Ready, set, invest!

If you’d call yourself an “investor,” give yourself a pat on the back.

Despite this personal finance activity almost being a requirement to achieve financial milestones — notably retirement, especially amid the quality decline in workplace pensions — it’s likely millions of Canadian adults aren’t investing much, if at all.

One recent survey by the Canadian Investment Regulatory Organization (recently featured in a Money Matters column) found 43 per cent of women and 56 per cent of men consider themselves investors.

Even though more men report being investors, there is still arguably a significant portion who don’t. Seeing yourself as not being an investor does not mean you don’t actually have investments.

Yet other studies point to many not investing enough. That includes a CIBC Investor’s Edge survey from 2024 whereby 52 per cent of respondents had not invested in the past year. That’s despite a more recent poll of Canadians by RBC finding many believe they need about $1 million to retire.

If you find yourself on the wrong side of these studies, and want to start investing, here’s a jumpstart guide from financial experts.

Set money goals

Besides the obvious — you invest to make more money — the endeavour should be underpinned by a goal: retirement, post-secondary education, buying a home, etc.

“It starts with a plan,” says Quinton Chambers, wealth adviser and certified financial planner with Scotia Wealth Management in Winnipeg. “You need to know what the money is going to be used for before looking at what to invest in.”

Goals guide the strategy. Otherwise, you might invest in the wrong assets, which can occur with new, young investors more than most realize, says Jason Heath, a Toronto-based certified financial planner with Objective Financial Partners Inc.

“The common belief for young people is that they have a long time horizon and can invest aggressively (in stocks).”

But if they first consider their needs for the money, like purchasing a home, starting a family and getting married, “oftentimes, they actually have a relatively low-risk tolerance because they have a short time horizon.”

Setting goals also guides account selection — whether you will contribute to an RRSP (Registered Education Savings Plans), TFSAs (Tax-Free Savings Accounts) or FHSAs (First Home Savings Accounts), Heath adds.

Save first, then invest

A common challenge is just finding money to invest. It is a requirement; you need to save money before you can buy stocks, bonds and investment funds.

“It’s surprising sometimes how often people talk about investing, but they have no clarity on their capacity to save,” says Dan Bortolotti, portfolio manager with PWL Capital in Toronto.

It may seem obvious, but would-be investors must look at their income and spending and find a cash flow surplus that can be invested.

Determining an amount each month or, even better, every two weeks is automatically contributed to an RRSP or TFSA (or another other account) is the most effective savings approach, says Bortolotti, author of Reboot Your Portfolio: 9 Steps to Successful Investing with ETFs.

And with each increase in income, bump up the regular contribution, he adds.

What are you willing to risk?

One of the first investing considerations is your risk appetite. More aptly, how much money can you stand to lose in the stock market?

“If you save $10,000, what dollar amount do you think you could accept losing in the short term without being so rattled that you would abandon your investment plan,” Bortolotti says.

Typically, the longer your time horizon for needing the money, the more risk you can take on with your investments. That said, risk is highly personal. Some people with 40 years to retire may be comfortable only investing in GIGs (guaranteed investment certificates).

That’s where advice from a financial professional can help, Chambers says. An investment professional can assess your goals, build a financial plan and then illustrate how much more you might need to save with a GIC-only strategy versus a diversified one involving stocks, bonds and cash.

Then you may be more comfortable with a more stock-heavy portfolio that “could take a 20 per cent kick in the teeth tomorrow,” because you know it will recover and likely grow substantially over the decades that follow, “benefiting from compounding returns,” he says.

Finally, invest!

You’ve got a plan, found money to save and assessed your taste for risk. Now, comes the fun/difficult/scary part: investing the money.

“Fortunately, there’s never been a better time for a small investor to get started,” Heath says.

The ways to invest it are many: doing it yourself with an online brokerage, embracing an automated, low-cost approach with a robo-adviser or working with an adviser at a financial institution. No matter the choice, you’re likely to fare well because you have completed the other steps first.

Still, some investment vehicles are better suited for investors with small sums to invest. All-in-one, asset allocation mutual funds and exchange-traded funds are generally the best choice because they are well-diversified, rebalance automatically and their fees are generally low, especially for ETF-based ones.

That said, mutual funds may be better to get started because you can invest small sums like $25 a month, Chambers says. The management fees can be significantly higher than ETFs. “But early on, fees aren’t the biggest deal.” As your investments grow, then fees become more impactful on the bottom line.

What’s important is not getting caught up fretting over what investments to pick, Bortolotti says. “Procrastination is really the biggest headwind.” He adds novice investors often get “analysis paralysis” and end up not investing.

“Even an imperfect solution is good start because you can always tweak it later,” he says. “The important thing is getting started as soon as you can.”

Joel Schlesinger is a Winnipeg-based freelance journalist

joelschles@gmail.com