With economies opening up and the stock markets showing signs of growth, now is the best time to start investing in Canada. No matter how much you have to put into stocks, or mutual funds, it’s never too early (or late) to start building wealth through smart investments over time.
For new investors, opening a portfolio can be an overwhelming experience. After finding the right brokerage and transferring your opening amount, how do you select which shares will get you closer to your financial goals? Here’s everything you need to know about starting an investment portfolio.
What is a Canadian Investment Portfolio?
While opening your investment account is the first step, it’s only cash until you start investing the money within your investment portfolio. In the simplest terms, your investment portfolio is your collection of securities you put money in. A robust portfolio may be comprised of stocks, bonds, exchange traded funds (ETFs), and mutual funds.
No two portfolios are exactly alike, and the investments you choose should reflect the goals you set out for your investment account. After your open an investing account with a brokerage, you will get access to research tools, which can help you make the decisions that will move you forward.
Start Investing in Canada With a Brokerage Account
The first step towards earning money through investments is opening a brokerage account. This will give you access to multiple international stock markets, and allow you to start growing your money.
New investors should consider using Questrade as their investing platform. Questrade is built with new investors in mind, offering multiple account types based on their overall goals. With a minimum of $1,000, users can open an individual or joint investing account, a tax-free savings account (TSFA), or a registered retirement savings plan (RISP).
More importantly, Questrade offers access to the biggest stock markets in both the United States and Canada. Along with the Toronto Stock Exchange, investors can purchase stocks and funds traded on the two largest markets in North America: the New York Stock Exchange and NASDAQ. You can read our full review of Questrade here.
Once you have opened your account, the most important step comes next: researching what type of stocks or funds will help you achieve your financial goals.
Stocks, Mutual Funds or ETFs: Which are the Best Canadian Investments?
As you start your investing journey, it’s important to understand the difference between the most common securities you may encounter. There are key contrasts you need to understand between stocks, mutual funds and ETFs.
Stocks are individual shares of companies, offered through stock exchanges. When you purchase a stock, you may receive partial ownership of the company, with limited rights. Class A stocks usually come with more voting rights, but usually cost more than Class B or other types of stocks.
Whereas stocks are an investment in a single company, mutual funds are an investment in several different companies. Overseen by a fund manager, mutual funds combine the funds of all the investors to purchase a strategic cross-section of stocks, bonds, and other securities. Although this type of portfolio gives you exposure to several different companies, mutual funds don’t give you direct ownership in any different company. Instead, as the fund grows from the investment selection, everyone in the fund benefits. Such is why mutual funds are considered a long-term investment, instead of a short-term opportunity.
Finally, exchange traded funds (ETFs) are similar to mutual funds, but instead of following a strategy, these funds usually track an industry or index. Like a mutual fund, investing in an ETF gives you exposure to many different companies without ownership in any of them. But instead of trading once per day, ETFs trade in real time on the stock market. Because of their efficiency and distributed risk, ETFs are among the best investments for new investors to consider.
How To Research Canadian Investments
With your account ready and a starting knowledge of how investments work, how do you decide which companies to invest in? While everyone has a different strategy, it all starts with doing the right research.
If you plan on purchasing individual stocks, newspapers like The Wall Street Journal provide financial research and reporting on companies. While financial news coverage can give you a broad idea of a company and strategy, it’s equally important to read through the company’s regulatory filings. With direct research, you can understand a company’s financials, determine if they have a competitive edge, and ultimately decide if their trajectory fits your goals.
If you are more interested in ETFs and mutual funds, then you should start with the reports your investment platform provides. Most investing platforms will give you analysis on funds and ETFs, including ratings and research from Morningstar. These report cards can give you a high-level outlook on investment options, helping you determine which shares are right for you.
Investing in the stock market shouldn’t be taken lightly. Past performance doesn’t necessarily predict future return, and shares may lose value over time. For that reason, it’s important to read financial reports and fund prospectuses before putting your money into any given option.
Although it requires research and reading, investing in Canada can be financially rewarding in the end. With an open mind and time to look into the best options, you too can start saving and investing towards your ultimate goals.