Active Insights

What is it and how can it help you?

When something more powerful is threatening us, thousands of years of experience tell us to get out as fast as possible. That’s a useful reaction when dealing with bears, avalanches and hurricanes, but not so helpful when it comes to investing.

Choosing a financial advisor can be one of the most important decisions you’ll ever make. So it’s worth taking the time to find the person who’s right for you.

What do you need from your advisor?

In order to choose the right kind of advisor, you should start by understanding what it is you’re looking for. Do you want someone to help you set goals and create a financial plan? Or are you just interested in investment advice? How involved do you want to be in making decisions? What are the financial issues that keep you awake at night? 

Starting young can be one of the best ways to build your wealth.

How much you save is important, but when you start can also have a big effect. The sooner you invest – even if it’s only a small amount – the more time your money has to reap the benefits of compounding. Put simply, not only will the money you originally saved have the opportunity to earn returns, those returns can also, potentially, earn returns.

And lest you be discouraged, remember that no matter what age you are, “starting now” will always be earlier than “starting later.” 

No one enjoys a bear market – usually defined as a market decline of 20% or more over two months.

But looking back through the history of both the Canadian and U.S. stock markets, it’s clear that on average, bull markets – an increase of 50% or more in the value of the stock market – last longer and more than make up for the losses during the bear markets.

That’s yet another argument for taking the long-term view and staying invested – even when the bear is abroad.

Your advisor can explain to you how your portfolio would likely be affected by a bear market and what strategies are in place to avoid the worst effects. 

A crucial factor in successful investing is understanding risk and how much of it you can afford to take.

All investments involve a certain degree of risk. Whether you’re buying a government bond or shares in a start-up company, you are lending money. In some cases it’s very unlikely you won’t be paid back, but you also won’t get much return for the risk you’re taking. If you’re willing to take more risk, you’ll be offered a better potential return. 

A mutual fund is a way of pooling your investment money with a large group of other investors. As a group, you get advantages and cost savings that might not be available to you as an individual investor.

Like the RRSP, the TFSA is a registered account developed to help Canadians save. While TFSAs can be used to save for and during retirement, the rules are different, making TFSAs useful for short-term savings goals such as family vacations, and for longer-term goals such as purchasing a new car or home renovations.