The Bullish Breakdown: A quick guide on how to begin investing

1. Open An Investment Account

Canadian:

If you're in Canada, I highly recommend opening a Wealthsimple account.

For the best results, consider starting with a Tax-Free Savings Account (TFSA). This type of account allows your investments to grow tax-free, so you can maximize your returns and keep more of your hard-earned money.

When it comes to choosing stocks, Wealthsimple offers commission-free trades for Canadian stocks. To save on fees, focus on trading stocks listed on the TSX. If you're interested in investing in major US companies but want to avoid exchange fees, look for stocks that trade in Canadian dollars and are hedged against the US exchange rate. This strategy lets you sidestep extra fees while still benefiting from the growth potential of these companies. Visit the CBOE to see which US stocks can be purchased without paying additional fees. They typically trade with the same ticker with a “.NE” at the end.

United States:

If you're in the United States, I recommend opening a Robinhood Investing account.

When selecting the type of account, you have a few options:

• A cash account, where you'll pay taxes on any gains or losses.

• A 401(k), which offers pre-tax advantages for retirement savings.

• A Roth IRA, which provides post-tax benefits, allowing your investments to grow tax-free.

When it comes to choosing stocks, Robinhood offers commission-free trading, giving you the flexibility to purchase the stocks you want without incurring additional fees.

2. Select Investments

Index funds and exchange-traded funds (ETFs) are ideal choices for beginners because they offer instant diversification by tracking a market index, such as the S&P 500. These investment options are low-cost, simple to manage, and carry less risk compared to selecting individual stocks, making them a practical starting point for new investors.

Here’s a list of beginner-friendly ETFs with brief descriptions:

1. Vanguard S&P 500 ETF (VOO): Tracks the S&P 500, providing exposure to the 500 largest U.S. companies.

2. iShares Core S&P 500 ETF (IVV): Another low-cost option that mirrors the performance of the S&P 500.

3. Invesco QQQ ETF (QQQ): Focuses on the Nasdaq-100, featuring top technology companies like Apple, Microsoft, and Amazon.

4. Vanguard Total Stock Market ETF (VTI): Covers the entire U.S. stock market, including large-, mid-, and small-cap companies.

5. iShares MSCI ACWI ETF (ACWI): Provides global exposure by investing in both developed and emerging markets.

3. Sit Back, Relax, and Enjoy The Ride

The stock market will inevitably experience ups and downs, but it's crucial to maintain a long-term perspective and leave your money invested in funds rather than reacting to short-term fluctuations. Historically, the S&P 500 has delivered average annual returns of around 7-8% after adjusting for inflation, demonstrating its resilience and growth potential over time. One effective strategy to navigate market volatility is dollar-cost averaging (DCA).

What is the dollar-cost averaging approach?

Dollar-cost averaging involves investing a fixed amount of money at regular intervals, regardless of market conditions. This approach helps mitigate the impact of market volatility by ensuring you buy more shares when prices are low and fewer shares when prices are high. For example, if you invest $500 monthly into an S&P 500 index fund, you'll accumulate shares over time at varying price points, averaging out the cost per share.

DCA is particularly beneficial during market downturns, as it allows you to take advantage of lower prices without the pressure of timing the market. It encourages consistent investment behavior and reduces the emotional decision-making that can lead to buying high and selling low. Over the long term, this disciplined approach helps smooth out market fluctuations and can lead to substantial growth as the market recovers and continues to climb.

4. Read and Learn More

Consider reading books to deepen your investment knowledge. One highly regarded book, often recommended by experts including Warren Buffett, is:

The Intelligent Investor by Benjamin Graham, first published in 1949, is a widely acclaimed and influential book on the principles and practices of value investing. This seminal work has stood the test of time, offering readers a comprehensive guide to understanding and implementing value investing strategies in the stock market. Graham, often referred to as the "father of value investing," meticulously outlines the fundamental concepts that investors can use to identify undervalued stocks and make informed investment decisions.

Disclaimer: The content provided here is for educational purposes only and should not be construed as financial, investment, or professional advice. All opinions expressed are based on personal insights and general market observations. Always conduct your own research and consult with a qualified financial advisor before making any investment decisions. We are not responsible for any actions taken based on the information provided.