3 tips from my financial planner to become a better investor

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• I have been working with my financial planner since 2017.
• I asked her for her top tips on how to become a better investor.
• She said to keep risk tolerance in mind, weigh all options and exercise due diligence.

Even though I have worked in financial literacy for years, I know there is still more to learn about money.

Since 2017, I have been working with my financial planner Liz from New School of Finance Inc., a pure financial planning advisory firm based in Toronto.

To become a better investor, I asked her for her top three tips for anyone looking to build wealth.

1. Know your risk tolerance

About a year ago, I increased the risk factor on my retirement plan for the second time in a row. I made this change because my time horizon for using these funds is long. In a way, I’m diving into slightly more aggressive investing as a form of exposure therapy.

The most important thing when it comes to risk tolerance, according to Liz – aside from the emotional, psychological part – is your schedule for using that money and how rigid that schedule is. The shorter your time frame, the less risk you want to take with your investments. “In general, the longer or more flexible your schedule is, the more risk you can take,” she said.

For long-term investments (over 25 years), the performance of comparable conservative and aggressive portfolios is very low. In the short term they can look very different, but in the long term things tend to average out.

The risk factor is most important when your time frame is tight – when you plan to use the money soon. “We really need to be clear about how much risk you can take if you plan on using this money soon,” said Liz, “but if your timeline is long, it’s actually less important than you might think.” Whether you’re investing really aggressively or really conservatively – so it’s better to just trust your gut.”

If you’re going to use the money in less than five years, you may want to keep it out of the market entirely and use an interest-bearing option like a high-interest savings account or CD.

2. Explore your investment opportunities

When I first started investing, I was actively managing funds at one of Canada’s big five banks. I switched to robo-advisor investing fairly early on to save on fees. Now all of my investments are in robo-advised accounts. I’m uncomfortable paying someone to actively manage my investments or try to beat the market because no one has a crystal ball.

Many financial institutions offer robo-advisor services, from large brick-and-mortar banks to smaller online banks. Robo-advisors can be a good option for people who want to invest and are “not interested in the traditional active management investing style,” Liz said. “They want passive index investing at low fees, and they don’t feel compelled to necessarily have a dedicated advisor. They feel comfortable using an online platform.”

“People generally seem to have a lot more investment knowledge than they did five to 10 years ago,” she continued. Millennials and Generation Z customers in particular come to her after doing a lot of research and having an idea of ​​what they want to do, but they want to speak to a professional first.

3. Do your due diligence

Our conversation revolved around the wild world of social media, AI and fake news. While I agree with financial empowerment and the role social media plays in making financial information more accessible and breaking taboos around money, I am wary of false information.

We spoke with equal amounts of curiosity and caution about the rise of the “finfluencer.” There are some real benefits when it comes to improving access to financial information: Access to financial information is no longer controlled by large financial institutions. But “it’s important to always take a critical look at what you consume,” Liz said. There is misinformation out there. Proceed carefully and ensure you use credible sources.

Remember that the information you find online is not tailored to you and your life. As Liz said, “Something may be true, but it’s not right for you.”

It can be difficult to know what is right for you when someone is trying to sell you something. It’s okay to go to your bank and ask what investment products might be right for you, but Liz recommends doing your research first. “You probably wouldn’t walk into a car dealership and say, ‘What should I buy?'” she says. Instead, ask yourself: Who am I talking to, what role do they play in this and what part do they have in it?