Bonds and GICs tend to be on the safer side, whereas stocks are more volatile, meaning the ups and downs could be concerning to investors. Stock investors generally need to have a long time horizon. Either way, generally a sound strategy is to have a mix of stocks and bonds to balance out your risk. Having many eggs in many baskets will help to provide diversification, so that any impacts will be softened and won’t affect your bottom line.
4 questions young investors often ask
1. Should I buy dividend stocks?
Personally, I’m a big fan of dividend stocks because it’s a predictable way to earn income. Simply put, dividends are regular payments of profits distributed to shareholders. Let’s say, you owned Canadian bank stocks. Every quarter, you would receive an amount of money per share that you own. You can also enroll in a dividend reinvestment plan (DRIP) which takes those dividends and reinvests them by purchasing additional shares of the same company. Some enthusiasts keep track of their dividend income and take time to grow it. Some have the goal to live off their dividends during retirement.
2. Should I buy bonds?
Traditionally, bonds have been a low-risk investment because they tend to generate lower returns compared to stocks. Although bonds haven’t shown stellar results in the past few years due to interest rate increases (bonds go down when rates go up), it shouldn’t deter investors from adding them to their portfolios. In the long run, bonds help minimize the risk and provide stability when the market goes through a downturn. Plus, the interest rates are now more attractive.
3. Are mutual funds good for me?
Mutual funds have been very popular among investors for the past several decades. The good thing is a mutual fund can hold many companies in one fund. However, ever since index funds and exchange-traded funds (ETFs) made it onto the scene, it now means that you can buy very similar diversified funds but for a fraction of the cost. That’s why mutual funds have been given a bad rep lately because they are known to have high fees that may not leave much return for the investor. Active mutual fund fees are generally higher than index funds and ETFs because they require a larger team and more research into which stocks to buy and sell than a passive option. If you’re looking for diversification and a simple way to invest in ETFs, a good solution is to consider all-in-one ETFs.
4. Are REITs worth it?
A real estate investment trust (REIT) is a company that owns and may operate income-producing real estate or real estate-related assets. There are a few advantages when it comes to owning a REIT. First of all, it gives you access to invest in the real estate market without having to own physical property. Second, it provides a low barrier to entry since it requires significantly less cash since you are one of many investors owning the real estate. Lastly, this type of investment is a much more hands-off approach compared to being a landlord or real estate agent. REITs can also provide diversification and help to reduce overall risk.
Investing is a lifelong journey
Everyone’s investing journey is unique. Just because something works for a close friend, family member or a “finfluencer,” it doesn’t mean that it’s best for you. Choose the path that makes sense for your financial needs and current situation.
Once you get started, investing can be a key part of how you grow your net worth and fund the lifestyle you want. Continue to learn about stock market investing through blogs, podcasts, YouTube and TikTok videos, but be sure they are from reputable sources. Once you know the investing basics it’s easier than you think!
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