HOWTO: Start Investing Today! By Using the Perfect Investment Vehicle For Students – the TFSA
They say the best investment for students is to start their own businesses. However, now is also the best time to start investing in the stock market with the recent down-turn of the economy.
Warren Buffet said it best, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” Simply put: Opportunities arise when the market is scared. With current talks about the economy, everyone seems to be scared.
For young adults like you and I (who have limited income) this is the perfect chance to own shares of strong, champion companies. Companies that will bounce right back after this whole mess has been cleared, leaving us with golden portfolios that we normally wouldn’t have had.
And if you are Canadian, you should start using that TFSA account right now! Here are some details of the TFSA (via MDJ):
- Starting 2009, anyone aged 18 or older can contribute $5000/yr to the TFSA.
- The TFSA can grow and be withdrawn completely tax free.
- You never lose contribution room even when withdrawn.
- Withdrawals can be made at ANY TIME with no withholding tax.
- Contribution room can be carried forward indefinitely.
- You can contribute to a spousal TFSA, and they can withdraw from it tax free (income splitting).
- Withdrawal income does not affect government benefits like OAS, GIS, or CCTB.
The Fine Print:
- Contributions are not tax deductible.
- Capital losses cannot be claimed.
So, if you can grow your investments inside of the TFSA, it will give you more tax-free space for your money. With time, you will be in tax-free haven!
Here’s how I got started:
1. Read, Read, Read and Read Some More
It’s imperative that you understand what’s happening in the market right now, and how fracked up our economy is. You also need to understand how to properly trade/invest, and the mistakes inexperienced investors make.
To start, read up on the following: What is ‘TFSA’? - Learn the Basics of Trading/Investing - Books to Read
If you’re too lazy to read at least one book on investing, you probably shouldn’t be investing. Investing isn’t gambling and there are many strategies to do well. If you don’t do your research, then you will lose your money.
2. Join Stock Communities
After your reading, chances are you will still feel lost on where to start finding awesome stocks, ETF’s. The best way to find them is through stock communities. For Canadians, I suggest Stockhouse. Follow other’s portfolios and do your own research. Don’t just blindly follow the most popular user’s porfolios. It’s you who will be impacted by your losses, not them.
3. Get a Discount Brokerage Account
Which is the best for you? Check out the comparison here. If you have a limited budget like me ($250-$5,000) I suggest Questrade even though their service is the worst I’ve ever seen. I plan on investing on small- to medium-cap stocks so I’ll be trading +1,000 shares. Questrade is the cheapest for this. Also, Questrade offers a TFSA trading account, allowing you to easily add to your TFSA.
4. Happy Trading!
Congrats! Now, keep a close eye on your portfolio. I use several tools to do this: Google Finance, Yahoo Finance, Morningstar, StockCharts, Stocks3 – A Vista Sidebar Gadget and a crap load of blogs and news websites.
- Peter Kao
