We're Here for You

By Phone

Give us a call 24 hours a day, 7 days a week at
1-888-826-4374.

Wondering about your tax receipts? Learn More
By Online Chat Session
Saving & Chequing

Weekdays 8am - 8pm ET
Weekends 9am - 5pm ET

Investing

Weekdays 8am - 8pm ET

FAQs

If you've got questions, we've got answers.
visit our FAQ's

Face-to-Face

We'd love to have you drop by one of our Tangerine Locations

In Online Communities

Before Investing, Ask Yourself This Simple Question

Written by Paul Williams

Thursday, April 13th, 2017

What's the purpose of investing?

It's a simple question, but it's an overlooked one. Especially for seven out of 10 Canadians who don't have a comprehensive written financial plan to meet their life goals.

There are no wrong answers to the question. Perhaps the most important thing is actually asking it yourself.

Why?

To invest for the future, it means you're cutting back on today's spending. That $100 per month that goes into your workplace savings plan means you or a loved one may have to do without new skates this year. There has to be some reason why you don't simply spend that $100 today.

Asking the question is the first step to creating an investment plan; a plan that will put into words your tolerance for risk, the timing — long-term or short-term — and tactics — investment products and strategies — required to meet your goals.

Will Posing the Question Make You a Better Investor?

Depending on your answer, it may make you a less frantic investor chasing the latest investment fad, or worrying you somehow missed out on the next big thing. In fact, you may stop listening to TV investment pundits or following the markets every hour on the hour.

Yes, it may make you a more patient investor. It could help you carve out realistic goals, and put in perspective what are sensible rate-of-return objectives. For example, if the purpose of investing is to build a down payment for that house you intend to buy in two years, it may be highly unrealistic to expect 10% rates of return. In fact, you may want to avoid risky stocks or funds and be more focused on capital preservation.

What's the purpose of investing?

The answer may seem rather obvious: You invest to make more money. It's also to preserve the buying power of your money: 15 years ago a dollar would buy you a loaf of bread. Today, that same loaf may cost $2.50. Parked under a mattress, that loonie has lost a lot of its purchasing power. Or, you may believe the purpose of investing is to lower your taxes by taking advantage of the favorable tax treatment for capital gains and dividends.

Perhaps the purpose of investing is simply a means to an end? You define the purpose of investing in terms of achieving future spending goals. For example, providing for your retirement at the same standard of living you now enjoy prior to retirement. Depending on your age, this "purpose" may define you as a long-term investor.

Your goals may include saving to get married, for university, a house, a baby, or simply building a safety net. These goals may help define you as a short-term investor, again depending on your age.

And, of course, you may just like to play the market — for entertainment. I'll leave you with the words of noted U.S. economist Paul Samuelson. He said: “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas."

Share now