New to Investing? This Step-by-Step Guide Will Get You Started

New to investing? Then follow this guide to help you get started, by paying off your debts and saving towards your near and distant future.

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So you’ve come to Motley Fool looking for investment advice. You’ve certainly come to the right place, but a lot of our articles may skip the introductory part. Which is why today, I’m going to focus on just that.

This step-by-step guide will get new investors started. Now, of course, everyone is different. And you’ll have to take into consideration your own risk tolerance, personal goals, and other financial items before tackling this. But this will certainly help get you started.

Build an emergency fund

Step one is to immediately put $1,000 into an emergency fund. What’s more, look for a high-yield savings account to invest in. That will help you grow your emergency fund while you take on the other items on this list. And should an emergency arise, you’ll have just enough to cover it.

Use employer matching

Have you ever gone through your employee contract? I bet most of us haven’t. But hidden in those pages is likely some information on employee matching. Whether it’s your pension or Registered Retirement Savings Plan (RRSP), many employees match to a certain amount. That’s free money for your future.

Take on high interest debt first

Then it’s time to tackle your debts before you start investing. Line them up from highest to lowest interest. Then, start putting anything and everything towards those debts so you can get rid of that high interest debt once and for all.

Increase your emergency fund

Now that debts are paid off, it’s time to start getting back to that emergency fund. Ideally you want between three and six months of your net income for an emergency. That can still be invested in a high-yield savings account, but work on that fund first and foremost.

Increase retirement investments

Then start paying your future self. This would be likely investing in your RRSP, as well as the Tax-Free Savings Account (TFSA). There are multiple reasons, but the biggest for both are the tax advantages. You can take out money anytime from a TFSA, and an RRSP can lower your taxable income each year.

Invest around 15%

Now this is where, of course, it depends on your own scenario and how much of your net income is used towards your everyday needs. But if you can aim to then start investing 15% of your net income each month, this will certainly bring up your savings in no time.

What’s more. those can both be put equally into an RRSP or TFSA, perhaps 7.5% and 7.5% into both. One can therefore be for short-term goals, and the other for long-term retirement goals. Short-term goals will likely mean investing in growth investments, with long-term goals tackled slowly and steadily. 

The iShares Core S&P/TSX Capped Composite Index ETF (TSX:XIC) could be a strong choice for long-term goals. It tracks the S&P/TSX Capped Composite Index, providing exposure to a broad range of Canadian companies across various sectors. This ETF offers diversification and potential for long-term growth through capital appreciation and dividend income. 

For short-term growth, you might consider an ETF that focuses on sectors or industries with high growth potential or volatility. The BMO Nasdaq 100 Equity Hedged to CAD Index ETF (TSX:ZQQ) could fit this criteria. It tracks the performance of the Nasdaq-100 Index, which includes some of the largest and most innovative non-financial companies listed on the Nasdaq Stock Market. This ETF provides exposure to sectors like technology, consumer discretionary, and healthcare, which are often associated with shorter-term growth opportunities. With both ETFs in your portfolio, you’re now set. For life.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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