As discussed on our site, it’s very beneficial to improve your financial literacy and invest as often and as early as possible to fully take advantage of compound interest. But where can I get started as a teen? What should I do first? Although we briefly dipped into index funds and the stock market, it’s important to do your own research in order to know what investments are best for you based on your risk tolerance. We highly recommend first reading the following books in order to get a deeper understanding of index funds, the market, and financial literacy in general:
Rich Dad Poor Dad by Robert Kiyosaki
The Millionaire Next Door by Thomas J. Stanley
The Little Book of Common Sense Investing by John C. Bogle
One Up On Wall Street by Peter Lynch
The Intelligent Investor by Benjamin Graham
After becoming financially literate, you can start by investing in your very first index fund! This can be done using a TFSA, RRSP, cash account if you’re 18+, or a custodial account if you’re under 18 (parental permission required). These accounts can be opened up using brokerages such as Quest Trade or Wealthsimple Trade. Simply by depositing money, you can start investing! Ticker symbols VFV and VUS track the S&P 500 (VFV) and the total US stock market (VUS). The S&P 500 tracks the top 500 companies located in the US, while the total stock market tracks the entire market and includes medium-small cap companies.
When buying a stock, it will ask if you’d like to place it as a market buy or limited order. A market buy is when the brokerage will attempt to buy the stock/fund at whatever the price is when you place your order. A limited order tells your brokerage that you want to buy this stock/fund at a set price. For example, if you wanted to buy VFV at $92.55, only then will the shares of the stock/fund be bought at your desired price, NOT the market price. It’s important as an investor you buy and HOLD for the long term, as this guarantees your share of the market. “Speculating and guessing in the short term is a losers game”, as John Bogle says. By holding for the long term, the fundamentals of the company will always make your investments richer. Short term speculation can lead to a lot of volatility and huge losses for your investment.
Some funds/stocks also provide dividends. A dividend is a payout companies/funds give for holding the stock/fund, without selling it. As of now, VFV has a dividend yield of 1.04% and pays out quarterly. So for every share you own, you’ll get a dividend of ~96 cents per year split into 3 months. As we’ve touched on the types of accounts and why you need to invest early and often, take advantage of this information and besure to do your own research..