Investing Basics

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Investing Basics

• Investment and Finance 12

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Five Steps to Plan Your Investment

• 1) Set your goals
• - What are my top financial goals?
• - When do I hope to reach these goals?
• - How much money do I want to save?

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Five Steps to Plan Your Investment

• 2) Find out what kind of investor are you
• - How do I want to approach investing?
• - How important is it to me to keep my money
  safe?
• - How comfortable am I with the idea that I may
  sometimes lose money if I want to grow my savings
  faster?
• - How important it is to me to make a good
  return on my investments?

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Five Steps to Plan Your Investment

• 3) Pick a mix of investment types
• - What types of investments do I understand and
  want to buy?
• Some types of investments may grow faster than
  others. A good mix of different investments (your
  asset mix) will help you get enough growth, while
  keeping losses in balance.
• - Am I comfortable choosing my own asset mix? If
  not, get some expert advice.

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Five Steps to Plan Your Investment

• 4) Choose specific investments
• - Once you know your asset mix, you can choose
  specific investments of each type.
• - Do a lot of research before you decide. Look
  at how an investment has done in the past and how
  well it may do in the future.
• - Again, many people get expert advice. 

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Five Steps to Plan Your Investment

• 5) Keep track of your investments
• - Keep good records of your investments so you
  will know how well each one does.
• - If you have an adviser, check that he or she
  is following your investment instructions.

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What kind of investor am I?

• Investing is about choices. The choices you make
  reveal who you are as an investor. This is called
  your investor profile. To discover your profile,
  ask yourself these four questions

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How much risk is right for me?

• Higher risk means you may lose some or all of
  your money. Ask yourself
• Do I want the chance to make more money if it
  also means I may lose money?
•  Would I rather make less and keep my money safe

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How much am I hoping to make by investing?

• With some investments, your return takes the form
  of income as interest or dividends.
• With others it takes the form of capital gains
  (or losses, if you sell an investment for less
  than you paid).
• In most cases, to get a higher return, you have
  to take more risk

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How long do I plan to invest for?

• Time horizon is the number of years that you plan
  to invest. For example, saving to buy a house is
  a shorter-term goal. Saving for retirement is a
  long-term goal.
•   Investments that dont guarantee your return
  are often better for a longer time
  horizon.Example An investment like a stock
  mutual fund may go up and down in value. If you
  have to sell early because you need your money,
  you may take a loss. If you can stay invested
  longer, you may get a better return over time.

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Do I need to get my money quickly?

• How easy will it be to get your money back from
  an investment? This is called liquidity.
• In most cases, when you give up quick and easy
  access to your money, you should expect a higher
  return.Example Bank account deposits often pay
  less than if you lock your money into a
  Guaranteed Investment Certificate (GIC) for three
  years. They may also earn less than a mutual fund
  over time.

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What mix of investments is right for me at my
stage in my life?

• Deciding on the right asset mix is an important
  part of investing and planning for your future.
  Your asset mix should
• Help you balance risk with your expected rate of
  return on your investments
• Fit your comfort level for risk
• Enable you to get your money when you need it
• Help you get the growth you need to reach your
  goals
• Change as your needs and goals change over time

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How does my stage in life change the way I invest?

• Your age and life situation can play a big role
  in your choices. If you are about to get married,
  you might need your money to buy a home. If
  youre in your 40s, you may be saving for
  retirement or your kids education.

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Investment Pyramid
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Early Investment Years

• If youre just starting to work, you may not have
  a lot of savings. Still, time is on your side.
  For this reason, many people at this stage are
  willing to take more risks when making long-term
  investments.

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Middle Years

• You may be earning more than ever, and you may
  also have a lot more responsibilities, including
• - Children to support or help through school
• - Saving for retirement
• - Debt

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Retirement Years

• Older investors usually move their investments
  gradually over to safer guaranteed investments.
• They want to protect their savings because
  theyll need to live on their investments after
  they retire.
• They may also prefer investments that create a
  steady, reliable stream of income.