How to Start Investing: What is a TFSA?

Today, we are going back to basics. Investing is an essential part of growing your wealth and achieving financial independence in the long term, but if you’re new to it, the first step can feel overwhelming.

I’m sure a lot of you have heard of investing and are feeling as though you should be starting but don’t know where to begin. This is where we come in. Let's learn together!

Step 1) Set up a TFSA

A TFSA, or Tax Free Savings Account, is the best investment account for beginners, and one every Canadian should have. We love TFSA’s because they allow your money from investments to grow tax free so when you take out the money, you don’t have to pay any tax, unlike other accounts. These accounts allow you to deposit and withdraw money at any time and give you access to a wide variety of investments like stocks, bonds, ETFs and more.

To start your account look up “your bank’s name TFSA” on google and click it. You can also explore other banks or online brokerages such as Questrade and Wealthsimple but for simplicity we prefer to use our primary banks. It will then prompt you to either invest with an advisor or self directed, but trust me girls, we can do this ourselves - click on the self directed online option. Then you're just going to follow along with the prompts it provides to create your account application and you will be approved to begin investing by the end of the day.

Step 2) Deposit money

Once your investment account is set up, the next step is to deposit money into it. To do so you simply transfer funds from your regular bank account into your investment account, similar to an e-transfer. Contrary to popular belief - you don't need a lot of money to start investing—every little bit counts. You can begin with as little as $100 and continue adding more to your account as you’re able. It’s all about getting started and building the habit of investing. Even small, regular contributions can grow significantly over time.

Step 3) Choose your investments

You’re almost ready to make some money - now you just have to choose your investments. As a beginner we recommend safe, simple, low-maintenance options like ETFs or dividend-paying stocks are great options. Check out our post on ETFs to see our top picks! 

Step 4) Make the investment 

Now comes t|he exciting part, placing your investment!

I) Depending on the banking websites layout, first toggle to the trade button and select the stocks & ETFs tab. 

II)Then enter in the ticker symbol (letter combination that represents a certain stock) of the stock or ETF you’re looking to buy; which can be searched online if you’re unsure of the ticker. 

III) Next, select buy as the action and enter in the quantity of shares you would like to buy. To determine the number of shares simply divide the amount of money you would like to invest in the stock divided by the amount the stock is trading for which will be shown on the screen. (Ex. $100 investment / $20 per share = 5 shares)

IV) Select the order type. More experienced investors may choose to place a “Limit” order, “Stop order”, or “Stop Loss Order”, but for beginners we recommend placing a “Market Order” which buys the stock immediately at the current price it’s trading for.

V) Select $CAD as the fund type

VI) Since we are using a market order you may not have to enter a good until date (Date when the order is valid until if it doesn’t sell immediately; which is common in other order types) but if required, select the end of the current day for simplicity. 

VII) Select Submit, read through to ensure you have entered everything correctly, and select confirm. Congratulations girl, you’ve made your first investment!

Step 5) Watch your money grow and reinvest

It's time to let your money work for you! As your investments grow, you’ll begin earning money through dividends, interest, and an increase in the stock’s price over time. Continue adding more money to your investments or new holdings as you have the spare cash. If you need to withdraw your money, go for it! But better yet if you don’t need the immediate funds, keep reinvesting in safe stocks like ETFs and let your money grow and compound over time to significantly boost your wealth over the long term.