How to Start Investing in Canada

Posted on February 5, 2021

Ever wonder how some people can work the same job as you, get the same raises and bonuses, but still wind up with vastly more money in their bank account?

It's important to work hard and be smart with how you spend your money, but the trick to preparing for retirement is to invest the money you have leftover at the end of the month. 

The process of investing can be tricky, but long-term investments are the way to reach your ultimate financial goals, especially when you earn an average income.

Unless you're raking in millions of dollars per year, investing is a wise option to start considering. So, let's take a look at how to start investing in Canada.

How to Start Investing in Canada

The process of investing can be relatively safe or extremely risky. How you proceed with your investment accounts is entirely up to you, but the nice thing is that you don't have to carry out the entire process in the dark. 

Investors all over the world have gone through the trials and tribulations of investing, and many of them have charted out their experiences so that others can be more successful. 

We'll look at some of the broad strokes of investing today, but keep in mind that it's always possible to get more informed in nuanced investment strategies if you feel like exploring different options. 

Where Do You Start?

The first thing to do is decide how you're going to go about investing. There are two primary ways to get started, both of which have their own perks.

First, you could take the traditional route and work with a financial advisor or mortgage broker to do your investing. In this option, you're in direct contact with someone who can buy and sell shares for you, offering up their own bits of advice when applicable.

This is a good way to start investing with minimal risk. Financial professionals have a knack for spotting bad investments and understanding how to distribute a portfolio in the most effective way.

One fallback of working with a professional is that it costs money, and you won't be able to buy and sell shares as easily as you might otherwise.

The other option is to start investing through a Robo-advisor, or just signing up for an online trading platform. Online platforms are an exceptional way to start investing because there are few, if any, barriers to entry and you can buy or sell shares as you please.  The beauty of an online platform is that you can view and monitor your funds 24/7.

You simply sign up for the platform you choose, link up your bank account, transfer some money, and away you go.

How Much Money Do You Need?

There's a longstanding myth that investing your money requires a large sum up front.

This is only true if you plan to invest with groups or through specific brokers that will only allow you to work with them when you have a specific amount in your investment account. This is largely due to the fact that those individuals might make commissions off of your returns and it wouldn't be worth it for them to work with smaller figures.

That said, there's no minimum to how much you can start investing with. You could choose to send $5 into a particular stock to start out. You could even start with less, granted that you purchase stocks that are extremely cheap.

The beautiful thing is, that $5 could blossom into $5,000 with a fair amount of luck and enough time. It could also shrink down to $.02 if the investment wasn't wise.

If you take on some of the strategies we'll discuss below, your initial investments, no matter how small, might grow into massive sums if they're contributed to on a regular basis.

Is It That Simple?

It's really as simple as signing up for a brokerage website and linking your bank account to it. Naturally, there's a whole lot more involved with making wise decisions with your money, but it's fairly simple to get started.

If you'd rather work with a professional, it might be wise to explore various options and see what's available for individuals with your intended investment amounts.

Now that you know how simple it is to begin, what in the world are you supposed to do once you get started?

Investment Strategies 101

Let's take a look at some of the fundamental ideas and concepts involved in investing so that you can have a better shot of cultivating a sum for your future. 

We'll start with the idea of "the portfolio."

What is a Portfolio?

Your investment portfolio is the combination of all the investments that you are currently holding. You can have as few or as many as you'd like.

There's an art to spreading out your portfolio in terms of risk. As you move forward, you'll find that stocks that are riskier typically hold more potential for extreme growth, while safer stocks won't burn you as badly in the short term.

While they're safer, they take a lot longer to grow. The wisest investors will tell you, though, that investing shouldn't be thought of in terms of short time frames. Smart investments for the long-run are what will allow you to turn tens of thousands of dollars into millions of dollars down the line.

That isn't to say that you shouldn't explore some of the riskier stocks, though. So, how are you supposed to manage your investments for the long-term while also trying your hand at some potential short-term growth?

How to Distribute Your Portfolio

It's wise to "diversify" your portfolio. This means that you should invest in various stocks across industries so that you're at less risk for extreme losses should anything go wrong.

That means investing in numerous stocks, rather than just one or two. Of those stocks, the majority should be low-risk and intended to be held onto for a long period of time. The smaller category of your portfolio, maybe 10 to 15 percent of your stocks, can be in categories that are risky but forecasted to grow in the short-term.

That small portion of risky stocks can be diversified as well, but it's important to think of that group as one independent group that can be used to gamble a little bit.

When you don't categorize your portfolio in this way, it's easy to get restless when you see that one extremely cheap stock is about to skyrocket. Dumping all your money into a "sure bet" risky stock, is one of the most timeless ways to, well, lose all of your money.

So, having clear guidelines and rules for yourself as to how you'll handle risky stocks is important.

Investing in Different Sectors

Another feature of diversification is investing in different areas of the market. You might have a decent spread of different shares in one corner of the market, but those shares might all be bound by the same economical factors.

For example, if there's a political shift and the country that sells Canada all of its shoelaces is barred from doing so, you wouldn't want to have all of your eggs in various "shoelace company" baskets.

That's a silly example, of course, but the reality is that you want to invest in a variety of entirely different sectors. That way, one devastating impact to the technology sector won't harm your investments in the other areas you're invested in.

The various other investments in your portfolio will still be in the green and continue to grow, even though one section of your shares took a beating.

Ideas for Long-Term Investing

Now, you might not have the foundation to think about investing significant sums into a group of shares that will allow you to retire. That said, making the right moves early on might have you feeling confident about retirement in 20 years.

One place to put some confidence in terms of long-term investments is Exchange Traded Funds (ETFs)ETFs are purchasable stocks that are combinations of numerous companies.

For example, there might be one ETF that is comprised of the top 100 new technology companies. Those companies could be forecasted to skyrocket, while there are likely a few that won’t.

Investing in an ETF like that allows you to have confidence that your stock will rise at a reasonable rate. Some of those stocks might soar, while others will sink. Either way, you'll be sitting at a regular appreciation rate that should continue to grow over the years.

Interested in Getting Started?

Understanding how to start investing in Canada is the first step towards an exciting financial future. While there are many other layers and tactics to learn and understand, this guide should have provided you with a solid baseline to get your investment ball rolling. It's never too late to start thinking about your financial future.  

If you have considered investing to secure your, and your families future, then it's probably a good time to start thinking about the insurance policies you have or don't have. In these uncertain times, we find that many people are asking themselves "do I need the insurance that I have?", and, "do I have the insurance that I need?". As one of Canada's top financial comparisons platforms, we at Insurdinary devote ourselves to assisting folks just like you navigate those questions. Interested in finding out more?  Visit us today! One of our advisors is looking forward to working with you.

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