefit of an advisor’s guidance, online brokerage is usually less expensive. Although it’s important to have a good knowledge of the market, many sites offer tools to help investors who are just starting out.

I have a project in mind. How do I choose the right investment strategy to make it happen?

Ideally, you would choose your investment strategy based on your goals. To do that, you need to factor in your timelines: is it a short-, medium- or long-term project? You also have to look at the stage of life you’re in. For example, if you’re young and want to save for retirement, you might be inclined to take more risks with your investments, because you have many years in front of you to compensate for fluctuations in the market.

If you’re looking for stable returns, you might opt for more conservative investments instead.

You also need to ask yourself whether, if you need to, you’ll be able to liquidate your investments quickly. Here, too, the investment products you should choose can differ. Each strategy should be personalized, so ask for professional advice!

Is the stock market the right place for me to invest?

It all depends on your objectives, your stage of life and your risk tolerance. If you’re worried about investing in the stock market because you think it’s too risky, know that over the long term, the stock market usually provides good returns. Of course, there could be periods of turbulence where things seem to be going badly, but if you set your sights on the long term, it’s possible to get good results.

In addition, there are investment strategies and ways of building your portfolio that allow you to better weather the ups and downs of the market. Remember that stock market fluctuations are normal, and no reason to run away. You should see these investments as a tool to generate revenue that will grow with a long-term investment horizon.

Conversely, you should never expect the stock market to pay out like a slot machine. Rapid gains of 10 to 20% are usually the result of pure luck. No investor, no matter how experienced, has a crystal ball…

Is it possible to limit the risks that come with investing?

A key way to keep your investment portfolio stable is to diversify your investments. It’s no secret: if you want to reduce your level of risk and still get a good overall return, don’t put all your eggs in one basket!

In other words, instead of focusing on a single type of investment, spread your money across several. For example, Canadian and foreign equities, bonds, term savings, dividend funds, etc. Ideally, you would also vary your investment horizons (one, two, three, five years, etc.), as well as your areas of investment (information technology, biopharmaceuticals, aerospace, natural resources, etc.).

Safer investments, like bonds, allow you to stay the course in case of market fluctuations, and compensate for negative returns on your stocks.

Of course, there are probably many other questions you’d like to ask. For example, you might wonder which investment products are best for your particular goals and stage of life, or maybe whether you should be managing your portfolio yourself or would be better off going through a brokerage firm, or which products are best suited to mitigating the effects of market fluctuations on your investments… Whatever your questions, speaking to a financial advisor will help dissipate your doubts before you jump in.

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