Starting to invest at a young age helps you get into the responsible habit of saving and setting aside money for your future.
CIBC Investor’s EdgeAug. 17, 2021
Life is busy. Between school, work, friends, family and doing all the things you enjoy, investing may be low on your list of priorities. But what you do or don't do with your money now may have a profound impact on your financial future. In fact, if you were to ask baby boomers what investing lessons they wish they'd learned sooner, investing earlier in life would probably be at the top of the list.
Two common misconceptions
Sometimes the hardest part is just getting started, and if that's holding you back, here are 2 myths you'll want to debunk.
I don't have any investment experience
Don't let inexperience hold you back; anyone can start investing at any point, but the more you know, the more confident you'll feel. If you want to ramp up your investment know-how, there are lots of places to start learning. CIBC Investor’s Edge offers a range of resources from trading tutorials to articles and videos. Just get started.
I don't have much money to invest
You don't need to have a pile of cash under your mattress to get started. Even investing a small amount can make a big difference over time. By starting early and contributing to an appropriate savings or investment vehicle, the powerful effect of compound returns will grow your savings exponentially. Here's how investing early can really pay off Opens in a new window..
More benefits to starting early
Beyond the clear advantage of compounded interest, starting to invest at a young age also helps you get into the responsible habit of saving and setting aside money for your future.
You also have the flexibility to take on a bit more investment risk — like investing in stocks, which are generally riskier but also have the potential to generate more return over time. For example, if your goal is to invest for your retirement, it is a long way off and your portfolio will have time to recover if the market gets volatile and your investments suffer.
A simple way to get into this habit is to set up a regular investment plan so the process is more automated. Money is pulled from your savings or chequing account and deposited to your investment account at regular intervals. It's an easy way to "set it and forget it" so that you easily introduce some discipline into your investment strategy.
Part of developing good savings habits is to focus on paying yourself first — in other words, setting aside money for investment and savings before any other spending. Consider the possible benefits of setting up an automatic contribution to an RRSP, an FHSA and a TFSA, all of which allow you to contribute up to a maximum amount for each year while sheltering taxes on your investment returns.
Get your plan in order
If you're ready to dip a toe in the investment pool, you'll first need to establish your financial priorities. For most people, that includes short-term goals like a vacation or a new car, medium-term goals like post-graduate studies or your first home, and long-term goals like retirement. Determine how important each of these goals are and how much you'll need to save in order to achieve them.
Build your portfolio
Next, you'll need to make some decisions on how to invest your money. Things you'll want to take into consideration are your investment objectives, how long you have to reach those objectives, how much investment risk you can accept and what types of investments are suitable for your objectives. For example, some of the investments may seem attractive but they may not be suitable for short-term objectives, based on how volatile they are.
An important way to reduce investment risk is through portfolio diversification. Diversifying your portfolio is essentially spreading your holdings across different industries, countries and asset types like fixed income, equity or cash. Adequate diversification can be your portfolio's best protection against a major loss if one asset class or market experiences a downturn.
If you turn 25, you’re still a student and you have CIBC Smart™ for Students, you’ll pay $5.95 for stock and ETF online trades instead of $6.95, with options trading at $5.95 + $1.25 per contract. We’ll continue to waive your annual fees.
You need a CIBC Smart™ Account with the Smart Start benefit and a CIBC Investor’s Edge trading account to take advantage of the CIBC Investor’s Edge Young Investor Free Online Trading Offer. Conditions apply. Learn about CIBC Investor’s Edge for Students.
Maybe you’re not thinking about your retirement at the moment, but you might be investing to meet shorter-term goals like paying for school, buying a car or saving for a down payment. Investing regularly helps you build this important financial habit now, when time is on your side.