by H. A. van den Berg, BBA, MBA, PhD, Chartered Investment Manager ®
Three “Rules”
Simply remembering 3 RULES will get you started on a successful investment journey:
- SPEND LESS THAN YOU EARN
- DIVERSIFY YOUR INVESTMENTS
- THINK LONG-TERM
SPEND LESS THAN YOU EARN
- Always completely pay off your credit card balance, every month. There is no investment you can make that will provide the same no-risk rate of return
- Set up an automatic savings plan to provide discipline and increase your chances of achieving your investment goals
- Reinvest your investment returns. Take advantage of the “magic” of compounding – growing your investment portfolio exponentially
DIVERSIFY YOUR INVESTMENTS
- Invest internationally. Canada represents only about 2% of the global economy
- Invest across various Asset Classes (stocks, bonds, real estate, etc.) using diversified exchange traded funds (ETFs) or Index mutual funds (note that these will charge you higher management fees than ETFs)
THINK LONG-TERM
- Long-term means having an investment horizon of 10 years or longer
- Start today! The sooner you start, the sooner you can take advantage of exponential growth (compounding effect)
- Don’t worry about temporary drops in asset prices. In the long-run asset prices recover