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Home My WebLink AboutThe Citizen, 2012-02-09, Page 6PAGE 6. THE CITIZEN, THURSDAY, FEBRUARY 9, 2012. Save money, but live your life Young investors should avoid common mistakes FINANCIAL 2012 NC –It’s hard to find a balance between keeping money in your wallet now, leading the lifestyle you enjoy and also saving for the future. There are many considerations when determining the savings plan that’s right for you: one option is a Retirement Savings Plan (RSP). The deadline for making RSP contributions for the 2011 tax year is Feb. 29, 2012. Other options for working towards a financially-secure future include: paying down your debt or mortgage, contributing to a Tax-Free Savings Account (TFSA), a Registered Education Savings Plan (RESP) for your children’s education or other investments (such as mutual funds, equities, etc.). Here are some tips to help you get started – or help with your current investments: • Evaluate your investment portfolio regularly. Analyze your asset allocation and assess if it’s appropriate for your required return, time horizon and risk tolerance, as well as if you’re on track to meet your goals. • Make sure you have a plan. Know what your goals are and determine what financial steps are needed to get there. An experienced financial advisor can help you build a custom plan suited for your personal situation as well as help you manage it. • If short of funds, consider a loan for your RSP contributions. The tax- deferred compound growth on your investments could potentially outweigh the interest costs. • Contribute regularly. Monthly contributions can help you reach your total annual contribution goal. Investigate taking advantage of payroll deductions for your RSP if offered by your employer. • Be mindful of the limits. Review your Notice of Assessment statement provided by the Canada Revenue Agency to check the maximum you can contribute to your RSP. You will pay a penalty if you over-contribute. MCC –The global economy remains in flux, and investors across the globe continue to witness a roller coaster ride with respect to their investments. Substantial gains one day are followed by a precipitous decline the next, and many investors are simply along for the ride and struggling to make sense of it all. Though veteran investors are more familiar with such fluctuations, young investors might be more confused. Some might even delay getting started on their portfolios, which is one of the many mistakes young investors commonly make. As unpredictable as the market may be, investors are often much more predictable, often repeating the behaviours of those who came before them. The following are some of the more common mistakes young investors tend to make, each of which should be avoided no matter how difficult the market becomes. Delaying the inevitable –Young people, particularly those who are just beginning their professional careers, often procrastinate when it comes to investing. This could be thanks to a host of factors, including inexperience, fear or simply wanting extra money in their pockets while they’re young. Each of these factors makes sense, but none of them should keep young people from investing. Most young people have seen the projections that show the staggering differences in money earned when a person begins investing at 25 as opposed to 35 (or even 30). Even something as simple as investing through a company’s investment plan is a good place to start, and young investors should take advantage of the opportunity to do so as soon as they’re eligible. When young investors put off investing, the results later on are not often pretty. That’s because of the tendency to overcompensate down the road. For instance, an investor who had the chance to invest in a particular asset but passed, only to see that asset grow significantly, might overcompensate the next time an opportunity presents itself. This is especially dangerous when it comes to investing, as fruitful investment ideas certainly don’t grow on trees. An investor who begins young and starts learning how to invest will feel more comfortable with his or her portfolio, and won’t feel the need to make up for lost years down the road. Being an ill-informed investor – Young investors know about the need to invest, but many simply don’t ask enough questions about their investments. A young investor is in a great position for a number of reasons. Young investors are typically decades away from retirement and, as a result, can take on the most risk. The older an investor gets, the more risk averse he or she should become. Young investors commonly understand this principle, but that does not mean they should simply sit back and accept it when a risky investment does not pan out. While it’s good for young investors to take risks, if the risk doesn't pay off, learn the reasons behind its failures. Doing so will lay a solid foundation for future investments. Another thing young investors must learn is to avoid taking a risk for the purpose of taking a risk. While it’s true young investors can afford risks more than their parents or grandparents, that doesn’t mean they should simply invest in any and all risky opportunities with the hopes of one of those opportunities eventually paying off in a big way. Learn what makes some risks better than others, and don’t necessarily get married to a certain investment strategy. The markets are constantly evolving, and investors need to evolve along with them to be successful over the long haul. Only investing “extra” money – Another common mistake young people make is the way they perceive investing. Many young people approach investing as something they will do when they get some “extra” money. Unfortunately, the day young people get this extra money rarely, if ever, arrives. Additional expenses, including vacations with friends or nights out on the town tend to take precedence, and young people find themselves approaching or even in their 30s without an investment portfolio to speak of. Treat investments as a monthly expense like rent or a car payment. Then, if there is any extra money at the end of the month, add that to the amount already invested. Tomorrow never comes in the world of investing, and young investors in particular need to realize that and get started as soon as possible. NC –Don’t get caught off guard. The Certified General Accountants of Ontario reminds us to circle these important dates on our calendar: February 29 – Last day to make personal and spousal RRSP contributions applicable to taxation year 2011. March 15 – First-quarter instalments due from individual taxpayers who are required to remit quarterly. March 15 –Deadline for employers to remit Ontario employer health tax (EHT) instalment covering February 2012. March 31 – File trust income tax return for trusts with a December 31 year-end. April 15 – Deadline for employers to remit Ontario employer health tax (EHT) instalment covering March 2012. April 30 – File personal income- tax return for taxation year 2011 and remit balance due, if any, to CRA. A free income tax checklist can be found at www.cga-ontario.org RSP Deadline February 29, 2012 Seek A Second Opinion! ENIB provides a total wealth management service. 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