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Personal finance

Zen and the art of self-directed investing

March 7, 2022

Breathe in. Breathe out. Clear your mind of all thoughts. Of course, it’s easier to do when you practice yoga at sunrise than while reading stock market news. When you’re managing your money yourself, it’s a good idea to keep your emotions out of it. Here’s why—and how to achieve it.

Online brokerage services are popular

According to the Autorité des marchés financiers (AMF), one in seven investors is considered a self-directed investor1. Evolving technology makes trades easier to do with no intermediary. You don’t need to fight for space on a crowded trading floor on Wall Street; just a few mouse clicks will do the job.

To do before investing

Before investing your money to achieve medium- and long-term goals, there are simple and easy ways to improve your financial situation:

  • First, pay off high-interest-rate debt, such as unpaid credit card balances. The money saved each month in interest can then be invested.
  • Set up an emergency fund—the equivalent of 3 to 6 months of regular expenses. This will ensure that you have money set aside to pay for unexpected expenses such as car repairs or a new fridge.

Desjardins Online Brokerage

The Disnat platform is a simple, modern and easy-to-use way to trade on your own. It lets you track all your investments at a glance on your computer or a mobile device. The information is updated in real time and trades are possible during stock market trading hours.

Lots of advantages for 18- to 30-year-olds

To encourage members and clients to invest early, Desjardins offers exclusive benefits for 18- to 30-year-olds:

  • No fees for equity and ETF trades (CAD and USD)
  • No minimum balance
  • No inactivity or administration fees
  • No minimum balances for RRSPs
  • Transfer fees refunded up to $150

Why emotions and returns don’t mix

There are many advantages to self-investing, but your emotions can sometimes play tricks on you. Without an intermediary, you can trade instantly. A hasty decision based on feelings rather than reason can have negative consequences on your portfolio. To familiarize yourself with investing and be a self-directed investor, the platform offers training and tools needed to make informed investment decisions. Whether you’re just starting out or a seasoned investor, there’s something for everyone!

The right information for making the right decisions

Small-time investors, influencers and “a friend of a friend who’s really knowledgeable about the stock market” have plenty of suggestions for making fast and easy money. But are these reliable sources for new investors?

Instead, we suggest that you watch the video “Compte sur moi,” which presents the journey of self-directed investor Alicia Rochevrier. With sound advice by investment professionals and the Disnat platform, see how far she will be able to grow her savings of $4,000.

Watch the “Compte sur moi” video series (French only).

What influences emotions

Before choosing an investment, you first need to know your investor profile. This includes:

  • Your investment objective: Are you looking to buy a first home? Save for retirement?
  • Your investment horizon: Would you like to purchase a home next year? Within the next five years?
  • Your risk tolerance: Are you able to sleep soundly despite stock market ups and downs? Do you prefer more stability?

When the economy is struggling, choosing the right type of investment that is in line with the reason you’re investing your money can help you stay calm. Keep your eye on the prize.

What do you do when markets take a nose dive?

The stock market goes up and down, like a roller coaster. Values fluctuate based on supply and demand, which are in turn influenced by all kinds of events and the news.

Logic tells us to buy low and sell high to make a profit. However, emotions tend to push us to do the opposite.

Investors become attracted by stocks going up. This drives the price higher and reinforces the impression of having made a good deal—or even reinvesting. When a stock goes down, some investors panic and sell, sometimes at a loss. Those who jumped off the boat are no longer there for the recovery.

A market bottom is actually an opportunity to buy low, which provides greater potential for growth. Without being able to predict the future, we can look at what has happened in the past. According to the AMF, in the last 10 periods during which the Canadian stock market dropped by more than 20%, the years of recovery saw average returns of 21%2.

It’s impossible to predict exactly when markets will go up or down. To protect yourself from volatility, you can instead:

  • Have a diversified portfolio: When some sectors of the economy slow down, others perform better.
  • Making regular contributions: To reduce the average cost of your investments by taking advantage of temporary downward market fluctuations.

Overview of investment opportunities

There are so many investments available through online brokerage that it’s hard to make a choice. Here is a summary of the main ones:

  • Term savings: Money deposited with a financial institution with a predetermined return for a given period.
  • Market-linked guaranteed investments: The return of these products fluctuates according to the performance of a stock index, up to a certain maximum, and the capital is guaranteed.
  • Bonds: You lend money to the government or a corporation in exchange for a fixed income. Bonds have an inverse relationship with interest rates: when interest rates rise, bond prices fall, and vice versa.
  • Stocks: Holding stock means owning a portion of the company that issued it. Its value fluctuates according to the company’s growth.
  • Investment funds: The money is entrusted to a fund manager, who invests it in various securities and tracks their progress on behalf of the group of holders.
  • Exchange-traded funds (ETFs): ETFs reproduce the performance of a stock index, economic sector or other financial product. They are exchanged like shares.

The more knowledge you have, the better equipped you are to make the right decisions without your emotions coming into play. Desjardins sets up over 250 training activities each year to further its knowledge. The Disnat News Feed, intended exclusively for the application’s users, lets you track economic and financial news and increase your knowledge every day.