So how do I get started with Investing in Canada?

Setting Goals

One of the first questions you must ask yourself before entering the stock market is: what are your financial goals. You must also ask yourself what your time frame of investing would be to decide the risk tolerance of your investing. For example, an older individual with a smaller time horizon with goals of retiring will adopt a more defensive mindset while investing while a younger individual in their twenties would have more aggressive growth investing.

Setting goals checklist:

Timeframe

• Short term (intraday up to within a years time) - This would be trading

• Midterm (1 - 5 years) - This would be the growth stocks and trading multi-year breakouts

• Long-term (5 - 10+ years) - These holdings would usually be your defensive core holdings within your portfolio. Usually, we recommend placing dividend-generating stocks and "hold till you die" types of stocks.

Important purchases

When setting goals, note to plan for potential big purchases in the mid to long time frame for example a purchase of a vehicle or property. If you have an important purchase that you are planning as the goal, the best way to approach the situation is to take more of a conservative approach. The aim is to create consistent gains while preserving and protecting your capital as you save for an important purchase.

Retirement

When saving for retirement, one should consider utilizing registered accounts such as a TFSA or RRSP to tax shelter your investments. For the longer time frame, we recommend utilizing dividend-paying stocks to allow for the power of compounding over time to instigate exponential gain. With the goal of retiring, stock picks should be mainly in bluechip companies that pay strong dividends. In investing, the easiest path to take without doing too much research and maintenance is to buy an index-tracking ETF such as the SPY and continuously contributing to the account monthly.

Passive income

If passive income is the goal, dividend-earning companies will be the way to go. We recommend choosing from the list of dividend aristocrat companies.

Choosing a broker

Disclaimer: Although there is a number of brokers for Canadians, we have opted to only cover brokers with which we have personal experience with to better review the pros and cons for each broker. In finding a broker, please only choose a broker who is insured by CIPF. To better understand security risks click here.

To learn more about Canadian brokers click here.

Decide the tax benefits with using registered accounts vs non-registered personal accounts

Refer to here for details of what Registered accounts are and how to use them to defer taxes.

Choosing a style of approach (funding)

After planning your goals as well as choosing the broker to invest with, now you must plan how to fund the account. Some popular ways are to set a bi-weekly or monthly automatic deposit system so that your account can achieve compounding exponential growth.

Checklist:

1. Plan and set a goal

2. Decide the type of investor/trader you are

3. Decide which type of account you want to open (Registered or personal account)

4. Decide which broker suits your goals and plans

5. Open a brokerage account and fund it

6. Begin investing/trading!

Note for those intending to do Day trading: Pattern Day Trader (PDT) rules do not apply to Canadians. PDT is a rule for Americans that prevent one from day trading until their total account value is over $25,000 USD.