Contrary to what many think, you don’t need to be wealthy to start investing. More and more every day, people are taking responsibility for their own investments. And in today’s online world, it’s more accessible than ever.
A few dollars and a few days’ wait is all it takes to get started with many beginner-friendly investment accounts. There are a handful of robo-advisors and brokerage accounts you can open for as little as $1 and offer fractional shares. This means you can buy a $10 piece of Amazon stock instead of paying $2,000 for a full share.
The biggest obstacle is often the wait time for the brokerage or adviser to verify your identity and for the bank to transfer your initial deposit. Almost any robo-advisor or brokerage account will accept recurring bank transfers that build your portfolio gradually every week or month.
Beware the investment fees
Although some companies allow small investments, some charge a flat rate. Some, for example, bills you at least $1 a month. Until you have several hundred dollars invested, the fee likely amounts to more than you’d make from your investment. It helps to have at least a small lump sum to start off with.
Several robo-advisors charge a percentage of the total amount you have invested with them annually, often between 0.25% and 1%.
What investment options do I have?
Regardless of whether you opt for a robo-advisor or brokerage account, there are two things to think about when getting started: your actual investments and the kind of account you’ll keep them in. Accounts offer different benefits.
Employer-sponsored retirement plans: A group Registered Retirement Savings Plan (group RRSP) are set up by your employer. To set this up you usually fill out some paperwork, decide the percentage of your paycheque you’ll contribute to the account and choose a portfolio. There’s usually a cap on the amount you can contribute annually, and many employers match your contributions up to a certain percentage — often 3% of your paycheque.
Tax-free savings accounts:As the name implies, a TFSA is a savings account that allows individuals to invest in securities and to withdraw cash without having to pay taxes on their contributions or earnings. Canadian residents who are 18 years of age or older can open a TFSA by visiting a financial institution, such as a bank, credit union, trust company or insurance company.
What to invest in
The second thing to consider is what to invest in. In general, here’s what you’ll find:
Stocks or ETFs: If the brokerage account you choose allows fractional investing and charges no commissions on trades, you could buy any amount of individual stocks or exchange-traded funds that hold a basket of stocks or other assets. If not, you’ll need enough money for at least one share plus any commission or fee.
Robo-advisors: Because they’re investing your money into a predefined portfolio, you simply deposit any amount of money and it’s invested for you.
Options: You’ll have to have enough cash in your account to cover the premium for at least one contract of 100 shares, plus any commission or fee when investing in options.
But there are exceptions. Some mutual funds or ETFs may have minimum investments, so your choices might be limited if you have very little to invest.
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How often should I be investing?
This, too, depends on your investment goals and strategy.
Long term: Investors with long-term or retirement goals often contribute regularly either through a portion of their paycheque or an automatic bank transfer. The strategy here is known as dollar-cost averaging. By spreading out your contributions, you’ll be investing at both low prices and high prices, which averages out over time. The key is to contribute regularly — start small and increase your contribution when you can.
Medium term: Investors with multi-year time horizons can still start small and contribute regularly to their account, though they may decide to either invest that amount immediately or wait for a good time and invest whatever cash is accumulated.
Short term: Short-term investors or traders generally monitor trade opportunities closely and want to have enough money in their account to take advantage of those opportunities.
Compare online trading platforms and robo advisers
Disclaimer: The value of any investment can go up or down depending on news, trends and market conditions. We are not investment advisers, so do your own due diligence to understand the risks before you invest.
You can start investing with a little money — as little as a dollar in some cases. If you’re aware of the risks and don’t invest more than you can afford, you have the chance to start growing that portfolio sooner than you may have thought. Decide which approach to investing you want to take, then compare robo-advisors, stock trading platforms or other services.
Felix Thompson is a freelance writer at Finder. He covers everything from digital banking to car insurance and, whatever the topic, he aims to make it easy for consumers to get straight to the best deal. Felix has a postgraduate qualification in international journalism and is also a broadcast journalist. In his spare time, he loves to cycle.
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