Grow your financial knowledge with resources built to answer your questions. This short quiz is a great place to start.
So, you’re thinking about starting to invest—but the idea of chatting with a financial advisor about “dividends” or “market volatility” makes you want to put it off another day. We get it. For many people, investing is a mysterious (maybe even scary) concept they don’t feel confident talking about, much less doing.
The first step to investing is easy, all you need to do is establish some basic information about you and your financial situation. An expert can always explain unfamiliar terminology, but only you can decide what your goals are, how much you can afford to invest and how comfortable you are taking risks. When you call to speak to an advisor, the most important thing they’ll want to know is what you want to achieve with your money.
We’ve compiled the top seven questions you should ask yourself before you start investing. These are questions that an advisor might ask you when deciding what investment options are best for you.
1. What is your investing goal?
In other words, what are you saving for? Whether it’s your child’s education, a down payment on a house, retirement or an all-purpose nest egg, there’s an investment that can help you meet your goal.
Identifying your intentions at the outset will make later decisions more straightforward and help a financial advisor recommend the best course of action for you and your needs.
2. What is your timeline?
By what date do you want to meet your goal? Investing for a goal you hope to achieve two years in the future will look quite different than investing for your retirement 20 or 30 years down the road.
3. How much can you afford to invest?
This calculation is similar to the calculation you may have already made about how much you can afford to save. Putting your savings into an investment just means there’s a potential for them to grow a little faster.
Once you’ve deducted your basic monthly expenses from your monthly income, how much do you have left over? This is where you need to decide how much of the “left over” will go toward immediate wants, and how much you’ll invest for the future.
Make this question easy to answer with our budgeting worksheet.
4. What is your risk tolerance?
Many types of investments are characterized by their risk factor—considerations like liquidity, industry sector, credit worthiness and maturity that can determine how likely an investment will be impacted by market volatility and the likelihood of gains or losses in any given situation. While the idea of risk can apply to your financial ability to handle ups-and-downs, there’s also an emotional element. How will you feel if the value of your investments takes a temporary dip? Will you be comfortable staying the course and giving them time to recover, or will your anxiety take a big toll?
5. Do you need access to your invested funds?
Some investments allow you to withdraw funds quickly and easily, making them ideal for people who might otherwise feel like they have to choose between investing and maintaining an emergency fund.
6. Are you hoping to use investing to get a tax break?
Some investments are registered through a government program and can offer you the ability to either defer income tax on the money you invest, or avoid paying tax at all on the interest you accumulate.
For more info, check out The difference between RRSP, TFSA and cash accounts.
7. How do you want to manage your investments?
Online or in-person? Independently or through a portfolio manager? How you’ll track and make changes to your investment portfolio might be something you want to discuss with a financial advisor. Regardless of what you decide, ATB advisors are available Monday through Saturday to go over your options with you at no charge.
Now it’s time to start
Once you know the answer to these questions, you can take the next-step to investing. There are many options available to investors, both online and with an advisor. Select an investment provider that offers the advice, experience and customer service that best suit your financial goals. Financial advisor or online investing? The choice is yours.
If you’re interested in learning more about investing and what options are best for you and your financial goals, call our Wealth Advice Centre at 1-888-282-3863. If you weren’t able to answer all the questions, that’s okay. Our advisors are here to help guide you through your investing journey and find a solution that suits your needs.