As a newly practicing dentist, investing early can help you achieve your financial goals and grow your savings through the power of compounding. Even while managing student debt, starting now gives your investments more time to work for you.
Before diving in, it’s crucial to understand who should advise you on your investment planning decisions and familiarize yourself with some core investing strategies.
Know who's dealing with your money
Across Canada, the title of “Financial Planner” is regulated in some provinces, such as Ontario and Quebec, where individuals must hold approved designations to legally use the title. However, in other provinces the title remains unregulated, meaning anyone can claim it without specific qualifications. This means the responsibility falls on you to ensure your advisor is trained, certified, and accountable for offering professional financial advice. A Certified Financial Planner® (CFP®) is typically a reliable choice.
A CFP IS:
- Certified and educated, with a minimum of three years of qualifying experience.
- Proficient in areas like tax planning, insurance, investments, retirement, and estate planning.
- Appreciates how decisions in one area of your finances impact others.
- Regulated by provincial authorities if selling financial products or offering investment advice.
- Aware of your risk profile and ensures your financial goals align with your life goals.
- Transparent about fees and willing to provide clear answers about their qualifications.
Investing basics: portfolio, diversification, and key strategies
A portfolio typically includes traditional assets like equities, fixed income, and money market instruments, along with other components like real estate, commodities, and hedge funds. How you manage this portfolio is critical to achieving investment success.
You can choose from three primary portfolio management approaches:
Work with a qualified financial professional such as a CERTIFIED FINANCIAL PLANNER.
They will help you select a portfolio based on your goals, risk tolerance, and timeline.
Do it yourself (DIY).
If you prefer more control, you can manage your own investments through a discount brokerage like Qtrade.
Full management by a discretionary manager.
A portfolio manager, such as our partner Cumberland Private Wealth Management Inc., can make investment decisions on your behalf with all decisions made to align with your agreed-upon financial objectives.
Portfolios can also be managed using a combination of these strategies to suit your preferences.
Key Investment Strategies for New Dentists
Dollar Cost Averaging (DCA):
Investing a fixed amount at regular intervals, regardless of market fluctuations. This can smooth out market volatility by purchasing more shares when prices are low and fewer when prices are high.
Asset Allocation:
Balancing your portfolio across various asset classes, such as stocks, bonds, and cash, to diversify risk. Your asset allocation should align with your financial goals, time horizon, and risk tolerance.
Laddering:
A strategy commonly used for fixed-income investments like bonds or GICs. It involves purchasing bonds or GICs with staggered maturity dates. This approach provides regular access to liquidity and helps minimize interest rate risk.
By applying these strategies and working within your chosen portfolio management approach, you can create a plan that balances risk and reward to meet your long-term financial goals.