Anokhi Buzz / 4 Key Ways To Be An Efficient Investor

4 Key Ways To Be An Efficient Investor

Anokhi Buzz Jun 01, 2017

Efficiency is always a good thing — especially when it comes to investments. Kunjal Mehta from Edward Jones Investments has four key tips to help you become an efficient investor! 

Generally speaking, if you’re efficient at a particular task, you’ll get good results without wasting effort. As you’ve already learned from your life experiences, it’s usually far better to be efficient at something than to be inefficient — and that’s certainly true with investing. So, what can you do to become a more efficient investor? Here are a few ideas that can help.

1.  Invest systematically 
If you put a few dollars in an investment, such as a stock that you heard was “hot,” and then a few months later put some more money in another vehicle that strikes your fancy, and you continue this pattern indefinitely, you may not be maximizing your resources. By taking this type of haphazard approach, you could end up owning a bunch of investments without rhyme or reason — a motley assortment that may not help you reach your goals.

 

Be an efficient investor
Be an efficient investor: Don’t be all over the place with your investments. Always good to keep the focus on one system. Photo Credit: Time.com

 

Instead of following this route, consider a systematic approach, sometimes known as “dollar-cost averaging.” You’ll first want to identify some investments that are appropriate for your objectives, risk tolerance and time horizon. Then, automatically move the same amount of money each month from your chequing or savings account into the investments you’ve chosen. When the price of your investments falls, your contribution will buy more shares, and when the price rises, you’ll buy fewer shares. In other words, you’ll be fulfilling the “buy low” part of the classic investment formula.

Over time, this technique should result in a lower average cost per investment. Keep in mind, though, that dollar-cost averaging does not ensure a profit or protect against a loss, and you’ll need to have the financial resources available to continue investing even in “down” markets.

 

2. Reinvest dividends 
Among your investments, you may own stocks that can pay dividends. You can take these dividends as cash, but if you don’t need the money to meet everyday expenses, you may be better off reinvesting the dividends. This is an efficient way to increase your shares — and boosting your share ownership in quality investments can be a key way to help build wealth. (Be aware that companies can increase, decrease or discontinue dividends at any time.)

Be an efficient investor
Be an efficient investor: Pay attention to dividends. Photo Credit: www.studypoints.blogspot.ca

 

3. Look for tax-efficient techniques 
Another type of efficiency associated with investing is tax efficiency, which is your ability to defer taxes as long as possible. Explore tax-deferred accounts that you may have in your country, such as Canada’s TFSA (tax-free savings account), that can help you put off the tax bill until retirement, when you may be in a lower tax bracket.

 

Be an efficient investor
Be an efficient investor. Take advantage of tax saving investment products your country may have in store. Photo Credit: www.colombia.com

 

4.  Consolidate investment accounts 
If you have one RRSP (registered retired savings plan) with one financial services provider, another with a second, and a separate investment account with a third, you may end up paying more in expenses, fees and commissions than necessary. And since these costs can eat into your investments’ “real” rate of return, this scattershot ownership method may be inefficient. You may be better off consolidating all your investment accounts with one provider.

 

Be an efficient investor
Be an efficient investor: Don’t be all over the place, keep your investments focused. Photo Credit: www.EurActiv.com

Seek to become an efficient investor. You may be pleased with the results.

 

Main Image Photo Credit: www.studypoints.blogspots.ca

Speak with your financial advisor to create a long-term strategy that can help meet your needs today and into the future.

Reported by: Kunjal Mehta, Financial Advisor – Edward Jones Investments. 3621 Hwy 7 East, Markham ON, L3R0G6. Office: (905)947-1165, Mobile: (647)388-1391. [email protected]

Edward Jones, Member Canadian Investor Protection Fund.

* Insurance and annuities are offered by Edward Jones Insurance Agency (except in Quebec). In Quebec, insurance and annuities are offered by Edward Jones Insurance Agency (Quebec), Inc.

 Kunjal Mehta  is a GTA-based Financial Advisor serving the Province of Ontario in partnership with Edward Jones Investments. His vision for his practice is to help clients achieve their financial goals utilizing his skill and knowledge that have been developed over the course of a 10-year career in the Financial Services Industry and Capital Markets Trading.

Hina P. Ansari

Hina P. Ansari

Author

Hina P. Ansari is a graduate from The University of Western Ontario (London, Ontario). Since then she has carved a successful career in Canada's national fashion-publishing world as the Entertainment/Photo Editor at FLARE Magazine, Canada's national fashion magazine. She was the first South Asian in...

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