Invest smarter Investing

Meet Jean-Francois Goyette, CFA, Moka’s Portfolio Manager

If someone wants to start investing, what’s the first thing they should know?

It’s never too late to start investing; the best time to start is today. And you don’t have to be rich either! Nowadays, there are plenty of options available (like Moka!) that will help you invest your savings, or help you save to invest for the long term, without prior financial knowledge.

That said, you should still get familiar with things like general terminology, account types, and how to read a statement, in order to make better decisions and understand what’s happening with your money. 

What do you need to get started?

You need an internet connection, a few dollars, a few minutes … and patience!

We always hear about risk. How can a first-time investor manage risk?  

First, you have to ask yourself how risk tolerant (or risk averse) you are. How would you feel if your portfolio lost value, how would you react? Can you afford losing some (or all) of the money you invested? 

Money that will be needed in a short period of time should be invested in conservative investments.

Also, don’t put all your eggs in the same basket, diversify your portfolio, and don’t chase “get rich quick” schemes. Remember, if it’s in the news, the opportunity is probably gone already! 

Professional money managers are broadly unsuccessful trying to time the market. As the saying goes: Time in the market is more important than timing the market. And don’t trust your brother-in-law who’s bragging about making a fortune investing in meme stocks; he’s most probably not mentioning those other times when he lost money! 

How can someone decide how much to invest?

A general best practice with budgeting is to save at least 10-20% of your monthly income, but you should really save as much as you can, keep some amount for an emergency fund, and invest the rest of it. When retirement comes, you’ll thank yourself and appreciate the wonders of compounding returns! 

If you’re not sure if or when you’ll need the money, there are different options that let you withdraw it whenever you need to without penalties, so don’t let it sleep in your chequing account!

What impact does inflation have on investments?

For starters, inflation is the rate at which the price level for goods and services is rising, generally as a result of the value of a currency falling, but also as a result of supply/demand forces. It’s most commonly measured by the Consumer Price Index (CPI). In general, too much inflation will be a drag on the economy.

Inflation can be positive for those holding tangible assets, like real estate or commodities, since it raises the value of those assets. However, higher inflation will harm savers because the purchasing power of the money they have saved will erode over time. As such, securities with fixed, longer-term cash flows like bonds will tend to underperform in a rising inflation environment. On the other hand, it can benefit borrowers, as the value of their debts will shrink over time, on an inflation-adjusted basis.

Stocks are considered to be a good hedge against inflation, as its effects are priced into stock values, although this won’t be true for all sectors of the market. Investors wishing to protect their investments from inflation should also consider other asset classes like gold, commodities, and real estate investment trusts (REITs), that can benefit from rising inflation.