Jan 11 – How to get started, when it comes to investing

January 11, 2024

Everyone talks about investing on their own for the long term. But what’s involved?

Save with SPP took a look at a few articles on getting started in investing, and while this is a huge topic that has spawned a library-filling collection of books and major education programs across the country’s universities and colleges, we hope these few tips will help newbies think about how to get started.

At the Savvy New Canadians blog, the first recommended step is to find yourself “an online brokerage account,” which the blog says makes it “much easier to trade stocks.” These days, the article notes, there are online brokerages with very low trading prices, and some with no fees at all.

The article explains that stocks, bonds, exchange-traded funds (ETFs) and mutual funds can all be easily traded through an online brokerage.

You’ll also have to decide what type of investment account you want. A registered account (such as a registered retirement savings plan) is “used to save for retirement and defers taxes on your earnings until you make withdrawals.” A Tax Free Savings Account (TFSA) “offers an opportunity to invest and earn tax-free returns forever.” A non-registered or cash account is the other option – you pay taxes on income and capital gains.

OK, we have an account, we have a basic knowledge of types of investment and savings vehicles. What’s next?

First, advises Investopedia, figure out what your “tolerance for risk” is.

“Stocks are categorized in various ways, such as large capitalization stocks, small cap stocks, aggressive growth stocks, and value stocks. They all have different levels of risk. Once you determine your risk tolerance, you can set your investment sights on the stocks that complement it,” the article explains.

In other words, are you going to be OK if the value of the security you buy goes up and down by 10 or 20 per cent in the short term? If you aren’t, you may be less interested in stock-related investments, and more interested in less volatile, fixed income-type investments.

Goal setting is important as well, the article notes.

“If you’re just beginning your career, an investment goal could be to increase the amount of money in your account. If you’re older, you may want to generate income as well as grow and protect your wealth,” the article notes.

Finally, the article talks about three investment styles.

If you are confident you know enough about the markets to go it alone, that’s an option, the article notes. “Traditional online brokers allow you to invest in stocks, bonds, ETFs, index funds and mutual funds,” the article tells us.

Alternatively, the article says, you can find yourself “an experienced broker or financial advisor” to help you make your decisions. “This is a good option for beginners who understand the importance of investing, but may want an expert to help them do it,” the article adds. A third, newer option is to use a robo-advisor, which is “an automated, hands-off option that typically costs less than working with a broker or financial advisor. Once a robo-advisor program has your goals, risk tolerance levels, and other details, it automatically invests for you.”

Investment guru Warren Buffett has a couple of memorable bits of advice on investing. His giant firm tends only to invest in businesses where they (Buffett and his team) feel they understand how the business works. He also likes the idea of investing half your money in index funds, and the other half in safe, government backed securities.

As mentioned, this is a very broad topic, so find out as much as you can before you enter the choppy waters of investing, and do consider getting professional advice to get started.

Alternatively, if you’re saving for retirement and want expert help, consider joining the Saskatchewan Pension Plan. All you need to do is contribute savings, the experts at SPP will handle the investment decisions at a very low cost in a professionally managed, pooled fund.

At the end of your worklife, your options for retirement income include getting a lifetime annuity (a monthly payment for life) or the flexibility of deciding how much income you want to receive through our Variable Benefit. Check out SPP today!

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Investopedia, Savvy New Canadians

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