Principles of Successful Investing

By Bruce Bassett, CRF

I have the privilege of travelling across this great country and hearing directly from investors on a regular basis. Some of the most passionate investors I encounter are those who invest primarily in real estate and have had great success. When looking at appreciation of real estate versus Canadian equities you would be hard pressed to understand how this is possible. The main reasons that real estate investors have enjoyed success are also relevant to investors in all types of investments. First, they have a good plan and stick to it. I’ve lived in areas in which housing prices dropped and have yet to consider packing up and selling. I buy and hold for the long-term. Second, real estate often requires regular payments for mortgages, upkeep and improvements. This is a forced savings program akin to regular investing.

HAVE A PLAN

As market volatility increases, investors have a natural tendency to want to move into safer investments, hoping to avoid further losses. However, this move can result in needlessly locking in losses on investments that, given time, are likely to recover. A key to overcoming this emotional reaction is to refrain from trying to time the market. Selling at the wrong time and missing just a few days of a market recovery could have a significant long-term impact on your portfolio.

INVEST REGULARLY

A regular investment plan allows you to choose when and how often you make contributions to ensure that investing remains a priority throughout the year, not just during certain periods – like the yearly RRSP contribution deadline. Contributing regularly enables you to apply a disciplined savings approach to help successfully build wealth over time. Investing regularly also allows you the opportunity to ease into any type of market (rising, falling or flat) and reduce long-term portfolio volatility. This is the case because regularly investing a fixed dollar amount gives you a chance to buy more investment units when prices are low and fewer units when prices are high, thereby potentially reducing the average cost of your investment over the long term.

I am a big believer in diversifying your investment portfolio. Following the aforementioned principles with a strategic mix of bonds, equities, alternative investments and real estate should improve your risk and reward dynamic and can lead to better investment success over time. Happy investing! •

Bruce Bassett, CRF, PFP, FICB is the Regional Manager Eastern Canada, RBC Global Asset Management Inc., in Halifax, NS. Email: bruce.bassett@rbc.com