How to Buy Your First Stock

Here's a quick step-by-step guide on how to open up your WealthSimple account and purchase your first stock.

Wealthsimple is a great platform for beginners because it's easy to use and has a low barrier to entry since there are no fees for purchasing/selling Canadian stocks and ETFs.

The UI (User Interface) is always changing so I'll try to keep the steps generic enough to be applicable to any version of the app.

1. Open a Wealthsimple account using my referral code VZP-FW. It’ll give both of us a small bonus! Link to Wealthsimple here.

2. Open a TFSA account. TFSA stands for Tax-Free Savings Account, which is a special account where you don’t have to pay any tax on any gains made within the account. However, there is a limit on how much you can contribute. You unlock more contribution room on January 1st each year.

   • Example: If you turned 18 in 2023, your contribution room for that year would be $6,500. For 2024, the contribution limit has increased to $7,000, giving you a total of $13,500 in contribution space if you haven’t yet contributed.

   You can check past contribution limits on this CRA website.

   Always make sure you don’t exceed your contribution limit, or you’ll face fees from the government.

   Note: You can withdraw money from a TFSA without penalties, but you won’t be able to re-contribute that amount until the following year when the limit refreshes.

   • Example: Let's say you have $13,500 in your TFSA, and in June 2024, you decide to withdraw $5,000 for an emergency. You can withdraw the money without any penalties, but you cannot re-contribute that $5,000 until January 1st, 2025, when your TFSA limit resets. In 2025, you would get back the $5,000 you withdrew, plus the new contribution room for that year. So, if the 2025 contribution limit is $7,000, you would now have $12,000 available to contribute in 2025.

   I will create a seperate blog post going more in depth about the TFSA as well as other type of accounts available in Canada (RRSP, FHSA, etc).

   Don't open a managed account. Instead, open a self-directed account instead (this should be an option where you can select your own Stocks, ETFs, etc). The Halal Portfolio is now just a single ETF, WSHR, and Gold. In my opinion, it’s not worth paying the extra 0.5% management fee to Wealthsimple when you can easily buy it yourself. However if you would like even more simplicity, you can opt for the managed account which will handle purchasing stocks for you.

3. Determine your TFSA contribution space and figure out how much you can realistically invest by the end of the year.

   I started investing in my early 20s, so I had accumulated a large contribution space (~$20k).

   Now I needed to know how much I was going to contribute over the course of the year. I was new to investing and paranoid, so I wasn't comfortable putting in a large sum of money all at once (nor did I have $20k). Instead, I decided to contribute $50/week into my TFSA. I was not worried about over contributing since the total I'd invest over the year would be $2600, which is less than my contribution limit.

4. Purchase investments with your now funded TFSA. Now that you have money in your TFSA, you need to purchase investments so they can grow over time. If you had opted for the Managed Account option in Step 2, you can skip this step.

   Search up the stock/ETF you want to purchase. In this case, search up WSHR. Click on it, and you should see a Buy button. Click on it, and you should be able to input the amount you want to purchase and from which account you want to purchase it from (select TFSA).

   Note: If your TFSA has $100 in it, and you want to buy a stock that is $150, you can still buy it since Wealthsimple allows you to purchase fractional shares. This means you can buy a portion of a stock/ETF if you don’t have enough money to buy a full share.

5. Build the habit of investing regularly. The amount you put in weekly/monthly doesn’t matter as long as you don’t over-contribute. It’s just important to get started. This will help calm your nerves about the new process.

   Although it's not the focus of this post, it's important to remember that investing is a long-term game. The stock market can be volatile, and it's important to not panic when the market goes down. Instead, view it as an opportunity to buy more shares at a discount. Check out the concept of Dollar-Cost Averaging for more information, and I will write up a post explaining this in the future.

And there you go, you are now investing in your future in an Islamically-minded way!

Check out my post on A Guide to Investing with Islamic Principals for more information on my investing mindset.