Investing basically means lending out your money, and getting some kind of return on it.
There’s two kinds of investments: debt and equity. With debt, you lend the money and get a fixed rate of interest. With equity, you buy a small slice of a business and get a share of its earnings. Typically the business will pay out some as a cash dividend and reinvest the rest to expand its business (for example, by buying or building another factory), causing its value to grow.
Either way, the value of your investment compounds over time. The rule of 72 says that if your annual return is x%, then it takes about 72 / x years for your money to double. At 5%, for example, it doubles every 14 years or so. So if you can invest $10,000 at 5% and not touch it for the next 40 years, it’ll double a bit less than three times, increasing to $70,000.
Equity investments are volatile: they go up and down. So investors aren’t willing to pay as much as for debt investments, resulting in a higher return on equities. In the long term, equity investments grow faster than debt investments. You take a higher risk and get a higher return.
There's different approaches to investing in equities:
Stock picking - you look for companies which you think are undervalued, i.e. selling for less than they're worth, and buy their shares.
Buy a mutual fund - a mutual fund is run by a manager who actively decides what companies to invest in, spreading your investment over a larger number of companies. Charges an annual fee of 1-2%.
Buy an index fund - an index fund has much lower fees (0.25% or less), because you just buy a small slice of all companies in the stock market ("passive investing"). There's no need to pay a manager and their staff to look at each company and decide whether it's undervalued or not.
A common approach is to keep your costs low by just buying index funds. Stock picking is hard: it's like trying to find a diamond in a field that's already been searched by an army of professionals. With mutual funds, you’re paying a lot. When your expected average annual return is around 5%, 1-2% is a big chunk. And because stock picking is hard, mutual fund managers have a very hard time doing better than average.
Index funds are liquid (you can sell them easily) and diversified (you’re not going to lose all your money if a single company or a single economic sector does badly).
You probably don't want 100% of your retirement savings in equities, because they go up and down, which can be pretty hard to take. (You don’t want to panic and sell whey they’re low.) A common recommendation is to keep 40% or 50% in bonds (interest-paying debt investments), which are less volatile, providing some stability and reassurance when the stock market is going through a meltdown.
The Vanguard Balanced ETF Portfolio fund, VBAL, is a simple, hands-off way to keep your investments 60% in equities, 40% in bonds, with annual management expenses of about 0.25%. (If you want a different allocation, VGRO is 80% equities / 20% bonds, and VCNS is 40% equities / 60% bonds. iShares and BMO also offer asset allocation funds.)
For a step-by-step guide, I'd recommend John Robertson's book The Value of Simple: A Practical Guide to Taking the Complexity out of Investing. (He comments here as /u/HolyPotato.)
by russilwvong 2019-07-21
If you're new to investing, I wouldn't recommend that you start with a high-risk, undiversified investment like weed stocks. Here's a brief introduction that I wrote up.
Investing basically means lending out your money, and getting some kind of return on it.
There’s two kinds of investments: debt and equity. With debt, you lend the money and get a fixed rate of interest. With equity, you buy a small slice of a business and get a share of its earnings. Typically the business will pay out some as a cash dividend and reinvest the rest to expand its business (for example, by buying or building another factory), causing its value to grow.
Either way, the value of your investment compounds over time. The rule of 72 says that if your annual return is x%, then it takes about 72 / x years for your money to double. At 5%, for example, it doubles every 14 years or so. So if you can invest $10,000 at 5% and not touch it for the next 40 years, it’ll double a bit less than three times, increasing to $70,000.
Equity investments are volatile: they go up and down. So investors aren’t willing to pay as much as for debt investments, resulting in a higher return on equities. In the long term, equity investments grow faster than debt investments. You take a higher risk and get a higher return.
There's different approaches to investing in equities:
Stock picking - you look for companies which you think are undervalued, i.e. selling for less than they're worth, and buy their shares.
Buy a mutual fund - a mutual fund is run by a manager who actively decides what companies to invest in, spreading your investment over a larger number of companies. Charges an annual fee of 1-2%.
Buy an index fund - an index fund has much lower fees (0.25% or less), because you just buy a small slice of all companies in the stock market ("passive investing"). There's no need to pay a manager and their staff to look at each company and decide whether it's undervalued or not.
A common approach is to keep your costs low by just buying index funds. Stock picking is hard: it's like trying to find a diamond in a field that's already been searched by an army of professionals. With mutual funds, you’re paying a lot. When your expected average annual return is around 5%, 1-2% is a big chunk. And because stock picking is hard, mutual fund managers have a very hard time doing better than average.
Index funds are liquid (you can sell them easily) and diversified (you’re not going to lose all your money if a single company or a single economic sector does badly).
You probably don't want 100% of your retirement savings in equities, because they go up and down, which can be pretty hard to take. (You don’t want to panic and sell whey they’re low.) A common recommendation is to keep 40% or 50% in bonds (interest-paying debt investments), which are less volatile, providing some stability and reassurance when the stock market is going through a meltdown.
The Vanguard Balanced ETF Portfolio fund, VBAL, is a simple, hands-off way to keep your investments 60% in equities, 40% in bonds, with annual management expenses of about 0.25%. (If you want a different allocation, VGRO is 80% equities / 20% bonds, and VCNS is 40% equities / 60% bonds. iShares and BMO also offer asset allocation funds.)
For a step-by-step guide, I'd recommend John Robertson's book The Value of Simple: A Practical Guide to Taking the Complexity out of Investing. (He comments here as /u/HolyPotato.)
If you decide to go with a brokerage, carefully consider whether the lower MER will actually make up for the trading costs. I believe RBC DI charges about $10/trade, and if you're going to add funds every month, spread out among 3 or 4 ETFs, you're looking at paying $30-$40 a month, or $360 - $480 per year. For an investment of 8K, a MER reduction from 1.7% to 0.15% only saves $124 per year so it would take 4 years before the "brokerage" scenario comes out ahead. You could reduce the costs by only purchasing 3 or 4 times a year instead of monthly, but you can eliminate the purchasing costs altogether if you use Questrade instead of RBC. They have zero-commission ETF purchases, and really would make no difference to the process. There is no advantage I can think of to keeping all your accounts with RBC. You'd probably still need to login separately for the RBC DI brokerage account, and wouldn't have any links to your other banking that are any different than the links you can setup with Questrade.
I also second the recommendation of The Value of Simple eBook, which also suggests Questrade for buying ETFs and provides great examples on how to actually implement that with Questrade. You can get a copy from Chapters , or from the author's website.
by elbyron 2017-08-19
Read The Wealthy Barber Returns, with a free copy still available here from Tangerine despite the page saying the offer expired Dec 31.
Tip: If you're saving up for a car, vacation, house, or anything that you're going to need the money within 5 years, don't bother with investing it in equities or mutual funds that hold equities. Just stick it in a high-interest savings account, preferably one that's tax sheltered (TFSA) and preferably with one of the banks offering the best interest rates
What do you have your TFSA invested in?
Here's a brief introduction that I wrote up.
Investing basically means lending out your money, and getting some kind of return on it.
There’s two kinds of investments: debt and equity. With debt, you lend the money and get a fixed rate of interest. With equity, you buy a small slice of a business and get a share of its earnings. Typically the business will pay out some as a cash dividend and reinvest the rest to expand its business (for example, by buying or building another factory), causing its value to grow.
Either way, the value of your investment compounds over time. The rule of 72 says that if your annual return is x%, then it takes about 72 / x years for your money to double. At 5%, for example, it doubles every 14 years or so. So if you can invest $10,000 at 5% and not touch it for the next 40 years, it’ll double a bit less than three times, increasing to $70,000.
Equity investments are volatile: they go up and down. So investors aren’t willing to pay as much as for debt investments, resulting in a higher return on equities. In the long term, equity investments grow faster than debt investments. You take a higher risk and get a higher return.
There's different approaches to investing in equities:
Stock picking - you look for companies which you think are undervalued, i.e. selling for less than they're worth, and buy their shares.
Buy a mutual fund - a mutual fund is run by a manager who actively decides what companies to invest in, spreading your investment over a larger number of companies. Charges an annual fee of 1-2%.
Buy an index fund - an index fund has much lower fees (0.25% or less), because you just buy a small slice of all companies in the stock market ("passive investing"). There's no need to pay a manager and their staff to look at each company and decide whether it's undervalued or not.
A common approach is to keep your costs low by just buying index funds. Stock picking is hard: it's like trying to find a diamond in a field that's already been searched by an army of professionals. With mutual funds, you’re paying a lot. When your expected average annual return is around 5%, 1-2% is a big chunk. And because stock picking is hard, mutual fund managers have a very hard time doing better than average.
Index funds are liquid (you can sell them easily) and diversified (you’re not going to lose all your money if a single company or a single economic sector does badly).
You probably don't want 100% of your retirement savings in equities, because they go up and down, which can be pretty hard to take. (You don’t want to panic and sell whey they’re low.) A common recommendation is to keep 40% or 50% in bonds (interest-paying debt investments), which are less volatile, providing some stability and reassurance when the stock market is going through a meltdown.
The Vanguard Balanced ETF Portfolio fund, VBAL, is a simple, hands-off way to keep your investments 60% in equities, 40% in bonds, with annual management expenses of about 0.25%. (If you want a different allocation, VGRO is 80% equities / 20% bonds, and VCNS is 40% equities / 60% bonds. iShares and BMO also offer asset allocation funds.)
For a step-by-step guide, I'd recommend John Robertson's book The Value of Simple: A Practical Guide to Taking the Complexity out of Investing. (He comments here as /u/HolyPotato.)
If you're new to investing, I wouldn't recommend that you start with a high-risk, undiversified investment like weed stocks. Here's a brief introduction that I wrote up.
Investing basically means lending out your money, and getting some kind of return on it.
There’s two kinds of investments: debt and equity. With debt, you lend the money and get a fixed rate of interest. With equity, you buy a small slice of a business and get a share of its earnings. Typically the business will pay out some as a cash dividend and reinvest the rest to expand its business (for example, by buying or building another factory), causing its value to grow.
Either way, the value of your investment compounds over time. The rule of 72 says that if your annual return is x%, then it takes about 72 / x years for your money to double. At 5%, for example, it doubles every 14 years or so. So if you can invest $10,000 at 5% and not touch it for the next 40 years, it’ll double a bit less than three times, increasing to $70,000.
Equity investments are volatile: they go up and down. So investors aren’t willing to pay as much as for debt investments, resulting in a higher return on equities. In the long term, equity investments grow faster than debt investments. You take a higher risk and get a higher return.
There's different approaches to investing in equities:
Stock picking - you look for companies which you think are undervalued, i.e. selling for less than they're worth, and buy their shares.
Buy a mutual fund - a mutual fund is run by a manager who actively decides what companies to invest in, spreading your investment over a larger number of companies. Charges an annual fee of 1-2%.
Buy an index fund - an index fund has much lower fees (0.25% or less), because you just buy a small slice of all companies in the stock market ("passive investing"). There's no need to pay a manager and their staff to look at each company and decide whether it's undervalued or not.
A common approach is to keep your costs low by just buying index funds. Stock picking is hard: it's like trying to find a diamond in a field that's already been searched by an army of professionals. With mutual funds, you’re paying a lot. When your expected average annual return is around 5%, 1-2% is a big chunk. And because stock picking is hard, mutual fund managers have a very hard time doing better than average.
Index funds are liquid (you can sell them easily) and diversified (you’re not going to lose all your money if a single company or a single economic sector does badly).
You probably don't want 100% of your retirement savings in equities, because they go up and down, which can be pretty hard to take. (You don’t want to panic and sell whey they’re low.) A common recommendation is to keep 40% or 50% in bonds (interest-paying debt investments), which are less volatile, providing some stability and reassurance when the stock market is going through a meltdown.
The Vanguard Balanced ETF Portfolio fund, VBAL, is a simple, hands-off way to keep your investments 60% in equities, 40% in bonds, with annual management expenses of about 0.25%. (If you want a different allocation, VGRO is 80% equities / 20% bonds, and VCNS is 40% equities / 60% bonds. iShares and BMO also offer asset allocation funds.)
For a step-by-step guide, I'd recommend John Robertson's book The Value of Simple: A Practical Guide to Taking the Complexity out of Investing. (He comments here as /u/HolyPotato.)
You open the TFSA with Questrade - if you decide to go with stock market investments (which I suggest you don't if it's only a 2-year timeframe). Here's a video for opening a Questrade account , or from the author's website.
If you decide to go with a brokerage, carefully consider whether the lower MER will actually make up for the trading costs. I believe RBC DI charges about $10/trade, and if you're going to add funds every month, spread out among 3 or 4 ETFs, you're looking at paying $30-$40 a month, or $360 - $480 per year. For an investment of 8K, a MER reduction from 1.7% to 0.15% only saves $124 per year so it would take 4 years before the "brokerage" scenario comes out ahead. You could reduce the costs by only purchasing 3 or 4 times a year instead of monthly, but you can eliminate the purchasing costs altogether if you use Questrade instead of RBC. They have zero-commission ETF purchases, and really would make no difference to the process. There is no advantage I can think of to keeping all your accounts with RBC. You'd probably still need to login separately for the RBC DI brokerage account, and wouldn't have any links to your other banking that are any different than the links you can setup with Questrade.
I also second the recommendation of The Value of Simple eBook, which also suggests Questrade for buying ETFs and provides great examples on how to actually implement that with Questrade. You can get a copy from Chapters , or from the author's website.
Read The Wealthy Barber Returns, with a free copy still available here from Tangerine despite the page saying the offer expired Dec 31.
Then read an eBook called The Value of Simple, which you can get from Chapters , or from the author's website.
Tip: If you're saving up for a car, vacation, house, or anything that you're going to need the money within 5 years, don't bother with investing it in equities or mutual funds that hold equities. Just stick it in a high-interest savings account, preferably one that's tax sheltered (TFSA) and preferably with one of the banks offering the best interest rates