1. Beware of behaviour biases
No matter how knowledgeable they are, at one time or another, most investors have kicked themselves for not buying a stock before it went up. Others cling stubbornly to a falling stock, convinced that one day their investment will pay off.
Research in behavioural finance has shown that investors are subject to a number of influences, including life events and emotional and psychological factors, and do not always act rationally. On the contrary, for better or worse, investors often let emotions guide their decision-making. Make informed, 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 test 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. First of all, remember that what constitutes a good investment varies from one investor to the next, and the latest must-own stock may not necessarily 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 Dow Jones Morning Briefing, independent research from Morningstar, and analysis from Stéfane Marion's team at National Bank Financial (NBF).
These resources will give you information—as well as inspiration—on 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?
When your brother-in-law offers you investment advice or your best friend passes on a hot stock tip, don't forget that your investment strategy is not the same as theirs. What works well for them may not suit you at all.
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 a number of 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 four tools in the Recognia suite: Technical Insight, Value Analyzer, Strategy Builder and Options Ideas. In addition, the trading platform includes three more free tools that you can use to track the securities you identify with Recognia:
- Watchlists: Enter all the securities you're interested in (up to ten per list), including shares, ETFs, options 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, so you can buy or sell when it's right for you.
- Virtual portfolios: Our virtual portfolios let you test out your strategy before you take the plunge. Specify the number of units of each security you're interested in, as well as the purchase price. You'll get an overview of the portfolio, helping you decide whether your stock selection is well balanced and in line with your investor profile.
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 graphs (frequency, period, indicators or volume). Select the right ETF for you and act on your investment decision right away.
Want to go further? The NBDB trading platform includes Market-Q, a tool that shows prices in real time so you can seize market opportunities as they arise. For more experienced investors, it also offers sophisticated fundamental and technical analysis features.
5. Monitor your portfolio on a regular basis
It's important to reassess your portfolio on a regular basis, whether that's every day, every month or every quarter. Make sure that the risk and return are still in line with your objectives and needs. Consider whether the reason you invested in a particular position still applies. Certain life events—such as the birth of a child, divorce, unemployment or bereavement—can instantly change your investment objectives. That's why it's important to regularly re-evaluate your investment strategy 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.