Money Column: Biweekly challenge: Invest the Monies

Investing money is a pretty simple concept. In theory, you pick something to invest money in, your investment gains value over time and you end up with more money. Before we go any further however, you should know that the options for investments range from crazy to ridiculous and you need to be able to evaluate which one is best for you.

So, to start off, there are some pretty basic investing plans that we constantly hear about – these range from straight up saving accounts that most of us grew up with to mutual funds, stocks, and bonds. There are also all those crazy acronym ones like the TSFA, the RRSP, the GIC or, for some of us, the RESP. There are so many; what does it all mean and which one is best for you? Now we are no financial advisors and we do not know every single detail about investing. However, we can give you information so that, when you do talk to the financial advisor at your bank, you know what you want.

Before we really start talking about these portfolio options, you need to think about you:

1. What are your investing goals? Maybe there is a fourth year trip you want to go on. Or maybe you want a new computer. Maybe you are thinking about buying a house or an apartment. Having a clearly defined goal will help you actually save the money you need for whatever you want.
2. What is the time frame you are looking at? This is related to what you are saving for. The time frame on a computer might be somewhere like six months. Saving for a house might be a few years or more.
3. Do you need your money and how is your cash flow for the time frame you are considering? This question is more for how liquid do you want your monies? By liquid we definitely don’t mean molten gold… It’s about how fast you might need your cash. Would you be willing to invest your money for a long period of time without accessing it? Are you making big purchases like tuition, a computer or textbooks? Even living expenses might even affect your cash flow.
4. Finally, the most important questions of all is: How much risk can you tolerate? You need to know if the ups and downs of the stock market will make you sick to the stomach. You might be too queasy to bear the sight of your hard earn pennies go for a turn on the market. Maybe you like to play it safe and protect your capital. Higher risk might mean higher returns on your investment but you also risk losing that money. Lower risk on the other hand might not have such a high yield. Neither option is better but depends on what is important to you.

You should think about these factors before going any further since these will determine the types of investments that you might like to make.  Just like when you’re trying to reduce your expenses, the first step to making more money is to know yourself.  So, as a goal before the end of term, start thinking about how you characterise yourself as an investor.

Hopefully sometime in future issues, this column will continue with topics about different options for investments and different governmental incentives but, for now, you should know the basics. Remember to be money-savvy and don’t forget to complete your tax forms by the end of the term.