The biggest barrier to investing isn’t always money, sometimes it’s a perception that the process is complex. But it doesn’t have to feel intimidating, says Caitlin Cormier, a senior client education instructor at TD Direct Investing.
She offers four tips to help do-it-yourself investors simplify their journey:
1. Start with goals, not investment products
New investors often try to figure out what stocks, exchange-traded funds (ETFs) or mutual funds to own without considering goals: retirement, saving for their children’s post-secondary education, or purchasing a first home.
“Begin with goal-setting to help make sure you have the right investments to be successful,” Ms. Cormier says. “Then you understand what risk you’re willing to take to meet those goals.”
The exercise also assists in determining which registered accounts to invest in, such as RRSPs (Registered Retirement Savings Plans), RESPs (Registered Education Savings Plans), TFSAs (Tax-Free Savings Accounts), and the relatively new FHSA (First Home Savings Account).
Investment selections, and how much risk to take on, should align with your timeline and what you’re aiming to achieve. Conservative investors, with a shorter time horizon, may tend to favour safer assets such as GICs (Guaranteed Investment Certificates) or government bonds. Aggressive investors with more time might lean more heavily into stocks and equity-based ETFs, which can swing dramatically in value in the short term but could also grow larger over the long term.
Whatever your goals time horizon, choices also come down to comfort, says Ms. Cormier. “It’s about choosing a portfolio mix so you can sleep at night.”
2. Be consistent
Sticking to a regular schedule of contributions, regardless of the dollar amount or market swings, can do more for a portfolio than occasional activity. It’s less about how much you put in at once and more about showing up steadily – “the secret sauce of successful long-term investing,” Ms. Cormier says.
“The simplest way to build wealth over time is making small, consistent investments.”
She touts the benefits of dollar-cost averaging, the tried-and-true strategy that mitigates market volatility. “You just contribute to the account whether markets are up or down – no need to worry about timing the market.”
3. Stay diversified
Any given stock can experience a significant price decline at any time. Novice DIY investors risk not only losing money, but being turned off from the markets. Mutual funds, ETFs or all-in-one managed portfolios all provide diversified exposure. “That may help achieve potential returns with lower risk compared to investing in a single stock,” says Ms. Cormier.
Instead of buying one stock, she adds, investors can purchase units in professionally managed funds that invest in several securities, across different sectors (such as technology or banking), geographies and even asset classes (stocks or bonds).
That simplifies the process for individual investors, says Ms. Cormier. “It really removes the need for significant investing know-how.”
4. Look for newer ways to tap into high-priced stocks
As they gain experience, many DIYers start exploring and investing in individual stocks, or in more concentrated thematic funds focused on specific corners of the market, such as clean energy. They can leverage innovative tools like partial-shares. TD Direct Investing was the first big bank to offer this option in Canada.
Some companies have share prices that cost hundreds or even thousands of dollars. Partial-shares investing, also known as dollar-based investing, allows investors with smaller sums to buy or sell a portion of a stock or ETF rather than a full share. It’s investing by the dollar, not the share – a fraction of the share for a fraction of the cost. This makes high-priced stocks more accessible, and it can make diversification easier.
Whether investing in a fund, an individual stock or a bond, Ms. Cormier says every investment decision should relate to the objectives you started with. “Branch out as you learn, but it’s always good to keep investing in that diversified core of your portfolio designed to meet your goals.”
To help, build market understanding and confidence, check out TD Direct Investing’s hands-on workshops, live shows, on-demand videos and other resources.
Advertising feature produced by Globe Content Studio with TD. The Globe’s editorial department was not involved.
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