5 questions smart investors need to ask themselves


When it comes to investing, it's essential that you have all the tools you need to make informed decisions.

Julie Malo | Journalist

Financial markets are complex. Although most small investors are familiar with some investment concepts, few truly understand how the markets work.

Normand Caron has worked for the past 10 years as a trainer for the Mouvement d'éducation et de défense des actionnaires (MÉDAC), whose mission is to educate and advocate for Quebec's shareholders and small investors. As the coordinator of a shareholder introduction course, he has trained over 1,200 people and answered countless questions. 

If you're interested in the stock market, here are the 5 questions Caron says you must ask yourself first.

1.  How do the markets work? 
To become a smarter investor, you should first understand that the financial markets are complex. They're like a giant puzzle, and the biggest pieces are individuals, private companies and public institutions that can trade investment securities, raw materials and other assets, at prices that reflect supply and demand. 

Understanding how the markets work is understanding how all the pieces of this puzzle fit together.

The degree to which you understand this world will help you determine if you're comfortable enough to be a self-directed investor or if it's better to delegate portfolio management to a financial expert.


2.  Who can I trust? 
Many investors decide to delegate portfolio management to an expert. Brokers, advisors, financial planners--with all these players, each one playing a very specific role, it be hard to sort through all your options and make an informed decision.

Some experts can only sell the products of the institution they work for, while others are able to directly buy any securities, according to your instructions. So it's essential to understand who offers what. 

The golden rule: always check to see if the professional you're trusting your savings with is in good standing with the appropriate securities regulator

You may like to read also: Choosing an investment broker

3.  Do the products in my portfolio meet my needs?   
You'll first need to clearly define your objectives and determine your risk tolerance. There are questionnaires that will help you establish your investor profile. Generally, the higher the return, the greater the risk. Next, do some research on the products that are in line with your profile. By taking this approach, you'll be able to clearly articulate your needs when you meet with your chosen expert. 

4. What fees will I be charged? 
This question is all too often overlooked, but it's essential in determining if you're getting good value for your dollar. A product's return might be good, but it could be reduced by high fees. So don't hesitate to ask the advisor about applicable sales charges and management and administrative fees, as well as the commission percentage. Some fees are clearly indicated in the investor statements, while others are harder to identify.  

5  Who protects me? 
The financial markets are highly regulated. If you feel you've been shortchanged, there are many resources at your disposal. Each province has its own securities regulator, and you can contact them for help. 

Learning about the markets
When it comes to investing, it's essential that you have all the tools you need to make informed decisions. As a proud partner of MÉDAC for 20 years, Desjardins offers training (some of which is free) to help you develop your investment knowledge. 

If you don't know where to start, check out these 5 steps everyone should take before investing: What you need to know about investments

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