Questions to ask yourself before you invest
(NC) With the global pandemic shaking up financial markets, you may be hesitant about investing in the current market. If you’re not sure whether the time is right for you to invest, there are some key questions you can ask yourself first.
Here, RBC Direct Investing shares some good ones to start with when making your own investment decisions.
- How comfortable am I with risk?
If you're a fairly conservative investor and you’re now considering an investment that doesn't fit that profile, make sure you're doing it for the right reasons. Even if it seems like everyone you know is putting money in a high-growth sector or volatile stock, it still must be the right strategy for you.
- How long have I got left to invest?
If you have a longer-term time horizon, it may be easier for you to look beyond the day-to-day volatility of the markets. If you believe in the long-term potential of a company and then markets drop, remind yourself that your goal wasn't just to make a quick buck. On the other hand, if you are hoping to profit from a short-term trade, remember that markets swing both ways. Decide how much fluctuation you can tolerate.
- Have I done my homework?
Research is an important part of investing. You likely wouldn't buy a car without giving it a test drive. Similarly, it wouldn't make sense to make an investment based only on the fact that it's a hot stock. Not all stocks are created equal, and quality will vary even within a sector.
- Am I diversified?
Take a look at your overall mix of assets – cash, fixed income and stocks – and determine where this new idea fits. Being diversified can help mitigate risk in your portfolio.
Knowing yourself is key to knowing what investments are right for you. Find more investing inspiration at rbc.com/inspiredinvestor.