Seven Smart Investing Principles for Everyone

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?

19 Responses to "Seven Smart Investing Principles for Everyone"

  1. Hi Mark,
    I have been following your blog and thanks for all the tips you share. Just curious. Do you have any months inwhere you buy your stocks? I heard some investors buy 2x a year and some say buy in Sept, sell in May. If you are regularly buying indexfunds and stocks, do you have any preferred months in a year to buy?

  2. In addition, I think every Canadian DIY investor should invest a few hundred dollars and a few months of effort into the Canadian Securities Course. Maybe not a ‘principle’ but a worthy investment to make sure their perceived level of knowledge of these and other principles is tested and valid. Any investor should be fully conscious of where they stand around the knowledge they think they may have.

    1. Excellent point Keith. I intend to take mine eventually after my current Health Admin. degree is taken care of. I suspect a few hundred bucks invested in the CSC could save many investors thousands of dollars.

  3. I’d like to add ‘Know your goal and follow the plan’.

    Case in point, as of close of the markets today (Apr 30th), our RRSP portfolio “value” is down over 25K from recent highs yet the generated income is up slightly. Keep your eye on the ball.

    1. We think alike Lloyd. I don’t care too much what my portfolio value is, week to week nor month to month. I’m more concerned about the cash flow I can eventually spend and I don’t need to touch my capital unless I want to or have to. “Keep your eye on the ball” is right 🙂

  4. these are nice tips you have here (actually I should say rules) and many of them I use myself too. I also added “Invest only money you can afford to lose” for peace of mind, although when speaking about retirement it is hard to think about that money as loss affordable. That’s why I have two to three accounts with three different strategies, so I believe I won’t be able to lose all three of them 🙂

    1. Yeah, I dunno about the money I can afford to lose comment. I don’t have any of that! If you do gamble a bit on the markets Martin, it’s good you have a strategy for it.

  5. Good list of principles even though I prefer my own! haha I don’t 100% agree with number one about tips though. I don’t make decision over “hot” tips, but if I hear about something interesting, I will for sure look into it deeper and judge by my own.



    1. Like you Mike I avoid all tips although I do find them interesting and I might investigate them further. I’m happy to be an indexer and a direct stockholder in many companies. That approach is working for me.

  6. A good basic list of principles. Ditto here on following them.

    However I find in retirement making good decisions on withdrawals and tax strategies across accounts adds additional considerations to effectively managing a portfolio overall.

  7. My son and his wife are just starting out ( early 30’s), new mortgage, first baby on the way. Little or no financial background. I am worried they will follow in the trap my wife and I did, mutual funds to nowhere. We are in our early sixties and are now only realizing the costs of that mistake.

    How do I getting him started down the road of financial awareness without feeling responsible for any missteps that they may incur along the way.

    Even if I start with a quick suggestion for they new arrival would it be a RESP or TFSA or just starting a balance investment portfolio in ETF’s- Dividend funds ?

    Unfortunately, like me in my early 20’s, he has a time-consuming career and thinks he has little or no time for finances. Of course this leads to giving away about 50 percent of your future investment potential to someone else so they can buy their cottage or boat.

    Also I am starting an investing account for our grandchild ( Questrade ?) any suggestions.

    I hoping, when I start the grand-children’s account on our own, this might spike his interests and become interested in his own financial security.


    Financial Neophyte.

    1. Ed, I made the exact same mistake. Fortunately I realized it fairly early (my early 40s) so I hope have time to fix.
      As far as our kids, they are 10 and 12, we started teaching them now and they have their own brokerage accounts and I am showing them on a real example how to invest and select stocks and see the risk involved but also a joy of their account growing.

      And definitely, speak to your kids and later grand kids. If they love you they will accept your advice.

    2. Hi Ed,

      Thanks for your great comment.

      I’m not that far removed from my “just starting out” days. I just left my 30s recently.

      It’s unfortunate to make money mistakes at any age but the reality is, you don’t know what you don’t know.

      To answer your question..”How do I getting him started down the road of financial awareness without feeling responsible for any missteps that they may incur along the way?”

      Check out these posts and these resources:

      To your quick suggestion:
      “Even if I start with a quick suggestion for they new arrival would it be a RESP or TFSA or just starting a balance investment portfolio in ETF’s- Dividend funds?”

      I would encourage some reading in the links above and personally, regardless of their income level, if they haven’t started using a self-directed TFSA and trying to maximize that account out first they should. This is a beautiful account:

      Nothing wrong with Questrade, great brokerage for many reasons. I think you’re smart to use the account to trigger some interest and good on you to do so 🙂

      Hope some of this information helped Ed!


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