You wait for the perfect time - to change jobs, to move, to go back to school… to invest. Even though such a time may exist, you can easily miss out on the opportunity when it comes along and end up kicking yourself.
1. Time is precious
Perhaps you feel the need to review your investments in light of your fast-approaching retirement or, on the contrary, maybe you find your strategy isn’t aggressive enough. If you do business with several financial institutions, reviewing your investments may take longer than you think.
Not only will you have to make multiple appointments, but you’ll also have to repeat the process and answer the same questions each time: risk tolerance, state of your finances, future projects, etc. Doing multiple reviews can be time-consuming and tedious.
After investing their initial amount of $10,000 in 1987, they each saved $100 a month for 35 years, from 1987 to 2022, and invested it in the same mutual fund, but using three different tactics. Our three investors have gone through the same major crises: the stock market crash of 1987, the technology bubble of the 2000s, the financial crisis of 2008, the Covid-related correction of 2020 and the selloff of 2022.
*Calculated from the MSCI Canada Index. Source: FÉRIQUE Fund Management.
1. Periodic investment
If you save and invest systematically, the same amount will be invested regardless of what happens, and the acquisition of your investments will be independent of market fluctuations. In addition, periodic investing promotes discipline, which puts investors on track to achieve their goals.
2. Investment diversification
Diversification means you avoid concentrating your investments in the same asset classes. A well-diversified portfolio will be less affected by volatility and will stay true to the investor’s risk tolerance and objective. In addition, by maximizing compound returns, optimal diversification can help investors achieve their goals faster.
3. Portfolio rebalancing
The equilibrium of an investment portfolio is precarious because the market constantly fluctuates. This precariousness means that assets have to be rebalanced periodically to prevent the portfolio from deviating from its target. The main function of rebalancing is to preserve a portfolio’s risk-return balance, which prevents investors from departing from their savings strategy.
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The information contained in this article does not constitute an offer or a solicitation of any nature in any jurisdiction in which such an offer or solicitation would not be authorized or to any person to whom it would be illegal to make such an offer or solicitation. The information contained in this article does not constitute specific advice of a financial, legal, accounting or fiscal nature concerning investments. You should not act or rely on the information without seeking the advice of a professional.