Considerations before investing in meme stocks

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You may have heard or read about a series of select companies discussed heavily on social media and Reddit, surging in value seemingly overnight. Referenced as “meme stocks” in the news and online, these companies are a select but growing assortment whose significant growth in price is fueled by the excitement and hype generated on social media and online forums like Reddit, and may not always accurately reflect underlying fundamentals. While the idea of buying into these companies with the expectation of huge returns may sound enticing, there are a few things you should consider before investing your money.

FOMO can lead you to risk far more than you’re comfortable with

FOMO, or The Fear of Missing Out, is one of the most challenging obstacles investors can face, especially when investment opportunities are championed on social media by seemingly everybody. While some investors have made money from meme stocks, many others lost substantial amounts due to the volatile spikes and dips in their values. As concluded in the Stanford Encyclopedia of Philosophy, people have a strong tendency to want to avoid losses, and when it comes to investing, that can mean both wanting to get in on the next “big thing” or holding on to a stock that is losing significant value with the hopes that it will change. Before investing in any stock online, contemplate if you’re able to stomach a high level of risk and the possibility you may lose most or all of your money.

Investing in social hype instead of fundamentals can expose you to fraud

Investing in stocks can be a powerful tool to grow your wealth but requires you to do considerable research into the company, the products and services it offers, the experience of its leadership and the industry landscape it competes in. Doing your due diligence enables you to assess whether the company is legitimate, has the potential to grow in value and whether the investment is suitable for you and your risk tolerance.

Online forums for investors to meet up and discuss investment opportunities have led to a blend of both speculation, hype and in some cases, inaccurate analysis. Online forums and social media can also quickly become an echo chamber of a particular positive sentiment towards a stock with little or no fundamental business reasoning. This can result in wild swings of the stock’s price that make it virtually impossible to make sense of the stock’s real value as it no longer corresponds to the company’s performance.  While not all investment opportunities hyped up on social media are fraudulent, scam artists also use this avenue to promote fraudulent investment scams to excited investors.

When it comes to your investing strategy, never let social media channels be your sole source for investing information and research. Before investing in any company, research its fundamentals and legitimacy to avoid the heartache of an unsuitable or, worse yet, fraudulent investment.

Investing in meme stock can derail your investment objectives and financial plan

Developing a financial plan and objectives for your investments is an important first step for any investor. By considering your age, life goals, time horizon, and level of risk tolerance, you can develop a meaningful plan of action that may combine various securities like exchange-traded funds, mutual funds, and stocks to meet your goals. While helping you achieve your goals, a financial plan also helps you evaluate any new investment opportunity against those goals.

Meme stocks are a relatively new phenomenon that can quickly derail your financial plans if you let them. The hype of massive returns echoed by other investors online can blind you to the age-old fact that high returns in the investment world come with higher risk. The speculative nature of these investments and the hype that social media brings to them does not guarantee wealth. If you plan to incorporate meme stocks into your financial plan, seriously consider if you can absorb a loss of some or all of your investment.

The foundation for long-term investing success relies on the core concepts of diversifying your investments, maximizing the power of compounding interest and always sticking to the right level of risk for you. With the rising popularity of meme stocks, it may sound like an appealing way to start investing or a relevant strategy to integrate into your financial plan, but it could end up doing far more harm to you than good.

Learn about the factors to consider when investing in meme stocks →

 

 

Understanding investment accounts

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Just as it’s important to select the right type and mix of investment products (e.g. cash equivalencies, fixed income securities, equities and investment funds) to meet your financial goals, so too is choosing the appropriate type of account to hold them in. Understanding the different types of accounts available to you can help you maximize your gains and reduce the amount of income taxes you owe. 

You can use several types of investment accounts in Canada that are broadly categorized as either “registered” and “non-registered”.

Non-Registered Investment Accounts

Non-registered investment accounts are the most flexible, with no restrictions on how much you can contribute or withdraw. They can be opened at any financial institution or registered firm.

Interest income in a non-registered account is fully taxed at your marginal tax rate, with some special considerations for dividends and capital gains. Dividends are taxed based on the province you live in, while capital gains and losses are calculated on a net basis with taxes at your marginal rate paid on 50 per cent of its value. While this account may seem like a logical first step for new investors, it’s worth understanding the benefits and characteristics of registered accounts before opening a non-registered account. In order to learn more about the different investing accounts available to Canadians, visit CheckFirst.ca and the Government of Canada website.

Registered Investment Accounts

Tax-Free Saving Accounts (TFSAs)
TFSAs, launched in 2009, have unique features that allow you to shelter your investment gains from most taxes. Without the tax implications found in a non-registered account, investment gains in most cases can be fully realized once withdrawn. As a result, TFSAs are becoming increasingly popular among Canadians.

Another unique feature of TFSAs is the contribution room limit. Every year the Canadian government provides additional contribution room to all Canadians. If you were 18 or older in 2009, you are eligible to contribute the full amount of $75,500; if you were younger than 18 in 2009, your contribution room would have started when you turned 18. For the 2021 tax year, every Canadian 18 and older received an additional $6,000 contribution limit in their TFSA. It’s important that you don’t over contribute to your TFSA however, as the excess amount will be subject to a one per cent per month penalty tax.

Registered Retirement Savings Accounts (RRSP)
RRSPs were introduced to Canadians over 60 years ago in order to encourage and reward them for building a nest egg for retirement. By using them strategically, they can benefit you now and in your retirement. For example, contributions you make to your RRSP allow you to reduce your income tax in a specific year by your marginal tax rate applied to your contribution and, if contributions are invested, can even grow tax-free. Additionally, you can use the money in the RRSP account to purchase or build a first home (Home Buyers Plan) and for post-secondary expenses (Lifelong Learning Plan) tax-free if paid back within 15 years. Once you retire, any withdrawals from your RRSP will be taxed at your retired tax bracket, which in theory should be lower than when you contributed during your working years.

While an RRSP can help you grow your wealth for retirement, special rules do apply. You may only contribute up to 18 per cent of your earned income from the previous year, and if you withdraw funds from the account early, immediate withholding tax is applied and your contribution room is permanently reduced. Once you reach 71, your RRSP is automatically converted to a Registered Retirement Income Fund (RRIF) and you can no longer contribute to the account. Instead, you must withdraw a calculated amount each month, which will be taxed at your marginal tax rate. If you withdraw more than the allotted amount, you will be subject to the same withholding taxes as if withdrawn prior to retirement.

When it comes to investing, where you invest is just as important as what you invest in. With a better understanding of the different accounts and their unique benefits and downsides, you may find that one or a mix of different types of accounts can help you better realize your financial goals and grow your wealth for retirement.

How financially fit are you?

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The New Year has arrived and while health and fitness resolutions easily come to mind, have you considered how financially fit you are? Undue stress from your finances can have a negative impact on your health and wellbeing, but there are several actions you can take right now. Check out our tips to help set out your 2021 financial goals on the right foot!

1. Review and refresh.

Blue Monday gets its name for a reason. The holiday cheer has worn off and your first post-holiday credit card statements have arrived. Check what you spent against your budget and make a plan. The New Year is a fresh start and you can take this opportunity to assess your budget, revise your financial goals and create a plan to repay any debt. CheckFirst offers a wide variety of calculators, quizzes and worksheets that can help you evaluate and set your 2021 budget no matter where you’re starting.

2. Don’t let new goals overwhelm you.

If you’re setting out with new investment goals in 2021, don’t let them consume you. It can be easy to get lost in the sea of investment options, unfamiliar language and complex mathematical equations by yourself. If you’re looking for a crash course in investing that’s taught in plain language and easy to digest, consider the wealth of resources, quizzes and videos at CheckFirst.ca so you pick the right investments for you and your financial goals.

3. Find the right fit. 

The root cause of financial stress can often be linked to a lack of information. If you aren’t working with a financial adviser, take some time to consider it. A relationship with the right financial adviser can help make you a more informed investor who is comfortable with their investment decisions. Before you work with anyone new, always be sure to check their registration and ask key questions to make sure they are right for you. With few exceptions, securities industry professionals are required to be registered with the securities regulator in the jurisdiction where they conduct business. Registration helps protect investors because securities regulators will only register firms and individuals if they are properly qualified, helping you to rest easy.

4. Break up with bad relationships.

Another big source of stress can stem from distrust in your investments or financial advisers. This year, once you’ve evaluated your finances and goals, don’t be afraid to end relationships that aren’t working for you. If an investment, financial partner or financial adviser isn’t providing what you need to feel comfortable and successful, don’t be afraid to speak up. Remember, they’re supposed to work for you.

5. Nothing is set in stone.

While goals can help you clearly define where you want to be, the path to get there isn’t cut and dried. Don’t be afraid to pivot on your financial plan, or change direction throughout the course of 2021 as needed. Your finances should be arranged so as to help you achieve your goals. If something is bringing you undue stress, now is the time to change it!

As you embark on your financial journey in 20121 don’t forget to visit CheckFirst.ca for free, unbiased resources. Wherever you are in your investment journey, CheckFirst is your go-to website for financial knowledge and investing wisely.

 

Back to School – Not Just for Kids

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The air is crisp and the leaves are changing colour. While some things have stayed the same – the end of summer and the start of school – others have drastically changed. The COVID-19 pandemic has certainly impacted us in ways we could never have imagined.

Many of us are juggling the needs of work and our family, others may have spent a bit more than anticipated over the summer, or are having to pull the belt tighter due to changes in employment. Most of us have had to make choices that affect the amount of money we have brought into our household. Whatever your situation, the good news is that fall is a great time for you to “go back to school” by reviewing your financial situation and increasing your financial knowledge, which can help you stay on track for the rest of the year. Here are some tips to get you started:

Review your budget.

Over the summer, budgets tend to slide. The fall is a good time to review the budget you set earlier in the year to make sure you are still on track to achieve your personal goals. Look back at receipts and financial statements to see your family’s spending pattern, then account for any new or anticipated expenses. Ask yourself the following questions: Are you saving what you had set out to? Are you able to pay down debt? What is your cash flow situation?

While you’re at it, take some time to outline how you will manage your finances for the rest of the year. With the holidays around the corner, factor this into your budget and consider emergency funds for any big-ticket items that could pop up, such as car or home repairs. By knowing where your money is going, and living within your means, you take control of your spending and reduce your stress.

Review your financial statements.

It’s easy to allow financial documents like bank or investment statements to pile up unopened. Take the time to open all your financial documents and review your statements. Be sure you understand the investment fees you’re paying, and how your portfolio is performing. Be sure to note any questions you have for your financial planner or investment adviser. Follow up if there are any changes to your accounts or new investments that you do not recall making.

Study up to increase your financial knowledge.

Start by identifying where you may have gaps: there are many places online, such as CheckFirst.ca, that offer quizzes to help you gauge your knowledge. Start with the Investing Basics quiz – it is a good general overview of investment fees, financial planning, risk tolerance and the legitimacy of investment offers. Commit to improving your financial knowledge in the areas you find challenging. While money-management and investments can feel confusing, there are many reputable resources available to help you.

Talk to a financial adviser.

If it all seems overwhelming and you’re not sure how to manage your finances, a professional may be able to help and identify areas for improvement. If you have a financial planner or investment adviser, reach out to them for a check-in to discuss your questions or concerns. If you don’t have an adviser and want one, consider meeting with a few individuals to see who might be a good fit for you. If you can’t afford to hire one right now, speak to your current banking institution. Banks have obligations to their consumers and should be willing to talk to you about your situation. Before meeting with them be sure to check their registration and learn how the adviser or bank are getting paid.

Set Goals.

Just like in school, setting achievable goals will help you conquer that next milestone. Pay off debt? Save more money? Put away for emergency fund? These are great goals but in order to be successful in meeting them, goals need to be specific, realistic and measurable. Instead try “Pay off $3,000 of debt by the end of 2021” and map out how you will do it.

Be flexible.

School today is very different than last year, and you can think about your finances in the same way. Situations change, and as they do, adjust your financial plans, budget and goals accordingly.

A bell isn’t going to ring to let you know you need to learn more about your financial future; it’s up to you to decide when to head back to school and build your own financial know-how. We might not know what the year will bring, but being proactive about our financial knowledge and planning for the future may alleviate some stress. It may just help you sleep better at night and give you one less thing to think about as you tackle all the other demands in your life.

For more information on increasing your financial knowledge, making wise investments, learning about budgeting, how to check registration and how to talk to a financial adviser visit CheckFirst.ca. It is chock-full of helpful tools and resources.

What to consider before day trading

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The number of novice investors day trading has surged during the coronavirus pandemic. People stuck at home have turned to playing the stock market on trading platforms with the hopes of big returns on their investments. While it has made some savvy investors rich, day trading has left many others with massive losses and in worse financial shape than before.

Day trading is risky and different from traditional investing. Day trading involves rapid buying and selling of securities to take advantage of small movements in prices. As a day trader, hedging your bets across a variety of day trades comes with inevitable losses on some trades and gains in others, with the goal of ending the day in the green. Day trading isn’t for everyone, and it takes a particular type of person to ride day trading’s rollercoaster of volatility day-in and day-out. Most individuals do not have the wealth, the time, risk tolerance or the temperament to make money and to sustain the devastating losses that day trading can bring.

If you are considering day trading, make sure you understand its dangers:

Huge risk – losing money is part of day trading.

Don’t enter into day trading if you don’t have the money to lose and you don’t have the flexibility to sustain losses daily across multiple trades.

Quick wins don’t guarantee future success.

Be careful of unfounded confidence and emotional decisions – each trade is unique and a huge win one day could be a loss the next.

Be prepared to treat it as a full-time job.

Day trading is time-consuming – to be successful, you need to have the self-discipline to view it as a full-time job and conduct ongoing investment research and monitoring.

Watch out for claims of easy profits, hot tips or expert advice

Relying on investment advice from day trading firms or platforms, websites, social media like TikTok or charismatic day traders can be dangerous as they may be seeking to gain profit from their recommendations. Don’t believe any claims without checking sources thoroughly.

Remember that seminars, classes and books about day trading may not be objective.

Find out whether anyone offering advice about day trading stands to profit if you start day trading.

Beware of easy training sales pitches.

Day trading training systems are heavily marketed to make it seem like an easy, safe, fun way to make money. These commercials leave out details about the pressure, the importance of researching and testing, and the high levels of risk.

 

If you recognize this and are still determined to try your hand at day trading, make sure you do the following:

Understand the risks and then choose whether this type of investing is right for you.

Know yourself as an investor, your risk tolerance and your financial goals before you decide to day trade. Take our Check your risk tolerance quiz to see if day trading aligns to your investing style. > Go to quiz

Learn all you can about investing and day trading.

In order to increase your chances of success, you need expertise, so read and research all you can on it. Day trading is not ideal for those new to the investing world.

Assess if you have the right personality and discipline 

You need long-term dedication, a focused mindset and the ability to ride the stressful highs and lows of the day trading roller coaster.

Only invest what you can afford to lose.

Day traders typically suffer severe financial losses in their first months of trading, and many never attain profits. Set aside a set amount and don’t get caught up in the hype or panic to invest more as a way to make up losses. Think of it like gambling in Las Vegas – it’s never a good idea to double down at a table when losing. Get up and walk away.

Research a good trading system, and keep at it.

Day trading requires a lot of self-discipline and trust in your trading system and algorithms. It is more complicated than just following a hunch. If you don’t have a system and manage risk, you are more likely to lose money.

Day trading requires expertise. If you do decide to pursue it, do your homework, and develop a financial plan to ensure it’s the right approach for you. Remember, all day trading firms must be registered, visit CheckFirst.ca to check the registration of any firm or call 1-877-355-4488.

5 Steps to Manage Financial Stress

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We are living in challenging times and every day Albertans face the unprecedented combination of economic uncertainty, ongoing COVID-19 dangers, volatile stock markets, a shaky job market and rising costs of living expenses. In a recent national poll by FP Canada[1], more than forty percent of people in Alberta ranked money as their biggest cause of stress in life and more than half said the pandemic had impacted their finances.

Financial stress can impact your health and relationships, while negatively affecting how you approach money and planning for your future. The good news is that you can take control and do what’s right for you. By taking these five steps you can reduce your stress level, optimize your expenses to weather the storm and avoid unwise investments.

1. Start with your budget

When it comes to your finances, there is no better ally than your budget in order to understand where your money goes and give you a plan of action that can relieve stress. If you don’t have a current budget or know how to make one, visit CheckFirst.ca  to build your own. Compare the money you bring in to the house, and your expenses. Consider looking for areas where you can reduce unnecessary costs and make a few changes if you’re spending more than you make. For example, maybe you can take that step you always talked about and cut your cable or stop using food delivery services and cook at home instead. Once you have built your budget, make sure you review it at the end of each month to stay on track. Take note though, a budget isn’t a dream scenario – use real numbers and take action based on what you learn.

2. Establish or strengthen your emergency fund

Unforeseen events happen. Whether your hot water tank goes on the fritz or you unexpectedly lose your job, unwanted expenses can strike when you least expect them. Saving and protecting emergency funds are a great way to hedge your bets against these unforeseen circumstances and avoid the financial impact and stress that can occur. A solid budget includes dedicating some of your income to an emergency fund. Open a separate savings account, ideally one with a decent interest rate and low or no fees, and start automatically contributing what you can. Even $40 every two weeks can net you $1,000 in savings within a year – the key is to consistently save the amount you are comfortable saving, no matter how small.

3. Defer payments

You are not alone in feeling the financial stress of COVID-19. Many Albertans are facing unprecedented challenges, which has made meeting financial obligations like paying mortgages, utilities, and other monthly expenses more difficult. Fortunately, many businesses, banks, service providers and municipalities recognize this and are providing payment deferrals for up to six months to help ease your financial stress. If you’ve reviewed your budget and removed all unnecessary spending, your next step is to identify bills that may qualify for a deferral. Try and pinpoint the smallest bills you can defer that will help you balance your budget.  Just remember that deferred payments still have to be paid – they do not cancel or eliminate the amount owed, but instead put them on hold to give you time to either grow your income, or further reduce your expenses.

4. Consider using an investment adviser or planner

Sometimes calling in an expert is a necessary step to help reduce the stress you might be feeling about your financial future. If you have investments, you are not alone in worrying about the volatility of the stock markets and the rapid changes in your portfolio. Making an appointment with a registered financial adviser or planner and seeking their knowledge and guidance can be a great way to review your investment portfolio against your financial plan, ensure you’re staying on track with your goals, and make any adjustments as needed. Learn how to ask the right questions and check the registration of your investment adviser by searching “Choosing the right financial adviser” on CheckFirst.ca.

5. Beware of “get rich quick” opportunities

Current economic conditions create a breeding ground for fraudsters looking to capitalize on the fear and vulnerability of hard-working people trying to make ends meet. Fraudsters use economic uncertainties and current trends to sell COVID-related investments, forex trading work-from-home opportunities, and too-good-to-be-true offers with the sole purpose of stealing your money quickly and efficiently. If you’re approached with a red flag of fraud such as an investment opportunity with the promise of significant returns with little to no risk, you could be dealing with a potentially fraudulent investment that could make your financial situation worse. Don’t make rash decisions with your money. Learn more about the red flags to be wary of, and always check the registration and disciplinary history of the individual or firm offering you any investment at CheckFirst.ca

Financial stress is an overwhelming reality for many households across Alberta. Take control of your financial security and relieve stress by taking action through these five steps. Visit CheckFirst.ca for free, unbiased resources to empower you through every step of your investment journey, detours and all.

[1] Seto, Steve, Financial stress biggest concern for Albertans during pandemic: survey, 660 News, Jul. 13 2020.

Buying in the dip: What to consider when investing during an economic downturn

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You may hear the investing motto “buy the dip” being used a lot these days. This phrase refers to looking at economic downturns as lucrative investment opportunities – one that can bring you significant gains by buying investments at reduced prices. While the idea behind the motto certainly seems exciting for investors, the truth is that there are many considerations and risks to weigh before buying the dip in today’s economic climate. If you are thinking of investing during this time, consider the following beforehand to ensure you make wise decisions that meet your financial goals.

 

Have you considered whether the money you invest is money you can afford to lose?

Many Albertans are impacted by the economic downturn in their immediate day-to-day lives with reduced working hours, less income and even job loss. Over the long-term, this may affect current retirement accounts and future retirees’ ability to save. If you are looking to invest money with the hope of covering your bills or building back your retirement fund quickly, you could be setting yourself up for unsuitable investments and even potentially fraud. Review your current financial situation against your financial plan and consider whether the money you want to invest is money you can afford to lose, should the investment not turn out as expected.

 

Are you in the right head space to be investing?

Emotional investing spurred on from fear of missing out or not having enough money to meet your needs is dangerous as it can quickly expose you to unsuitable investments and fraudsters. Removing the emotional component from investing is hard, but by analyzing the investment against your risk tolerance (how willing and comfortable you are to the risk of losing your money on an investment), the risks of the investment, your financial plan and investment strategy can help you see the opportunity clearly and determine if it is right for you.

 

Have you considered the significant market risks?

We are living through unprecedented times. Rapid market volatility over the past few months has resulted in some of the sharpest declines and gains in the history of many stocks and indexes. While governments worldwide try to stem the impacts of COVID-19, the fact remains that no one knows what the market will look like tomorrow or over the next while. The investment world is full of speculation on when and how things will turn around. With this in mind, make sure you research the investment you are considering. Check to make sure the person selling the investment opportunity is registered to do so; investigate the validity of the product, solution or service that you are considering investing in; understand what the opportunity is offering; and, ensure you are comfortable with its risks.

 

Have you considered whether the investment opportunity you’re interested in is fraudulent?

When it comes to economic downturns, many fraudsters capitalize on the uncertainty, fear and financial strain that people experience to gain their trust and then to sell them false investments. Watch out for red flags. Anyone offering you an investment opportunity with the promise of significant returns with little to no risk is a major cause for concern. If it sounds too good to be true, it probably is. Make sure you always check the registration and disciplinary history of the individual or firm offering you the investment at CheckFirst.ca or call the Alberta Securities Commission at 1-877-355-4488.

This global economic downturn is bringing a lot of uncertainty and panic. While mottos like “buy the dip” seek to bring a positive outcome, you should never let fear or the expectations of great returns cloud the proper assessment of any investment opportunity. By taking deliberate actions with your investments, based on your risk tolerance and research, you can stay true to your financial plan and navigate the uncertainty of today’s investing market.

STOP! Steps to take before saying yes to an investment

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When it comes to new investment opportunities, it’s hard not to be excited about the potential of significant returns on your money. While it’s ok to be excited, researching the investment and the individual or firm offering it is crucial to avoiding painful and avoidable losses.

In a recent Investor study commissioned by the Alberta Securities Commission, it was noted that many Albertans spend more time researching cars and vacations than researching investments. Only 47% of Albertans did two or more hours of research on their last investment versus 69% with two+ hours of research on their last vacation, and 79% the last time they bought a car. Considering your hard-earned money is at stake, spending more time investigating your investment opportunities is worth its weight in gold.

You can make wise investment decisions and, more importantly, protect yourself from fraud by following these easy steps:

1) Check if your financial adviser or firm is registered

Verifying that the registration of the individual or firm offering it to you is legitimate is an essential first step when considering any investment opportunity. By law, most security industry professionals and firms are required to register with the securities regulator in each province or territory they do business in. Registration helps protect investors like you from investment fraud as it signifies that the person or firm is recognized as being properly qualified and compliant with investor protection laws.

But remember, while registration can tell you if an individual or firm can offer and sell investments, they cannot guarantee their performance or success with your money.

2) Review the investment against your financial plan

When buying a vehicle, there are many different factors to consider from the number of passengers it can hold to the cost of maintenance and safety. Investments are no different and no one investment is suitable for everyone.

Create or review your financial plan that maps out what you’re looking to achieve with your investments. Saving for retirement? Investing for a down payment on a home? Along with your risk tolerance and willingness (the amount of money you are able and comfortable potentially losing ), your future goals and their associated timelines are all relevant details to consider before saying yes to any investment opportunity.

3) Understand what you’re investing in

Diversifying your investment portfolio across different industries is a great strategy to try and minimize any potential losses. When it comes to choosing investments, it is also critical to conduct research to understand the market, company, business and investment opportunity, and ensure it is credible. This is especially important in the fast-moving and volatile technology industry and emerging industries like cannabis and cryptocurrencies.

Conducting research also helps protect yourself from fraud. Scam artists often rely on investing trends to grab your interest and try to dissuade you from doing research that will quickly show the scam for what it is.

4) Know where to go for help

When it comes to investments, it is beneficial to walk through it with someone who is not involved. Lawyers and advisers can help you review the opportunity and identify details you may have missed, including unsatisfactory fees and even potential fraud.

A clear red flag of fraud is if you’re told to keep an investment opportunity secret. Scam artists use this tactic with the hopes that no one will call out anything suspicious. No credible adviser or firm should ever encourage this; if this situation happens to you, contact the Alberta Securities Commission and discuss it with a specialist.

Don’t let expectations of a great return gloss over the risks of any investment. Just as you take the time to thoroughly review a new car to ensure it’s not a lemon or plan the activities you want to do on your upcoming vacation, investments need the backing of proper research and planning to avoid potential negative results. With these four steps, you can make safe, suitable and informed investment decisions for your future.

 

 

Choosing the right financial adviser

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Just as picking the right opportunity for your money is important, choosing a financial adviser that’s registered and matches your needs is critical when it comes to wise investing. A good financial adviser may help you manage your wealth and build a sustainable future based on YOUR risk tolerance, goals, experience and stage in life. As a key member in your investment journey, here are four questions to ask when looking for the right financial adviser that matches your needs.

1) Are you registered?

The first step any investor should take when looking for a financial adviser is to ensure they are legally allowed to be trading or advising in securities or managing investment funds. By law, individuals who are trading and advising in securities, including stocks, bonds, mutual funds, and ETFs, must be registered with the provincial or territorial securities regulator of the province in which they are doing business. Registration may help protect investors from investment fraud because securities regulators will only register firms and individuals that are properly qualified. Albertans can easily determine whether their financial adviser is registered by visiting checkfirst.ca and checking the registration of any individual or firm that is in the business of trading or advising in securities or managing investment funds, as well as if they have a record of any disciplinary actions.

2) How are you paid?

There are a variety of ways financial advisers are compensated, including salary, commission, flat fees, or a combination of these methods. When a financial adviser is paid by salary, the cost of their advice is included in the prices of the products you buy, whereas others may charge an hourly rate or a percentage of the assets in your account. As an investor, you have the right to obtain disclosure on how your financial adviser is compensated, as well as any costs paid to the registered firm associated with your account. This information may allow you to properly assess if a financial adviser meets your investing budget and help you avoid unwanted fees or charges.

3) What kinds of products and services do you offer?

Not all financial advisers offer the same products and services or have the same levels of expertise. While some can offer a wide range of options, others may specialize in only certain kinds of investments and only deal with clients who have certain levels of risk tolerance. If you are new to investing, working with a financial adviser that offers fewer products and provides more guidance may be more helpful. If you are a more experienced investor, you might want an adviser that offers more products and allows you to customize your portfolio.

4) How will you help me reach my goals?

Your goals from investing are unique to you alone, and no one investment portfolio will work for everyone. Before working with you, financial advisers should understand whether your investments are for financial security, income, long-term growth or something specific, such as retirement. Additionally, financial advisers will ask you about your financial situation (including your stage of life and any big expenses you might have coming up, such as a house purchase or paying for a child’s university tuition), investment knowledge, and risk tolerance. It’s important to be honest with your financial adviser so they can make recommendations that are appropriate for your needs. And remember to ask questions about anything you are not comfortable with or are unsure about.

Overall, take your time when choosing your financial adviser because this decision may be just as important as the investments themselves. Remember: financial advisers are working for YOU. By conducting the proper research and asking the right questions, you can ensure that you are working with a financial adviser with the expertise, products, services and fees that best align to your needs in order to meet your financial goals.