Start by defining your goals
With all these choices, how do you decide what’s right for you? Start by considering your financial goals. For example, do you want to buy a house, send your children to university or retire at 65? Your goals will help determine when you need to draw on your accumulated wealth and how much risk you can take in your investment portfolio.
From there, figure out how much you need to save for each goal and when you’ll need the money. You can use online calculators to determine how much you’ll need to save each month to reach your goals. It could be helpful to divide your portfolio into buckets, each dedicated to a goal. That way, you can be sure you have funds available for short-term needs while working toward longer-term goals.
Having a goal in mind can also motivate you to stick to your savings and investment plan. The 80/20 budgeting method is a common way to save, in which 80% of your income goes toward your monthly expenses (including rent/mortgage, bills and groceries), while 20% goes toward savings and investments.
Understand your risk tolerance
When it comes to investing, how much risk are you willing to take? How comfortable are you with swings in the value of your assets? Generally, riskier assets (like stocks) fluctuate more, increasing the chance of losing some value, but they also tend to have higher returns over the long term.
Time is also a factor when determining how much risk to take. If you’re investing for a short-term goal and need the funds in a year, you’ll want to invest in near-risk-free assets such as GICs to preserve your money. If you’re saving to retire in 40 years, you may want to take on more risk because you have more time to make up losses.
Diversify your portfolio
When building your portfolio, you’ll want to consider diversifying your investments. This means holding multiple assets, so you’re not putting all your investment eggs in the same basket. So, if you own various stocks, you’ll also want to own multiple asset classes. For instance, a common way to structure a portfolio for the long term is to own 60% stocks and 40% bonds. This gives you the stocks’ potential upside and the bonds’ relative safety.
How to get started
An easy way to get started on your investing journey is through CIBC Investor’s Edge. It’s a tool where new Canadians can build their own investment portfolio and easily make trades of all kinds in asset classes, from stocks to structured notes.
You can also open a variety of accounts, including a Tax-Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP), Registered Education Savings Plan (RESP), First Home Savings Account (FHSA) and non-registered accounts. Plus, there are no account minimums, no first-year account fees for new clients and low fees thereafter.
Need help? All of this can feel overwhelming in a new country. CIBC Investor’s Edge also provides educational tools and advice to help you get started with your new life in Canada — and prepare for success, no matter your goals.
