The world of investing can be both exciting and rewarding, so long as you have a good idea of what you would like to achieve. 

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Here are five questions to ask yourself as you start on the path to investing.

1. What do I want to achieve with my money?

Before creating your investment portfolio, decide on your savings goals. Of course, you want your money to grow. But your choice of investments should depend on what the money is intended for (your goal) and how much time you have to achieve the goal (your time horizon). 

If you have a short-term goal (usually less than three years), for items such as saving for an emergency fund, vacation or car, you may want to consider savings accounts or short-term guaranteed investment certificates (GICs). The money will be there when you need it because it can be quickly converted to cash, and the principal amount (money you’ve deposited) is protected. For longer-term goals, such as saving for your children’s education or retirement, you could consider a Registered Education Savings Plan (RESP), long-term GIC or long-term mutual fund.  

2. How comfortable am I with the idea of a drop in my portfolio balance?

Your risk tolerance, or risk appetite, is the amount of risk you’re willing to accept when investing and your financial ability to handle loss. Having a clear understanding of your risk tolerance will help you determine which investments are appropriate and which to avoid.

Many investments that offer the potential for a higher rate of return also involve a higher level of risk. More risk may be acceptable if you have a longer time horizon, which will allow for more time to recover from market downturns. 

Your Scotiabank advisor can help assess your risk tolerance and build an investment portfolio tailored to address your unique needs and comfort level.

3. What is the right mix of investments for my portfolio?

To reduce risk, it’s important to diversify your investments across a range of asset classes (for example, stocks, bonds or cash), as well as across industry sectors (such as technology, health care, consumer goods or energy, just to name a few) and geographies. While a well-diversified portfolio won’t eliminate fluctuations in your balances, it can reduce some of the inevitable market downturns and help you stay invested and on track to reaching your goals.

With an abundance of investment options to choose from, choosing the right mix of investments can be a challenge.  An all-in-one mutual fund portfolio is a convenient solution that can remove the guesswork of building and maintaining a well-diversified portfolio.

Visit scotiafunds.com to learn about Scotia Portfolio Solutions. Each portfolio solution offers a diversified mix of mutual funds that is carefully selected, thoughtfully combined and continuously managed by experienced multi-asset management investment professionals.

4. How will I monitor and rebalance my portfolio?

Once you’ve determined your portfolio’s asset allocation, you’ll want to rebalance your portfolio periodically to maintain its proper mix over time. Strong (or weak) performance in one asset class could cause your asset mix to drift from its original weightings and expose you to unintended risks. Regular rebalancing helps keeps your portfolio aligned with both your investment objectives and your risk tolerance.

If you’re using one of Scotia Portfolio Solutions, your funds are automatically rebalanced to maintain the optimal asset mix.

Asset allocation is an investment strategy that divides your investents among different asset classes to better manage investment risk.

5. How will I react to market fluctuations?

Markets inevitably experience periods of growth and periods of decline. When this happens, you may be tempted to jump in or out of the market to avoid losses. Don’t let emotions drive your investment decisions.

Having a financial plan in place will help you stay the course, knowing that your goals won’t be derailed  by a market downturn. A well-designed financial plan can help prepare you for the unexpected and focused on the long term, which allows you to see beyond the ups and downs of market volatility.

Your Scotiabank advisor can help you choose an investment strategy that considers your goals, time horizon and risk tolerance