Investing Your Money

Here are some lessons on investing I’ve picked up over the last couple of years.

Investing isn’t supposed to be difficult.

You really don’t need an advisor selling you funds that they themselves get a commission from (or represent the company that pays their salary).

Avoid High Fees

The best advice you can get is for investing is you should be avoiding high fees.

Find a bank that doesn’t charge you monthly fees. There are many, but I recommend Tangerine. It’s owned by Scotiabank and you can use their ATM network without any usage fees. Admittedly, they’re not for everyone, especially if you like going to your branch or banking with a teller. But if you’re like me, you never have to visit a branch more than once every couple of years (I lost my debit card on a few occasions).

If you’d like to give Tangerine a try, sign up and use my “Orange Key” (16388000S1) to get $50.00 for depositing $250.00 (that’s 20% of your deposit for just opening an account that has zero monthly fees).

In terms of investing, buying ETFs (Exchange Traded Funds) is a good way to avoid high fees, as well as managing risk.

What risk level am I comfortable with?

Only you can judge this in the situation you are in. Generally speaking, though, if you’re younger and think you’ll be investing for over 10-20 years, your risk tolerance should be higher as you have more time to average out the swings that will come with being in the market. The older you are, the less risk you should be taking with your savings.

What you should not be doing:

Waiting for the perfect time

Not investing today means that your time horizon is getting shorter and shorter every day. The longer your time horizon is, the better the chances of your investment growing dramatically.

With Investing, Compound interest is your friend

Say you were really into origami and you had a sheet of paper. If you could fold this magical piece of paper 40 times on to itself, do you have a feeling of how tall would this paper be? Let’s bust out our trusty spreadsheet. Assuming the paper is your average thickness of printer paper: 0.1 millimetre.

fold thickness (mm)
0 0.1
1 0.2
2 0.4
3 0.8
4 1.6
5 3.2
6 6.4
7 12.8
8 25.6
9 51.2
10 102.4
11 204.8
12 409.6
13 819.2
14 1638.4
15 3276.8
16 6553.6
17 13107.2
18 26214.4
19 52428.8
20 104857.6
21 209715.2
22 419430.4
23 838860.8
24 1677721.6
25 3355443.2
26 6710886.4
27 13421772.8
28 26843545.6
29 53687091.2
30 107374182.4
31 214748364.8
32 429496729.6
33 858993459.2
34 1717986918
35 3435973837
36 6871947674
37 13743895347
38 27487790694
39 54975581389
40 109951162777.60 109951162.78 metres! 109951.1628 kilometres!

By the end of your fortieth fold, you’ll have a piece of paper that is almost 110,000 kilometres! Almost three times the circumference of our planet. That is the power of exponents and compound interest.

What you can do today:

Do you have $25 a week to invest? Sign up for reputable robo-advisor services like Wealthsimple that automatically purchase ETFs for you. The service purchases ETF funds for you based on the risk profile they assess you at when you sign up. They also do fancy things like automatically rebalancing your portfolio at the end of the year.

What other Robo-advisor services are out there?

Along with Wealthsimple, there is:

  • Justwealth
  • NestWealth
  • Questrade Portfolio
  • Wealthbar

I personally have used both Wealthsimple and Questrade Portfolio and prefer the former more.

 

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