Nicolas Mesly | Journalist
Are you itching to invest the stock market but don't want to pay high broker commissions? Self-directed investing might be for you. To tackle the challenges of investing on your own, it can't hurt to take a tip or two from an experienced guide.
Steve Deschenes has been navigating international stock markets like the NASDAQ, NYSE, TSX and LSE for more than 20 years. A DISNAT GPS portfolio strategist with Desjardins Online Brokerage, Steve can easily spot the traps to avoid along the way, and he knows how to cushion the blow when things don't go as well as hoped.
Steve gives between 20 and 30 talks every year on how the stock market works: "Since the Second World War, the stock market has plummeted at least 10 times. It takes some investors a decade or more to recover. Others swear they'll never dabble in that type of game again."
Here are his top 3 recommendations for all independent investors, whether new to the game or with years of experience:
1. Take advice from friends and family with a grain of salt
Don't trust stories that sound too good to be true. How many people paid top dollar for Nortel shares on the advice of their brother-in-law only to pull out their hair later?
So many disastrous investments could have been avoided had common sense prevailed--take the example of a company in Quebec whose promises of impossibly lucrative returns on a game fell through.
Do-it-yourself investors don't place bets--they use strategy, like in chess, where nothing is left to chance.
2. Don't try to get rich quick
It's better to go with a sure thing and seek out annual returns of 7 to 10% than to try to get rich overnight. Steve recommends investing in the food industry because people will always need to eat. Three solid companies in this industry are Metro, Loblaws and Sobeys.
"If Metro's shares drop by 20%, it's probably just bad luck," he says. Given our aging population, the health sector could also prove interesting. In Canada, this area is governed primarily by the State, but many multinationals like Johnson & Johnson and Novartis are doing very well for themselves.
3. Don't let emotions get in the way
Steve insists that it's just as important to know when to sell shares as when to buy them. You need to act rationally and keep your emotions in check.
"One day you buy a Ferrari, the next day, it's a clunker," explains Steve. The same goes for investments. It's sad, but sometimes you just have to cut your losses and invest in something more promising.
Making an average of 12 transactions per portfolio every year, hundreds of do-it-yourself investors follow Steve's tip and invest in the 4 model portfolios:
- Canadian equity
- Global equity
- High-income security