Investing BasicsInvesting Basics

Investment and Finance 12Investment and Finance 12

Mr. AndrecykMr. Andrecyk

Five Steps to Plan Your Five Steps to Plan Your InvestmentInvestment

1) Set your goals:1) Set your goals:

- What are my top - What are my top financial goals?financial goals?

- When do I hope to - When do I hope to reach these goals?reach these goals?

- How much money - How much money do I want to save?do I want to save?

Five Steps to Plan Your Five Steps to Plan Your InvestmentInvestment

2) Find out what kind of investor are you:2) Find out what kind of investor are you:

- How do I want to approach investing?- How do I want to approach investing?

- How important is it to me to keep my money - How important is it to me to keep my money safe?safe?

- How comfortable am I with the idea that I may - How comfortable am I with the idea that I may sometimes lose money if I want to grow sometimes lose money if I want to grow my savings faster? my savings faster?

- How important it is to me to make a good - How important it is to me to make a good return on my investments? return on my investments?

Five Steps to Plan Your Five Steps to Plan Your InvestmentInvestment

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

Five Steps to Plan Your Five Steps to Plan Your InvestmentInvestment

4) Choose specific investments:4) Choose specific investments:

- Once you know your asset mix, you can - Once you know your asset mix, you can choose specific investments of each type.choose specific investments of each type.

- Do a lot of research before you decide. Look - Do a lot of research before you decide. Look at how an investment has done in the past and at how an investment has done in the past and how well it may do in the future.how well it may do in the future.

- Again, many people get expert advice. - Again, many people get expert advice. 

Five Steps to Plan Your Five Steps to Plan Your InvestmentInvestment

5) Keep track of your investments:5) Keep track of your investments:

- Keep good records of your investments - Keep good records of your investments so you will know how well each one so you will know how well each one does.does.

- If you have an adviser, check that he or - If you have an adviser, check that he or she is following your investment she is following your investment instructions.instructions.

What kind of investorWhat kind of investor am I? am I?

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

How much risk is right for How much risk is right for me?me?

Higher risk means you may lose some or Higher risk means you may lose some or all of your money. Ask yourself: all of your money. Ask yourself:

Do I want the chance to make more Do I want the chance to make more money if it also means I may lose money if it also means I may lose money?money?

  Would I rather make less and keep my Would I rather make less and keep my money safemoney safe

How much am I hoping to How much am I hoping to make by investing?make by investing?

With some investments, your return takes With some investments, your return takes the form of income as interest or the form of income as interest or dividends.dividends.

With others it takes the form of capital With others it takes the form of capital gains (or losses, if you sell an investment gains (or losses, if you sell an investment for less than you paid). for less than you paid).

In most cases, to get a higher return, you In most cases, to get a higher return, you have to take more risk have to take more risk

How long do I plan to How long do I plan to invest for?invest for?

Time horizonTime horizon is the number of years that you plan to is the number of years that you plan to invest. For example, saving to buy a house is a invest. For example, saving to buy a house is a shorter-term goal. Saving for retirement is a long-term shorter-term goal. Saving for retirement is a long-term goal.goal.

    Investments that don’t guarantee your return are often Investments that don’t guarantee your return are often better for a longer time horizon.better for a longer time horizon.

Example: Example: An investment like a stock mutual fund may An investment like a stock mutual fund may go up and down in value. If you have to sell early go up and down in value. If you have to sell early because you need your money, you may take a loss. If because you need your money, you may take a loss. If you can stay invested longer, you may get a better you can stay invested longer, you may get a better return over time.return over time.

Do I need to get my Do I need to get my money quickly?money quickly?

How easy will it be to get your money back How easy will it be to get your money back from an investment? This is called from an investment? This is called liquidity..

In most cases, when you give up quick and In most cases, when you give up quick and easy access to your money, you should expect easy access to your money, you should expect a higher return.a higher return.

Example:Example: Bank account deposits often pay Bank account deposits often pay less than if you lock your money into a less than if you lock your money into a Guaranteed Investment Certificate (GIC) for Guaranteed Investment Certificate (GIC) for three years. They may also earn less than a three years. They may also earn less than a mutual fund over time. mutual fund over time.

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

my life?my life?

Deciding on the right asset mix is an Deciding on the right asset mix is an important part of investing and planning for important part of investing and planning for your future. Your asset mix should:your future. Your asset mix should:

Help you balance risk with your expected rate of return Help you balance risk with your expected rate of return on your investmentson your investments

Fit your comfort level for riskFit your comfort level for risk Enable you to get your money when you need itEnable you to get your money when you need it Help you get the growth you need to reach your goalsHelp you get the growth you need to reach your goals Change as your needs and goals change over timeChange as your needs and goals change over time

How does my stage in life How does my stage in life change the way I invest?change the way I invest? Your age and life situation can play a Your age and life situation can play a

big role in your choices. If you are big role in your choices. If you are about to get married, you might need about to get married, you might need your money to buy a home. If you’re in your money to buy a home. If you’re in your 40s, you may be saving for your 40s, you may be saving for retirement or your kids’ education.retirement or your kids’ education.

Investment PyramidInvestment Pyramid

Early Investment YearsEarly Investment Years

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

Middle YearsMiddle Years You may be earning You may be earning

more than ever, and more than ever, and you may also have a you may also have a lot more lot more responsibilities, responsibilities, including:including:

- Children to support or - Children to support or help through schoolhelp through school

- Saving for retirement- Saving for retirement

- - DebtDebt

Retirement YearsRetirement Years Older investors usually Older investors usually

move their investments move their investments gradually over to safer gradually over to safer guaranteed investments. guaranteed investments.

They want to protect They want to protect their savings because their savings because they’ll need to live on they’ll need to live on their investments after their investments after they retire. they retire.

They may also prefer They may also prefer investments that create investments that create a steady, reliable stream a steady, reliable stream of income. of income.