Why is investing important? It’s a good question. If you’re already trying to manage a budget and pay down debt, you might wonder why you have to add another financial task to your to-do list. But this one might be the most important of all.
Investing is essential to good money management because it ensures both present and future financial security. Not only do you end up with more money in the bank, but you also end up with another income stream. Investing is the only way to achieve both growing wealth and passive income.
What is investing?
Investing means to use your money to make more money.
Technically, anything that generates a return is an “investment”. This means even your savings account generating 1% interest is an “investment”. However, when most people talk about investing, they are referring to higher return investments like mutual funds, ETFs, and stocks.
Why is investing important?
Investing ensures present and future long-term financial security. The money generated from your investments can provide financial security and income.
One of the ways investments like stocks, bonds, and ETFs provide income is by way of a dividend. This is an amount paid to shareholders simply for holding the investment. Because many investments pay monthly, quarterly, or annual distributions, you can enjoy passive income that ultimately could replace your paycheque.
If you want to retire or become financially independent, investing is the way to do it.
How do I start investing?
In order to start investing, you’ll need to open a brokerage account or a robo-advisor account. Which one is best for you depends on your investment goals, experience, and comfort with risk. For most people, a robo-advisor is the best option. Not sure where to start? Check out our post on the Best Robo Advisors in Canada!
However, if you enjoy trading and have some experience in the stock market, you may want to take your portfolio into your own hands with a brokerage account. This has a steeper learning curve and higher risk, but also the opportunity for higher returns.
Starting with a Robo-Advisor
The name can be misleading, but a robo-advisor is not actually a robot. Behind every robo-advisor in Canada there are actual people. The term “robo” is only there to emphasize that the investment is happening on autopilot for the investor (that’s you). The best robo-advisor in Canada is Wealthsimple. Open an account with as little as $100 and your money will be invested right away.
You don’t need to research any stocks or make any trades yourself, they take care of everything for you. They charge a small fee of only 0.50%, which is a fraction of typical mutual fund fees. As an added bonus, you can get your first $10,000 managed for free by signing up here.
Opening a Brokerage Account
This is different than a bank account, though large banks might also offer brokerage accounts. However, you’re likely best off choosing a discount online brokerage.
Online brokerage accounts make investing in the stock market more accessible than ever. There are tons of online resources to build and manage your investment portfolio, whether you’re investing in the USA or Canada. Most brokerage accounts require at least $1,000 to open and start investing.
The best discount online brokerage account is Questrade. They offer low-commission trading, and it’s even free to buy ETFs! If you want the freedom to manage your own money with an efficient and easy to navigate a trading platform, this is your best bet.
Most twenty- and thirty-somethings are afraid of investing in the stock market. I can’t emphasize enough how much opportunity there is to really kickstart lifetime wealth-building if you start now. It doesn’t even matter if you don’t have a lot of money to contribute, because time is on your side. Once you open that brokerage account, even as little as $100 per month can help your portfolio grow.
How to learn to invest in the stock market
I teach a comprehensive self-paced eCourse called The Six-Figure Stock Portfolio that teaches people how to build a $100,000 investment portfolio, even if they’re starting from scratch. If you’re brand new to investing and want to do it right, this is the only guide you need.
The program is entirely online and consists of text, videos, and 1-hr classes on specific stock market topics. I teach everything I learned in my MBA in Finance, plus my best strategies as an investor, to help you build the portfolio of your dreams. If you’ve ever felt intimidated or scared of the stock market, but know you need to invest to get ahead, this is exactly what you’ve been looking for.
A $100,000 portfolio is NOT too good to be true. In fact, it’s just the beginning!
What should I invest in?
Any investment is better than none, but you need to choose carefully. Generally, the higher a return offered by an investment, the greater the risk of losing your money. In order to protect your wealth, you want to hold a mix of high- and low-risk investments. In other words, don’t keep all your eggs in one basket.
You want to allocate a certain amount to cash, ETFs, bonds, and common stocks of varying degrees of risks. Your investments will be diversified in purpose, with some focused on capital growth and others on generating income. You might even make some investments just for fun, like investing in Bitcoin. However, for speculative investments like cryptocurrency, make sure you’re not investing anything you can’t afford to lose!
Why is investing important? Investing is the secret to achieving your financial goals.