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How to get your Finances in Order (Part II) - Investing for Millenials

Allright allright allright, so you've read my first blog post about getting your finances in order, things are going well, you're starting to get the hang of paying down your debt and now you have some more money. YAY good on you, that's an amazing start. So now you have some dollars in your savings account that you don't touch but then you look at your monthly statement and you only received a few dollars and some change as interest. "That's it??" you think to yourself, "That's all I get? I have x amount of savings and the only interest that I'm getting can't even buy me a coffee and a muffin?"

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Well ladies and gentlemen, this is where investing comes into play.

"That's not for me, only rich people do that. I don't have enough money to invest in. That's risky". Whatever thoughts you might have about it are wrong. You don't need to have a lot of money to invest, it's not hard to learn (although it does take time!) and although there is some risk involved, the reward is much better. So are you ready to jump in? Let's begin with the basics shall we?

First you need to open up a trading/investment account. In Canada there are different types of accounts to trade with, RRSPs, TFSAs, and non registered accounts are your main options. I personally use all three accounts and one of the greatest benefits of having an RRSP is that you can take out money (tax free!) from it in order to buy your first home in the case that thinking about retirement is too daunting for you. Will you be doing one big deposit, or weekly/monthly contributions? You need to sit down and take a good hard look at your finances to decide. Trust me, it's worth it to do it, and the earlier the better.

Do something today that your future self will appreciate.

After the account is opened up and you deposit money into the account, you have to decide what to buy. I won't be telling you what stocks to buy because it's a personal choice depending on a variety of factors. Maybe ETFs are your things. Blue chip stocks? Tech? Marijuana? How much risk are you willing to take and how often will you be checking your accounts? Make sure that you don't put all of your money into the same 'type' of security, you want to make sure to diversify your portfolio. Oh yes, I used that terminology. 

Essentially it means that you want your stock picks to be a combinations of different sectors and industries. This can include a certain percentage in bank stocks, tech, resources, mutual funds, bonds, ETFs etc... If it's too overwhelming, start by picking one stock, buying a few shares of it and then keeping the rest of your account in cash. In a month, check your account and see how you're performing and then pick one more stock to buy.

Diversifying your portfolio is fancy talk for saying;
Don't put all your eggs into one basket.

Does investing take time? Yes.
Will you sometimes lose money? YES.

Here is what's important to know. You'll sometimes buy something, and then you might see that you're losing money. WHATT??! "no no no" you think. "I didn't start investing to lose money". You're correct, you invest to make money. The important factor is that you haven't made or lost anything until you SELL. Once you sell the stock, that's when you officially make/lose money. Think of it this way, if you own a home, and your home is valued at $1 000 000. Do you have $1M? No, you have a home worth $1M. Let's say you go to sell it, but the housing market is weak and the maximum that you can get is $800k. Once you sell your house, you have solidified the price. If you think $800k is too low, you can keep waiting and waiting… Maybe when you wait it goes down to $700k, but you still decide to hold onto it. 6 months later, the market is HOT, and you finally sell it and make a profit of $1.2M. All of the ups and downs didn't matter because you didn't sell at that point. At the end of the day, you sold it at $1.2M so you made $1.2M… even though there were times when it was worth less (or more!) than that.

What matters is the price that you buy, and the price that you sell at, everything else in between doesn't matter. So if you're losing money, don't sell, just wait (of course proceed with caution).

So.. with all of this information… Where do you start? First, set up an appointment to open up your accounts. Once open, there are TONS of learning material, check youtube, online or from your brokerage themselves. I'm actually a part of the client education group with my bank where I help to teach people about investing. Daily videos including topics like how to start trading, how to use the platforms, options, margin, registered accounts etc... I know it all inside out (well most at least)

At the end of the day, learning about finance and learning how to control and manage your own investments is one of the most empowering things that you can do. Everyone has to start somewhere, and if you don't invest you're actually losing money because of the rate of inflation which eats away at the purchasing power of your money.


There we have it people, how to start investing. Did that all make sense? Did you want me to a third installment where I go into more detail? What's stopping you or what scares you the most? I would love to continue discussing this subject as it's an important one!

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