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How to Become a Better Self-Directed Investor

Becoming a better investor can mean getting higher returns, but it can mean much more than that.

Do you care more about quality and stability, or would you rather aim for higher returns with increased volatility?

Invest in your style

Some investors may prefer high-growth stocks, such as Shopify Inc. (TSX:SHOP)(NYSE:SHOP). The stock returned 190% in a year! Yet other investors may require a stock to pay a dividend or they don’t invest in it.

Dividend-growth stocks work well for anyone looking for consistent income that can at least keep pace with inflation.

Many retirees love blue-chip dividend-growth stocks such as Royal Bank of Canada (TSX:RY)(NYSE:RY) and Fortis Inc. (TSX:FTS)(NYSE:FTS) because they tend to increase their payouts year after year. If you build a large enough portfolio, you may never have to spend your principal!

Some investors are uncomfortable buying individual stocks and would rather hold funds, such as Vanguard FTSE Canadian High Dividend Yield Index ETF (TSX:VDY).

That’s fine too. There’s no right or wrong strategy.

When self-directed investors start out, they should be open to new ideas and strategies. However, they should choose ones that fit their style.

Stick with the strategies that work for you.

happy investors

Train your patience and courage

There’s a business behind every stock. It takes time for businesses to create value and generate profits.

So, patience is required to hold stocks and watch them appreciate over time. Ideally, that’s what every investor wants to see happen.

In reality, businesses stumble from time to time. To make it worse, they report their financial results every quarter. Any results that don’t meet analyst expectations can cause their share prices to slide.

As a result, it requires patience to hold on to a stock when its share price falls. Before the Shopify shares tripled in value, they fell more than 40% from their October 2015 high for four straight months! Patient shareholders with the courage to hold on and possibly buy more were eventually rewarded, but they needed to have high convictions in the business.

Keep learning and track your results

Read about investing and talk with other investors, learn from your own mistakes as well as from others, and subscribe to newsletters that help you become a better investor.

Most importantly, apply what you learn. If you reflect on your actions and continue to learn the craft, your investment returns should improve over time.

Ask for help when needed

You don’t have to be alone in your investment quest. Consult a qualified financial advisor when needed.

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Fool contributor Kay Ng owns shares of FORTIS INC. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of Shopify and SHOPIFY INC. Shopify is a recommendation of Stock Advisor Canada.

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