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How I started investing: Part 3

This is Part 3 of a 3-Part series in how I started investing. If you’re new here, please take a moment to read Part 1: The Beginning, as well as Part 2: DIY Investing!

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).

Moving Forward

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 krystalatwork@gmail.com. I’d love to hear from you, and potentially feature your story here on the blog.

Spending Recap: August 18-24, 2014

Monday 18th
+ $736.35 freelance income
$46.51 gas

Tuesday 19th
$91 GoodLife Half Marathon registration
$31.20 groceries

Wednesday 20th
$66 field hockey insurance

Thursday 21st
No Spend Day!

Friday 22nd
No Spend Day!

Saturday 23rd
$20 dinner
$8.69 groceries

Sunday 24th
$61.74 BC Lions game (2 tickets)
$40.09 lunch (for 2)

Freelance Income: + $736.35
Expenses: - $365.23

TOTAL: + $371.12

This was an expensive, fun, exhausting week. :) First, I paid for my half marathon fees. I wanted to make sure I was going to be able to actually do it, since my recovery from injury has been slow. After a great 17km training run, I felt confident that I’d at least be able to finish the race, so I registered. Not sure how smart that was of me, but hopefully the next 6 weeks of training goes well.

I spent Saturday helping BF with renovations on his house. Progress has been stalled, and there’s still a lot to do, so I expect to be helping out often over the next few weeks. That evening, we went out to dinner with his family at a favourite local pub. :)

Sunday was spent with my family! My mom and dad, as well as my aunt and uncle came over for the BC Lions football game. A few days earlier, the owner of the BC Lions guaranteed a Lions victory – and if they didn’t win, everyone who attended would get free tickets to another game this season. Well, they didn’t win! So we’ll likely be claiming our free tickets to another game sometime this fall. It was probably the best valued game to go to, since we purchased our tickets to that game using a 2-for-1 coupon already. :)

Spending Recap: August 11-17, 2014

Monday 11th – Seattle, WA
$22.14 breakfast
$14.58 dinner

Tuesday 12th – Seattle, WA
$16.82 parking
$7.54 breakfast
$11.31 lunch
$6 dinner

Wednesday 13th
$22.50 gift
$22.87 groceries

Thursday 14th
$22.94 groceries

Friday 15th
No Spend Day!

Saturday 16th
No Spend Day!

Sunday 17th
No Spend Day!

Freelance Income: $0
Expenses: - $146.70

TOTAL: - $146.70

This was a busy week! The first two days were spent in Seattle with my family. We had a great time at the Blue Jays/Mariners game, despite losing by a lot. :) Still, I’m happy that we went, and I’m glad this is now an annual event for us. :) Although next year, we’ll probably stay for at least two games!

The rest of the week was pretty uneventful. I got in a long run this week of 17km, which I’m happy about … but with the half marathon less than two months away, it’s a bit stressful. I had hoped this year I could really put in a good effort to improve on my time, but with the injury setback, it’s been slow. Still, I’ll be able to at least run in the race.

I spent most of the weekend helping BF with his rental house. There was some tree pruning to be done, as well as a major renovation to the sundeck. I’ve never done any renovations before (aside from painting, and building IKEA furniture), so it was a good learning experience. :)

Spending Recap: August 4-10, 2014

Monday 4th
$18 parking
$3.80 ice cream
$48.88 lunch & drinks (for 2)

Tuesday 5th
$7.34 groceries
$47.15 gas

Wednesday 6th
$11.50 lunch

Thursday 7th
$24.78 groceries

Friday 8th
+ $300 freelance income
$6 dinner

Saturday 9th – Redmond, WA
$8.26 Chipotle
$41.20 gas

Sunday 10th – Seattle, WA
$5.54 lunch
$6.69 dinner
$20 GameWorks
$9.98 beer (2)

Freelance Income: + $300
Expenses: $247.62

TOTAL: + $52.38

This was a fun week for sure. Monday was a holiday for us (BC Day), so we spent it at White Rock Beach with friends of mine who were visiting from out of town. We had lunch, and played on the beach for a few hours. I never knew White Rock Beach existed before they suggested we meet up there, and I’m sure that we will be back again.

Bright and early Saturday morning, we headed across the border for breakfast with one of BF’s friends. Then we drove around Lake Whatcom, which is absolutely gorgeous! Another place I’ve never explored before. Around mid-afternoon, we drove to Redmond. There, we hung out on the shore of Lake Sammamish.

The next morning, we drove to Seattle to meet up with my parents and sister! We spent the afternoon wandering around the market and pier, and in the evening, BF and I went with my sister to GameWorks – a huge arcade right in downtown Seattle. It was so much fun! The variety of games was great, and drinks were cheap as well. My only complaint is that there weren’t enough pinball games – my favourite. :)

How I started investing: Part 2

This is Part 2 of a 3-Part series in how I started investing. If you’re new here, please take a moment to read Part 1: The Beginning!

In this blog post, I’m going to talk about how I got started managing my own portfolio, as well as the mistakes (and small wins) I made along the way in creating my own DIY investing strategy. :)

DIY Investing

So in Part 1, I left off by talking about how I had just learned about Management Expense Ratios (MER) and the existance of the TD e-series Funds from a blog. As soon as I felt like TD Canada Trust was taking more money away from me than necessary with the high MER on the Balanced Growth Fund they had gotten me to invest in, I made it my mission to try and keep as much of my own money as possible.

After doing a bit of research, I decided that the TD e-series Funds were the right product for me to invest in. The funds seemed straight forward enough, and I was excited to get started! However, because the TD e-series Funds aren’t really managed by TD, it was a huge headache figuring out how to switch my account over (especially because there was very little information on the internet about e-series funds at the time). I’ve talked about my issues with TD a lot on this blog, but finally figured it out.

Related: How to set up a TD e-series account

To be honest, when I finally got my account set up and was able to buy e-series funds, I didn’t really know what I was doing. I just started reading about each fund, and randomly purchased ones that sounded interesting. At one point, I had 9 funds in my account: CDN Money Market, Canadian Index-e, U.S. Index-e, European Index-e, Japanese Index-e, CDN Bond Index-e, International Index-e, TD Dividend Growth, TD Balanced Growth.

You’ll notice that I ended up buying another TD fund with a high MER – Dividend Growth. Why did I do that? I have no idea. So you can start to see that even though I was mostly investing in low-fee mutual funds, I was still pretty lost at this point.

Getting help

I continued contributing to these funds over the next couple of years, building my portfolio up to the point where I had almost $40,000 in 2011. It felt great to see my money grow, but at the same time I was questioning whether or not I was on the right path for my goal of early retirement and financial independence. I didn’t have a strategy, and it really started to bother me.

So I made it my goal to start reading articles about investing. I wanted to read all that I could about mutual funds, ETFs, stocks, and some sort of basic investment strategy for someone in my position. But instead, I found myself researching investment advisors instead. Up until that point, I didn’t believe in paying for someone for financial advice. I figured I was young enough to do my own thing through trial and error. And besides, I had the basics down. I knew I was invested in the right mutual funds, and I had the basic understanding of what I needed to do. But nobody had ever seen my investments before, and I began to crave direction and validation.

After looking into investment advisors for a few weeks, I decided that I wanted a “fee-only” advisor, because I was confident that – once given a plan – I could execute it myself. Luckily, through my previous gig with the Toronto Star, my editor asked if I wanted to be a guinea pig and get complimentary advice from a fee-only financial advisor. Of course I said yes immediately. It was perfect timing.

A Rebalancing Act

Above, I mentioned I was invested in 9 different funds at the time:

  • Asset allocation
    • 91.7% stocks
    • 2.7% bonds
    • 5.6% cash
  • Geographic allocation
    • 51.6% Canada
    • 24% U.S.
    • 24.4% International

In speaking with the financial advisor, I learned that while my geographic allocation was good, my asset allocation was too risky. He recommended rebalancing to 70% stock, and 30% bond funds. He also advised that my portfolio was over-diversified. By a lot. For example, the allocations contained in both the European and Japanese Index-e funds were also contained within the International Index-e fund. He also called me out on investing in that Dividend Growth fund, which boasted a lame 2.03% MER. Whoops.

The financial advisor told me that I should simply my portfolio from 9 mutual funds down to just 4, and suggested this allocation:

  • 20% Canadian Index-e
  • 25% U.S. Index-e
  • 25% International Index-e
  • 30% CDN Bond Index-e

It all made sense to me, so I took his advice (to this day, I’m still invested in those 4 mutual funds with that exact percentage allocation). I continued to invest in my TD indexed mutual funds for the next two years, and it wasn’t until 2013 that I took the next step in my DIY investing strategy and branched out.

Part 3 coming soon…