5 tips for successful self-directed investing

10 November 2021 by National Bank Direct Brokerage
A clever boy in a jacket show paper money.

Whether you’re new to direct investing or an experienced investor, it’s important to stay on top of market developments and the latest trends. How do you make sure you’re following the right stocks? Are there any tools that can help? Here are a few tips to help you choose the right investments for you.

1. Beware of Behaviour Biases

Investor psychology is often overlooked but is especially relevant for self-directed investors because you are ultimately the one deciding whether to buy or sell an investment.

Behavioural finance biases can influence our judgment when deciding how we invest. The most common pitfalls include mental accounting errors, loss aversion—which is a preference for avoiding losses rather than taking risks to make eventual gains—, overconfidence, and following the herd behaviour.

Emotional and psychological factors also play a part. Investors don’t always act rationally. On the contrary, for better or worse, they often let emotions guide their decision-making.

What should you do? Make informed and rational decisions by:

  • Being aware of the impact emotions can have on your choices.
  • Using investment tools, like the ones offered by National Bank Direct Brokerage, to analyze and bolster your decisions.

2. Do Your Research

You’ll find a lot of information online, from a variety of sources, about the best stocks to hold in your portfolio or the stocks you need to buy or sell right this minute. If we think back to January of this year, and its WallStreetBets Reddit-fuelled speculation, we can clearly see an example of herd behaviour. What should you do? First, remember that what constitutes a good investment varies from one investor to the next. The latest must-own stocks may not be a good fit for your portfolio. Don’t forget that the investments you choose should always be in line with your objectives.

National Bank Direct Brokerage offers a number of useful resources that you can use to evaluate your investment strategy, including the Trading Central Morning Brief, independent research from Morningstar, and access to exclusive National Bank Financial (NBF) research. Consult fundamental and technical analysis reports on over 300 Canadian stocks, learn about market trends or gain insight from numerous NBF publications.

These resources will give you information—as well as inspiration—on sectors, stocks, options and exchange-traded funds (ETFs).

3. Devise a Strategy

First and foremost, investing is about knowing and staying true to your objectives, expectations, and risk tolerance. To ensure that the securities you choose are suitable for your portfolio, it’s important to have a clear investment strategy. Ask yourself these questions:

  • What are your investment objectives?
  • What is your investment horizon?
  • How comfortable are you with risk?
  • Do you have a diversified portfolio?
  • How frequently do you plan to trade?

Finally, remember that diversification is the key when it comes to investing.

4. Use the Right Tools

Because investment decisions shouldn’t be made on a whim, NBDB offers several tools to help you sift through buying and selling opportunities, stay informed, test your decisions, and discover new investment ideas. All NBDB clients get free access to the three tools in the Trading Central suite: Technical Insight and Strategy Builder. In addition, the toolbox available on our trading platform includes other free tools that you can use to track the securities you identify or to compare them:

  • Watchlists: Enter all the securities that interest you (up to 10 per list) including stocks, ETFs, and mutual funds to monitor changes over time.
  • Alerts: Enter the securities you want to monitor, and we’ll notify you when they hit your desired price or percentage change so you can buy or sell when it’s right for you.
  • Compare: This tool allows you to compare up to 4 different stocks, ETFs or mutual funds side by side. It provides all the information you’d expect from a detailed quote but also performance, dividends, and top 10 holdings.

Interested in ETFs? The ETF centre is a comprehensive source of information that helps you make investment decisions, and act on them quickly. You can search for an ETF by ticker symbol or keyword, get a one-page summary of an ETF’s features and composition, and track ETF price fluctuations using customizable charts (frequency, period, indicators or volume). Select the right ETF for you and act on your investment decision right away.

Our most recent addition to the NBDB toolkit is OptionsPlay, an analysis platform that finds ideas for options trading using technical analysis. The tool allows you to quickly compare strategies according to your market forecast, understand each strategy’s risks, and estimate the potential gains or losses to make an informed choice (a must see for covered call investors).

5. Monitor Your Portfolio on a Regular Basis

It’s important to reassess your portfolio on a regular basis to make sure that the risk and return are still in line with your objectives and needs. NBDB helps you with this task by providing a performance & asset allocation tool under the Accounts heading. Consider whether the reason you invested in a particular position still applies. Certain life events can instantly change your investment objectives. That’s why it’s important to review your investment strategy regularly to ensure that it still meets your needs.

While it’s impossible to predict market trends with certainty or say for sure which stocks to buy or sell, by using tools like the ones offered by NBDB you can make better decisions and choose investments that correspond to your strategy and needs.

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