If you’re a Canadian who’s just starting out in the investment world, you may feel like you need a much larger sum before you go ahead and pick up your very first stock. Though I’d encourage new retail investors to go down the route of index funds (ideally, one that follows the TSX Index or even one of the U.S. exchanges like the S&P 500 or Dow Jones Industrial Average), I’m not against picking up shares in individual companies, especially if you’re with a brokerage that has low commissions or a lack thereof.
Further, with the advent of the ability to purchase partial shares in stocks, I’d argue that there’s never been a better time to get started investing. Whether you’re a new graduate looking to put money to work or someone who just wants to learn the ropes with their first $1,000, it’s worthwhile to make a move, even if the headlines warn of a looming stock market correction.
At the end of the day, near-term stock market predictions, I believe, should not influence your investment plans. Why? Even if someone out there could predict a pullback for the TSX Index, it’s arguable that such declines are a good thing for beginner investors, especially those who are just getting started in their careers.
Value stocks could be a great starting ground for new investors!
Lower prices on stocks are a good thing if you plan to buy stocks continuously throughout the years. And it’s times when the market weather is truly nasty when it tends to be the best time to put a bit more money into stocks while others around you are more than willing to sell shares at potentially sizeable discounts to their real worth.
In any case, Canadian investors with $1,000 may have some options as they look to learn market dynamics and the fundamental principles of investing.
At this juncture, I’d look at undervalued (think low price-to-earnings (P/E) ratio) stocks that have the means to grow revenues and earnings at a steady pace over time. And while no stock will be “safe” from the next stock market plunge (we don’t know when it’ll hit, but it will hit, and you’ll need to keep your cool when it happens!), I view the name as a sound investment for those with an investment horizon of five years or more.
Sure, investing $1,000 won’t be make or break for your retirement plan. However, you will learn a thing or two about markets. And once you’ve got more to invest, you’d be glad to have built your knowledge of markets so that you have the confidence and know-how to pick your spots carefully for your long-term investment portfolio.
So, what’s the best TSX stock for Canadians to buy with an extra $1,000 sum?
Arguably, the best stock is actually an exchange-traded fund (ETF), one that follows the TSX 60 (60 large and liquid Canadian stocks on the TSX). iShares S&P/TSX 60 Index ETF (TSX:XIU) offers exposure to Canada’s biggest, brightest blue chips with one single purchase. The 2.83% dividend yield is rich, and the management expense ratio (MER) of 0.18% is more than reasonable.
Of course, many new Canadian investors would rather give the S&P 500 a go rather than the TSX Index. Though the S&P 500 has outperformed in the recent past, it’s important to note that the same may not be in the cards for the future. If anything, the XIU’s larger yield and exposure to more value-oriented names may make it an intriguing long-term bet.
