Many young professional tend to stress out about the basics of their financial life, like budgeting and saving. While four in five millennials have started saving for the future, only one in two millennials are investing.1
No matter what age you are, investing can be very intimidating. As a result, it is possible you have put off investing or have not given it much thought. Regardless of where you currently stand with investing, continue reading as we discuss five tips to help you get started and make sure that you are on the right track.
Tip #1: Start Early
Like mentioned above, investing can be an intimidating endeavor which is why many don't start investing as early as they should. You don’t need to be earning six figures in order to start investing. If you’re able to, start small with what you have. A modest amount of money can grow exponentially over time thanks to the power of compound interest. Starting a small investment now can create a big payout later down the road.
Tip #2: Invest Regularly
While it may be tempting, trying to time the market is not the best investment strategy. Timing the market occurs when investors wait around trying to decide when the perfect time to invest is. Timing the market has a reputation for not always being a favourable move for the investor. Instead of trying to time the market, investors should try to invest small amounts of money on a scheduled basis, like clockwork. It’s also important to invest regardless of your recent returns, as past performance does not guarantee or indicate future performance. Instead, create a plan and stick to it.
Tip #3: Diversify
Diversification is a crucial term all investors should be aware of as it helps balance the risk of your portfolio. If you were only invest in one company or sector, you could lose a lot of money if something causes those stocks to drop. Avoid putting all your eggs in one basket by keeping your portfolio diversified.
Tip #4: Enroll in Your Company's RRSP
Many companies offer there employees some type of retirement or pension plan. So, if you are a full-time employee and your company offers a Registered Retirement Savings Plan (RRSP) or other company pension plan take advantage of it and enroll. After enrollment, you’ll likely have the option to automatically divert a fixed amount from every paycheck into the plan. Also, any income you earn in the RRSP is typically exempt from tax until you make a withdrawal.2 Enrolling in your company's RRSP offers employees tax-saving advantages, and also makes investing less stressful as you won't even have to think twice about when or how much to invest.
Tip #5: Work With an Advisor
You are always going to have a certain amount of bias when it comes to your money. This can make it tricky to make fact-based investment decisions. A financial advisor offers an unbiased opinion on your money, and also provides educated guidance to help you make investment decisions based on your long-term goals, not short-term worries. An advisor can provide the dedicated time and know-how needed to properly manage a portfolio that you yourself may not have.
Hindsight is 20/20, and there are ways in which everyone wishes they would have handled their money differently in the past. If you’re just beginning to build your portfolio, take the advice we wish we could give our past selves. These five tips are just the beginning, be sure to speak to an advisor before making any big decisions regarding your financial future.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.