Start Investing
- joannedodd9
- Feb 5, 2022
- 5 min read
Updated: Mar 31, 2022
Investing isn't hard, but starting isn't common knowledge either.
Disclosure! I am not a financial adviser, the contents of this blog are based on my personal experiences only. Before making any investment decisions consult with your financial adviser.
I honestly cannot remember what triggered me to invest in the stock market. Until the Fall of 2020, I did not know anything about the stock market or how to invest. The pandemic may have brought it on...I don't know but let's leave COVID out of this one. COVID has taken up enough space.
Although I recently re-watched that movie, this isn't the "The Wolf of Wall Street," but I understand the film way better now, ha!
Something triggered me to research "stock market investing," and this led me to podcasts such as "Build Wealth Canada" and the book "Millionaire Teacher."
I discovered what a TFSA and RRSP are and how to self-invest through both registered accounts.
You can read my posts on these accounts here:
Investing isn't hard, but starting isn't common knowledge either.
If you go to your financial institution, they aren't likely to promote "doing it yourself" as they make commissions from your investments. They are also expected to push mutual funds with high commissions and management fees.
But it is easy to invest in the stock market. What I find challenging is making a decision and the fear of making the wrong one.
The internet is bombarded with information that can be difficult to cut through the noise. So for me, I just keep it simple, no day trading or penny stock purchases. This can't be practiced inside registered accounts, to my knowledge anyway.
I decided to share my journey here on my blog because I am still new to this adventure. I hope to spark curiosity in my readers and inspiration to reach their financial goals.
There are many ways someone may choose to invest. This is mine :)
I started investing with a goal of future financial independence, no "Get Rich Quick" dreams. I am also the type of person who must understand what I am doing (I guess I am a little bit of a control freak in this way) before I execute it.
That is why I choose to self-direct invest instead of hiring someone to control my investments for me. And this is just my personal preference.
So, after researching different firms in Canadian wealth management, I choose "Self-directed Investing" with Questrade. The link to this site is included below.
I opened a TFSA and an RRSP with no account opening fees. My only requirement at the time was that my first contribution had to be a minimum of $1000 per account. After that, I can contribute $20 on a random Wednesday if I want to:)
It was scary! I don't know why but it was. I think I pictured my bank account suddenly being sucked dry or the world imploding from mass destruction.
I am happy to report that this did not happen... clearly!
I decided I wanted to play it as "safe" as possible, but there's always some risk in anything investment-related. I didn't want to pay high brokerage fees for buying and selling stocks as I was new in the game.
From my research, the most common recommendation is to purchase ETFs or index funds, particularly those that track the Standard & Poor's (S&P) 500. And so I am.
The S&P 500 tracks the 500 largest corporations and their stocks through market capitalization listed on the Nasdaq and NYSE stock exchange.
Don't worry reads like gibberish to me too. But I looked it up on Investopedia.com. This is a pretty decent source to learn stock market terminology for beginners.
So how do I invest in the S&P 500? I purchase index or exchange-traded funds (ETFs) that track the S&P 500 through popular issuers such as Vanguard.
And the ETFs I purchase using Questrade are commission-free.
What is an ETF or index fund?
An ETF is traded on the stock exchange like a regular stock. It holds a bucket of securities that track an index, commodity, sector, or other assets.
Instead of investing in a single company, an ETF stock is diversified and can contain several different companies in a sector. Giving you a small part of the overall markets such as energy, consumer, health care, and real estate, to name a few.
Many different types of ETFs are available beyond the scope of this blog.
ETFs are generally a lower-risk investment option and are great for the passive investor looking to invest over the long term.
The purchase of an ETF is usually at a low ratio and with a lesser brokerage commission when compared to the purchase of an individual stock.
Diving deeper into this topic, you'll find that many Canadians part of the FIRE (financial freedom retire early) community invest in portfolios comprised of ETFs or index funds.
What is a Portfolio?
I view an investment portfolio as a "folder" of all my investments. I have multiple ETFs in my portfolio, each with an asset class, either fixed income or equity. The ETF equity stock can be tracking US, CAD, international or emerging markets, and ETF fixed income is a bond.
I will discuss more in a future post on how I built my diversified portfolio. You can also purchase pre-built diversified portfolios through issuers such as Vanguard, Ishares and BMO.
What is trading, and how to find ETFs?
Trading involves the buying and selling of stocks. Stocks are traded on a stock exchange using a unique "ticker symbol."
If sticking to the S&P 500, you can start by researching ETFs tracking the S&P500 online. You should then find the ticker symbol for the ETF, the listed stock exchange, and the issuer.
For example, VFV.TO is the ticker symbol for VANGUARD INVESTMENTS CANADA INC S&P 500 INDEX ETF traded on the TSX (Toronto Stock Exchange).
Note: I am not promoting the ETF VFV.TO, I have included it for demonstration purposes only :)
There are so many options available, but as mentioned, the most common recommendation I found was to pick an ETF that tracks the S&P 500 to start and just invest what you are comfortable with :)
Wealthsimple is another Canadian wealth management company. I have added a link below from their website with information on ETFs that track the S&P 500.
How do I make Money on ETFs?
The ETFs I invest in pay dividends.
Dividends are how companies distribute profits to the shareholders and are paid regularly. I receive dividends both monthly and quarterly.
When purchasing ETFs through Questrade, you can find the dividend under "key statistic" once you bring up the ETF. You can also find this information by simply researching the ETF online.
My ETFs' dividends are deposited directly inside my investment account (TFSA or RRSP). I re-invest this money back into the market and continue to make money off my earnings :)
Another way I make money is through Capital growth. The equity will grow over time by making contributions and re-investing my dividends back into my portfolio. But this is a long-term hold, not a short-term "get rich quick" plan.
There are other ways to make money from ETFs, such as keeping a balanced portfolio, buying low, and selling high.
I'll write about building and balancing a portfolio in a future post.
Start Self-direct Investing Beginners Summary
Find a wealth management company
Open a TFSA or RRSP or both :)
Fund your registered account
Research the stock/ETF or index fund you like to invest in. A common recommendation is an ETF tracking the S&P500
Get the ticker symbol
Use the ticker symbol to trade on the platform provided by the wealth management company you've registered with
You are responsible for your financial education, and the information is out there to help. Just keep it simple.
The more you know, the more you grow:)
Check out https://www.bogitsblog.com/post/book-recommendations for more books on self-directed investing.
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