After listening to tons of podcasts and reading tons of blogs about FI/RE, investing is something I need to learn about. Things like, what is an index fund? What’s an ETF? What the f&*k is everyone talking about?
Part of the issue is, most of my favorite podcasts and blogs are American. Well the rules be all different up here in Canada. So, I can tell you what I’ve learned so far, and you can tell me how I’m wrong (or perhaps provide your advice/experience in a nice and non-condescending way) in the comments.
Things I have learned so far, after just scratching the surface of how to Invest
- People who understand investing believe that financial advisers are bad to use in general. Especially if they work for the big 5. While I agree that you will pay more through an adviser, they do serve a purpose for those of us who know nothing about investing. My adviser has many years of experience in the biz and he’s providing me with a service which I currently value. As I continue to learn and educate myself, his service will likely become less valuable in the future.
- If you are going it on your own, low cost Index Funds and/or ETFs are the way to go. Everything you invest in has some kind of fee attached to it, known as an MER (Management Expense Ratio). These can range from less than 1% up to 3+%. From what I gather, less than 1% is decent. Any fund that is “actively managed” by investors will have higher MERs to offset the cost of being actively managed.
- Canadian Couch Potato is god for many. Dan Bortolotti writes the Canadian Couch Potato blog which provides self-directed investing strategies in Canada. There are a few model portfolios he recommends depending on your personal situation. This site is extremely helpful and informative for newbies.
- Start early and invest often. The earlier you start investing, the better your returns will be! Use compound interest to your advantage. Since it’s too late for me, just do it NOW you young whippersnappers reading this!
- Stay the course. If you’re someone who freaks out about the ups and downs of the market, self-directed investing MAY not be for you. it’s important to invest in the right spot, and leave it there for a really long time. Maybe you will have to re-balance once a year or something like that, but it’s best to just ignore what is going on most of the time assuming you are following a tried and true method.
Investing Baby Steps
In order to get my feet wet, I decided to sign up for a Practice Questrade account, which was recommended to me by a coworker. Questrade is one of the lower cost self-directed investment options in Canada. I then invested my fake money ($500,000) in one of the Couch Potato model portfolios to see how it all works and how the model performs.
So far, I’ve lost money since my initial investments. I’m down about 2.5k. Since I chose an aggressive investment model, this is to be expected. More risk can also mean more reward! (see “Stay the course” above). Unfortunately the practice account only remains open for 90 days, so we’ll see where things go.
I also opened a real TFSA Questrade Account! A TFSA is a Tax Free Savings Account, for anyone outside of Canada. A great place to shelter money from taxes aside from traditional retirement savings. So far, it is empty. I need $1000 to fund it, which I’m gathering up now. Also I need to decide carefully where I will invest.
Obviously I have a lot more reading and research to do to get to a point where I’m really comfortable with what I’m doing. Hopefully the Christmas break will provide me with some time for that! I would appreciate any reading recommendations you may have.
Also still looking into other side hustle opportunities to find even more to invest. More on that in the New Year!