The stock market is down, meaning it’s time to celebrate. You read that right. When the market sinks, it’s time to celebrate that you can score some good buys.
As we battle a global pandemic, economic forecasters are cautious. Governments around the world are likely to issue stay-at-home orders to slow the spread of COVID-19. A vaccine could offer some relief, but many people feel uncertain about the safety and efficacy of medicine developed in a compressed time frame. All of that makes many people feel unsure of their financial future. But at CleveDoesMore, we see this as the season to sow the seeds that will grow your family’s wealth. Those who plant now will harvest profits later.
Will Ashworth wrote in InvestorPlace, one of the largest, longest-standing independent financial research firms, that Canada’s stock market is the 16th best performer in 2020. He ranked it against 40 countries. Better yet, Ashworth believes the Canadian stock market will do better in 2021. Black Canadians have access to a wide range of accounts that offer tax advantages and any day you can keep money in your pocket instead of handing it to the government is a good day.
One of the best ways to begin securing your financial future is through an employer supplemental retirement or pension plan. The money automatically comes out of your paycheck, making it effortless. Many of these accounts are tax-deferred, meaning you don’t pay taxes on the money now. You only pay when you withdraw it years from now. Your employer may also match a percentage of your contributions. Always take advantage of this free money.
Two additional ways to invest your money are Registered Retirement Savings Plans (RRSP) or Tax-Free Savings Accounts (TFSA). For the RRSP, you don’t pay income tax on the money you invest. You only pay years from now when you withdraw the money. The TFSAs are slightly less advantageous in that you pay income taxes on the initial contribution. However, you are exempt from paying taxes on any investment gains in your TFSA.
If you can tolerate a little risk though, you could win big in the stock market. Stock prices around the world fell in 2020. If you already were an investor, you may have felt alarmed while watching the value of your portfolio shrink. Here’s another way of thinking about it though. Stocks are essentially on sale right now. It’s no different than filling your pantry with canned goods when a store runs a buy one, get one half-off sale.
There’s no replacement for talking to an investment expert to get suggestions on where to put your money. However, we can offer four simple tips to get you started:
- Before you dive in, remember investing is a risk-based decision. In general, the riskier investments offer the potential for the highest rewards. Lower-risk investments deliver lower rewards. Before you invest your first dollar, make sure you understand both the risk you’re taking and the potential rewards. A good financial adviser can help you determine what’s best for you.
- Diversify your portfolio. That means investing in different types of assets. Your portfolio should include stocks, bonds, mutual funds, and more, to protect yourself from any market dips. The more different types of investments you have, the safer you are.
- Consider how long you can leave the money invested. If you’re 22 and saving for retirement, you can tolerate a high-risk investment. You won’t touch the money for years, so you can weather any short-term dips. If you are 60, though, you’ll want to choose lower-risk options.
- Do your research. The stock market is volatile and unpredictable. Research your investments to understand how they’ll fare. For example, home-delivered meal kits are surging now. It’s good news for the established companies, but a little research shows new firms are beginning to crowd the market.
The bottom line is, the billionaires of the world are investing in the stock market now. They know that with the right strategy, this will pay off in the long run. The time to invest is now!