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3 Considerations before Investing Your Money

Do you have a financial goal that you’re saving for?  If so, have you thought about how you are going to reach it and with which type of investment product, e.g. savings account, Guaranteed Investment Certified (GIC), or Mutual funds?
Before you get into the nitty-gritty of how and where to invest, here are three things to consider first:
Time Horizon—how long are you planning to stay invested for before withdrawing the bulk (90% or more) of the investments?  Will your investment be short term (0 – 2 years), medium term (3 – 5 years), or long term (5 years+) ?
Investment Objective –what do you want the investments to do during that time frame? Do you want to preserve the money; help it generate some income—like interest or dividends; or are you looking to buy and hold, hoping the market value will increase (capital appreciation)?
Risk Tolerance –when you are determining a suitable investment think about how you would feel if your investment drops in value. If any drop in value causes you to lose sleep at night then you’re a low risk investor, whereas any loss up to 20% could mean medium risk, and 20 – 30% drop could mean you’re a high risk taker.
Just as it’s important to consider your timeline, objective and tolerance before investing, it’s also important to ensure you are investing with a reputable company. Check for things like how long they’ve been in business and the reputation of the person that will be managing the investment. Last, but most importantly, read all the product information and disclosures about the investment so you know about any fees associated with purchasing, selling, switching to another investment or even taking your business elsewhere (transfer fee).
If you’re interested in knowing your risk profile, checkout this quiz by GetSmarterAboutMoney.ca.

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