Thinking about investing in the stock market on your own, without investment advice? It may be a good idea, but you should take the time to make sure you’re properly prepared.

Generally speaking, investing on your own requires more time and knowledge than investing with a professional.

If you want to build your portfolio with individual securities such as shares, you’ll need to perform the appropriate financial and economic analyses of the companies you’re considering investing in. If you have limited time or knowledge, you might consider investing in investment funds, such as mutual funds or exchange-traded funds.

You will be responsible for your decisions and their outcome, good or bad. It’s better to use an investment professional if you don’t have a lot of time to gather and analyze relevant information about your investments or track them.

Before you invest on your own in the stock market on a discount brokerage platform, you should determine your investor profile.

Your investor profile must consider your objectives, financial situation, risk tolerance and investment knowledge.

Would you lose any sleep if your investments dropped in value? If the market declines sharply, it is often recommended that you don’t panic and that you hold on to your securities so you don’t take an actual loss.

You’ll need your money and have to sell your investments in the short, medium or long term? If you need to sell them in the short term (for example, within a few months), you should probably choose safe, liquid investments.

Investing in shares on the stock market requires knowledge and expertise, and it carries risks.

Before investing in the shares of a publicly traded company, you need to understand and assess the business, risk exposure, capital structure, financial performance, indebtedness and other facets of the company.

Analyzing these and other aspects is essential to maximize your chances of making a profit on your investment. This analysis requires familiarizing yourself with the company’s financial statements and the information they provide on its performance, financial position and cash flow situation. A knowledge and understanding of key financial ratios  is also important.

A stock’s value is also influenced by many external factors, including the general economic environment, political or financial crises, trade tensions between countries, natural disasters, and public health issues.

Searching for and analyzing information

If you want to buy the shares of a company, read relevant documents that will answer such questions as:

• What indications are there that the investment will be profitable?
• What could affect the company’s profitability? Is the company facing legal proceedings? Has a caution been issued regarding its survival?
• Does the company operate in an industry with good future prospects? What are the company’s competitive advantages and production capacity? Who’s on its management team and board of directors?
• If it’s a manufacturer, is its equipment state-of-the-art or obsolete?
• What is the company’s financial position? Publicly traded companies are required to produce quarterly and annual financial statements. The company’s financial statements and other material documents, including prospectusesA prospectus is a detailed information document that a company must prepare to be able to sell securities (such as shares) to the public.
  It must provide full, true and plain disclosure of all material facts likely to affect the value or market price of the security in question.  , annual reports, management’s discussion and analysesManagement’s Discussion and Analysis (MD&A) is a document that explains management’s point of view on the company’s financial statements, financial condition and future prospects. This report complements the financial statements, but does not form a part of them. (MD&As), annual information formsThe annual information form is an information document that describes the company and its activities at a given time, future outlooks, the risks to which the company is exposed and any other factors that impact the company. and news releases, can be found on the SEDAR+ This link will open in a new window site.

Don’t have the time or knowledge to select individual securities and build a diversified portfolio that suits your needs?

An exchange-traded fund (ETF) is an investment fund whose securities are, like shares, traded on an exchange. Index ETFs usually track a benchmark (or “underlying”) index.

Here’s what you need to know about ETFs

Our investment biases are difficult to overcome, but just being aware of them can decrease them.

Here are actions you can take to limit biases:

• Consult multiple trusted information sources before investing.
• Take a step back, be realistic and assess your decisions critically.
• Question what you think and what others say.
• Think about your objectives for the medium and long term.
• Choose investments that suit your investor profile rather than follow others’ example or try to beat the market.