We interviewed seasoned wealth planners and advisors for their best advice to beginners who are completely new to investing. Here's everything they told us, simplified into 5 steps. If this is your first time thinking about investing, we encourage you to follow the steps in order, but you don't have to.
"The market", "dividend", "large-cap". Forget the lingo for a minute. Investing can be overwhelming. Frame your thinking before diving in to make it easier.
The first step is to think about your money and separate it into groups based on when you'll need to use it. For example:
Keep these groups in mind as you learn about different ways to invest in the next steps.
Don't forget, you can get wealth planning advice free at any time. If you'd rather do this with a professional, let's chat.
Book a free appointmentThe stock market is just one way of investing among many. All investments, and there are many, sit on a spectrum of risk.
A low-risk investment is predictable – you know what you’re going to get. Higher risk usually means it has the potential to earn more but also has the potential of loss as well.
Think back to the groups in step 1. How much risk would you want to take with each group of money?
Starting early and making regular contributions to your investments is one simple approach to investing. Even $25 a month can be a sigh of relief one day. If you delay for too long, you’ll miss out on early returns that could add up to exponential growth.
Let's say you have $5,000 to invest right now and save $500 every month to add to your investment. If you invest in a low-risk investment with 3% return, in 20 years you'll have $172,861. If you wait 10 years before you start, you'll only have $76,616.
So the "when" is approximately as soon as you can. How much depends on when you'll need the money and how much you want to have by that time. Book an appointment with a wealth professional to make the math and decision making easier.
Think back to your groups of money in step one. Now you decide how to invest each group. As a rule of thumb, the sooner you need to use a portion of money, the lower the risk you should take with that portion.
They are promises in exchange for interest. You deposit money into a term deposit, aka GIC, for a promised amount of time known as the "term". We pay you interest when we return the money at the end of the term. They are low-risk and good for short-term investments.
A mutual fund is changing collection of dozens of investments (stocks and bonds) selected by a professional portfolio manager. Most are less risky than individual stocks because mutual funds spread the risk across multiple investments.
There are hundreds of mutual funds out there ranging from low to high-risk.
Like mutual funds, ETFs are also made of stocks or bonds. Recently when people talk ETFs, they’re likely thinking of index-based ETFs which only contain stocks. The portfolio manager of a market ETF picks stocks that reflect a stock index, such as the S&P 500, and try to match its performance.
You can invest in ETFs by finding an advisor or with online investing* options.
Bonds are issued by a government, or a company, to borrow money. Whoever buys the bonds become the lenders and are paid interest. Because the government or company promises to play back the original amount plus interest, they’re generally less risky than stocks.
You can invest directly in bonds by finding an advisor.
When you own a stock, you own a piece of a company called a share. The share changes value every business day. Stocks are considered riskier investments because while there’s no upper limit to how much they can be worth, a stock's value can potentially decrease all the way to zero.
You can invest in stocks by finding an advisor or through online investing.
Canadians can access special accounts with all sorts of benefits called "registered accounts". You've probably heard of some of them before! With all the basics you just learned, select an account below to explore next steps or get started with investing.
The every-person investment account. Best part, you aren't taxed on your investment earnings.
Investments for retirement with tax benefits that you can also use for your first home, education or training.
The first-time home buyer investment account. Grow your investments tax-free and withdraw it when you find your first home.
For saving for your child's post-secondary education while getting access to government grants and bonds.
A long-term, tax-sheltered savings and investment option for Canadians with disabilities.
An investment account for retirees withdrawing from their registered retirement savings.
Already have an account and want to lean on a professional opinion? Book an appointment with our specialists to:
Start saving and growing
With the basics under your belt, now you just have to choose where to start. Plenty of financial institutions offer the same tools to invest but we give you tools to put your money where your values are.
Every dollar you spend, borrow and invest with Vancity goes towards building a cleaner and fairer world while making you a return as a member.
*Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise stated, mutual funds, other securities and cash balances are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer that insures deposits in credit unions, their values change frequently, and past performance may not be repeated.
