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Online brokerage: A quick guide for independent investors

August 15, 2023

Do you have what it takes to be an independent investor and take full responsibility for your investment decisions and their consequences? Then, Jean-René Ouellet, Strategist and Portfolio Manager, Desjardins Wealth Management, would like to share with you 3 important steps to follow as well as some useful tips to help you make the most of your online brokerage experience.

1. Determine your goals and investment horizon

First, you should carefully consider and clearly define your financial goals. Make sure they're realistic and achievable. This will allow you to determine your investor profile and investment strategy. Here are a few questions to ask yourself:

Your main motivation for managing your finances is the desire to achieve your goals, both large and small, through the fruits of your labour. What goals do you have in mind? Do you want to achieve them in the long term or the short term?

Maybe you want to save for the trip of your dreams in a few years, save for your children’s education, plan for retirement in 15 to 20 years, enjoy a more vibrant lifestyle?

2. Determine your investor profile

First off, there's no such thing as a good or bad investor profile! You have your own way of looking at things and responding to various situations. This will naturally impact your investment decisions.

To determine your investor profile, begin by asking yourself what investor type you are: Are you inclined to sell your investments the moment their value drops, or can you keep a cool head? Your comfort level with stock market fluctuations is what is known as risk tolerance. It's essential to know where you stand on this so you can determine your investor profile.

Even if you understand the correlation between investment risk and potential returns, it's essential that you're comfortable with your investment choices. If your investment decisions keep you up at night, they may not be the right fit for you!

3. Build your investment strategy

Many people think independent investing is simply a matter of repeatedly buying and selling shares to get rich quickly. However, that's just one of many possible approaches.

Independent investing also works for the longer term. Your challenge is to figure out how you’re going to grow your money. Regardless of the investment strategy you use (for example, owning stocks or exchange-traded funds, investing in the European market or the Asian market), the key is diversification—the principle of not putting all your eggs in one basket.

To sum up, it goes without saying that your investment strategy will dictate how you select your investment products. You can only succeed if you thoroughly understand what you’re buying. For example, if you’re looking to take on more risk, it’s better to choose a small-cap equity fund instead of a large-cap one.

5 tips for self-directed investing

At first glance, independent investing seems easy. It doesn’t cost much to get started (a computer or smartphone, internet access, transaction fees), and the training you need is widely available and affordable. But make no mistake, investing your savings is not something to be taken lightly. Here are 5 tips to help guide your decisions.

1. Manage your emotions

As an independent investor, do you know who your worst enemy is?

Don’t look too far. It’s you.

That’s why it’s important to manage your emotions, especially when the financial markets are under pressure. The key to success is to reduce the risk of impulsive decisions like liquidating your portfolio after a general drop in stock prices. Given the bullish tendencies of stock markets, this type of decision could significantly hurt your long-term performance outlook.

2. Keep your own pre-conceived notions in check 

Everyone has their own beliefs and opinions. However, applying them indiscriminately to your investments can get you into deep waters. Your investment choices shouldn't be based on your perceptions but grounded in facts and analyses. As a crucial first step, take the time to gather and analyze all the available information on a given investment, rather than rely on past performance figures only—because they tell you nothing about future results! Otherwise, you may find yourself saddled with an investment that's riskier than your investor profile and financial situation allow.

3. Beware of advice from so-called experts

Do you know a lot of people who have done well in the stock market? It’s most likely a matter of luck. Since no one can accurately and consistently predict how the stock market will behave, beware of recommendations from so-called experts, from social media testimonials or from friends who claim to have fool-proof tips.

4. Use all available resources

To help you manage your investments, we encourage you to check out specialized online brokerage platforms and apps such as Desjardins Online Brokerage (Disnat). You’ll have access to a range of technical support services as well as useful analytical tools to help you gain confidence. Disnat also offers 250 free online training courses! We encourage you to take full advantage of these resources to increase your chances of success and, who knows, you could become a full-time independent investor!

5. Be disciplined

There’s no magic bullet for investing. You have to invest time and energy on staying up to date with the stock market and with the latest economic and financial news. Fortunately, you can obtain this type of information through an online brokerage firm.

Based on the above, you can see that independent investing requires careful decision-making, preparation, emotional resilience, time and sustained effort over the long term. Do your research before you start investing via an online brokerage platform!