Last fall, I obtained a copy of this document from PWL Capital entitled Seven Principles of Smart Investing. After reading this through this white paper I reflected upon how we’re applying these principles.
1. Ignore ‘hot’ investment tips
We do. I ignore all financial tips from people who think they know where stocks or markets are headed. They may pretend to know but they don’t.
2. Have a basic knowledge of investment vehicles
I believe we do. We use low-cost indexed Exchange Traded Funds (ETFs) and individual stocks in our portfolio. I don’t own mutual funds and haven’t for many years.
3. Understand the risk-return trade-off
I believe we do. I appreciate the value that bonds can bring as stabilizers within a portfolio but I prefer not to own any at this time.
4. Know your time horizon
Our investing horizon is as long as we live. We expect to use the dividends and distributions paid from our investments for living expenses. We have at least 10-15 years of savings contributions ahead of us.
5. Focus on time in the market, not timing the market
We do, hence our plan above to save, invest, regardless of market conditions and simply keep repeating that cycle for many years to come. We also reinvest all dividends and distributions paid every month and quarter.
6. Be wary of high investing costs
I am fully aware that high fees kill portfolio values as they tend to make money for financial firms instead of me.
7. Utilize tax advantaged accounts
We do. We try to maximize our Tax Free Savings Accounts (TFSAs) first, then we contribute to our tax-deferred Registered Retirement Savings Plans (RRSPs). We hope to rinse and repeat this process as much as possible as long as we work. With any savings leftover we pay down debt and also have some travel fun.
Overall, we’re doing OK. While there is always room for improvement we continue to be thankful for the opportunities in front of us and some of the fine things we are able to enjoy.
How do you stack up when it comes to these seven investing principles?