In an ideal world, most Canadians would have started their investing journey long before they turned 30 years old. While your carefree 20s may, or may not be, coming to an end, the reality is that many Canadians reach the age of 30 without investing for a variety of reasons, ranging from debt to the instability of the economy, or lack of financial literacy. So, if you are inching closer toward your 30th birthday, but haven’t gotten started on your investment journey, not to worry – there is still time!
These are the 5 investment tips to know before you’re 30.
1. Starting Small is Better Than Not Starting at All
Have you put off investing because you haven’t had enough money saved up? For many young Canadians, starting their investing journey can be an intimidating venture – but it doesn’t have to be. You don’t need hundreds or thousands of dollars in your bank account to get started. Instead, start with investing what you can. Consistently investing small increments each month, or each paycheque, will add up over time and can help you build confidence as an investor. So, if you have $50 to spare each month rather than impulsively spending it on a lunch out with friends, invest it instead, possibly in a High-Interest Savings Account! You may not think $50 will amount to anything, but $50 per month is enough to get the ball rolling for your financial future. Then, once you have more funds available to invest, you can increase your contributions, in something like a GIC for example. Ultimately, starting small is always better than not starting at all.
2. Diversify your Portfolio
As the old adage goes – don’t put all of your eggs in one basket! The same rings true for investments. Many twenty-somethings and even those in their thirties think of stocks or real estate when they hear the word “investing.” But, investing is multi-faceted. There is a wide array of investments you can choose from, such as mutual funds, bonds, GICs, stock trading accounts and more. Are you passionate about the effects of climate change or social issues? Responsible investments are another option to consider for your portfolio. These investments seek to generate strong financial returns while also making a positive societal impact. Based on your risk tolerance, your values, and your short and long-term financial goals, an advisor can recommend a diversified mix of investments that is right for you.
3. Ride the Turbulence
With inflation and economic uncertainty continuing to be a concern for Canadians, you might not think that now is the right time to invest – but think again! It’s important to remember that market dips and climbs are a normal part of a financial cycle, and by starting to invest in your 20s it will give your investments time to ride out market fluctuations, recover from financial losses, and come out financially stronger. For short-term financial goals of five years or less, avoid putting your money into risky investments such as stocks. Rather than stocks, choose lower-risk investments such as high-yield savings accounts, income-focused mutual funds, ETFs, and GICs. For long-term goals – such as retirement – you may consider higher-risk investments such as growth-focused mutual funds, ETFs, and stocks because your finances will have a longer window to bounce back from market turbulence. If you are a new investor, speak with an advisor to help determine your risk tolerance and select the right investments that match your financial needs and goals.
4. Take Advantage of Tax-Free Growth
If you have money currently sitting in a regular savings or chequing account, it’s time to make a move! Take advantage of a Tax-free Savings Account (TFSA) to maximize your returns. TFSAs are all-purpose savings accounts that allow you to set money aside for a variety of savings goals. This savings account can hold a range of investments such as high-interest savings accounts, mutual funds, and GICs while sheltering your interest gains and growth from being taxed. They also offer you the flexibility to withdraw funds for any occasion without incurring a tax penalty. Registered Retirement Savings Plans (RRSPs) are another great investment vehicle to grow your money tax-free, however it’s designed for more long-term financial goals such as retirement. RRSPs are most suitable for those in their income-earning years looking to save towards long-term financial goals.
5. Speak with an Advisor
If you’re new to investing, seeking out expert financial advice can help you feel less overwhelmed by the investment options available to you. While seeking out the expertise of an advisor might seem like a no-brainer, many young Canadians are quick to believe they have a handle on how to invest and then purchase investments they may regret in the long run. By discussing your short and long-term financial goals with an expert, you can gain valuable information, advice, and support as you begin your investment journey, and they can help you build an investment portfolio that is tailored to your risk tolerance and financial objectives so you can reach your investment goals at any age.
Ready to get your investment journey started? Speak with a member of our Wealth and Investment team. Book an appointment today!
With the right advice and financial planning, you can set yourself up to confidently tackle the ins and outs of investing and make long-lasting financial returns. At Kindred, in partnership with Qtrade Asset Management and Qtrade Advisor, we keep your best interests at heart to help you make peace with your money! It pays to plan!
*Mutual funds are offered through Qtrade Asset Management (a tradename of Credential Asset Management Inc). Mutual funds and other securities are offered through Qtrade Advisor, a division of Credential Qtrade Securities Inc. The information contained in this report was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This report is provided as a general source of information and should not be considered personal investment advice or a solicitation to buy or sell any mutual funds and other securities. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise stated, mutual fund securities and cash balances are not insured or guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer that insures deposits in credit unions. Their values change frequently and past performance may not be repeated.
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