Many Canadians put off investing because they aren’t sure of what to buy. They worry about making the wrong choice about what to buy and losing their principal investment or taking great risks and achieving negligible results. Limiting your exposure to risk is prudent, but some risk is needed in order to make gains. It is an important task to put aside some savings each month and to invest wisely. If you take no risks, then your only assurance is that of receiving no returns.
Information Sources
In order to help become more comfortable with investing, there are several excellent sources of information to explore. The Investor Learning Centre (ILC) at investorlearning.ca has an online glossary, an investment selector and a list of resources on a specific topic as well as an archive on frequently asked questions. The ILC was created in 1996 by the Canadian Securities Institute (CSI), the industry’s national education centre. The CSI provides more information by offering various courses for a fee. The courses are available individually or as part of a program for any individual, including those who want to invest or work in the field. The most common courses taken are the Canadian Securities Course and the Investment Funds in Canada course.
Www.investopedia.com (although U.S. based) also is an excellent source of information on investments. Here you’ll find investing tutorials on topics such as “investing for safety and income” and an “introduction to order types.” You can also sign up for free newsletter topic, such as on investing basics and a term of the day.
One of the terms that every investor will want to be familiar with is compounding, which is a tool for growing your investment. Compounding uses time to multiply your investment returns. When you have an instrument that has a compounding interest rate (e.g., a compounding Guaranteed Investment Certificate), your investment returns can multiply. When an investment compounds, better results are obtained by starting early and investing more. Similarly, a Registered Retirement Savings Plan (RRSP) can have a compounding effect, as tax-deferred plan, until the investment is withdrawn. RRSPs grow tax free until you withdraw from them and pay tax at your apparent tax rate.
For those who enjoy reading, plenty of books are available online and at your local bookstore as another way to learn more about becoming financial secure. The Intelligent Investor by Warren Buffett and The Cold Hard Truth: On Business, Money and Life by Kevin O’leary two examples of many. Investing for Canadians for Dummies is also widely available as is more specific similar books on stock investing, mutual fund investing, real estate investing.
Hands On Experience
Many people do not want to make their own investment decisions and instead turn to a professional financial advisor for advice. Whether you use the guidance of a professional or do it yourself through a self-directed account, there is a real learning opportunity with hands on experience. Investing a small amount in investment instruments you are less familiar with, until you become more comfortable with your investment knowledge, may be the best approach.
