8 Tips to Invest Successfully as a Self-Directed Investor in Canada

In collaboration with moomoo Canada

Investing is one of the ways to get the allure of quick gains. But the hard truth is that most active traders lose money. On the other hand, long-term investing also comes with some common pitfalls to avoid. If you’re new to investing, or getting ready to start, there are practical ways to minimize risk and optimize returns. From the importance of a well-crafted strategy to the power of emotional discipline, here are 8 tips to start your investment journey off right with moomoo, the new online investing platform in Canada.

1. Set Clear Financial Goals

Before you think about investing, ask yourself: What are my financial goals and how will I get there? For long-term investors, this means defining objectives such as retirement savings, purchasing a home, or funding education. For short-term traders, goals might be more focused on generating specific income levels or mastering certain market segments.

Whatever your plan is, clearly defined goals will inform your investment choices, from choosing a broker, to opening the appropriate account, selecting suitable assets, and leveraging tools that support your strategy. Using moomoo Canada as an example, we can easily find some ETFs or stocks for different investment goals. For example, if I want to invest in big caps with momentum, I can use the heat map and sort companies using their filters.

2. Minimize Costs

If you plan on holding investments for a longer period, minimizing costs, such as account maintenance charges, is crucial to maximize your returns over time. You also want to look for platforms offering diverse assets and access to various markets for effective portfolio diversification.

If shorter-term active trading is your plan, you need access to real-time market information and sophisticated tools for analysis, charting, and executing trades quickly. And of course, frequent trading can rack up significant costs, so choosing a platform with competitive fees is a no brainer. Moomoo offers zero-fee investment accounts and low-cost trading starting at  $0.009/per share. 

3. Understand the Risks

Trading apps and zero-commission brokers have made it easier than ever to start investing. But they also encourage more frequent trades, especially among new investors who aren’t aware of the risks. If active trading is something you’re interested in, it requires a disciplined strategy and appropriate risk management. 

Emotional decisions driven by fear or greed can derail your strategy. Insufficient risk management, like not setting stop-loss limits or risking too much capital on a single trade, can lead to significant losses. Not to mention, the cumulative fees associated with frequent trading can erode profits and lead to overall financial loss for active traders. 

A platform like moomoo can help minimize costs and losses with competitive fees, various risk management tools built into the platform, and extensive educational resources. For example, their library has an excellent article that explains five common behavioural biases and how they affect investors.

4. Beware the Tax Man

When you invest within a registered account, like an RRSP or TFSA, your gains are either tax-deferred or tax exempt. But if you plan to trade actively, such as day trading, these advantages could be compromised.

For example, income generated within a TFSA is not tax exempt if the Canada Revenu Agency determines your day trading activity constitutes a business. If that happens, you’ll need to poney up and pay tax on your business income. Unfortunately, the CRA does not accept “I didn’t know” as a tax deduction. 

While the same rule does not apply to day trading within an RRSP, there are other downsides to consider. As long as you are trading qualified investments, you do not have to pay tax on profits until you withdraw from the account. That’s because every withdrawal from the account is taxed as income. 

But that also means you cannot use tax loss harvesting to offset any losses you incur from day trading within your RRSP. Another major downside is that active trading often requires frequent deposits to the account which uses up limited and valuable contribution room.

Whether you’re investing for the long term or looking to develop an effective short-term strategy, choose a broker that offers both registered and non-registered accounts. You can open a non-registered account on moomoo right now, with RRSPs and TFSAs launching by the end of 2023. 

5. Educate Yourself

Investing isn’t just about picking stocks, it’s about understanding the market and knowing how to use the right tools effectively. Moomoo shines here with its extensive educational library and courses. They offer hundreds of FREE premium educational resources that you‘ll have to pay for in other platforms. They cover almost every investment related topic you can think of, from the basics for beginners, fundamental analysis for long term investors, to advanced trading indicators like Fibonacci Retracements, Bollinger Bands, and everything in between. 

These resources transform complex concepts into digestible knowledge that’s crucial for making informed decisions. Personally, moomoo’s commitment to investor education is my favourite thing about the platform and I frequently use these resources to improve my knowledge.

6. Practice, Practice, Practice

Before risking your hard earned bacon, test the water first. Practice accounts are an invaluable tool that allow you to hone your skills and develop strategies without losing your shirt. Moomoo’s free practice account, or “Paper Trading,” offers a simulated environment with $1,000,000 in pretend money. 

As someone who is consistently frustrated by the tug of war between my very risk-averse personality and insatiable need to master-all-the-things, this feature is a game-changer. It has allowed me to test my skills, experiment with different strategies, and get comfortable using various analytic tools in a safe, risk-free environment.

7. Start Small & Diversify

Don’t put all your eggs in one basket. Begin with small, manageable investments across different sectors and asset types and increase over time as you gain experience. But beware the pitfalls of home country bias, which limits exposure to global growth opportunities and sectors not well-represented in the domestic market.

Moomoo Canada supports trading in U.S. and Canadian markets for now, but users still have access to check other foreign markets with their analyzing tools (AU, China, etcs). The platform also offers a competitive CAD/USD currency exchange rate of just 0.09% (minimum USD $2.00/transaction). 

While moomoo only offers stocks and ETFs, diversification across various international markets can be an effective way to achieve a more balanced, resilient investment portfolio despite their limited asset offerings. 

8. Stay Informed & Adapt 

The market waits for no one. Staying up to date on market trends and adjusting your strategy accordingly is foundational to your success. Self-directed brokerage can be an ideal choice for investors seeking greater control and flexibility over their investment portfolios. You have the autonomy to make your own investment decisions, choosing from a wide array of stocks, bonds, mutual funds, and other securities. You can align your portfolio with your unique financial goals, react swiftly to market trends and capitalize on investment opportunities. 

With its low fees and great tools, moomoo is an ideal choice. They provide real-time level 2 data, premium news sources from outlets like Dow Jones, Bloomberg, Investorplace, and more at no additional cost. You also get access to over 100 free charting and technical indicators, over 100 pro-level tools including daily short sale analysis and institutional holdings, and extended trading hours from 4am-8pm EST.  

Your Investment Journey: Weighing the Pros & Cons of Moomoo Canada

Whether you’re the buy-and-hold type or an active trader, moomoo is a solid choice for new investors. This platform stands out for its competitive fee structure, with trading fees starting at just $0.0099 per share and virtually no account fees. I also love the extended trading hours and access to foreign markets for better diversification. 

But there are two major downsides to consider. Right now, you can only trade stocks and ETFs, and registered accounts are not available yet (but they should be soon). 

Having said that, there is a lot to love about this new investing platform, especially for active traders. While I don’t typically recommend this strategy because of the risks involved, moomoo addresses this through educational articles and tools designed to curb emotional decision-making.   

In all, moomoo is an excellent choice for new investors who value a blend of low fees, educational support, and extensive market access. If you are interested in it, please visit moomoo Canada to get the welcome rewards for up to $1 520 cash bonus.

Investment information provided in this content is strictly for illustrative purposes, and may not be appropriate for all investors. It is provided without respect to individual investors’ financial situation. You should consider the appropriateness for this information having regard to your relevant personal circumstances before making any investment decision. Moomoo is a financial information and trading app offered by Moomoo Technologies Inc. In Canada, investment products and services available through the moomoo app are offered by Moomoo Financial Canada Inc. a broker-dealer member of CIRO and CIPF. T&Cs apply.