Principles of Smart Investor

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– Know yourself
We all have different investing goals and different time frames for achieving them. Some are short-term, like saving for a vacation or a car, while others are long-term, like retirement. In addition, every investor has a different comfort level with investment risk.

While risk sounds like something to avoid, there can be an upside greater risk that may offer greater rewards over the long term. Finding a balance between risk and reward that you’re comfortable with and appropriate for your investment time frame is an important first step to successful investing.

To better understand yourself as an investor, consider your: risk tolerance, investment knowledge, investment objectives, gross annual income, approximate net worth, and investment time horizons.

– Get an early start
Taking advantage of the effects of “compounding” is one of the best ways to make your money work for you. Compounding is money multiplying itself by earning a return on the return.
The mix of investments within your portfolio is also known as your portfolio’s asset allocation. A diversified portfolio typically holds a combination of savings, income, and growth investments.

– Invest regularly
It is generally much easier to develop a smaller amount to invest monthly or weekly than to make a large, lump-sum contribution. A regular investment plan allows you to choose when and how often you make contributions, ensuring you make investing a priority.

Investing smaller amounts in mutual funds over time or “dollar-cost averaging” can mean lower average costs than if you make infrequent purchases. For example, your money will buy more units of a mutual fund when prices are down; and fewer units when prices are high. Provided the fund gains in value over the long term, you will profit from your purchases during short-term price declines.

– Build a diversified portfolio
Spreading your assets across a wide range of investments is an effective way to reduce risk and increase potential returns over the long term. Holding a mixture of different types of investments will help cushion your portfolio from downturns, as the value of some assets may go up while the value of others may go down.

– Monitor your portfolio
It would help if you examined your investment portfolio with a CIBC advisor or on your own at least once a year to ensure that it continues to meet your needs. Market conditions, life events (marriage, children, and retirement), and changing goals are cues to review your portfolio.

– Align your investments with your time horizons
The type of investments you choose will depend on whether you are saving for long-term or short-term goals. For your long-term goals, you may want to consider long-term, growth-oriented investments. Your short-term goals call for assets that are more conservative and more accessible.


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