How to Start Investing for Beginners


How to start investing can be challenging for many and there is seemingly so much information to know. It’s also a challenge to figure out who to trust – so many people want your money!

  • How can you start investing?
  • What accounts should you start investing with?
  • Should you buy: funds/ETFs or individual stocks?

Today’s post answers those questions and much more with references to our library of content and various links for how to start investing for beginners. Let’s get into it!

Just starting out – how to start investing

At Cashflows & Portfolios, we believe there is huge power in the power of “why”:

  • Why do you want to have money?
  • Why is money important to you or your family?

Answering these questions is at the heart of financial planning, which comes before investing.

Read on more in one of our pillar posts about The Power of Why – why we believe answering some questions about your relationship with money is essential before doing anything with it.

Just starting out – where does my money go?

Now that you might have a better idea behind your money “whys”, we believe it’s important to document where does your money actually go. This is because instead of using leverage, i.e., borrowed money to invest including at higher interest rates of today, you need money in the first place to invest.

To find your money, you should know that at the end of the day: Cash flow is King!

Your key to wealth building will be to essentially “grow the money gap” over time: increase the difference between money coming into your account and money you can divert to investing.

What’s the money gap?

The money gap is the space between your income and your expenses.

This is where the process of cash flow planning and forecasting comes in.

Cashflow planning is knowing, in detail, what money is coming in and when.

It’s also just as important to know what money is coming out, when, and to whom.

For example, you might earn $5,000 per month after taxes. Your expenses might tally up to be $4,900 per month. You now have a positive money gap of $100 to save, spend more, or do other things with.

On the flip side, you can have a negative money gap number. If you earn $5,000 per month after taxes but you have expenses totalling $5,200, you have a negative gap number of $200. A negative gap number like this means you’re essentially overspending. You want your money gap number to be in the positive territory and grow over time.

A good reminder for beginners is:

Income after taxes – expenses = your money gap number

We believe managing the money gap and growing the money gap over time will deliver financial independence like the journeys we’ve been on.

How do you figure out the money gap?

Luckily, we always have a free tool for that on our site!

If you sign up for our free email newsletter (that shares new content at least every month), you’ll get your own free cashflow spreadsheet to work with and be notified when new content is posted. You’ll also get exclusive content only made available for our subscribers. We have a 100% no-spam policy – see our privacy policy here.

How can you grow the money gap?

We have a few simple solutions to share:

  1. Consider reducing expenses – those include fixed costs where you can, including debt and variable costs you can track in your cashflow spreadsheet.
  2. Consider increasing your income – essentially you can make more money via your current job or take on a new, higher-paying job. There are also side-hustles, overtime work and other part-time jobs to consider.

Don’t think a side-hustle or hobby job can matter?

Think again!

Your side-hustle can even help you retire, earlier!

How Your Side Hustle Can Help You Retire Earlier

Remember, you can alter each part of the money gap equation as you wish.

Income after taxes – expenses = your money gap number

The bottom line when it comes to understanding your money gap, we want you to understand your cashflow for investing long before you actually invest.

Once you have your cash flow spreadsheet done – consider this next step in the playbook for how to start investing for beginners….

When Should I Start Investing?

The path to financial independence through investing is both simple but not always easy:


  1. Spend less than you earn (“live below your means”) – first understand then manage the money gap.
  2. Invest a percentage of money earned as part of a long-term plan.
  3. Consider diversifying your investments.
  4. Rinse and repeat steps #1-4.

Not Easy:

  1. Staying the course. Not just for a few months. Years. Decades.
  2. Avoid disrupting your investing plan at all costs.
  3. Keep reminding yourself about #1 and #2!

We know you’re keen to get investing but based on our experiences, we suggest you tackle these things instead of investing right away:

When Should I Start Investing?

Assuming you have minimal debt and/or you’ve got debt payments under control, and you have a positive money gap, we can turn our attention to the key accounts to start investing with.

TFSA or RRSP – Which Account is Better to Start Investing With?

We believe, either way, you win!

But, we do have a preference…

First, read up about these two (2) great investing accounts that most beginners should consider:

This one is:

Everything You Need to Know about the Tax-Free Savings Account (TFSA).

After you read that post, check out:

Everything You Need to Know about the Registered Retirement Savings Plan (RRSP).

Generally speaking, you’ll discover in those posts that an RRSP and a TFSA are mirror images of each other:

  • TFSA = contribute with after-tax money, money grows inside the account tax-free.
  • RRSP = you contribute with pre-tax money (or get a tax refund based on your RRSP contribution at your current tax rate), but you pay taxes on RRSP withdrawals/when money comes out of the account.

A reminder that any RRSP-generated tax refund from your RRSP contribution should be considered a temporary  government loan.

My Own Advisor wrote about this in more detail here. 

So, when it comes to the TFSA vs. RRSP debate unless you always (we mean always) reinvest the RRSP-generated tax refund back into your RRSP, then the TFSA could make more financial sense.

That’s why we believe the TFSA should be your starting point for long-term investing – so don’t let “Savings” in the Tax-Free Savings Account name fool you.

This account can help you help build significant wealth!

You might be surprised that after decades of investing, inside the TFSA, you can retire on the TFSA alone. We know. We did the math. 

Can you retire using just your TFSA?

Who to start investing with?

Now that you understand we have a bias to using a positive money gap for investing, assuming your debt payments are well within your control, AND you should consider using your TFSA first for investing, the next logical question might be: who to start investing with?

Great question!

Here are some popular options including our favourite highlighted below.

1. Using your local big bank

These institutions can help you set up a TFSA, RRSP or high-interest savings account as well. Be mindful that big bank advisors normally promote their costly mutual funds that belong to big bank’s families of funds. Those big bank funds may charge higher fees than what you could own on your own, using a self-directed brokerage/account.

You can certainly work with a big bank, including their mutual funds, but we would prefer you consider starting to invest with the big bank brokerage’s arm to build a low-cost ETF portfolio.

For further reading: Investing in Index Funds.

(We’ll come back to indexing and why that matters in a bit!)

2. Using a discount brokerage – open a self-directed investing account 

This is our favourite and preferred choice for you, including the brokerage arm’s at the big banks too.

To buy your own ETFs, or individual stocks, or both, we believe owning a self-directed TFSA or RRSP account is the best way to be hands-on to invest for these key reasons:

  1. You won’t or don’t need to pay a money management fee to a financial advisor to invest for you.
  2. You can make all your own investing decisions. Mind you, the downside is, you’ll need to know what funds, ETFs or stocks to buy on your own. Again, more on that soon!

Fans of this site, MoneySense, always offer up an annual outstanding post every year sharing the Best online brokers in Canada to invest with. We encourage you to follow them every year for updates and news on this list.

3. Using a Robo-advisor

We like this option as well, maybe secondary to the self-directed approach.

This option provides more guidance to any beginner investor for any investing approach since these are digital platforms that ask you questions about your investment risk tolerance, how much you want to invest, how often, and they essentially create an investment formula/recipe for you. Don’t worry, real humans work behind the scenes at these Robo-firms!

With any DIY investing route, that might seem very daunting out of the gate for a new investor, the great news is the robo-advisor does all the heavy lifting for you for an incremental fee over DIY investing.

You already know from reading our posts above, including this pillar article about The Four Keys to Investing Success, that the financial industry at large is a colossal machine designed to do one major thing: make money off you and for shareholders.

Our best suggestion is to utilize a discount brokerage whereby you can invest on your own, for some of the lowest fees around and/or when in doubt, use a robo-advisor as a secondary option if you need some support. Using a robo-advisor can help you determine your tolerance for risk, and ensure you get your asset allocation (mix of stocks and bonds) in a zone you can stick to over time.

Using a robo-advisor, whenever your investments start performing outside your specified risk zone, the humans monitoring your portfolio will re-balance your assets to get back to your pre-determined parameters. So, this is a great way to save, then invest, then automate your investment portfolio for a small fee that is typically far less than big bank mutual funds charge but be mindful it’s also slightly more expensive than your DIY brokerage approach.

Again, you can review this annual MoneySense article as well for your brokerage decision:

Best online brokers in Canada to invest with.

Flip us an email or comment if or when you have a question!

How much do I need to start investing?

Very little!

For some online brokerages or a robo-advisor you can start investing with just a few dollars.

Of course, we believe you’ll want a bit more money to start investing with.

In fact, you may want to read this post first:

Savings by Age – Are You Saving Enough?

We know you’re keen to get investing right away but given our experiences over the last 20+ years and those from clients we help out that have been very financially successful, we suggest you establish a small emergency fund first before investing.

You can also consider this bucket approach for your cash flow management:

  1. Bucket One – keep cash you need immediately for your day-to-day living expenses; usually your income is deposited into a chequing account and a small balance is maintained there to waive any bank fees.
  2. Bucket Two – keepy some cash you’re saving for, for near-term expenses, like a vacation. This bucket can also be part of your emergency fund – stashing cash when you need it most! To stash cash, make sure you take advantage of the Best High-Interest Savings Accounts in Canada!
  3. Bucket Three – keep cash set-up as regular contributions to investing; in the form of a direct debit/automation from your chequing account to your investment account. This way, money is sent automatically to your investment accounts or robo-advisor every week or month, and that money is put to work for you.

We feel it’s smart to keep enough money in Bucket One to cover expenses for many weeks.

We like Bucket Two for an emergency fund, say a few thousand bucks.

For Bucket Three, and how much of a positive money gap you can grow, we suggest you put your investments into a diversified portfolio of index ETFs and make a habit to contribute to those regularly.

Just starting out – what should I invest in?

A typical diversified portfolio includes stocks, bonds, and some cash.

With Bucket One and Two above, you’ve already got some cash.

Use Bucket Three for investing.

We believe most investors, for long-term wealth-building success, should consider investing in low-cost Exchange Traded Funds (ETFs) that passively track large stock market indexes like the TSX in Canada or the S&P 500 in the U.S. This way, by holding so many stocks, from many different sectors, you can ride market-like returns without worry about individual stock selection.

Check out these two essential posts:

  1. What is Investing in Index Funds and Why Does that Matter?
  2. Build Long-Term Wealth using our Diversified ETF Model Portfolios.

What about individual stocks?

Individual stocks can be bought as a DIY investor – we do that ourselves too!

The challenge is, for any new investor, the time necessary to research and figure out your stock-buying strategy including the strategy you can stick to over time takes effort. There could be a focus on large-cap growth stocks (the biggest stocks), dividend payers (we like those!), small-cap value stocks (younger companies or less mature companies trading at lower valuations), or any combination of these and more.

When it comes down to it unless you have some experience and have some research-time then some form of stock picking can be risky for new investors. How do you know the winners of today will also be the winners of tomorrow? You can’t really ever be sure.

That said, there are some strategies we personally employ and have been rather successful at.

Read on: Is Dividend Investing Right for You?

All-in-one ETFs – a great way – how to start investing for beginners

In our posts above, we’ve outlined that generally speaking – cash savings is in a very different bucket than investing.

As a general rule, we believe any near-term money needed in the next 1-2 years, at minimum, should remain in cash. Avoid stocks or other investments if you need money, for sure, in 1-2 years.

If your investing time horizon is 5 or more years, then consider stocks. Stocks have historically delivered more growth than bonds or cash for longer investing time horizons. That should work in the future too!

Given your investment timeframe and tolerance for investing risk (i.e., the ability to stomach losses) are often related, we believe some all-in-one ETF solutions could be a great choice: how to start investing for beginners.

Whether you decide to invest with a robo-advisor or go the DIY route with a leading online brokerage as we do, all-in-one ETFs like the ones offered by BMO, Vanguard, iShares or Horizons, to name a few, can be excellent candidates for long-term wealth building.

Again, consider this post to narrow your ETF selections.

Build Long-Term Wealth using our Diversified ETF Model Portfolios

We like those ETFs including for new investors since other than making regular investment contributions into these funds within your accounts (e.g., TFSA and RRSP), many all-in-one funds will do all the work for you.

  • You no longer need to worry about getting fleeced on fees by your financial advisor! These funds are inexpensive to own – more money in your pocket!
  • You no longer need to worry about portfolio re-balancing. These funds are designed to keep a particular asset allocation for you based on your risk profile/risk tolerance.
  • You no longer need to worry about asset location – what funds to put where and why. These funds are designed to be held in registered accounts (RRSP, TFSA, and RRIF, and more). That means you can even hold these all-in-one funds in retirement income accounts!

Read on: What is an RRIF? How does that account work?

  • You no longer need to fret about your risk tolerance or think about market timing. This is because the fund’s regular re-balancing act (for you) will keep your desired risk level in line with your investing goals.
  • You no longer have to worry about your diversification. For some of these funds, you can obtain broad global and fixed income exposure to reduce investment risk while increasing your long-term return potential.

For any investor really:

“All-in-one ETFs are just as they sound: a simple, diversified, and low-cost portfolio solution using just one ETF.”

Summary – How to start investing for beginners

That’s a monster post.

Our longest and most comprehensive ever!

Yet we wanted to write and maintain his post to tie many subjects and references on our site together for you.

We know there is information overload on the internet. Not to mention people who profess to have been there and done that with investing without any evidence.

Well, we’re here to help.

We know getting starting with investing can be daunting. We had to start somewhere too!

Hopefully, this post provided many great insights into what to consider as we shared some of our experiences along the way.

In summary, here are some closing thoughts on how to start investing for beginners:

1. Focus on your savings rate – grow the money gap! While long-term returns are important, your savings rate will be a HUGE factor in your wealth-building success. The sooner you start saving, the more you can save, the longer you can stay invested, the wealthier you will be. Those are the facts.

Check out how Michelle, a 20-something software engineer, plans to retire by age 40 including how much she’ll need to save to accomplish that goal.

This couple plans to retire by age 50 by using their appreciated home equity.

2. Make savings for investment purposes automatic! For years, Joe and I as founders at Cashflows & Portfolios, we have treated our savings for investment purposes like a bill payment – we pay ourselves first and invest that money after cash savings/emergency funds have been established. We automate our money for investing such that we never see that money – it shows up for investing purposes in our investment bank accounts! We strongly suggest you pay yourself and never stop until your retirement goals have been realized.

3. Keep it simple! Investing can be like a bar of soap, the more you touch your portfolio, the smaller it gets. By owning an all-in-one ETF or owning some of our favourite ETFs here (some of those ETFs we own ourselves!), you have can dramatically simplify your investing approach, minimize fees, and optimize the amount of money ready to work for you. While the stock market will gyrate up and down in the short-term, longer-term, the stock market has provided wonderful returns to us DIY investors over many decades and others who have stayed invested. Define and stick to a simple, long-term investing strategy you can commit to. Your future self will thank you!

For investors with longer timelines (i.e., younger investors or new investors) – we cannot stress enough that the best way to build wealth (over time) is to learn to live with stocks in your portfolio and train your investing brain to celebrate market declines as reasons to buy when stocks tank in price.

In closing, as DIY investors for decades now, we’ll continue with our individual paths that marry a combination of individual stocks to go along with low-cost ETFs for diversification. We firmly believe our approaches and the information above can work for you too!

Looking for help?

If you’ve already been investing for some time, and want to know if you’re on track to meet any long-term goals including semi-retirement or retirement, we’re here to help.

Again, flip us an email or a comment. We reply to everything we can.

Our site is growing thanks to you!!

Rob Carrick was also very kind to mention our site and services when we just started out in The Globe and Mail. From Rob:


Cashflow$ & Portfolios is the name of a website built to help people learn how to reach their long-term financial goals with budget and long-term investing. Brought to you by a pair of veteran personal finance bloggers.”

Thanks Rob Carrick!

Knowing how to save and invest wisely, like using low-cost diversified ETFs is just part of the investment puzzle. In addition to that asset accumulation work, we believe all DIY investors should understand asset decumulation too – how to enjoy the money you’ve worked so hard to build in a tax-smart way as you manage your retirement portfolio.

Figuring out when to draw down your RRSP/RRIF assets, by how much, and when amongst other assets and accounts like TFSAs, your pension; when to take CPP or OAS and more is complex work.

We can help at a lower-cost.

We deliver personalized reports to help you make decisions and navigate your retirement income drawdown plans – it’s something we’ve helped dozens upon dozens of clients within the last few months alone!

If you are interested in obtaining private projections for your financial scenario, read more about our retirement projections service.

Thanks for your readership!

We look forward to sharing more detailed posts and financial wealth-building articles with you!

Mark and Joe.

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Disclosure: Cashflows & Portfolios is reader-supported. When you buy through links on our site, we may earn an affiliate commission.

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