How to be a better investor

by Ann deBruyn

A smiling woman looks at her laptop.

Photo by Tim Samuel from Pexels

For both beginner and experienced investors, focusing on a few basic guidelines can make the difference between good results and great ones. Whether you’re investing in a taxable account or a tax-sheltered account like a registered retirement savings plan (RRSP), doubling down on the basics can help you make better-informed decisions and reach your financial goals faster.

Set clear targets 

Instead of vague aspirations like “save more in 2022” or “grow my RRSP,” set specific goals you can quantify and track over time. Once you have a goal, you can break it down into the steps needed to get you where you want to be. If you’d like to max out your tax-free savings account (TFSA) this year, for example, what do you need to put in monthly or weekly to reach $6,000—and could you automate your deposits to help ensure it happens?

Online calculators can help you decide on what’s realistic for you. Explore different contribution rates, return assumptions and time horizons. In just a few clicks, you’ll have answers to questions like “How much do I need to save for retirement?” and “How will compound interest affect my investments?”

Reduce your risk with diversification

A well-diversified portfolio includes investments that do well in different market conditions, lowering your risk of losses. Gains in one security or asset class can offset declines in another. If you invest with Qtrade Direct Investing, for example, you can take advantage of features and tools like Portfolio Score, which evaluates your portfolio’s performance, diversification and risk exposures.

You can also compare your existing holdings to “what if” scenarios using the Portfolio Simulator tool. Add and remove securities to see how these changes can improve your score. And, if you need suggestions for what to invest in, try the Portfolio Creator tool, which generates a portfolio of exchange-traded funds (ETFs) based on your goals and preferences.

Grow your savings faster with registered accounts

Shelter your investments from taxation by using registered accounts:

  • registered retirement savings plan (RRSP)
  • registered education savings plan (RESP)
  • registered disability savings plan (RDSP)
  • tax-free savings account (TFSA)

Each type of account has specific rules, and if eligible, you can use these accounts to accumulate interest, dividends and capital gains tax-free. How much you’ll save depends on your tax bracket, the types of investments held and other factors.

If you already have registered accounts, shop around for a trading platform that adds value and saves you time with online tools, research and educational resources. Some platforms—including Qtrade Direct Investing—will reimburse some or all of your transfer fees.

Beware of emotional investing

Successful investing is driven by facts, not emotions, advise credible investing experts. Beware of pitfalls like loss aversion—holding on to losing investments to avoid the pain of selling them—or fear of missing out (FOMO), which drives otherwise sensible people to buy speculative investments with little or no research. Resisting the impulse to trade based on emotions will help you stick to your long-term plan and reach your goals.

One popular strategy to prevent emotional investing decisions is dollar-cost averaging: investing a set amount on a regular basis, rather than a large lump sum, regardless of market conditions. When prices are high, you’ll avoid the temptation to stay out of the market. And when prices decline, you’ll get more shares for your money, buying on dips instead of holding back in fear or hesitation. Over time, dollar-cost averaging minimizes the impact of volatility, and it could lower your average cost per unit.

Make investing a habit

The easiest way to stay on track with your investment plan is to set up automatic transfers to your direct investing account. With Qtrade Direct Investing, you can easily set up recurring contributions—say, every payday—from a financial institution to your Qtrade account.

Consistency is key. Even if the amounts are small at first, you’re building a habit of paying yourself first.

Arm yourself with independent research and powerful tools

When you make investment decisions based on independent research, you’ll be less vulnerable to emotional reactions to the markets and less likely to follow the herd during a bubble or panic. Platforms like Qtrade Direct Investing offer reports, ratings, pick lists and other resources. Qtrade offers research from Morningstar, one of Canada’s most respected independent investment research firms.    

You can test-drive Qtrade Direct Investing with a free 30-day trial. Signing up takes less than a minute, there’s no obligation and you’ll gain full access to its research, tools and educational materials.

More on investing:

  • How to choose an ETF
  • The MoneySense ETF Finder Tool
  • What rights do shareholders have?

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