Investing Basics Investment and Finance 12 Ms. Stewart getsmarteraboutmoney.ca

Five Steps to Plan Your Investment 1) Set your goals: - What are my top financial goals? - When do I hope to reach these goals? - How much money do I want to save?

Five Steps to Plan Your Investment 2) Find out what kind of investor are you: - How do I want to approach investing? - How important is it to me to keep my money safe? - How comfortable am I with the idea that I may sometimes lose money if I want to grow my savings faster? - How important it is to me to make a good return on my investments?

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

Five Steps to Plan Your Investment 4) Choose specific investments: - Once you know your asset mix, you can choose specific investments of each type. - Do a lot of research before you decide. Look at how an investment has done in the past and 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 Investment 5) Keep track of your investments: - Keep good records of your investments so you will know how well each one does. - If you have an adviser, check that he or she is following your investment instructions.

What kind of investor am I?  Investing is about choices. The choices you make reveal who you are as an investor. This is called your investor profile. To discover your profile, ask yourself these four questions:

How much risk is right for me? Higher risk means you may lose some or all of your money. Ask yourself:  Do I want the chance to make more money if it also means I may lose money?  Would I rather make less and keep my money safe

How much am I hoping to make by investing?  With some investments, your return takes the form of income as interest or dividends.  With others it takes the form of capital gains (or losses, if you sell an investment for less than you paid).  In most cases, to get a higher return, you have to take more risk

How long do I plan to invest for?  Time horizon is the number of years that you plan to invest. For example, saving to buy a house is a shorter-term goal. Saving for retirement is a long-term goal.  Investments that don’t guarantee your return are often better for a longer time horizon. Example: An investment like a stock mutual fund may go up and down in value. If you have to sell early because you need your money, you may take a loss. If you can stay invested longer, you may get a better return over time.

Do I need to get my money quickly?  How easy will it be to get your money back from an investment? This is called liquidity. liquidity  In most cases, when you give up quick and easy access to your money, you should expect a higher return. Example: Bank account deposits often pay less than if you lock your money into a Guaranteed Investment Certificate (GIC) for three years. They may also earn less than a mutual fund over time.

What mix of investments is right for me at my stage in my life? Deciding on the right asset mix is an important part of investing and planning for your future. Your asset mix should:  Help you balance risk with your expected rate of return on your investments  Fit your comfort level for risk  Enable you to get your money when you need it  Help you get the growth you need to reach your goals  Change as your needs and goals change over time

How does my stage in life change the way I invest?  Your age and life situation can play a big role in your choices. If you are about to get married, you might need your money to buy a home. If you’re in your 40s, you may be saving for retirement or your kids’ education.

Investment Pyramid

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

Middle Years  You may be earning more than ever, and you may also have a lot more responsibilities, including: - Children to support or help through school - Saving for retirement - Debt

Retirement Years  Older investors usually move their investments gradually over to safer guaranteed investments.  They want to protect their savings because they’ll need to live on their investments after they retire.  They may also prefer investments that create a steady, reliable stream of income.