Investing

This section will explain how to make your savings grow. Successful investing is rooted in logic and common sense.

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1.) When is the money needed?

If < 5 years, a savings account or GIC is likely best.
If > 5 years, investing in stocks may be a good option.

Financial markets are very volatile. Stocks will make you money over 10 year period. However, how they perform year to year or even a couple of years is really a coin flip. “Only invest what you can afford to lose without that loss having any effect on your daily life in the foreseeable future.” Peter Lynch OUOWS p69

2.) What kind of investor are you?

Defensive (passive) investor: "will place his chief emphasis on avoidance of serious mistakes or losses. His second aim will be freedom from effort, annoyance, and the need for making frequent decisions." Ben Graham II p6

Enterprising (active or aggressive) investor:

"willingness to devote time and care to the selection of securities that are both sound and more attractive than the average." Ben Graham II p6

Big Idea: Index Funds

Most investors can be classified as Defensive Investors. What should they do? Invest in Index Funds. The index fund is a great invention for people who have neither the time nor the inclination to test their wits against the stock market. Also ideal for people with small amounts of money who want diversification. Simply buying index funds ensures you will outperform the majority of professional money managers (who charge much higher fees).

So you want to pick your own stocks?

Enterprising investor: Picking Stocks. This is where things get complicated. Most people who pick their own securities actually do not outperform index funds. However, for those who are able to figure it out the rewards can be large.