A Beginner’s Guide for How to Start Investing in Canada - Slice (2024)

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Maximize your contributions to retirement plans

Not maximizing your contributions to your RRSP and other retirement savings plans is free money you’re missing out on. As RateSupermarket points out, some of these plans come with huge tax savings. So, if you pay the maximum contribution each month, you’ll not only grow your retirement savings much faster, but you’ll also save more on taxes.

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Get a TFSA

Investing for Dummies suggests that you get a tax-free savings account. As the name suggests, you’ll save on taxes if you invest emergency funds and extra savings into this type of account, since capital gains, dividends, interest earned and withdrawals are tax free.

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Start with mutual funds

Boomer&Echo suggests that you start with a portfolio of index mutual funds. They’re an easy way to get into online stock trading and you won’t have to pay an arm and a leg in commission or trading fees. The only real work is in how to find the best mutual funds in Canada.

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Invest in what you know

With so many investment opportunities out there, it can be hard to decide where to put your hard-earned money. Of course it will help to brush up on those financial terms most Canadians don’t know, but as Investing for Dummies says, investing in what you know and understand means you’ll need to spend less time doing the research.

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Diversify

While it’s wise to invest more of your money in an industry you know, you should be careful about putting all your eggs in one basket. Investing for Dummies suggests that you also buy stocks in other industries to minimize risk.

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Don’t diversify too much

Even though it’s good to divide up your investment eggs and put them in different baskets, Investing for Dummies warns against diversifying too much. In fact, the idea that the more you diversify, the better, is one of the common money myths about investments that Canadians still believe. Online investment can make investing easier, but you still need to keep track of all your investments. This can become very difficult if you’ve invested in too many places.

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Consider investment bonds

Traditionally, investment bonds have been considered a solid option for those who wanted to play it safe. MoneySense says that since the global financial crisis a decade ago, interest rates are so low that investment bonds don’t really provide a stable source of income anymore. However, you can still use high quality bonds to diversify your investment portfolio since they can help offset losses elsewhere.

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Know the difference between investing and speculating

It’s important to learn the difference between investing and speculating. Stock Investing for Dummies explains it like this: if you’re buying stocks in a company that’s making a profit, you’re investing in its long-term success. If, however, you’re buying stocks in a company that isn’t making a profit, you’re speculating: you’re basically taking a gamble, hoping that the company will start making a profit in future.

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Be logical in your choices

Buying and selling stock is one the ways to invest $100 and grow it to $1,000. However, Stock Market for Dummies says that you should always have a well-reasoned answer to the question of why you’re buying a particular stock. So, do your research and think logically, rather than emotionally when you want to buy stocks.

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Automate

Boomer&Echo says that the best way to invest is to start small and make it automatic. So, set up automatic transfers from your bank account so that on pay day, the money will go directly into your investments. Another way to automate when investing is to use a robo-advisor to manage your portfolio online.

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