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Top 10 Investment Rules To Follow In Canada!

Investment requires you to make prudent choices about money to grow it exponentially. Personal experience also plays a pivotal role in guiding you towards the right investing path. You can also learn from others’ mistakes and implement those learnings to grow an investment style that suits your preferences. There are no written golden rules for investing, however, there are some unspoken or evident investment rules to follow in Canada that everyone should follow. 

Those rules avert you from losses while providing a good harmony with the market. But what are these investment rules to follow in Canada and how can you follow them? Let’s find out in this article! 

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What are the 10 Investment Rules to Follow in Canada?

1. Gambling is a Big No

One of the top investing rules to follow in Canada or anywhere in the world is that in the initial stages of your investing journey, everything will seem like a gamble or a game of speculation. The new traders are looking to gain profits with every shift in the market, and so will you!

You will be tempted to indulge in day trading in anything that appeals to you like stocks, options, futures, and other such instruments. You will earn but you will also lose out on your funds as you invest thousands to become a millionaire. Running out of capital to invest is not a good thing!

But why is this termed gambling? Because your focus is not the long run but the short term. Gambling and investing are not related because investing focuses on balancing your return and risk, and the returns are usually garnered after some time. With a long-term approach, you need to understand investment assets and find value.

Read: How to Buy Stocks in Canada: The Ultimate Beginner’s Guide

2. Do not Tread Lightly and Invest in Anything

Having a lot of options to invest in sounds great but it is essential that you only invest in what you understand. If you are aware of things and fundamentals that are essential to invest in an Exchange Traded Fund (ETF), it will be more clever to purchase an ETF and continue with the same until you get a hold of other instruments. 

Also, people tend to rely a lot on some advice about Profitable Stock that someone gave them, but do not rely on this trick. Your choice should be based on your own thorough research and you should have clarity about it.

Block the noise of all the financial pundits and so-called experts. They claim to have the answers, but you should ultimately decide the direction in which your investment will go. You should consult and learn when you need more insights. This can be acquired from professionals or renowned internet platforms. Every investment, be it time or money should be made after you have duly considered all the factors of investing.

3. Get Rid of Investment Costs that are Not Worth It

If you are drowning in the heaps of high investment fees, the returns on your investment will be reduced significantly. Investment fees are an integral part of investing. However, not every fee is necessary. A fee is justified if you are being compensated in the form of returns that are more than the money that you have given as fees. 

You should look after the exciting Management Expenses Ratio (MER) that you pay to your active fund managers. While trading in ETFs or stocks, you will pay commissions on the account of buying and selling. Here, you need to monitor your transaction costs, as they are also a part of why your costs keep going up.

Fees like MER, trading expenses ratio, brokerage fee, or commission are all a part of your cost, and you should ensure that your returns are more than these costs. You do not need to be extravagant and go on a hunt for ‘sophisticated’ investment advice and instruments when you are not a long-player in the market.

4. Diversifying is the Holy Grail of Investment

This is one of the crucial investment rules to follow in Canada or any other place for that matter. Diversification is the process of investing in different asset classes that have negative correlations. For example, investing in Gold and equity. Both are different and go in opposite directions. This reduces risk and increases the long-term returns. Essentially, what we are trying to say is, “Don’t put all your eggs in one basket.”

However, exceeding anything is not good, and so is over-diversification. Over-diversification is the process when you invest in assets that have increased risk, it will lower your returns and defeat the purpose of diversification. To ensure if your portfolio is adequately diversified not, consolidate assets like stocks, mutual funds, ETFs, real estate, and pension into a portfolio as one and manage it well regularly.

Read: 13 Ways on How to Improve Your Finances in Canada

5. A Long-term Mindset Gives You Immense Returns

Investment should always be for the long term. Patience is a virtue that cannot be neglected. Studies have proven that investors who stay long in the game often have better returns. Your interest gets compounded over time which means more returns. Compound interest and time are two crucial components of your investment strategy. Combined, they will work miracles to gain profits.

Markets are volatile in nature and don’t go as you predict. But the long term surpasses the short term, so even if there are big changes in the short term, stay invested. It will balance your portfolio. 

6. Your Tax-sheltered Accounts Should be Leveraged 

Tax-sheltered accounts are essential as they help you to defer taxes when you withdraw funds in the future. Registered investment accounts are also important as they stay sheltered from taxes indefinitely.

The reason why we are imploring you to max out on these accounts is that you will have more money being compounded over time. 

In Canada, the tax-sheltered accounts that you can invest in include RESP, RRSP, and RRIF. Once you have utilized the space in registered accounts, you can invest in non-registered accounts as well.

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7. Rebalancing Your Portfolio is the Key

While we are talking about investment rules to follow in Canada, how can we miss this important key! Investing for the long term is good, forgetting your investment is not! Prudent investment strategies include monitoring the portfolio and rebalancing it once a year so that your assets are invested in accordance with your investment goals. 

Assets fluctuate, and with time their return and behavior also change. The annual review period is good to tune in these assets again with your risk tolerance. This rebalancing also includes buying and selling some underperforming or over-performing shares that no longer serve your purpose.

8. An Emergency Fund is off Limits

Having an emergency fund is essential. Your fund can be in the form of cash, savings, or near cash assets that have high liquidity. This is because you should not have to liquidate the long-term assets in case of an emergency and dry out all the funds available to you.

Hence, the former advice of treating all assets as a part of one portfolio and prudent investment is always a must.

Read: How to Invest in TFSA in Canada?

9. Don’t Complicate Things

Investment does not need to be complex. It should be simple and non-stressful. To achieve this goal, you should automate your purchase and buying plans. If you are invested all the time, you are indulging in dollar-cost averaging where you purchase more shares when the securities are cheap and less when they are expensive.

Furthermore, you should invest in index funds and ETFs because they are globally diversified. You can also use Robo-advisors for an automated rebalancing of portfolios.

10. Investing in Yourself is the Best

Nothing helps you progress in the investment market and life than the knowledge in investment and time that you do for yourself.  It is a pervasive task that you should continue until you breathe. 

To create history, this investment is a must. Keep yourself updated on the changes in the market, the securities you have invested in, and the current news that can affect your portfolio. Implementing that on a regular basis is one of the best investment rules to follow in Canada and across the globe as learning never goes without yield. So, use it!

Read: GIC vs. Mutual Funds – Which One is Best for You?

Devanshee Dave

Devanshee is a staff writer at She is a finance enthusiast and has completed her Master’s degree in Mass Communication & Journalism. She has worked as a journalist in a local business newspaper, multiple start-ups as well as finance and economy-related online media houses.

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