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March 20, 2023


Investment information for the new generation

Top 7 Tips for the First Time Investor

I think academic brain power is wasted on the young. Allow me to explain.

Because I have chosen a profession that is essentially just committing to doing homework on a deadline forever, I think back in total awe about how prolifically studious I was as a high-schooler and my ability to read and retain multiple books, pump out 2,000-word essays, and design presentations all in a single afternoon. And for what? A fictional grade with no bearing on the real world? Absurd.

Of course, now when I desperately need that type of super-human focus to make actual money to support myself, it’s nowhere to be found. I need to be drugged with at least 2 coffees just to research an article, and even then, I’ll sometimes pause halfway to go for a walk – mental health comes first! I always say to myself. (Only to be met by my left brain telling me, a mental health walk doesn’t pay for your $9 almond milk chai lattes!). Though those too, I justify as a mental health purchase.

I think we’ve got something about the order of this stuff all wrong. I think we’ve got something about the order of most stuff all wrong in general – but that’s probably an existential breakdown for next week. All this to say, my TikTok-addled brain was never meant for this erudite adult life.

So, for myself, for my fellow distracted minds, and for my roommate who finally decided to subscribe to my newsletter after I’ve been screaming about financial literacy for 2+ years, I’ve decided to go back to the basics.

Here’s 7 tips for the first-time investor – Holiday Edition! (I’ve been drinking more wine than usual this month, so I expect no snide comments about spelling errors – everyone gets a pass in December).

1. Celebrating Channukah and Christmas

I have always defined myself as being culturally Jewish while celebrating Christmas and ignoring all aspect of religion. Every year for Channukah, I would get a chocolate or some similar treat for all 8 nights that you light the menorah. For Christmas, as the good atheist I am, I would get gifts under the tree.

All this to say, over the years, the doubling up made December an extremely profitable time for my 10-year-old self. And in financial speak, this metaphor is suggesting that you make the most of extra income if you have it.

Having investing and savings goals makes it easier to know what to do with extra income when it comes. Whether you get a raise at work, or want to make the most of your tax refund, there are a few places to put the extra:

  • Add to your emergency fund
  • Pay off debt (first and foremost people)
  • Add to your retirement savings
  • Contribute a little more to your long-term investing goals
  • Buy that $800 wool coat (this could also arguably be considered an investment)

You could mix and match these goals as you see fit.

2. Abuse Black Friday Sales

The overwhelm of “Don’t Miss Out!” adverts this year made my brain spontaneously combust and I ended up hiding in my house and reading a book to avoid the crazed holiday mobs. As I started gift shopping late last week and was forced to purchase items at the full-blown regular price I began to realize – I did it all wrong. The crazed holiday mob did it right. This is where having a plan comes into play.

Having a financial (or Christmas shopping) plan can sound complicated, but really only starts with a few simple questions:

  • What goals are you investing for?
  • How much will you need to put aside each month to reach your goals?
  • How much debt will you need to pay off, and when?
  • How much room do you have in your budget for saving/investing/paying off debt?
  • What kind of advisor support will you need to reach your goals?

Nothing is carved in stone (unless, of course, the silk shirt isn’t returnable). If your financial goals change, your plan can change too. Your plan should be specific and realistic. Include your risk tolerance, investment strategy, and when and how your portfolio should be rebalanced. If you check up on this plan every 3 months (even if your life is in shambles) I promise it will make you feel like an adult.

3. I want Mini Ugg’s, or I want nothing!

Think twice before choosing a trendy investment. Some investments become popular through the media, celebrity endorsements, or just because they are new.

While it might be tempting and comforting to go along with decisions of a larger group, be cautious about herd behavior. Just because an investment opportunity is trendy, doesn’t mean it’s the right one for you.

For example, there was a moment in my life where I seemed to think side bangs would work for me because they seemingly worked for Justin Bieber. Spoiler alert! They didn’t work for either of us.

4. Thoughtful gifts mean more anyway.

People who have “everything”, (and by everything, I mean mass amounts of money), are always the hardest to gift for. If they want something, they just buy it themselves. This is where the thoughtful gift comes in – a genre that I must say, I thrive in. Generally, a homemade something or inside-joke-trinket means more than a price tag (and if that’s not the case, you have bad friends).

This is a roundabout way to say, invest and spend within you means. If you’re a 110% at all times person, the outset of your investing journey may be unnecessarily aggressive.

Consider if you contribute large amounts to your investment accounts or RRSP, but haven’t left enough of your cash flow to put towards your day-to-day spending or short-term savings. In this case, you’ll end up having to dig back into your savings to cover expenses or rely on credit cards or loans which you’ll have to pay back later.

Keep your investing goals in sight while also investing within your means.

5. Listen to the Jazz version of all the Christmas classics instead.

Do you ever get sick of Mariah Carey (or dare I say Michael Buble’s) voices at this time of year? The same is boring. And this goes for your investment strategy as well.

Diversification means holding investments from a variety of different asset categories, industries, and geographies. It can help reduce the overall risk in your portfolio. Diversification is important because:

  • Not all types of investments perform well at the same time.
  • Different types of investments are affected differently by world events and changes in economic factors such as interest rates, exchange rates and inflation rates.

If your portfolio is not diversified, it will be unnecessarily risky. (You will not earn a higher average return for accepting the unnecessary risk).

6. No one wants to kiss an arrogant man, mistletoe, menorah, or otherwise.

In other words, be reasonable about your investing skills. Many investors overestimate their ability to “beat the market” by trading frequently. This can leave them with lower returns than if they just held onto a broad set of investments.

Overconfidence can include looking at information in a way that confirms our prior beliefs (any 1st year University Psych 101 girlies recalling confirmation bias?).

For example, during a bull market when investments generally perform well, we (and by we I mean typically men) might decide that it’s actually our trading decisions that are getting us higher returns. And during a bear market when investments perform poorly, we might blame the market, and hold onto our belief that we’re still good traders.

7. Cry over Christmas, not your investments.

The holidays are an emotional time for everyone and if you deny this you are either lying, need therapy, or are far too healthy to be someone I could relate to.

The financial world, however, has no place for your tears. Your investments should be guided by your long-term plan rather than emotions.

When markets tumble, it’s easy to let fear start taking over and be tempted to sell. Likewise, when markets are strong, feelings of overconfidence can lead you to take more risks than you might otherwise (this behavior is more prevalent in men than women which you can read more about here). If you’re feeling stressed about your investments, that’s often a sign to:

  • Check in with your financial advisor or aforementioned financial plan
  • Consider your level of risk tolerance
  • Take a long, deep breath
  • Spend $9 on an almond milk chai latte because mental health comes first!

Until the next.

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