Test your investment knowledge

19 January, 2017

Time to see just how smart you really are when it comes to investing. Do you know your investment IQ? Answer the following questions to find out. The explanations given following each question will hopefully help you to understand more about managing

Time to see just how smart you really are when it comes to investing.

Do you know your investment IQ? Answer the following questions to find out. The explanations given following each question will hopefully help you to understand more about managing your money.

Stocks, bonds and cash — most investors need all three

True. The vast majority of Canadian investors should have at least a portion of their wealth in each of these basic asset classes for diversification. How much of each depends largely on your personal circumstances – your age, your appetite for risk, your personal financial goals, etc. 

You don't need to be aggressive to make money in the stock market

True. In fact, taking on too much risk is one of the most serious error most investors make. Instead of thinking about risk after your investment has dropped 25% in value, think about risk first, and determine whether the investment you're considering fits with your personal risk tolerance. Always remember: your goal should be to protect your wealth as much as build your wealth.

I'm retired — stocks and equity mutual funds are simply too risky for my portfolio

False. Speculative, "hot stocks" and “hot mutual funds” or other risky investments probably don't belong in a retirement portfolio. But GIC’s and other "safe" investments probably won't return much after taxes and inflation, putting you at serious risk of outliving your portfolio. If you're looking to stay ahead of taxes and inflation – and you should be – you'll need to invest at least a portion of your portfolio in equities. Over the long run, a well-diversified, prudently managed portfolio of equities, bonds and cash will give you the best chance of sustaining your portfolio.

You don't have to be a financial genius to be a successful investor.

True — what you need is discipline – and a strong and capable financial advisor to keep you on the righteous path. The smartest investment ideas aren't worth much if you don't have the discipline to stick with them when volatility strikes. Don't let your emotions derail your long-term financial future. Understand your limit for risk, select quality investments, and determine solid buy and sell criteria that you can stick to no matter what the market is doing. 

ABC company has hit a bit of a rough patch. Eventually it will come back.

Maybe. Maybe not. Even quality companies can get caught up in a market downturn. But sometimes there's a good reason why a given stock is suffering. The fact is, you won’t know until you do some research and find out for yourself. Don't let your emotional attachment to an investment prevent you from doing what's right for your portfolio. If you realize you've made a mistake, far better to realize your error and sell rather than riding a loser all the way to zero. If you’re unsure whether you made a mistake, perhaps a visit to your friendly financial advisor will help you to objectively assess your situation.

When it comes to investing, professional advice is key

It's true. Even the most successful investors recognize the value of professional advice. Perhaps the most valuable aspect of working with a financial advisor in these circumstances is to have an objective sounding board. By working with a professional financial advisor, you can keep your portfolio strong and healthy in all kinds of market conditions. 

As always, please do not hesitate to communicate with the writer if you would like additional information on this topic. 

 

Joel Attis

joel@attiscorp.com

Joel Attis is a Senior Financial Advisor with AttisCorp Wealth Management and IPC Investment Corporation. Comments or questions may be submitted to Joel at joel@attiscorp.com, or he may be reached at 855-1155.

 

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