Your Top 5 Investing Questions Answered

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Most millennials are not investing. In fact, as many as 80% of millennials are staying out of the stock market, citing both lack of funds and lack of understanding about how investing works as their reasons for staying put on the sidelines. However, failing to invest, especially when your young, means missing out on decades of returns. This is why I say not investing is the most expensive mistake you can make: choosing to stash your cash in a savings account instead of the stock market can cost you six- or –seven figures over your lifetime.

In other words, you can’t afford not to invest.

Nevertheless, you might still be hesitating because you have questions about what exactly investing is and how to get started. Check out my answers below to the 5 most common investing questions I hear all the time!

What exactly is investing?

Investing means using your money to make more money. Anything that earns you a return on your capital is an investment. Technically savings accounts are a type of investment because you earn interest on your deposit. However, because interest rates are so low right now, a savings account is not enough to grow your wealth over the long-term. In fact, if you’re putting your money in a savings account, it will actually be worth less over the long-term because interest rates are less than inflation. This is true of most GICs as well. For this reason, the best places to invest to actually grow your wealth are mutual funds, ETFs, or stocks.

How do I get started investing?

It’s never been easier or more affordable to access the stock market, because you can do all of your money management online. In the past, investors had to work through a broker in person at their bank or over the phone, but now you can buy and sell investments with the click of a mouse.

Setting up a brokerage account takes about 1 week and requires an online application and cheque to seed the account with some starter funds. After that, you’re good to go.

How much money do I need to get started investing?

Most people are surprised how little it takes to get started investing in the stock market. You can begin investing mutual funds with as little as $25 or $50. You can start investing at ATBProsper.com with as little as $100. Or you can open a brokerage account with between $1,000 and $5,000. The more you have to invest, the sooner you’ll start seeing a real return on your money.

I suggest saving up $1,000 to start investing. You can start with more, but since timing in the market matters more than market timing, it’s not worth the opportunity cost of waiting until you have $5,000 or $10,000 in the bank to jump into the stock market. Besides, it’s better to learn how to invest and take your first risks with a small amount of money rather than your life savings. Remember, investing well is a lifetime skill, so you have time to take it slow!

What should I invest in?

What you should invest in depends on two things: your risk tolerance and your investment knowledge – and both of these are likely to change over time.

As a new, inexperienced investor, your primary objectives should be getting in the habit of investing, learning the language of finance, and getting used to watching the value of your portfolio fluctuate with the market. Index funds, such as mutual funds or ETFs, are best for this.

RELATED POST: Why You Should Invest in Index Funds

When it comes to selecting your investments, you may want to get help from a financial advisor, but there are some important questions you need to ask before you trust anyone with your money. ATB Investor Services has four key questions everyone should ask their financial advisor regardless of where they bank:

  • How can I be confident you’re going to act in my best interest?
  • How are you compensated?
  • How will I be charged?
  • What is your (and your firm’s) investment philosophy?

Since fees can drastically reduce your returns on your portfolio, it’s vital that you know how much you’re being charged and how. Recently, many of Canadians financial institutions have come under fire for focusing on selling financial products rather than helping clients reach their financial goals. Being able to ask the right questions is integral to ensuring your best interests are being looked after.

For most investors, index funds will be all they need, but if you enjoy managing your portfolio and want to take a more active role in trading, you can start buying individual stocks. Investing in common stocks requires a greater time and skill because you have to make the effort to research and evaluate different investments, determine how they fit into your overall portfolio asset allocation and make decisions about when to buy and sell them to meet your investment goals. Trading common stocks comes with higher income potential, but it also comes with increased risks. You have to have the time and skills to manage individual securities in your portfolio. Otherwise, the risks far outweigh any potential rewards.

Where can I learn more about investing?

Something I always tell millennials eager to jump into the stock market without taking the time to seriously learn about investing is:

If you don’t know what you’re doing, you’re not investing. You’re gambling.

Many people think investing in the stock market is “risky”, but that’s only true if you don’t know what you’re doing and you don’t have a plan. Knowledgeable and experienced investors can expect to grow their wealth consistently in the stock market, unskilled investors making guesses are unlikely to have the same returns.

To really profit in the stock market, you have to invest as much time in your education as you do money in your brokerage account. Some of the best places to learn about investing are:

  • Personal finance blogs (like this one!)
  • Directly from your brokerage or bank – check out ATB Financial to ask questions directly, check out InvestU, or learn more about investing with ATB
  • Personal finance books
  • Websites like Google Finance, Investopedia, and Marketwatch

The more you learn about investing, the more confident you’ll feel managing your own portfolio, and the more you’ll be able to earn in the stock market. Happy investing!

Have more questions about investing? Tune into ATB’s Facebook Live event on May 25th at 12:30 pm MST with President of ATB Investor Services, Chris Turchansky!

This post was sponsored by ATB Investor Services The views and opinions expressed in this blog, however, are purely my own.


7 Comments

  1. Thanks for the quick primer on investing! Mr. Picky Pincher and I have been investing in retirement accounts, but nothing yet in the proper stock market. However! I just signed up for an Acorns account to start investing a little at a time. It’s something. 🙂 It’s good for now, while we’re trying to use our funds to pay off debt first.

  2. Jen

    Great tips for the beginner investor! The thing I lacked when I started investing was understanding the financial markets and knowing all the different options available. I just put my trust in a financial advisor and hoped he would act in my best interest. Although he managed my money okay, if I had been able to educate myself and then do my own investing, I would have felt more comfortable and even increased my investments more (since his firm took a 2% fee every year). I definitely recommend learning as much as possible! You’re right on point with investing your time, as well as your money.

    • Bridget Casey (Author)

      100% agree!!

      A 2% fee sounds small but over the decades it reduces your returns like crazy. It’s good that you took a look and and took charge!

  3. I think many are afraid to invest because they’re afraid of losing their money. Stocks and bonds and all that “fancy talk” is quite confusing for beginners! However, no one has to start investing with thousands right away. Being able to start small is a huge advantage.

  4. The financial principle I most hope young people learn early is how important it is to start saving early, especially for their retirement. Saving early, even a small amount, allows more time for the “magic of compound” interest to grow your savings and earn interest on your interest. One example: saving $250 per month starting at age 24 and earning 8.5% return will make you a millionaire at age 65 in time for retirement. Some people may focus on the length of time this takes, but the real issue to note is that waiting just ten years to start saving means you have to DOUBLE the amount you save to reach the same goal. Reaching a savings goal is a combination of amount saved, length of time, and rate of return. So in addition to focusing on the savings amount and importance of starting early, you should also focus on your rate of return, the greater the better. In our example above, note that you need a rate of return averaging 8.5%. This cannot be achieved with mostly conservative investments in bonds, CDs, and savings accounts. It requires keeping most of your long-term investments in stocks even when they go up and down. The easiest way to do this is with low-fee ETFs, index funds, and target date funds. This is true whether it is thru your 401(k), IRA, and regular online broker account.

  5. MrForcat

    I got to this site after reaching 80% of my net worth objective before I retire, and found it very interesting not only for young people, you’d be surprised how medium age people managing other people business don’t have a clue about managing their own wealth. Well done!!

    When investing in stock markets spend some time understanding historic charts, and be able to identify trend. There is no much secrets, I’d say 90% of investors follow the same rules, and it’s probably the safer way. Finding next decade Google or Facebook is another option, but we only hear about the one that succeed, loads just fail and sink taking investors funds with them.