How to Start Investing - A Step-by-Step Guide

It’s never too late—or too early—to start investing. Investing is one of the most effective ways to build long-term financial security, but it can feel intimidating at first.

Investing is one of the most powerful tools to build long-term wealth and achieve financial security. Yet, for many, the thought of putting money into the stock market or other investment vehicles feels daunting.

Questions like “Where do I even start?” or “What if I lose all my money?” can hold people back from taking that critical first step.

The truth is, investing doesn’t have to be intimidating or complex. Whether you’re 18 and just starting to earn an income or 50 and thinking about retirement, it’s never too early—or too late—to begin. The sooner you start, the more time your money has to grow, thanks to the power of compounding. And even if you’ve delayed investing, starting now is better than waiting any longer.

Why Start Now?

According to a 2023 Gallup survey, 61% of Americans report owning some form of stock, showing that many recognize the importance of investing. In Canada, a recent survey by Statistics Canada revealed that 45% of Canadians actively contribute to investment accounts like TFSAs and RRSPs. But these numbers also show a significant portion of the population missing out on the benefits of investing.

So, how do you move past the fear or uncertainty and begin your investment journey? This guide breaks it down into simple, actionable steps. From understanding your financial goals to choosing the right accounts and investment vehicles, you’ll learn the foundational strategies to build wealth over time—at a pace and risk level that’s right for you.

Whether you’re saving for a new home, planning for retirement, or simply looking to grow your savings, this post will equip you with the knowledge and confidence to start investing today.

As mentioned above, the earlier you start investing, the more time your money has to grow through compounding, where your earnings generate their own earnings. Even if you start later in life, the important thing is to START.

Here’s why:

• Only 37% of Canadians and 38% of Americans feel confident about their financial knowledge, according to a recent survey.

• About 44% of Americans aged 18–29 and 43% of Canadians under 35 have not started investing yet, citing lack of knowledge as the main barrier.

Starting early could be the difference between financial stagnation and wealth growth.

How to Get Started

1. Determine Your Timeline

Your investment approach depends largely on how soon you’ll need the money:

A. Short-Term Investing
Short-term investments are for goals within 1–5 years, such as saving for a home, a car, or travel. Options include:

• High-Interest Savings Accounts (HISAs)

• Certificates of Deposit (CDs) (US) or Guaranteed Investment Certificates (GICs) (Canada)

• Treasury Bills (T-Bills)

These options are relatively low-risk and easy to access when needed.

B. Long-Term Investing
Long-term investing focuses on building wealth over a decade or more, often for retirement. This approach requires patience and a willingness to ride out market fluctuations.

• Common vehicles: stocks, ETFs, and mutual funds.

• Action step: Speak with a financial advisor to assess your goals, risk tolerance, and time horizon.

2. Decide How Much to Invest

Budgeting for investments may feel like a stretch when managing bills, debt, and savings. Here are some tips:

• Start small: Invest what you can afford, even if it’s just 5% of your income, and gradually work up to 20%.

• Take advantage of free money:

  • In Canada: Contribute enough to your RRSP to secure your employer match.

  • In the U.S.: Maximize your 401(k) match, which is essentially free money from your employer.

• Use a spending plan: This can help you identify how much money you can comfortably allocate toward investments each month.

3. Open an Investment Account

Choose the account that aligns with your goals:

A. Retirement Accounts

• In Canada: Registered Retirement Savings Plan (RRSP)

  • Benefits: Tax-deductible contributions and deferred taxes on earnings until withdrawal.

  • Annual contribution limit: 18% of your income, up to $31,560 in 2024.

  • Ideal for: Retirement savings.

• In the U.S.: 401(k) or IRA

  • Benefits of a 401(k): Employer match and pre-tax contributions.

  • Benefits of an IRA: Tax-deferred growth (Traditional IRA) or tax-free withdrawals (Roth IRA).

  • Annual contribution limits: $22,500 for 401(k)s and $6,500 for IRAs in 2024.

B. Tax-Advantaged Savings Accounts

• In Canada: Tax-Free Savings Account (TFSA)

  • Annual contribution limit: $7,000 in 2024.

  • Benefits: Tax-free growth and withdrawals.

• In the U.S.: Health Savings Account (HSA) (for those with high-deductible health plans)

  • Benefits: Triple tax advantage—pre-tax contributions, tax-free growth, and tax-free withdrawals for medical expenses.

C. Taxable Investment Accounts

• Available in both Canada and the U.S.

• No contribution limits or withdrawal restrictions.

• Ideal for: Investments exceeding your RRSP, TFSA, 401(k), or IRA limits.

Pro Tip: You don’t need a fortune to start investing. Many banks and brokerages in both countries allow you to open accounts with as little as $100.

4. Understand Investment Options

Here’s a quick overview of the most common investment vehicles:

• Stocks: Ownership in a company, offering potential high returns but with higher risk.

• Bonds: Loans to companies or governments, providing fixed interest income.

• Mutual Funds: Diversified collections of stocks or bonds, managed by professionals.

• ETFs: Similar to mutual funds but trade like stocks, often with lower fees.

5. Monitor and Rebalance

After building your portfolio, check in regularly to:

• Evaluate performance: Aim for an annual review rather than daily monitoring to avoid stress.

• Rebalance: Adjust your investments to maintain alignment with your goals and risk tolerance.

The Bottom Line

Investing isn’t just for the wealthy; it’s for anyone ready to build a secure financial future. By starting early, contributing consistently, and diversifying your portfolio, you’ll be on your way to growing wealth. Remember, you don’t need to do this alone, visit your bank and speak with a financial planner or financial advisor and get any of your questions answer and then you can start small. The more comfortable you get with investing, then you can add in more.

Remember, you got this, take that first step, your future self will thank you.