“Back to school” for investors

As kids head back to school this week, investors can also take this moment to brush up on their own investor education. Here are some tips to think about:

 1. Hit the books

GetSmarterAboutMoney.ca has hundreds of articles, tools and calculators such as our investing basics primer, our guide to financial planning, and our calculators like the compound interest calculator and the RRSP savings calculator. Read up on investing to refresh your memory and knowledge as the school year starts. If you want to share information with others to teach them about investing, our embeddable Fact Cards are another great resource.

Lastly, don’t forget to sign up for Investor News. Stay informed about the latest investor initiatives, additional resources, topical issues, key dates and investor warnings and alerts.

2. Review how you did in the past

Getting back to school also means getting back to grades and report cards. In the investment world, this means reviewing the performance of your investments and the fees you paid. As part of the new cost and performance reporting rules, you will receive an annual performance report using standard formulas that explain how your investments have performed over time. Performance will be reported by providing:

  1. Opening market value, deposits and withdrawals
  2. Change in market value
  3. Your personal rates of return

While all registered dealers and advisors are required to implement these changes as of July 15, 2016, you may not receive the new report on investment performance until 2017. Talk to your dealer or advisor to find out when you’ll receive yours.

Learn more about the report on investment performance.

 3. Know your strengths and weaknesses

Being aware of how behavioural biases impact your decisions could help make you a more informed investor.

There are a number of biases that may influence decision-making, including:

  • Confirmation Bias – Someone displaying confirmation bias is someone who is looking to validate a pre-determined idea or outcome. With this bias, an investor may be more likely to ignore contrary or negative information in order to support what they already believed either when reviewing their investment’s performance or when making a new purchase or sale.
  • Familiarity Bias – It has long been documented that Canadian investors tend to invest more in domestic companies and products even though Canada makes up only a small portion of global markets. This is one aspect of what is known as a Familiarity Bias.
  • Loss Aversion Bias – Studies have found that losses are felt twice as much as gains; consequently investors tend to underweight gains and overweigh losses. This can cause investors to continue with the status quo and hold on to investments far too long rather than considering other options.

The Investor Office will publish research by the end of fiscal 2016-17 that explores behavioural economics and finance concepts and examines how these disciplines are applied in other jurisdictions, with a view to identifying relevant areas and potential applications for investors and for the OSC.

 4. Plan for post-secondary education

We all know that getting a good education will help give your child the best chance to reach their goals. But dedication and hard work are sometimes not enough. Give your child a helping hand and plan for their future post-secondary education costs by opening a Registered Education Saving Plan (RESP).

An RESP is a dedicated savings plan to help you save for your child’s education after high school. Your savings grow tax-free and there is no tax on the investment earnings as long as they remain in the account.

You may also use other types of accounts to save for your child’s education, such as a TFSA, a trust or a non-registered account.

5. Ask questions

If you have questions about your investments or their performance, ask your advisor. A good advisor will want you to be informed and will welcome your input. When your advisor recommends an investment, don’t forget to ask questions about how the investment works, the level of risk, why you should buy it and how will it help you reach your goals.

You can also ask questions through Re: Investing.  Re: Investing offers clear, unbiased answers to your questions on investing. Questions range from “Where can I start looking to invest money?” to “How do I transfer the funds from a mutual fund to an ETF? Do I have to sell it first?

And finally, the OSC’s Contact and Inquiries Centre is there to answer your questions and may refer your complaint or inquiry to another branch at the Ontario Securities Commission.

  • Local (Toronto): 416-593-8314
  • Toll-free (North America): 1-877-785-1555
  • Email: inquiries@osc.gov.on.ca

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