Investment

Are You Broke? Here's How to Start Investing – The Motley Fool Canada

Published

5 years ago

April 19, 2020

It’s not easy being broke. Long-term financial planning becomes difficult. Saving for retirement is hard when you have monthly debt payments to make. But it’s never too early to start investing, even if your financial life is grim.

The biggest thing to know is that you don’t need $10,000 to start investing. You don’t even need $1,000. Stashing away even $20 per week can compound into incredible sums over time. All you need to do is get started.

Pick an account

If you’re broke but still want to invest, put your money into an RRSP — that stands for a Registered Retirement Savings Plan. These are available to any employed or self-employed person in Canada.

There are several reasons why you want to stick with an RRSP versus a traditional investment account or even another retirement vehicle like a TFSA.

The biggest advantage deals with taxes. When you put $100 into your RRSP, your taxable income is reduced by $100. If you pay 20% of your income to the government, you’ll be shaving $20 off your annual tax bill for every $100 that you contribute.

This type of tax advantage is considered pre-tax — that is, you’re reducing your pre-tax income, which effectively lowers your eventual tax hit. Traditional investing accounts have no such advantages.

Other tax-advantaged vehicles like TFSAs, for example, are considered post-tax. Contributions don’t lower your current taxable income, meaning you’ll pay the same amount in taxes this year. In return, you pay no taxes upon withdrawal.

If you’re broke, go with an RRSP. Getting the tax savings today means you can afford to contribute more. The long-term tax advantages of a TFSA are lucrative, but they don’t improve your short-term finances.

Free up some money

This is a piece of advice that you’ve heard over and over: build and maintain an accurate budget. Knowing where your money is coming from and where it’s going is the first step towards financial freedom. If you don’t get your income and spending aligned, your investment efforts will be for naught.

This exercise isn’t as daunting as it may seem. You don’t need to be a mathematical wizard. The most important thing is to have a simple awareness of your money flows. Only then can you start investing.

Many budgeters realize that a handful of spending categories are responsible for the bulk of their expenses. Sometimes it’s rent or car payments. Other times it’s entertainment or debt payments. Without targeting your major spending buckets, you’ll struggle to free up enough capital to build a strong investment account.

Open an RRSP. Build a budget. Identify where you can squeeze out some extra savings. Then move to the final step: automating your contributions.

Start investing with this trick

Automated contributions are the greatest trick in investing history. Here’s how they work.

Most RRSP accounts will allow you to establish recurring deposits. For example, you can have $20 per week deposited into your account. You can have it taken out of your paycheque or from a savings account. In either case, automated contributions ensure that you’re regularly stashing away more money, no matter how small the sum is.

After building your budget, you should have a clear sense of how much extra money you can direct into your RRSP. It doesn’t matter if the amount is $20 or $2,000. Any dollar figure is enough to start investing.

As your financial condition improves, you can start to raise your regular contribution amount. Maybe you start putting away $50 every two weeks, or $250 every month. The important part is simply to have these recurring deposits in place.

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Fool contributor Ryan Vanzo has no position in any stocks mentioned.

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Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

Published

1 day ago

November 6, 2024

Anne Joseph

NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

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Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

3 weeks ago

October 16, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

4 weeks ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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