The Ins and Outs of Investing In Your 30s

“Why God? Why are you doing this to us?”

If you’re in your 30s, you’re old enough to remember Joey asking that question in Friends episode called The One Where They All Turn Thirty. It also means you’re old enough that it’s time to start asking other questions like how you’ll be able to afford to retire.

Even if you don’t feel like an adult yet, your 30s are a great time to start investing. Time is still on your side. And the same rule applies to money as it does to everything else in your life: Your 30s are the perfect time to take risks and make mistakes.

The best part is, it doesn’t have to be difficult! You don’t care how the Nikkei is doing? Neither do I. You don’t know what the Nikkei is? It’s a stock index in Japan. It doesn’t matter. Investing in your 30s isn’t about following the markets or listening to the business report. It’s just about making smart decisions that encourage your money to grow. Simple!

So how do you make those smart decisions?

Start by thinking about your goals. What do you want to get out of your investments? You don’t always have to worry about percentage yields and dollar amounts. I’m talking about the things you want to do with your money. Do you want to buy your first house? Go on a vacation? Get married? Retire comfortably? Knowing what your goals are can help you make decisions such as how much you need to save and how you should invest your money.

Read:What to Do If You Can’t Max out Your RRSP

Take charge of your investments

It’s time to get your hands dirty. Whether your savings are sitting in the bank account you’ve had since you were a kid or the pension your employer gave you by default, these investments may be risky because they’re not always geared towards all of your goals. Now is the time to do some research and find out how to invest your money to make sure you get what you want from it.

There are lots of great resources, but one of the best options for this kind of financial advice is a fee-only financial advisor. That’s a person whose job it is to review your financial situation with you and give you advice based on their expertise. Rather than collecting commissions by selling you financial products, they charge you for their time and give you unbiased advice. Your advisor can recommend what kinds of investments to make and walk you through the process.

If you prefer a more hands-off approach, look into a robo-advisor. These are online investment services that ask you questions about your goals and automate your investments based on what you want from your money. They take care of the daily maintenance for you and make adjustments as time goes on. It’s a set-it-and-forget-it approach.

If you like to do your own research, there’s a lot of information on Ratehub.ca’s RRSP and TFSA education centres.

Friends and family are great resources, but keep in mind they’ll have different attitudes about money and different life experiences. The investing decisions that helped your parents grow their wealth might not be great ideas 30 years later.

Use tax shelters

Canadians have access to fantastic tax shelters. The most common ones are RRSPs and TFSAs.

When you invest in an RRSP, you don’t pay income tax on the money you deposit and any growth is sheltered from tax. Instead, you pay income tax when you take money out in retirement. You can keep various kinds of investments in an RRSP. Make sure to stay within your RRSP contribution limit and keep a handle on all of the other rules about how you can and can’t use an RRSP.

When you invest in a TFSA, you don’t get a tax refund, but you never pay tax on the money your investments make, even when you make a withdrawal. TFSAs aren’t limited to just cash. You can keep various kinds of investments in them. There’s a TFSA contribution limit and there are plenty of rules.

Read:How Do I Make the Most of the Money I’ve Saved?

Take some risks

You’re in your 30s, and that means you have a long-term time horizon. The more wealth you’re able to accumulate now, the more it will grow over time. So your 30s (and 20s) are a good time to make higher-risk investments.

That doesn’t mean you should head to Las Vegas and invest it all at the casino. It just means you can take on more risk and make investments that offer the potential to produce higher returns. The further out your goals are, the more you can withstand the ups and downs that come with investing. As you get closer to your goals, you can trade your riskier investments for more stable ones to preserve the wealth you’ve accumulated.

Riskier investments are stocks and equity mutual funds/exchange-traded funds (ETFs). Safer ones are bonds, GICs, bond mutual funds/ETFs, and cash in a high-interest savings account. If you’re in your 30s and investing for retirement, you may decide to keep 80% to 100% of your portfolio in riskier investments depending on your risk tolerance.

Taking some risks can help make investing fun, too. You might want to take a small amount of money and invest it in something exciting or tangible. You can pick a couple of stocks or fund microloans to businesses using a service such as Lending Loop. You can even buy a gold bar or invest in collectibles. Just make sure to keep this to a very small percentage of your overall portfolio and be prepared to lose every penny you invest.

Of course, make sure you take risks in line with your goals. In other words, don’t take huge risks if you’re saving to buy a home in the next few years.

The bottom line

Investing in your 30s doesn’t need to be complex or boring. But you do need to put in a little effort.

Start with doing your research and getting the right advice. Choose investments based on your goals and take advantage of your RRSP and TFSA. Aim to build a portfolio that suits your risk tolerance, but give yourself permission to take some additional risks and have some fun.

Whatever you do, start now. Your money needs lots of time to grow, and even starting with a small amount in your 30s is better than waiting until your 40s or even later. You don’t need to be rich or invest a huge amount of money to get started. Just $10 a week is enough to get started (and enough to grow to a couple thousand dollars in just a few years).