Understanding Self-Directed Investing for Newcomers to Canada

If you’re new to Canada and interested in managing your own investments, self-directed investing might be an option for you.

It is one way to make your own decisions on where to invest your money. In this article, we’ll explore what self-directed investing is, how to get started, and the resources available to help you along the way.

What is Self-Directed Investing?

Self-directed investing puts you in control of your investments. Instead of working with a financial advisor to help you manage your portfolio, you can manage your investments independently and make the decisions about which stocks, bonds, mutual funds, or other investment products to buy and sell. This gives you the opportunity to choose how and where your money is invested based on your preferences and personal financial goals.

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Where Do I Begin?

Before you start investing, it’s helpful to learn more about investing in Canada and how to define your investment goals. Begin by asking yourself: What am I investing for?

1. Define Your Investment Goals

Identifying your goals may help you make choices when it comes to your investments. Some common goals may include:

• Home Ownership: Invest to save for a down payment on a home in Canada.
• Retirement: Save and invest for the long term to help you reach your retirement goals.
• Secondary Source of Income: Invest to potentially generate additional income beyond what is earned through your job or business.
• Building Wealth for Key Milestones: Grow your wealth to help meet key life milestones such as a wedding, a child’s education, etc .

Once you’ve identified your goals, you may wish to start thinking about how much risk you're willing to take and how much time you have before you need the money.

2. Why Investing Matters

Investing is a way you can make your money work for you. By putting your money into investment products, you may potentially grow your wealth over time and chart a course towards achieving your financial goals.

3. Getting Started: How to Open an Investment Account

The first step in self-directed investing is to open an investment account. This account is where you’ll buy, sell, and manage your investments. Many financial institutions offer online platforms where you can easily open an account. You can start by visiting the website of a financial institution that offers self-directed investing services in Canada, such as TD Direct Investing, to learn more about the process and available account types. When selecting a self-directed investing platform, consider the following:

a. Platform Capabilities

Look for a platform that is easy for you to use and offers the tools and features you need. Some self-directed investing platforms may offer research tools, educational resources, and customer support to help you make informed decisions. You may also wish to ensure the platform provides a range of investment  products  you can choose from.

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b. Investment Products

Self-directed investing services can have different investment products available for investors to choose from. TD Direct Investing, for example, offers a variety of investment products including stocks, bonds, mutual funds, and exchange-traded funds (ETFs). Each type of investment may have different potential advantages and risks. Whether each type of investment is suitable for you will depend on factors including your investment goals, risk tolerance, and time horizon.

• Stocks: Investing in individual companies allows you to become a partial owner of a business. Some stocks may be considered risky, and stock returns depend on many factors related to the company you are investing in. This can also include factors outside of the company, such as market and economic conditions, which can also have a significant positive or negative impact on returns.
• Bonds: These investments, sometimes referred to as "fixed income" products, are issued by governments or corporations and pay you specified interest over time. Bonds differentiate themselves from stocks as they are debt investments, meaning the investor is lending money to the issuing corporation or government. Interest is paid over the life of the bond, typically semiannually. At maturity you receive the final interest and the face value of the bond.
• Mutual Funds & ETFs: These are investment funds that pool money from many investors to buy a mix of stocks, bonds, or other assets. They may offer diversification and may be considered less risky than purchasing individual stocks. However, the level of risk will vary between funds depending on their specific investment objectives, strategies, and other factors.

c. Different Account Types

When setting up your self-directed investment account, you may choose between two main types of accounts^[1]: registered and non-registered.

• Registered Accounts: These include options like the Tax-Free Savings Account (TFSA), First Home Savings Account (FHSA), and Registered Retirement Savings Plan (RRSP). These registered accounts may offer you a combination of tax advantages. Depending on the account type, these advantages may include tax-deferred growth, tax-free withdrawals, or tax-deductible contributions.
• Non-Registered Accounts: These accounts may be more flexible but don’t offer the same potential tax advantages as registered accounts. You will be required to pay taxes on any income or capital gains earned within the account.

Each account type may have its advantages and disadvantages, depending on your investment goals and tax situation.

Helpful Resources for New Investors

As you begin your self-directed investing journey, it’s helpful to do your research and explore some reliable resources that may help to guide you – before taking the first step.

By educating yourself and making informed decisions, you may begin to build a stable and secure path to your financial future. Whether you’re investing for retirement, income, or other goals, self-directed investing may be the answer that brings you flexibility and control over your financial decisions. Remember to take your time, educate yourself, and seek out helpful resources to guide you along the way.

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Why Choose TD?

150 years helping Canadians:

TD has a proud history of delivering financial solutions to Canadians for more than 150 years. TD also brings a century of experience helping newcomers navigate the unique challenges of the Canadian banking system.

With over a thousand branches, a reputation for excellence in financial services, and the ability to also serve you in more than 80 different languages, TD has become one of the largest and most trusted banks in Canada, now serving 16 million Canadians.

TD offers online support and resources of interest to newcomers on topics such as banking basics, moving to Canada, credit score essentials, and more. TD is open longer hours for your convenience and has thousands of ATMs across Canada to help you take care of your everyday banking needs quickly and easily.

Ready to Bank?

Learn more about TD New to Canada Banking Package today. Book an appointment to talk with a TD Personal Banking Associate about the TD New to Canada Banking Package. You can book online right away, or visit the TD website to learn more.

Legal Disclaimer:

Information provided by TD Bank Group and other sources in this article is believed to be accurate and reliable when placed on this site, but we cannot guarantee it is accurate or complete or current at all times. Information in this article is for informational purposes only and is not intended to provide financial, legal, accounting, or tax advice and should not be relied upon in that regard. This information is not to be construed as a solicitation to buy. Products and services of the TD Bank Group are only offered in jurisdictions where they may be lawfully offered for sale. All products and services are subject to the terms of the applicable agreement. The information in this article is subject to change without notice.

TD Bank Group ("TD") means The Toronto-Dominion Bank and its affiliates, who provide deposit, investment, loan, securities, trust, insurance and other products or services.

TD Direct Investing is a division of TD Waterhouse Canada Inc., a subsidiary of The Toronto-Dominion Bank.

^® The TD logo and other TD trademarks are the property of The Toronto-Dominion Bank or its subsidiaries.

[1]Registered vs. non-registered accounts: What you should know https://www.moneytalkgo.com/registered-vs-non-registered-accounts/ (06-11-2024)