After my last post ” Top 5 Reasons to Start Investing Your Money” It’s time to start investing!!! but how?

1.- Open an account… TFSA vs RRSP

My recommendation would be to open either a Tax-Free Savings Account (TFSA) or a Registered Retirement Savings Plan. Both accounts are Tax-free and they help reduce your tax bracket. Here is a comparison between both accounts.

I personally invest through a TFSA, but both options are good. There are also other types of accounts where you get taxed, but it is for investors with more experience or that are looking to invest large sums of money.

2.- Financial Advisor or Self-invest

Once you have your investment account, is time to decide on whether you want to create your own portfolio, or have someone else do it for you. Unless you have an idea about investing and feel capable of managing your own money, I would recommend going to a financial advisor, since they will diversify the portfolio into different investment vehicles accordingly to the type of risk you are willing to take.

3.- Mutual funds

If you would like to manage your own money but not 100%, I recommend investing in mutual funds, these investment vehicles are existing portfolios, managed by a professional portfolio manager. These investments tend to grow around 7%-10%, but there are some that give higher returns. They can be purchased through your Web Broker or in a bank.

4. Investment Vehicles

Either you hire a Financial Advisor, or decide to Self-manage your portfolio, it is important to know the different investment vehicles tax exist, how they work, the rights, benefits, and risks that come with them. Here is a list of different vehicles that exist:

Mutual funds – described in step 3

Stocks – you own part of the company.

Bonds – you gave a loan either to a company or government.

Treasury bills – (T-bill) short-term loan to the government.

FX – Buy/Sell of currencies

Futures – Contract stipulating future price of a commodity. (oil, gold, lean hogs, etc.)

Options – Contract giving you the option to buy/sell an asset at a specified price in a certain period of time.

5.- Follow up

Continuously check on your investments, track their performance and start enjoying your results.

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Next week post: Stocks Vs. Bonds

References:

Investopedia

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