Part 3: Figuring it Out
Since consulting with a financial advisor three years ago, I’ve made some significant changes in how I invest my money. In Part 2 of this series, I talked about how I rebalanced the asset allocation of my portfolio based on the financial advisor’s advice.
To recap, I was originally investing in 91.7% stocks, 2.7% bonds, and 5.6% cash.
The financial advisor suggested 70% stocks, and 30% bonds, so I readjusted my portfolio to reflect the following:
- 20% Canadian equity
- 25% U.S. equity
- 25% International equity
- 30% Canadian Bond
I continued to contribute to my TD e-series Funds for the next two years, and it wasn’t until 2013 that I decided I wanted to branch out into ETFs and individual stocks. But because I didn’t have much knowledge outside of these e-series funds, I started by doing a lot of reading online. Particularly Dan Bortolotti’s Canadian Couch Potato blog. I really liked how he laid out each mock portfolio, and I was already on the right track since my portfolio was very similar to Dan’s Global Couch Potato, Option 2:
Option 2: Using individual index mutual funds allows you to keep management fees low and customize the asset mix. TD’s e-Series funds are the best choice, but they are only available to investors who open an online account with TD Canada Trust, or through a TD Direct Investing discount brokerage account. The total annual cost of this portfolio is 0.44%.
When I started saving for retirement in 2007, I was only able to put away $25/month. But just that act of consistently putting away money got me into the habit of saving for retirement. So as my salary grew and my debt shrunk, I was able to contribute more and more. For the past few years, I have been contributing about $750/month towards retirement, and the plan is to keep increasing my contributions as my salary increases as well.
ETFs and Stocks
Early last year, I became interested in investing a little bit of money into the stock market – not enough to jeopardize my savings, but enough to make it interesting. So I started reading. I didn’t really know where to start, but I decided to pay attention to the Business section of the news. I took a look at what companies were doing, researched their stocks, and started tracking a few that I was interested in.
After about 3 or 4 months of monitoring, I decided to take a baby step and buy $1,000 worth of the stock I liked the best (October 2013) through Questrade. Within a few weeks, it plummeted 10%, and I felt pretty bad about it. But, I reminded myself that it wasn’t a lot of money, and the stock market was a lot more volatile than the mutual funds I was used to investing in. Since then, the company has been doing very well, and as of today, it is up 53%. :)
I’ve also invested in my first ETF: the Vanguard FTSE Canadian All Cap (VCN).
Following the Couch Potato Model, in the coming years, I’ll be looking to advance from the Global Couch Potato over to the Complete Couch Potato portfolio:
The Complete Couch Potato includes additional asset classes while remaining easy to manage. This portfolio is really all the average investor will ever need: it includes almost 10,000 stocks in more than 40 countries, as well as government and corporate bonds of all maturities and additional diversification from real estate and real-return (inflation-protected) bonds. The weighted MER of this portfolio is 0.23%.
I hope to continue to play in the stock market as well – although to a much lesser degree than my mutual funds and ETFs. It was something I was intimidated of for many years, and I don’t think you can ever get over that fear until you take the plunge and make your first purchase. I’m still very cautious and I tend to monitor stocks for many months before buying. In fact, since my first stock purchase in October 2013, I’ve only purchased one other stock – which is up 9.5% since the beginning of the summer. But I have my eye on about 10 stocks at the moment, and I’m excited at making my next purchase. :)
I realized a long time ago that there’s no sense being scared of my money. With no company pension to help me reach my goal of early retirement (and with no confidence that CPP and OAS will be available to me when I retire), I’m going to have to work hard in order to achieve it on my own. Nobody taught me anything about investing, but I’m being proactive in learning and doing. Sure, I’ve made mistakes in the past, and I’ll likely continue to make mistakes. But we all have to start somewhere, right? And thankfully there are helpful blogs and websites out there to help us achieve whatever financial goals we’ve set for ourselves.
Related: What does retirement mean to you?
Anyway, that ends my 3-part series on how I started investing. :) If you have any questions or comments, please feel free to leave a message on this blog post in the comments section, or find me on Twitter at @krystalatwork.
Do you want to share your story on how you started investing? If so, please feel free to email me at email@example.com. I’d love to hear from you, and potentially feature your story here on the blog.