What Kind Of Investor Are You?

Your personal investing profile will influence which funds are right for you.

Before you save for your RRSP, or build a portfolio of investments, you need to decide what your goals are for those investments. This should be an important discussion with your financial advisor -- and one which you revisit on a regular basis -- especially as your personal situation or financial needs change.

Here are five quick questions you should think about, and review with your advisor:

1. How many different financial goals do you have?

Most working Canadians are thinking about their retirement savings, but you may have other, shorter-term, savings goals as well: a child's education, a new home, a special vacation. Make a list of your goals, and how much money you would like to save for each.

2. How long do you expect your money to be invested before you will need it?

Again, you may have two or more different investment time horizons.

3. How do you feel about "risk" the possibility that your investment may drop in value (even if that drop is temporary)?

Some investors -- especially those with a long-term investment time horizon -- find that they can live with the risk of market "ups and downs", and stay focused on their long-term goals. Others will lose sleep each time the market drops. Your ability to tolerate risk will be an important factor in building a portfolio of mutual fund investments that meets your personal investing profile.

4. What are your current financial obligations? Are you supporting a spouse or dependent children, or perhaps an aging parent? Are you supporting a mortgage, or perhaps a personal or business loan?

Factor this in to your overall investment strategy.

5. What is your current financial situation? Is your current net worth below $50,000? Above $100,000? Or somewhere in between? Measured against your other financial commitments, this may help determine how resilient you may be to market ups and downs.

Whatever your personal investing profile, remember that your investments should be diversified. Even very conservative investors can find an equity fund that suits their personal investing profile. And even the most aggressive investor should think about saving a little room in his or her portfolio for a bond or money market fund. Your financial advisor can help you sort through your choices.