How to Start Investing: 4 Simple Steps for Beginners

07. May 2020 Loans 0
How to Start Investing: 4 Simple Steps for Beginners

Do you ever think about investing, but you don’t know where to start? You are definitely not alone! There are several factors to consider when investing. But before diving in, consider this: the finance sector depends on your personal financial situation and your personality. Unless you are filled with debts, you should start investing. So here are 4 simple steps to start investing your money in the stock market! 

Step #1: CHOOSE THE RIGHT ACCOUNT

Selecting the right account could work wonders for your investments. For example, many employers offer sponsored plans that you can contribute to. Your employer will automatically remove a small portion of your paycheck to put into this account. This amount will go unnoticed at first but will shine through later on in your life. 

In addition, you can also open a Registered Retirement Savings Plan, also called an RRSP. This is a great option because you won’t pay any income tax on the amounts contributed, except upon withdrawal.

Another great option is a Tax-Free Savings Account. The money you put into this account will be taxed as income, but never on your investment gains. 

Your choice depends entirely on your personal situation. If your job doesn’t offer any plans, then some of these accounts wouldn’t apply to you. 

STEP #2: CHOOSE THE RIGHT INVESTMENT PROVIDER

If you don’t feel comfortable leaving your money in the hands of someone else, then there are many online brokers that you can use to have control over your investments. This is the cheapest option because these online brokerages offer little to no advice. If you know what you want and have done extensive research, this is your best bet! 

However, there are some downsides to this: these firms usually ask for a minimum requirement to invest. Also, there is a flat commission fee, no matter what the purchase. Moreover, if you are not patient nor proficient in the use of modern technology, you should steer clear of this option. 

Next, if you are clueless about investments, then the bank is your go-to! They will manage your money wisely and properly. Several banks also offer deposit protection with the CDIC. Eligible deposits are covered to a limit of $100,000 per insured category. This means that you are protected if ever the stock market crashes. If you invested independently, without the help from your bank, you would lose all the money invested. 

Besides the aforementioned points, you must be careful when bringing your investment business to the bank. The paycheque of some in-house financial advisors depends on how many bank-related products they can sell you. 

Be vigilant and read the terms and conditions before locking away your money. Allowing your financial advisor to manage your money means you are paying commissions and fees, all of which could have been invested elsewhere. 

STEP #3: DEAL WITH THE RIGHT FINANCIAL ADVISORS

The more money you hand over to your investor, the better it is. There is an annual percentage charged to every dollar that they handle. So, if you give more than a million dollars, you will always remain in the 1% annual percentage bracket that they will charge on your gain returns. 

Now, if you’re an investor with less than a million dollars, you will pay 1% or more on your gains every year. Over time, this adds up and you will lose quite a bit of earnings. 

Also, the less you need to pay annually, gives you more time for your money to grow with your compound interest. This is the interest that you earn on your other earns from interest, which means if your balance increases, so will your interest numbers. 

STEP #4: CHOOSE YOUR INVESTMENT

If you have a sufficient amount of money to risk, then you should think about investing in the stock market. This is an unpredictable choice of investment and even professionals have trouble foreseeing the market. 

Although this can set you up for an absolute disaster if the market crashes, this can also pave you a path to good fortune— if all goes well! 

On the other hand, if you want to stick to the lower-risk side, you should consider investing in passive funds. These cost less than active funds. Passive funds charge between 0.05% to 0.25% depending on the specialist you choose to do business with. This is much less costly than active funds, which go for a 1% to 2% rate. 

With passive funds, specialists don’t need to gamble on an individual’s wins in the market, but rather track the investments of a whole group. Managers also don’t need to make large numbers of trades. These are all factors that would cost them a lot of money. 

The diversity of the funds decreases your chance of losing money, however, you will be far less likely to make more than if you were to invest actively in the stock market. 

Investing can be simple and it doesn’t require a lot of money, but always consider your financial circumstances before jumping in. Analyze how much risk you can take with your finances. Think ahead too. If you foresee yourself needing the money in the near future, then you should keep saving it. Wait until you are fully ready to commit. 

Of course, investing at a young age is always advantageous because time is key. The more time you have, the more time your money has to grow. On the last note, consider putting your money in different types of investments—don’t put all your eggs in one basket.

Always check out our blog for all the best advice on investing, saving, and taking charge of your financial situation! And if you’re in need of some quick cash, apply now at Eastern Loans for same-day deposit!  


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