You don’t need a significant sum to get started investing, especially if you’re a young person who’s looking to learn the ropes before you really start putting new money to work. If you have a broker that allows low-cost (or even no-cost) trades, perhaps $500 is a good point to get started. Of course, a low-free, vanilla index fund that tracks the S&P 500 or TSX Index is good enough to get the job done. You can simply buy and forget with such index funds or exchange-traded funds (ETFs).
However, if you really want to learn more about the process of picking your own stocks, I’d argue that it can’t hurt to put in your research by analyzing companies that you’d be tempted to buy with relatively small amounts. Sure, a mockfolio is good enough to get the job done.
However, I’d argue that you may also be likely to speculate and overextend on risk with money you know isn’t the real deal. In any case, this piece will focus on two Canadian stocks I view as underpriced that new investors may wish to consider picking up right now, provided your broker doesn’t charge more than $6 per trade.
With the rise of no-free trading, it may not make much sense to pay $9.99 per trade to invest a sum as small as $500. In any case, if you have a low-cost broker and are ready to put in the homework to build your starter portfolio, you’ve come to the right place. Here are two that are worth checking out as we inch closer to the heat of the summer!
Royal Bank of Canada
Royal Bank of Canada (TSX:RY) is Canada’s largest bank and it’s also one of the better-performing of the Big Six banking cohort in recent years. The stock recently hit new all-time highs, just shy of $150 per share, before pulling back to around $142. I think the more than 4% pullback is unjustified and could represent a great buying opportunity for new investors who like solid dividends.
At writing, shares trade at 13.1 times trailing price-to-earnings (P/E) ratio to go with a 3.96% dividend yield. Of course, RY stock isn’t a deep-value play, given some of its peers are struggling to sustain gains out of their depths.
However, when it comes to Royal Bank, it’s one of the bluest blue chips of the group. Also, the HSBC Bank Canada acquisition is a stellar deal that should unlock value for long-term shareholders. As a “gold standard” banking play, RY stock is one of the names you can buy and forget about for years at a time.
Shopify
Shopify (TSX:SHOP) is a riskier, high-growth stock for new, young investors who really want to build their market “legs.” Heightened volatility may be perceived as a risk, but for those who know how to navigate tougher terrain, the rewards (growth) could be substantial over the long term.
Shopify stock is attempting to rally after a brutal implosion suffered back in May on a sub-par quarterly earnings report. I think the quarter, though not incredible, wasn’t deserving of a substantial plunge.
On Friday, the stock soared 4.6% in a day as a new bull stepped forward in the analyst community. Given Shopify’s massive market opportunity and its impressive tech talent, I’d be inclined to buy the $119.6 billion Canadian tech titan on the way up.
