Invest your Money Successfully!

It’s not surprising that the world of investing can seem complex. Investors today face often-changing market conditions, an endless supply of market news and many investment choices. 

So what can investors do to achieve better results over time? These five tried and true principles can help you build an effective long-term strategy designed to achieve your financial goals. 

1. Invest early – Starting early is one of the best ways to build wealth. Investing for a longer period of time is widely considered more effective than waiting until you have a large amount of savings or cash flow to invest. This is due to the power of compounding (the snowball effect that occurs when the dollars you earn investing generate even more earnings). 
2. Invest regularly – Investing often is just as important as starting early. This way, investing remains a priority for you throughout the year – not just around certain deadlines, like the yearly RRSP deadline. When you invest regularly, you can ease into any type of market (rising, falling, flat). Investing small amounts of money on an ongoing basis can help smooth out returns over time and reduce overall portfolio volatility. 
3. Invest enough – Achieving your long-term financial goals begins with saving enough today. Saving for a major goal like a house, post-secondary education or retirement requires significant thought and decision making. It is vital to know how much you need to begin saving today to have a large enough investment portfolio for your future goals. 
4. Have a plan – When markets turn choppy, even experienced investors can become too focused on short-term movements. This can lead to hasty decisions, especially trying to time the markets. For example, investors see markets rise and jump in – buying high. Or, they see markets fall, lose confidence and sell at a loss. The key to avoid making rushed investment decisions is to maintain perspective and focus on the long term. 
5. Diversify your portfolio – When it comes to investing, one of the easiest ways to manage risk and improve your probability of success is to have a variety of investments. You can diversify your portfolio across different asset classes, geographical markets and industries, leaving you better positioned to tap into opportunities across different investments as they emerge. 

Want to understand these principles better and how you can implement them – work with a financial planner and get the advice and support you need.

 

Jennifer Taylor, CFP®, PFP, Financial Planner, RBC Royal Bank