How to Start Investing Today: A 6-Step Guide

Mel, I want to invest, but I don't know how or where?!

This is the question I most often get asked by friends or strangers.

And once you start researching you can easily end up down the rabbit hole where suddenly it all starts to get overwhelming and complicated so you leave it for another day.

I am here to provide you with a guideline designed to keep it simple and break it down so you don't need to leave it for another day. 

The hardest part of investing - making the time to actually set up your account and keeping it simple. 

1. Financially & Mentally Prepare.

Before you start investing, you need to make sure you are financially and mentally prepared. Here is a checklist to ensure you are ready:

- You have paid off high interest debt (anything over 8%)
- You have an emergency savings fund in place for unexpected expenses
- You are NOT seeking instant gratification
- You are patient & understand investments take time to grow

If you have checked all these boxes, you are ready to start investing!

2. Open a Brokerage Account

A brokerage account is an investment account from which you can purchase investments such as stocks, bonds, index funds & ETF's.

For those in Canada, I recommend Wealthsimple. It takes 5 minutes to open up online, is free to use, and allows you to set up automated re-occuring investsments which I encourage!

3. Select a Tax Advantaged Account

Identify what you want to achieve with your investments. Are you planning to invest for retirement, a house in the future, or your children's education? Your goals will influence the types of investments you choose and the type of tax advantaged account you select.

Placing your investments in a Tax Advantaged Account (in Canada RRSP, TFSA, FHSA & RESP) is key to avoid paying taxes on income earned from your investments and compouding growth.

You can open more than one account if you have more than one goal you are actively working towards!

4. Choose Index Funds or ETF's that align with your goals

Take some time to learn about the different types of investments available. Index Funds and ETF's are a cost effective and a simple way for you to diversify without needing to do the work yourself! 

My blog post WTF is an ETF breaks down what you need to know about Exchange Traded Funds and provides a list of some of the most common ETF's for Canadians.

5. Start Small and Automate your investment.

If you're new to investing, start with a small amount of money. This allows you to learn, gain experience and easily get started. As you become more comfortable or start earning more, you can increase your investments!

I encourage setting up a regular contribution to the investment selected on a bi-weekly or monthly basis to take advantage of Dollar Cost Averaging. Choose an amount that you can comfortably afford.

6. Set It & Forget It.

Don't obsess- set it & forget it. 

The market will fluctuate, don't obsess and continuously try to time the market or get emotionally attached to the ups & downs. 

By following these steps, you can start investing with confidence. Remember, investing is a long-term journey.