10 Things Self-Directed Investors Should Know

Whether you are new to investing or have years of experience, it's always good to brush up on some of the so-called tricks of the trade. That's especially true when markets are volatile, which can often lead to moments of uncertainty or self-doubt for even the most veteran of DIY investors.

Knowing what type of investor you are will help you determine how comfortable you are with risk and, in turn, what mix of assets — such as stocks, exchange-traded funds, bonds and cash, for example — is right for you. Beyond that, however, there are a number of other core principles that can help keep you on track.

Here are 10 things self-directed investors should know:

1. There's more than one order type.

Market, limit, stop, stop limit….there's more than one choice when it comes to entering your stock or ETF order. The two main choices – market and limit – are good places to start. In short, with a market order, you pay (or receive) the best price available at the time your order is received by the market. If the market is closed, you'll get the market price the next trading day. A word of caution: the opening price one day can vary greatly from the closing price the day before. Limit orders let you set the maximum price you're willing to pay when you buy a security, or the minimum price you're willing to accept if you're selling. Limit orders give you more control over the price, while market orders tend to be the fastest way to get your order executed.

2. Emotions can affect your decisions.

"It's not a sprint it's a marathon. That said, some days you just have to roll with the waves." – Luke1, 29, investor

Even the savviest of investors can sometimes let emotions get in the way of good decision-making – especially when markets are volatile. "Emotions can hijack your investment decisions," says RBC Behavioural Economics expert Michael Sherman. Find out how you can keep your emotions in check through volatility, and read David Chilton's take in How the Wealthy Barber Manages Emotions.

3. Research can be key.

"I follow a lot of news about the companies that I invest in. I like to get to know them before I invest." – Brandon, 33, investor

New (and experienced) investors can often buy an investment they don't quite understand — which can mean taking on more risk than is wanted or expected. Research is important when choosing investments that are right for you. Annual and quarterly reports can give you a sense of a company's financial position, and detailed quotes can give you all kinds of insights — from details about dividends to beta to price-to-earnings ratios – to help you with research. Find out more in our Research Guide and Extra, Extra: Market News is at Your Fingertips.

4. Explore the pros and cons of dollar-cost averaging and DRIPs.

"Investing is like building a house. Each brick helps get you closer to your goal." – Alex¹, 27, investor

There are two common investing concepts you'll often hear about: dollar-cost averaging and dividend reinvestment plans (DRIPs). Both can help take some of the guesswork out of trying to time the market, especially during times of volatility. Dollar-cost averaging, at its simplest, involves investing a set dollar amount on a regular basis regardless of current market prices. A DRIP, meanwhile, automatically reinvests the cash dividends you earn on your stock (or ETF) investments into more shares or units of your investment. Find out more in Automated Account Services.

5. There are many ways to find investing ideas.

"It was helpful to me to have someone hold my hand" – Barb¹, 68, investor

Investing inspiration can come from all kinds of sources. You might read about opportunities online or in the newspaper. Ideas often come from friends, family members or colleagues. Inspiration can even strike as you go about your daily routine.

6. It's always smart to be cyber aware.

As with any online transaction, cyber safety is key in investing. The fundamentals of keeping your banking information secure, avoiding public wi-fi and keeping your email safe all still apply. A couple of quick tips for "safe clicking":

• Create strong passwords and use unique passwords for different websites
• Look for a lock symbol in the address bar, which can confirm a site's security
• Keep your anti-virus and anti-malware programs up to date
• Check closely for spelling errors in content, email addresses and URLs
• Be wary of strange email addresses that don't correspond with the organization's
• Know that government tax agencies will never contact taxpayers by email, text message or social media requesting personal or financial information
• RBC will not ask you to divulge your personal information or credentials in an email
• For RBC Direct Investing clients specifically, logging into your account online and sending inquiries or instructions through a secure message from your account's homepage is the best way to ensure you're being cyber safe

7. There are ways to save on foreign exchange.

Many direct investing accounts have two currencies: U.S. and Canadian. If you use Canadian currency in a U.S. market or vice-versa, you may face double foreign-exchange fees: once when you buy and once when you sell. It is possible to convert money to U.S. dollars and then buy and sell on the U.S. side of your account. Find out more in Your Dual Currency Account – How to Use It.

8. You can march to the beat of your own drum.

"I wanted to be able to put my money into companies and investments I believe in." – Milene, 41, investor

It's easy to get caught up in the hype of the latest investing craze – in fact, it's often why many investors open an investing account in the first place. But remember, while the latest hot stock may be right for your friend or colleague, it may not necessarily be for you. Check out 4 Questions to Ask Yourself Before You Buy.

9. Leverage can be your best friend, until it isn't.

First off, leverage (or margin) means borrowing money with the aim of increasing your returns. A margin account lets you borrow money against the investments in your account. Leveraged investing allows you to buy a larger number of shares than you would otherwise be able to and, when market conditions are favourable, you could generate a larger return. That's because you pay back the amount borrowed, plus interest, but keep any investment earnings. But, it's key to remember that you owe the money you borrowed whether an investment pays off or not. Investing with borrowed funds can magnify returns but can also magnify losses. Find out more in Understanding Margin Accounts.

10. Checking order status is a good habit.

While you can always check your portfolio holdings to see how many shares you have, it takes just seconds to verify the status of an order before ending your online session. It's also the first place you will see if a trade has been rejected. Orders can be rejected for a number of reasons, from trading halts to invalid price increments. Find out more about orders in How to Place an Order. Checking your order status is just one of many self-serve tools that can help you be in control. Check out these eight essential self-serve tools, tips and resources to find out how to place a trade, transfer funds and more.

For more investing guides, concepts and common questions, check out the Investing Academy, where you can read about specifics such as options trading strategies in the Options Trading Guide, or the benefits of investing in stocks in the Guide to Investing in Stocks.