With so much investing information available—often conflicting and confusing—it can be hard for Gen Z and Gen X investors to know where to begin. Social media “finfluencers” frequently promote specific stocks, which can encourage inexperienced investors to try day trading without understanding the risks. Before putting your money anywhere, do your homework: learn how an investment works and weigh its potential risks and rewards. First, let’s review the main ways you can get started investing.
Types of investment services available in Canada — a comparison chart
If you’re ready to begin investing, here’s a clear comparison of the three most popular routes: self-directed online brokerages, robo-advisors, and working with a financial advisor.
| Online brokerage (self-directed) | Robo-advisor | Financial advisor | |
|---|---|---|---|
| Financial knowledge needed | Intermediate to advanced | None required | None required |
| Minimum amount required | ~$5,000 to $25,000 | $0 to $5,000 | • None required by law • Often $100,000 to $1 million |
| Fees | • Trading: $0 to $9.99 • Annual: $0 to $125 • Management expense ratio: ~0.30% to 1%, but can go up to 2% † |
0.4% to 0.8% | • Hourly rate of $250 to $500 • Flat fee from $1,500 to $5,000 for a plan • Fees of 2.0% to 2.5% of assets |
| Use of registered accounts | Yes | Yes | Yes |
| Portfolio | You create | Algorithm-based build | Human creates and manages |
| Your involvement | High | Low | Medium |
| Human interaction and customer service | None | Rare | Always |
† Fees vary by product: for example, stocks can have 0% management expense, while mutual funds can charge up to about 2% or more.
Taking the DIY investor route with an online brokerage
DIY investing means you take full responsibility for selecting and managing investments using an online broker. This option gives you control and the potential to minimize fees, but it also requires more knowledge and discipline. If you want model portfolios to guide you, resources such as the Canadian Couch Potato provide straightforward ETF-based strategies.
Pros
- You control the investment choices and can tailor your portfolio according to your risk tolerance and goals.
- Online brokerages typically offer the lowest costs for trading and ownership, which helps maximize long-term returns.
Cons
- You won’t have professional guidance, so you’ll need to plan and monitor your progress toward financial goals yourself.
- Emotional reactions to market volatility can lead to poor decisions; self-discipline is essential.
- Frequent trading or constant tinkering can increase transaction costs and hurt returns.
Going high-tech with a robo-advisor
Robo-advisors automate portfolio construction and rebalancing, offering a low-effort way to invest. They are generally less expensive than hiring a human advisor and a good fit for investors who want a hands-off approach or who are still learning the basics.
Pros
- Minimal hands-on management—algorithms build and maintain a diversified portfolio for you.
- Accessible for beginners who haven’t yet developed deep investing knowledge.
- Some providers have no minimum balance; others require modest starting amounts, such as $1,000 to $5,000.
Cons
- Management fees are higher than doing everything yourself through a broker, though still lower than full-service advisors.
- You have limited control over the exact holdings and less customization than a bespoke advisor would offer.
- Most robo-advisors offer a set of model portfolios rather than fully tailored solutions, and access to human advisors is usually limited or available only on hybrid plans.
Finding the right financial advisor
If you prefer personalized advice and someone to speak with about complex financial decisions, a qualified financial advisor can help. Advisors offer tailored strategies, guidance on long-term planning, and hands-on management for complicated situations.
Pros
- Advisors can handle complex financial situations, such as managing an inheritance or creating a comprehensive financial plan.
- You get direct answers to questions and can request input on which investments remain in your portfolio.
- They can respond to market changes and help you avoid reactive decisions that may harm long-term progress.
Cons
- Personalized advice typically comes with higher fees than robo-advisors or self-directed options.
- Many advisors focus on higher-net-worth clients and may require substantial minimum account sizes. Fee-only planners are an option but often provide planning and strategy rather than direct buy/sell recommendations for securities.
Where to find one: Use tools designed to locate credentialed advisors and prepare a list of questions to ask when interviewing potential advisors to ensure their services match your needs.
What are the risks for young investors?
How comfortable are you with seeing your portfolio fall in value? Some investors panic at a small dip, while others tolerate large swings without worry. If you’re new to investing, consider your time horizon and emotional tolerance for volatility. A conservative approach uses lower-risk options like guaranteed investment certificates (GICs) and high-quality bonds. An aggressive approach favors stocks and growth-oriented assets, appropriate if you have decades to ride out market cycles.
Bonds and GICs typically offer greater stability but lower returns, while stocks are more volatile and generally require a long-term outlook. A balanced portfolio that mixes equities and fixed-income can reduce overall risk through diversification—spreading investments across many assets so that any single loss has a smaller impact on your net worth.
4 questions young investors often ask
1. Should I buy dividend stocks?
Dividend stocks can be attractive because they provide a steady, predictable stream of income. Dividends are periodic payments companies distribute to shareholders from profits. You can also use dividend reinvestment plans (DRIPs) to automatically buy more shares with those payments, accelerating long-term growth. Some investors focus on building a rising dividend income over time as part of retirement planning.
2. Should I buy bonds?
Bonds have traditionally been lower-risk compared to stocks and can stabilize a portfolio during market downturns. While rising interest rates can temporarily reduce bond values, bonds still play an important role in preserving capital and smoothing volatility. Current yields may be more attractive than in recent years, making bonds a useful diversification tool.
3. Are mutual funds good for me?
Mutual funds were once the go-to way to diversify easily, since a single fund can hold many companies. However, index funds and exchange-traded funds (ETFs) now offer similarly diversified exposure at much lower cost. Active mutual funds tend to charge higher fees for professional management, which can reduce net returns. If you want simplicity and diversification at lower cost, consider low-fee ETFs or all-in-one ETF portfolios.
4. Are REITs worth it?
A real estate investment trust (REIT) owns and often operates income-producing real estate. REITs let you invest in real estate without owning physical property, usually with a much lower capital requirement and minimal hands-on management. They can provide diversification and a steady income stream, although, like all investments, they carry risks tied to the real estate market.
Investing is a lifelong journey
Every investor’s path is different. What works for a friend or an online personality may not fit your situation. Choose the approach that aligns with your financial goals, risk tolerance, and timeframe. Learning the basics through reputable blogs, podcasts, and educational content will make investing less intimidating. With knowledge and consistency, investing can become a powerful way to grow your net worth and support the life you want.
Read more from Making It:
- How to manage money as a student
- How to afford moving out as a student or young adult
- Applying for your first credit card? Here’s what you should know before getting one
- Struggling with student debt? Here’s how to pay off student loans faster