My Basic Investing Rules

Simple Investing Tips

A bar chart with a line graph over top of it, slowly increasing in height

I get a lot of questions about investing.

  • How should I start?
  • How does the stock market work?
  • What is high risk or low risk?
  • How do I not lose all my money?

I have plans to write a mini-book. But in the meantime here are my simple rules for investing*. If followed I think these will give you reasonable returns with a reasonable amount of risk.

  1. Use a diversified method.
    Buy stocks (shares in Canada, also called equities) and bonds. Invest in various countries and industries. Don’t put a big chunk of money into Bitcoin or marijuana stocks or whatever other fad of the week, unless you can afford to lose it all.
  2. Use a passive investing method.
    Numerous studies have shown that active management only sometimes earns you more money than the average stock market increase.
    From the Globe and Mail

    From CNBC
  3. Use a low cost method. Related to the above point, when fees are taken into account it is rare for high cost, active methods to outperform the low cost, passive methods over time.
  4. Perform routine rebalancing between asset classes, or have the company do it for you (as happens with robo-advisors and passive-method portfolio funds). This means you will always be buying low and selling high, without trying to time the market.
  5. DON’T PANIC (any HGTTG fans?) Sell. Some ways to avoid panic selling are:
    1.  Don’t sell until you actually need the money.
    2. Don’t put short-term investments in the stock market.
    3. Ignore the noise. When everyone else is panicking, stick to your strategy. During the big stock market drop in the USA in 2008, within a few years the markets recovered nicely. If you didn’t sell when everyone else did you wouldn’t have lost any money.

*I did not invent these rules. I just agree with them and invest by them. And I think most people should, too.

Want more info? Book an appointment and we can talk about your particular situation.

Want more reading material. My two favourite sources for Canadian investors are the website, Canadian Couch Potato, (start with the top tabs) and the magazine, Canadian Money Saver (check your library; you might get lucky).

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