How To Invest In Stocks For Beginners for Canadians
This how to guide is written for Canadians that are beginner investors. If you’ve never bought a stock before then this is the step-by-step guide that will walk you through the process.
How To Invest For Beginners Step By Step
Investing for beginners can be confusing. I’m going to break down how beginners can start investing in the stock market step by step.
Step 1 Signup For An Investing Platform
Step 2 Open A TFSA
Next, you’re going to open a self-directed TFSA account. This allows you to invest without paying taxes on any money you make.
Which is a huge deal.
A basic TFSA strategy is to max it out as soon as you can, and don’t withdraw from your TFSA until as long as possible. Because you want your money inside the TFSA to grow for as long as possible because it’s tax free investing.
Note there is a maximum amount of money that we’re allowed to contribute to the TFSA. Find yours here.
Now Wealth Simple Trade will walk you through the account setup process and it will take a few days for them to verify your identify after you submit to them your documents.
Step 3 Fund Your Account
Setup AUTOMATIC payments to your new TFSA account. Even if you just start with $50 a month that’s better than nothing!
Of course I’d love you to save at least 30% of your salary, but baby steps come first.
Once your account is funded it will take a few days for the money to completely transfer over to your new investing account.
Now you’re ready to start investing!
Step 4 Buy Your First Investment
Now you’re going to search for VFV. This is what Warren Buffet recommends everyone to do is to just buy and hold VFV.
That’s because this is a low cost index fund and every dollar you spend on VFV gets split up to give you a bit of ownership in the top 500 companies in the USA stock market.
All you have to do now is purchase the number of shares that you desire. I usually place market orders because I don’t try to time the markets. I just buy and hold my investments for the long run.
And that’s it. Now it’s important to note that Wealth Simple Trade does not automatically buy these stocks for you. So I recommend to open your app at the beginning of every month and buy as many VFV shares as possible.
Step 5 Stay Investing
While investing is actually quite simple being successful at investing is quite hard. This is because 99% of investors do the following:
Selling your investments before you retire
Trying to time the market highs and lows
Buying individual stocks (typically creates too much risk)
High management fees
To avoid these pitfalls and to become a successful investor you’ll need to:
Buy funds with lots of companies in it
Buy funds that are low in management fees
Buy on a consistent basis (e.g. Monthly)
Hold your investments (never sell until you retire)
- Wealth Simple Trade Account
Don’t fall for these common beginner mistakes
Common Investing Mistakes
Warren Buffet is the best investor to ever live. So following his advice would be a really good idea. Here’s some of the common mistakes he sees beginner investors make in the stock market.
Trying to time the market. The more you buy and sell the more fees you pay, and the more taxes you pay. Typically doing this is also a fools game as data shows the less you trade, the more profits you make.
Not being diversified. Owning 1 stock is great. Owning 25 is even better. But having 500 is the best, and the easiest way to get this diversification is with index funds.
Paying high management fees. Over the long term 97% of professional hedge fund managers can NOT beat a simple index fund. So why pay for their 1,000% higher fund fees if you can just buy a low cost index fund?