Beginner’s Guide to Investing for Canadians

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The idea of investing can be intimidating. When it’s your hard-earned money at stake, you may think it’s not worth the risk. However, with an array of investment opportunities in Canada, you can take control over your finances while minimizing risk. You just need to know how to get started.

So, how to invest in stocks? It’s a great question because it’s one that people either feel completely confident or terribly inept in answering. The good news is, even if you have no idea where to begin with your investments, you’re not alone. Additionally, you don’t need to be an expert in stocks or finance to start investing.

In fact, with just a few hundred dollars, you can put your money into a Guaranteed Investment Certificate (GIC). If you’re just getting started, this is a low-risk choice with a fixed rate of return. However, while it’s insured by the Canadian government, the return rates are low, limiting your chances of earning any real profit.

To maximize your chances of higher return rates, there are options for those who can take a little more risk. The Exchange Traded Funds (ETF) is a good way to diversify your investments by holding stocks. You can purchase these using a brokerage firm or through a robo-advisor. Currently, Wealthsimple is one of the most popular robo-advisors in Canada.

But before you start downloading apps and opening portfolios, it’s important to get a handle on your financial goals. This will help gauge your investments and reduce your risks. Speak with your accountant to build a healthy financial foundation and explore investment opportunities. To get you started, here’s a beginners guide to investing:

Make Your Money Work for You

If you’re looking into investing, you’ve probably heard this phrase. But how exactly should you go about it? As a beginner to investing, it’s best to start small as you learn the trade. With time, you’ll get a better feel for the market and as your confidence grows, so can your investments. To get you started, here are a few ways you can invest your money that don’t require a degree in finance to understand.

1.     Retirement Plans

Have you been maximizing your contributions to your retirement savings plans such as your RRSP? If not, you’re missing out on free money. Many plans come with huge tax savings, allowing you to grow your retirement fund faster.

2.     Open a TFSA

After transferring some savings into your RRSP, make sure that you speak with your bank about opening a tax-free savings account. With this, you can save on taxes by moving your earnings from your chequing to your TSFA. Currently, the annual limit you’re able to place in your TSFA is $6,000. Meaning that’s 6 grand of your yearly earnings that are completely tax-free. In terms of investing, you can enjoy tax-free compounding, which allows your investments inside a TSFA to grow tax-free as well.

3.     Invest in Mutual Funds

Similar to the ETF’s mentioned earlier, mutual funds have convenient, built-in diversification that includes stocks, bonds, and cash. Rather than build your own portfolio, you invest your money into a professionally managed portfolio with other investors. This reduces your risk as it spreads the assets amongst various sectors. You can speak with your bank or accountant to learn more about the best mutual funds for you.

4.     Specify Your Research

With all the investment opportunities around, it can be tough to know where to start. Rather than pool your money into an industry you’ve heard about through the grapevine, invest in what you know. This can prevent you from burning out while researching hundreds of markets, only to be left more confused. Start with what you know, and dive in from there.

5.     Diversify With Care

There’s a fine balance when it comes to diversifying your investments. While you don’t want to risk investing all your money into one industry, having your money in too many places can quickly get out of hand. It’s important to keep track of the health of your stocks for optimal management. Therefore, invest in a few industries you feel knowledgeable and passionate about, and keep an eye on them.

6.     Speak With Your Accountant

With great attention to detail, accountants are an asset when learning about how to invest in stocks. If you’re a beginner to investing, your accountant can analyze your finances to ensure you’re in a healthy financial position to venture into investment opportunities. Whether it be tax planning advisement, finance strategy, or other complex financial matters, our team at Genesa CPA are here to assist. Request a consultation today!

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