New to Investing Series Part I: WHERE TO START

Investing is a crucial step in building wealth over time, and starting young is always a good idea. The specific types of investments you should consider depend on factors such as financial goals, risk tolerance, and time horizon. 

Financial goals often include saving to purchase a big-ticket item like a car, saving to make the down payment on your first home, as well as saving for retirement. 

Risk tolerance is unique to every individual. Some cannot handle seeing large fluctuations in their savings or investments, while others are ok with this as long as the end return is in line with their goals. Each person’s tolerance will also change over time, as their goals and life circumstances change. The length of your time horizon (how soon you will need to use the investment) also helps to determine how much risk is acceptable.

This is where the advice of a financial advisor like Tara Webber of BeOne Financial can be helpful. We can help you determine your risk tolerance, understand the different types of investments available, and give advice on when each is appropriate.

Here are some common investments:

• Registered Retirement Savings Plan (RRSP):

  • RRSPs are tax-advantaged accounts designed to help Canadians save for retirement.

  • Contributions to RRSPs are tax-deductible, meaning you can reduce your taxable income by contributing to them.

  • Investments within an RRSP can include a variety of assets like stocks, bonds, mutual funds, and exchange-traded funds (ETFs).

• First Home Savings Account (FHSA):

  • Like RRSPs, FHSAs are tax-advantaged accounts designed to help Canadians save for their first home.

  • Contributions to FHSAs are tax-deductible, meaning you can reduce your taxable income by contributing to them.

  • You start accumulating contribution room at $8,000 per year in the year you open it, so you should open this account as soon as possible, even if you don't contribute much at first.

  • Investments within an FHSA can include a variety of assets like stocks, bonds, mutual funds, and exchange-traded funds (ETFs).

• Tax-Free Savings Account (TFSA):

  • TFSAs are versatile and can be used for various savings goals, not just retirement.

  • Contributions are not tax-deductible, but any investment income, including capital gains and dividends, is tax-free when withdrawn.

  • TFSAs can hold a range of investments, making them suitable for both short-term and long-term goals.

• Stocks:

  • Investing in individual stocks can offer the potential for high returns, but it comes with higher risk.

  • Diversification is key; consider building a portfolio of different stocks across various sectors to spread risk.

  • Alternatively, investing in low-cost, broad-market index funds or ETFs provides diversification with less effort.

• Bonds:

  • Bonds are considered lower risk compared to stocks and can provide a steady stream of income through interest payments.

  • Government bonds, municipal bonds, and corporate bonds are common options.

• Real Estate:

  • Real estate can be a good long-term investment. However, it often requires a significant initial investment and ongoing management.

  • Real estate investment trusts (REITs) offer a way to invest in real estate without directly owning property.

• Education and Skills Development:

  • Investing in education and acquiring valuable skills can be one of the best investments in yourself. It can lead to higher earning potential over the long term.

• Emergency Fund:

  • While not a traditional investment, having an emergency fund in a high-interest savings account or a TFSA can provide financial security in unexpected situations.

Before making any investment decisions, it's crucial to do thorough research and consider your own risk tolerance and financial goals. Additionally, staying informed about the current economic climate and market trends is essential for making informed investment decisions. Tara Webber of BeOne Financial can help you navigate and understand the investment landscape. Contact me today!