Tips for investing beginners | CTV News
It would be a mistake to think you need to amass some wealth before you start investing, says one expert.
Benjamin Croitoru, finance professor and associate dean at McGill University, offers his advice for the latest installment of CTV News Edmonton’s series Saving and Spending, which focuses on helping viewers make smarter financial decisions.
He believes that everyone, regardless of their financial situation, should have a basic knowledge of investing.
“It doesn’t take a lot of knowledge and, perhaps more importantly, it doesn’t take a lot to get started and make a big difference over the long term as long as you’re consistent,” he told CTV News Edmonton in a recent interview.
HOW DO YOU LEARN
Croitoru says it’s possible to learn the basics yourself.
He recommended starting with a free online course offered by his faculty at McGill. The course, called Personal Finance Essentials, is divided into short modules and requires participants to pass a test before each chapter.
“Don’t worry,” Croitoru said. “You can take the test as many times as necessary to pass it. So no stress.”
There are also many excellent books, he added. His favorite is The Elements of Investing by Burton Malkiel and Charles D. Ellis because it’s easy to read and fun.
If You Can: How Millennials Can Get Rich Slowly, by William J. Bernstein (also available as a free PDF), is written about the U.S. market but explains the key principles of investing well, Croitoru said.
Of course, professional advice from financial advisors and banks is subject to a fee.
“You just have to remember that your interlocutor does not work for you. He works for the bank,” he said.
“There’s nothing wrong with that, of course… That doesn’t mean they can’t give you good advice.”
That’s why he recommends doing some reading before paying for a service.
START AS SOON AS POSSIBLE
Croitoru encourages even those on limited incomes to start investing because of the power of consistency and compound interest.
A modest return over the long term will turn even a $10-a-day investment into tens, if not hundreds, of thousands of dollars, the professor told CTV News Edmonton.
“This idea of compound interest — it’s a simple idea — but most people don’t realize how powerful it is,” Croitoru said.
“It’s very important to keep your money invested for as long as possible, and in practice, of course, that means investing as early as possible, even with small amounts.”
The first investments a person makes should be simple and diversified, he teaches.
“You don’t want to invest everything in just one type of product like bitcoin or one share of a small number of stocks because that’s very risky.”
Some financial products, such as index funds or mutual funds, might be attractive to some people, but they become more complicated and come with fees, Croitoru pointed out. And he believes you should minimize spending wherever you can.
INVESTMENT GOALS
Your investment strategy can be customized based on why you’re investing, the McGill professor said.
Usually the main reason for investing is for retirement or family support.
“On the other hand, if you’re investing because you’re going to buy a house in a couple of years or go on vacation next year, you probably want to choose investments that don’t pose any risk because you don’t know what might happen in the short term.” stock market,” said Croitoru.
“You’re on the long haul, the long game. It’s not a short game.”
FOLLOW THE PLAN AND OTHER TIPS
“Don’t trust your instincts too much, because your instincts will arouse you too much,” advises Croitoru.
More dangerously, he said, emotions that people believe to be instincts could sell them at the worst possible time, after a crash or breakdown. Research shows that the market will recover over the long term and perform quite well.
“You will sell that at the low price. This will be catastrophic for your long-term ROI.”
He also advises against following the crowd, which can affect your decision-making.
“Don’t invest based on the prevailing sentiment, the prevailing sentiment of the market. It’s far better to have a long-term plan and stick to it.”
Staying the course goes hand-in-hand with something that may seem contradictory: don’t try too hard.
“I think to be a good investor you have to understand that there are some things that are relatively easy to control and some things that are almost impossible to control, such as forecasts… It’s incredibly difficult to predict, what stocks are doing to become the big stock,” Croitoru said.
“Don’t try to pick the best times to enter and exit the market because that’s very challenging and trying to forecast will probably do more harm than good… Focus on the things you control.” even if they don’t look very exciting. Like the fees.”
With files from Katie Chamberlain of CTV News Edmonton