Five steps to investing for beginners

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Beginner's guide to start investing.

We interviewed seasoned wealth planners and advisors for their best advice to beginners who are completely new to investing. Here's everything they told us, simplified into 5 steps. If this is your first time thinking about investing, we encourage you to follow the steps in order, but you don't have to.

Step 1: Frame your thinking.

"The market", "dividend", "large-cap". Forget the lingo for a minute. Investing can be overwhelming. Frame your thinking before diving in to make it easier.

The first step is to think about your money and separate it into groups based on when you'll need to use it. For example:

  • Short term: 1 year or so
    Loan payments, wedding, money for emergencies
  • Medium term: 3 to 5 years
    Savings for home, car, a big vacation
  • Long term: 5 years or more
    Retirement, your child's post-secondary education

Keep these groups in mind as you learn about different ways to invest in the next steps.

Don't forget, you can get wealth planning advice free at any time. If you'd rather do this with a professional, let's chat.

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Step 2: Learn about risk.

The stock market is just one way of investing among many. All investments, and there are many, sit on a spectrum of risk.

A low-risk investment is predictable – you know what you’re going to get. Higher risk usually means it has the potential to earn more but also has the potential of loss as well.

Low risk
High risk

High interest savings accounts

Term deposits

Conservative mutual funds
with more bonds and fewer stocks

Balanced mutual funds
with a blend of bonds and stocks

Growth mutual funds
with more stocks and fewer bonds

Aggressive mutual funds
with only stocks

Individual stocks

Think back to the groups in step 1. How much risk would you want to take with each group of money?

Step 3: When and how much.

Starting early and making regular contributions to your investments is one simple approach to investing. Even $25 a month can be a sigh of relief one day. If you delay for too long, you’ll miss out on early returns that could add up to exponential growth.

Graph visualizing the growth of an investment of $5,000 and monthly contributions of $500.

Let's say you have $5,000 to invest right now and save $500 every month to add to your investment. If you invest in a low-risk investment with 3% return, in 20 years you'll have $172,861. If you wait 10 years before you start, you'll only have $76,616.

So the "when" is approximately as soon as you can. How much depends on when you'll need the money and how much you want to have by that time. Book an appointment with a wealth professional to make the math and decision making easier.

Step 4: What to invest in.

Think back to your groups of money in step one. Now you decide how to invest each group. As a rule of thumb, the sooner you need to use a portion of money, the lower the risk you should take with that portion.

Term deposits / GICs

They are promises in exchange for interest. You deposit money into a term deposit, aka GIC, for a promised amount of time known as the "term". We pay you interest when we return the money at the end of the term. They are low-risk and good for short-term investments.

  • How it makes money:
    You earn interest. Specifically, while we hold your deposit, we use it to offer mortgages and loans to other members. You earn interest because they pay interest on their loans. Even if they don’t, you’ll still earn interest because that’s the deal we agree on.

Learn about our term deposits

Mutual funds*

A mutual fund is changing collection of dozens of investments (stocks and bonds) selected by a professional portfolio manager. Most are less risky than individual stocks because mutual funds spread the risk across multiple investments.
There are hundreds of mutual funds out there ranging from low to high-risk.

  • How it makes money:
    You may make money buying and selling pieces of a mutual fund, called units. The value of a mutual fund is priced at the end of a trading day. Because the price can go up or down, mutual funds have risk. If you sell it for lower than you bought it for, you would lose money.

    Certain mutual funds also pay dividends — for example a share of profits from companies in the mutual fund.

Learn about our mutual funds

ETF - Exchange Traded Funds*

Like mutual funds, ETFs are also made of stocks or bonds. Recently when people talk ETFs, they’re likely thinking of index-based ETFs which only contain stocks. The portfolio manager of a market ETF picks stocks that reflect a stock index, such as the S&P 500, and try to match its performance.

  • How it makes money:
    You may make money buying and selling your shares of an ETF. Unlike a mutual fund, its value changes all day long while the stock exchange is open. Like mutual funds, the price can go up or down which means you may also make a loss if you sell it for lower than you bought it for.

You can invest in ETFs by finding an advisor or with online investing* options.


Bonds are issued by a government, or a company, to borrow money. Whoever buys the bonds become the lenders and are paid interest. Because the government or company promises to play back the original amount plus interest, they’re generally less risky than stocks.

  • How it makes money:
    There are three ways to possibly make money with bonds. One is to wait until the bond "matures". That’s when the loan is due and the government or company pays everyone holding that bond. Bonds may also pay you interest (sometimes called a coupon.) Lastly, you can buy bonds and sell them at a higher price.

You can invest directly in bonds by finding an advisor.


When you own a stock, you own a piece of a company called a share. The share changes value every business day. Stocks are considered riskier investments because while there’s no upper limit to how much they can be worth, a stock's value can potentially decrease all the way to zero.

  • How it makes money:
    You can make money with a stock by buying it and then selling it at a higher price. It takes time and research to pick the right stocks and sell them at the right time. If you don't sell them at the right time, you may even lose money.

    Some companies will pay their shareholders dividends — that’s a share of the company’s profits.

You can invest in stocks by finding an advisor or through online investing.

Step 5: Get started with a registered account.

Canadians can access special accounts with all sorts of benefits called "registered accounts". You've probably heard of some of them before! With all the basics you just learned, select an account below to explore next steps or get started with investing.

TFSA - Tax-Free Savings Account

The every-person investment account. Best part, you aren't taxed on your investment earnings.

Learn about TFSA

RRSP - Registered Retirement Savings Plan

Investments for retirement with tax benefits that you can also use for your first home, education or training.

Learn about RRSP

FHSA – First Home Savings Account

The first-time home buyer investment account. Grow your investments tax-free and withdraw it when you find your first home.

Learn about FHSA

RESP - Registered Education Savings Plan

For saving for your child's post-secondary education while getting access to government grants and bonds.

Learn about RESP

RDSP - Registered Disability Savings Plan

A long-term, tax-sheltered savings and investment option for Canadians with disabilities.

Learn about RDSP

RRIF - Registered Retirement Income plan

An investment account for retirees withdrawing from their registered retirement savings.

Learn about RRIF

Already have an account and want to lean on a professional opinion? Book an appointment with our specialists to:

Start saving and growing
Plan for growth and optimization
Review your investment portfolio

With us, you can be a financial force for change.

With the basics under your belt, now you just have to choose where to start. Plenty of financial institutions offer the same tools to invest but we give you tools to put your money where your values are.

Every dollar you spend, borrow and invest with Vancity goes towards building a cleaner and fairer world while making you a return as a member.

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