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Before you Invest: 5 Things you Must Know

Investing is one of the most reliable ways to accumulate wealth. With the right information and practices, you can hit your financial goals and invest without fearing the outcome. If you have decided to make some financial investments before you dive in, there are some things you must know.

Working with a financial advisor in Edmonton and Alberta is one of the best ways to gain insight into everything that investments entail.

Investment can simply be putting your money in an account with a tax advantage, buying a new property, or buying stocks. In essence, investments do not take on one particular form. Although it has one goal, which is to increase your money, investment is very dynamic.

To begin your investment journey with a solid foundation of knowledge, you must know these five important things;

The Different Types of Investments

Your investment option would depend on how fast you want your returns. There are long-term investments and short-term investments, so let’s talk about these two types of investments briefly.

Long Term Investments

Long-term investments or long-term growths are investments that are left to mature for a period of 10 years or more. This type of investment is perfect when you want to save for a college fund, retirement, or to establish generational wealth.

The best investment options for long-term growth in Canada are index funds, mutual funds, and exchange-traded funds among others. Long-term investments will require you to be bold enough to face the changes in the market and bold enough to take risks. Although not all long-term investment opportunities are wildly risky.

Short Term Investments

These are investments made with a focus on a shorter time horizon. The timeline for short-term investments can range from 12 months to 3 years. Short-term investments are perfect if you want to quickly sell or convert your assets into cash.

Some of the best investment options for short-term investment in Canada include Treasury bills, money market funds, and bonds.

The type of investment you choose should depend on your needs and investment goals or purpose. Another way to decide the best investment options is to consult a financial advisor in Edmonton or Alberta. Financial advisors are professionals and seasoned investors who can guide you, so you don’t make irreversible mistakes.

Investments will always come with Risks

Nothing is as risky as investing because you can only predict the outcome; you can never honestly know the result. There is no complete guarantee that this investment will yield returns or not so always invest with this at the back of your mind.

A lot of professionals will tell you not to invest funds you have plans for in the next five years because of risk factors, but it all depends. This is why it is vital to work with an Edmonton financial advisor, so you can make the right investment decisions.

If you’re looking for quick cash, you probably should reconsider investing because of the unpredictability of the market. If anything happens, you may not be able to recoup.

You Must Set Investment Goals

What are your investment goals, why do you want to invest, and who do you want to invest for? These are all valid questions you need to have answers to. In fact, if you consult a financial advisor in Canada, these are the first questions they will ask you, in order to know the kind of investments to recommend.

Your investment purpose could be to save for a home, your children’s education, or retirement; all of these will determine how long you should invest for and what you should invest in. For example, index funds in Canada focus on long-term growth and are considered the perfect investment for a retirement plan.

While your goals can be to increase the value of your money, keep your principal safe or maintain your purchasing power. Until you have all of these things sorted out, and clearly specified, you might get confused when it’s time to make an investment decision.

Spreading Your Investments is Wise

When it comes to investing, the popular saying “Do not put all your eggs in one basket” is not a cliché. There are two major reasons why diversifying your investments is a good thing; to build a solid investment portfolio and to minimize the risk of losing it all.

Diversifying your investments means spreading them across different kinds and types of investments. So, simply put you’re investing in bonds, money market funds, ETFs, and GICs, with long and short-term returns. Every professional will agree that investing in one thing at once is a recipe for major disappointment.

Your investment portfolio should be very diversified, showing your risk tolerance and knowledge of bonds. If you’re still wondering what all this is about, consulting a financial advisor in Edmonton will help.

All Investments come with Fees

Your investment profits are not solely for you; there are a lot of fees and expenditures attached to them, which can significantly affect your final investment turnaround. As you dive into the investment world, you will find that there are fees that you cannot escape; the best thing you can do is minimize them.

It doesn't matter how lucrative an investment opportunity looks, if it has too many fees, at the end of the day you might only be getting a quarter of your profit. To be safe, the first thing you want to do is check which one of these fees you will be paying and how much of your profit it will eat into.

These costs affect not only your final result but also the value and weight of your portfolio. Therefore, costs are a very significant factor to consider because they affect the overall performance of your investments.

Fees to Look out for in Investments

  1. Expense Ratios – Expense ratios are a reflection of the amount you pay for the administration, management, and distribution of your portfolio from your ETF or mutual funds.

  2. Brokerage Fees- Brokerage fees are charged when you make an investment. They are the fees collected by your broker for helping you to buy or sell your investments.

  3. Transactions Fees- Some investments can have transaction fees. Before investing in an investment ask if it has any fees to buy and sell the investment.

  4. Investments returns are often unpredictable, but even if you can’t control the outcome of your investments, you have control over the costs. Do your best to minimize the fees you pay, so that you can maximize your final outcome in the long run.

Another thing to note is that when you cash in on an investment that is in a non-registered account, you will automatically be owing the Canadian government capital gains taxes. Your Canadian capital gains taxes will be determined by how long you have owned the asset or investment. The longer you’ve owned an asset, the lesser the capital gains you will pay.

Entering into the investment sphere can be very hectic and confusing, but with the right financial advisor in Edmonton, you are guaranteed smooth sailing. You, too, can make well-thought-out investment moves and start enjoying the returns in a few years. Do not hesitate to reach out to us at DeHaan Private Wealth for professional guidance and assistance on Investments.

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