ETF Investing in Your 20s: Where to Start

I want to help my 20-year-old daughter start investing in ETFs. For context, she’s in university and has $8,000 in her portfolio. How can I help her learn about the markets and get started?
—Marv

Teaching kids how to invest

It’s commendable that you want to teach your daughter about investing, Marv. Before jumping in, remember some young adults prefer to learn at their own pace or may decline financial help. With that in mind, here are practical, straightforward steps and considerations you can share so she builds confidence and avoids common beginner mistakes.

Where to invest in your 20s

Today’s tools make it easier than ever for individuals to manage investments. Trading costs have fallen and educational resources are abundant. That abundance can be useful, but it can also be overwhelming. For a new investor, simple and disciplined approaches usually work best.

DIY investing and ETFs

For a beginner who wants to manage their own account, I recommend focusing on exchange-traded funds (ETFs) rather than trying to pick individual stocks. Stock picking is difficult even for professionals, and building true diversification requires a substantial number of holdings—often 15–20 stocks or more. Holding just a few stocks can expose an investor to heavy sector or company-specific risk. ETFs offer an efficient way to gain broad exposure without the time and risk of selecting many individual companies.

ETFs vs mutual funds

ETFs resemble mutual funds in that each fund pools investors’ money to own many underlying securities. The main difference is that ETFs are usually passive, tracking an index, while many mutual funds are actively managed and try to outperform indexes. Active management requires research and higher fees, whereas most ETFs charge lower management costs. There are actively managed ETFs and passive mutual funds (index funds), but generally ETFs are known for lower fees and intraday tradability.

ETFs to know about

Below are a couple of ETF examples that may suit a young, new investor looking for broad exposure and simplicity:

iShares S&P/TSX 60 Index ETF (XIU)

This ETF is one of the largest and most liquid on the Toronto Stock Exchange. It tracks the S&P/TSX 60 and holds 60 large Canadian companies, including major banks and energy firms. While it offers concentrated exposure to Canada’s largest firms, it is not a complete diversified portfolio on its own—Canadian banks and energy names can represent a sizable share—so pairing it with international and bond exposure would broaden diversification.

Vanguard Balanced ETF Portfolio (VBAL)

VBAL is an example of an all-in-one or “balanced” ETF. It holds roughly 60% equities and 40% bonds across Canada, the U.S., developed and emerging markets, and a mix of domestic and global bonds. Through a single ETF, an investor gains exposure to thousands of stocks and bonds, making it a simple option for someone who wants a diversified core holding without building a multi-ETF portfolio.

The best way to invest when you’re young

Your main advantage in your 20s is time: long-term growth and compounding work best when you can stay invested through market ups and downs. Still, fees matter. Many discount brokerages now offer commission-free ETF trading, and where fees exist they are typically low. For a young investor, keeping costs down and sticking to a diversified plan are key.

If she prefers to build a custom portfolio, she can combine ETFs for Canadian equities, U.S. equities, international equities and bonds. But avoid overcomplicating things with sector bets, commodity funds, leveraged or inverse ETFs, and niche strategies until she has a solid understanding. Simple core ETFs or a single balanced ETF often serve new investors best.

Robo-advisors provide another easy path. They use risk questionnaires and automated rebalancing to construct an ETF portfolio and manage deposits and withdrawals, which can be attractive for someone who prefers a hands-off approach while still benefiting from low-cost ETF exposure.

What to consider for a small portfolio

With $8,000 and university life in mind, clarify the purpose and timeline for these funds. Will she need the money in the short term for tuition, rent, a car or moving expenses? If the money may be needed within a couple of years, keeping a portion in cash or a high-interest savings account may be wiser than investing heavily in stocks that can fall before she needs to withdraw.

Consider tax-advantaged accounts too. At age 20 she likely has accumulated TFSA contribution room since turning 18. TFSA room begins at age 18 and carries forward, so if she hasn’t contributed before she may have multiple years’ worth of contribution room available. For students with little or no income, an RRSP is generally less useful now because the tax-deferral benefit is most valuable when income (and tax rates) are higher.

If she wants a mix of safety and growth, one practical option is to place an emergency reserve or short-term needs in a high-interest savings or the cash portion of a TFSA, and invest the remainder in a diversified ETF or an all-in-one balanced ETF. If she prefers DIY and the account balance is modest, aim for a small number of broad ETFs to avoid excessive trading costs and complexity.

Finally, focus on fundamentals: encourage regular saving, a simple diversified plan, attention to fees, and a long-term mindset. Help her learn how to use a brokerage platform, read ETF factsheets, and understand how risk and time horizon affect investment choices. Small, consistent habits now can lead to big advantages decades from now.

Read more on student money:

• How to invest as a teenager in Canada
• The MoneySense Student Money Guide
• Which type of ETF investor are you?
• How to use ETFs in your child’s RESP
• A year-by-year guide on using RESPs