To most U of T students, the thought of finding unused money to start investing with might seem impossible, but in fact it doesn’t take a lot to get started.
“If you have money lying around in your bank account that you’re not using now, then you should open an account tomorrow,” said Andrew Harrison, the co-president of the Toronto Student Investment Council.
According to Harrison, even if students are not in a position to invest, understanding how investments work is something students should know, given that most retirement savings are in the form of stocks.
“I find that many undergrads are intimidated by investing because it sounds too risky and unknown, but there are plenty of great resources out geared towards beginners,” wrote Caroline Tolton, a second-year majoring in international relations and health studies, in an email to The Varsity.
Joining pre-analyst programs at the Rational Capital Investment Fund (RCIF) or the general membership program at the Toronto Student Investment Counsel can also be useful first steps. As for gaining information, online resources like The Balance, Investopedia, and Khan Academy offer beginner-friendly resources. Tolton noted that she has family and friends with investing experience who are able to answer her questions.
However, Spencer Caul, President of the RCIF, also told The Varsity that investing your own money is the best way to learn.
First steps to investing
For those who lack the confidence or funds to begin investing, Harrison suggested opening a virtual portfolio. Virtual portfolios that are operated through various websites let individuals simulate investing without the financial risk.
“It is really nice to start investing young, as you can build up experience over time. Investing can be a great way for undergraduates to work towards their financial goals—whether they would like to save up for a trip, grad school, or an apartment,” wrote Tolton.
Harrison suggests opening a tax-free savings account (TFSA) as a first step. The government usually taxes investment earnings, but the TFSA allows individuals to save $6,000 per year without it being taxed.
Those over 18 years of age who have a valid Social Insurance Number can open TFSAs with a Canadian financial institution, credit union, or insurance issuer. Otherwise, Caul noted you can also open investment accounts through your local bank, or platforms such as QuestTrade, Wealthsimple, Interactive Brokers, or Robinhood.
Investing smart is a learned experience. When choosing stocks, Caul cautioned against jumping on certain trends or companies. Instead, he suggested discussing your ideas with friends to pinpoint industries that you might have missed or that you disagree upon.
“If you cannot understand technology and computers to save your life, then [investing in a] high tech firm is probably not ideal,” said Caul.
That said, Harrison and Caul recommend investing in index funds, a form of mutual fund that pools various stocks and investments, are recommended for those with little time for research, low risk tolerance, or low funds. Index funds can be bought like a company stock via a TFSA or an investment account.
“It would diversify your money,” Harrison said. “They are typically low cost with low transaction fees, and you are almost guaranteed a very solid return.”
Investing requires time and patience
It is important to recognize your risk tolerance, invest accordingly, and be patient. On potential losses, Harrison added that in the grand scheme of an individual’s lifetime earning, a few hundred dollars might not be a significant loss.
Caul noted that time and compounding will become your friends in investing.
“Don’t be worried if the stocks go down in value from time to time,” Tolton wrote. “When I first started I would check the market every day and would worry if the price went down even a few cents. But it’s generally better to focus on bigger trends over time, and not the everyday fluctuations of the market.”
“Just know that the experience and what you’re learning is much more valuable than the amount of money that you might lose,” said Harrison.