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(Emma Lee/Life File)
(Emma Lee/Life File)

Learn more: Advanced Investor

Thirty-nine investing secrets revealed at last Add to ...

This is the final lesson in a six-part course on advanced investing that we publish every week.

We live in a world full of lists: "Five Tips for a Flatter Belly;" "Ten Moves to Drive Your Man Crazy;" "Eight Tips for Making Money Sitting At Home Doing Jack Squat."

Unfortunately, investing is too complex to boil down into five or 10 easy steps. That's why, for the final instalment in this series, I now present not 10, not 20, but 39 Steps to Becoming a Successful Investor.

Read them all at once. Or read a few at breakfast, a few more at lunch and save the rest for after dinner.

Some of these steps may seem obvious. Others not so much. These are the things that have worked for me and people I know. I hope they work for you, too.

1. Learn as much as you can about investing. Nobody (except maybe your heirs) cares more about protecting and building your wealth than you do.

2. As the ING guy says, "Save your money!" Without savings, you have nothing to invest.

3. If you're having trouble saving, track your income and expenses to the nearest dime for a few months. It's the only way to find out where your money is going and, hence, the only way to figure out where you can cut back to save more.

Learn more about investing from John Heinzl The 2010 Investor Education series for beginner investors:

  • Part 1: Want to invest? Learn to save first
  • Part 2: Mutual funds: A good place to start
  • Part 3: Why ETFs are booming
  • Part 4: Sleeping well with GICs
  • Part 5: Why buy and hold is (still) the best approach
  • Part 6: Death, yes. Taxes? Not necessarily.

The 2010 Investor Education series for advanced investors:

Gail Bebee's weekly mentoring for our investor education contest winner:

4. If you need motivation, read Your Money or Your Life by Vicki Robin and Joe Dominguez.

5. Keep a percentage of your savings, roughly equivalent to your age, in low-risk bonds or GICs. This is your "sleep at night money."

6. Build a ladder for your GICs or bonds.

7. Always be on the lookout for "black swans" - rare and destabilizing events that aren't supposed to happen but do. (Credit meltdown, anyone?)

8. Invest a portion of your savings in a low-fee index mutual funds or exchange-traded funds.

9. When buying individual stocks, stick with those that pay dividends, preferably rising dividends.

10. Reinvest your dividends and interest payments to benefit from compounding.

11. Remember that investing isn't a sprint but a marathon - a very, very long marathon. The longer you invest, the greater the benefits of compounding.

12. Don't listen to stock tips from your brother-in-law.

13. Avoid "story" stocks. They're usually duds.

14. Stay out of debt. If you're in debt, get out.

15. Pay off your mortgage as quickly as possible.

16. Take full advantage of RRSPs, TFSAs and RESPs.

17. Invest in Canadian banks. The same reasons we hate them as customers - too big, not enough competition - are why we love them as investors.

18. Invest in boring companies - pipelines, power producers, utilities.

19. Ask your adviser if his or her fees are negotiable. They usually are, although the vast majority of clients don't realize it.

20. When negotiating, say the magic words "Is that the best you can do?" (Works best when you have a disappointed look on your face).

21. Always question your adviser, and never pull the trigger on a trade until you get a second opinion from someone you trust.

22. Read The Investment Zoo by Stephen Jarislowsky.

23. Visit the website, dividendgrowth.ca, run by Mr. Jarislowsky's biggest fan, Tom Connolly.

24. Read The Single Best Investment: Creating Wealth with Dividend Growth , by Lowell Miller.

25. Keep your trading costs as low as possible.

26. Read The Little Book of Common Sense Investing by John Bogle, founder of U.S. index fund pioneer Vanguard Mutual Fund Group.

27. Keep trading to a minimum to reduce commission costs.

28. Resist the urge to check your portfolio every five minutes. It encourages excessive trading.

29. Consolidate your investments with one broker. It's easier to track how you're doing.

30. Avoid leveraged ETFs. The returns are too unpredictable.

31. Avoid principal-protected notes. The fees are too high.

32. Read In Your Best Interest: The Ultimate Guide to the Canadian Bond Market by W.H. "Hank" Cunningham.

33. Pay particular attention to Mr. Cunningham's warning that most investment advisers are more concerned about selling products than looking after their clients' needs: "Very few IAs (my guess is 10 per cent) actually have your best interests in mind."

34. Don't invest in anything you don't understand.

35. Get your spouse and kids on board.

36. Ask your adviser for a full breakdown of all fees you are paying, including those that are embedded in products and which you may not know you are paying.

37. Write an investment policy statement that sets out your goals and philosophy.

38. Ignore opportunities that seem too good to be true. They usually are.

39. When you retire to your villa in Tuscany, don't forget to send me a postcard.

Editor's note: An earlier online version of this piece provided only the subtitle of W.H. Cunningham's book. The full title now appears.

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Follow on Twitter: @johnheinzl

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