We believe that Canadian investor education begins with recognizing what you know and what you don’t know, as well as an awareness of the most important qualities to look for in stocks

If you ask investors who have a few decades of successful investing behind them, few, if any, will credit their success to any one investment or investing technique. Instead, most will talk about the value of everyday qualities like patience, consistency and a healthy sense of skepticism—in short, the kind of qualities that bring success in all aspects of life, not just investing.

Here are some key Successful Investor tips that can serve as the foundation of a sound Canadian investor education.

Canadian investor education truly begins when you realize how much you don’t know

If you take a university-level psychology or medical course, you run the risk of “medical student’s disease.” This happens when you read about disease symptoms, and get a sudden fear that they describe something you already suffer from.

A good teacher will tell you that many symptoms in your textbook are exaggerations of normal, everyday fluctuations in your health and vitality. As numerous websites explain, a headache can signal anything from a cold to a brain tumour. To make a sound diagnosis, you need to take a wider, deeper view.

Something like this also happens in many investing careers. Early on, you may learn a few things about investing, and form some opinions. But your investing education really begins after you start to recognize just how much you don’t know. When you reach that point, you’ll start to look at a much wider range of data and indicators. But, more important, you’ll start to pay more attention to investment selection and portfolio structure, and far less to deciding when to buy and sell.

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Until you begin that process, you run a big risk of zeroing in on a narrow selection of data that’s irrelevant in the current market, or putting your faith in a single indicator that at best works intermittently.

You can always get lucky, of course. You may zero on the one omen that is most telling for that point in time. But you are more likely to choose an indicator or narrow slice of data that will lead you to miss out on a low-risk opportunity, or lose money. That’s due to simple arithmetic. There are many indicators to choose from, along with a variety of ways to interpret them. At any given time, only a minority of the many combinations will lead to profit-making decisions. The same idea applies to the way you sample the data.

Canadian investor education should include technical analysis—but with caution

Use technical analysis of stocks to support—not determine—your view of a company. The Successful Investor approach is to look at a chart reading as one tool among many. But don’t look at the chart for a prediction of what’s going to happen. Look to see if the pattern on the chart seems to support your view of the stock, based on its finances and other fundamentals. But remember that the stock market follows a multitude of factors to varying extents, and the most important or influential factors continually change.

It’s encouraging if your analysis and the chart seem to match. But sometimes they don’t. If a company looks promising, but its chart shows a lengthy falling trend, insiders may know something you don’t. That’s when you know you have to dig deeper, and perhaps wait until the situation clarifies itself.

Canadian investor education: Take a broad look at the market

Trouble is likely to arise from zeroing in on any single facet of investing—a trading or investing technique, a particular industry, a single commodity or whatever. With a narrow view, you can get lucky and make a handful of brilliant trades. But to profit consistently in a long investing career, much less make any serious money, you have to take a broad view of the market and economy, you have to learn how to single out stocks that will go up and stay up, and you have to learn to diversify. Many investors are well into their investment careers when they make that essential discovery.

Canadian investor education should include advice on diversification and investment quality

Early in their investment careers, many investors pick up on the idea that the best way to control stock-market risk is to figure out which way stock prices are headed next, then invest accordingly. This, though, turns out to be much harder than it sounds. It’s easier— and more profitable—to focus on investment quality and diversification.

You’ll do even better if you follow our three-part Successful Investor strategy: Invest mainly in well-established, dividend-paying companies; spread your money out across most if not all of the five main economic sectors; and downplay or avoid stocks in the broker/media limelight.

Here’s a simple refinement you can add to our three-part strategy. It will improve your results all the more. Buy stocks regularly during your working years, regardless of the market outlook. Sell stocks gradually in retirement, when you need money to supplement your income from dividends and other sources.

What have been the foundational pieces to your investing education that have changed the way you invest?

What is the biggest mistake you made as you were learning to invest?