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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…

Spending Recap: July 28-Aug 3, 2014

Monday 28th
+ $200 freelance income
$3.59 groceries

Tuesday 29th
+ $50 Tangerine referral (thx!)
$17.91 Running Room

Wednesday 30th
$33.89 liquor
$6.79 groceries

Thursday 31st
No Spend Day!

Friday 1st
$10 parking
$11.81 Theirry Cafe

Saturday 2nd
No Spend Day!

Sunday 3rd
$6.50 dinner

Freelance Income: + $200 (+ $50)
Expenses: $90.49

TOTAL: + $159.51

This was a really light week in terms of spending, because most of the things I did this week were free – two nights of the Celebration of Lights, Pride Parade, and the beach. :) I also went for lunch with a friend this week, and they offered up my meal for free because it took so long for them to bring it out (we think they forgot about it). Free food is the best. :)

Grocery expenses were way down this week because I stayed the majority of the time at BF’s house. But I sort of made up for it by helping purchase alcohol and a few groceries for a fireworks party he was throwing.

I think the most notable expese this week was finally buying a handheld water bottle for running. It’s one of those tiny 12 0z bottles with a handstrap. I’ve never run with water before, and when I drained the bottle halfway through my first run with it, I found myself wondering how I ever ran without one before? Crazy.

August 2014 Goals

We’re into August, which means the summer is almost over. I’ve tried to calculate my expenses the best I can, so here’s hoping for a good month. :)

I anticipate the major expensive of the month to be paying my field hockey fees for the upcoming season, as well as registration for the GoodLife Half Marathon in Victoria.

Another big expense is the 3-night trip to Seattle with BF and my family. Two nights of our hotel are covered, so we only need to worry about one night of accommodation, gas, and food. Hotels seem to be around $80/night where we want to stay, and I can get to Seattle and back on almost one tank of gas… so if BF and I split those expenses, $200 for the trip seems reasonable.

08-Aug-Budget

August 2014 Goals:

  • Eat healthy. I eat relatively healthy most of the time, but sometimes I slip up… and when I do, my body feels so awful afterwards. Sometimes I even skip runs/workouts because I’m not feeling good, or if I haven’t eaten enough during the day. This month will be about eating nutritious meals at home, limiting restaurant food, and cutting back on sugar, coffee, and alcohol.
  • Sign up for the half marathon. In hindsight, I should have registered for this race a few months ago when the race fee was $20 less, but I wasn’t confident I would be in town for the race, so decided to hold off.
  • Clean out my storage area. There’s a lot of stuff I can toss or give away.
  • Save $850 towards retirement. My usual monthly contribution is $750.

July 2014 Goals: Recap

Well, this month’s summary is pretty much what I expected it to be. Entertainment expenses were pretty much through the roof, and the only reason my monthly budget was saved is because I purposely spent significantly less on travel to make up for it.

Other than that, it was a typical month in almost every other category…

07-July-Recap

Over Budget

  • Cell Phone – My plan took longer than expected to switch over to the new, cheaper one.
  • Internet – Same with the internet. I still payed the higher price for this month before I get dropped down to the cheaper plan.
  • Entertainment – Yikes. This was a combination of spending too much time at the beach and not cooking meals at home, as well as patio drinks, the Richmond Night Market, and general summer fun.
  • Fitness – Just a little bit over in this category. I paid field hockey tournament fees ($20), plus picked up a couple of running accessories.
  • Miscellaneous – $120 of this was the Ryan Adams concert tickets I bought last week.

Net Worth Change: + $1,298 (1.32%)

I bought more ETFs this month, and my RRSP/TFSA accounts keep on chugging along.

July 2014 Goals:

  • Save $800 towards retirement. CHECK! $600 towards RRSPs and $200 towards TFSA.
  • Earn an additional $800. CHECK! I’m still waiting on some cheques to come in, but I’ve made just over $1,000 this month. :)
  • Work out 5-6x/week. FAIL. I worked out 3x/week on average. But, on days that I didn’t exercise, I still walked 10,000 to 15,000 steps (8-10km).
  • Get rid of my old television. FAIL. I’m clearly not a very attentive homeowner. Plus I don’t have visitors over very often, so I don’t feel too badly about having an old TV in my dining room area.
  • Fix my sink. FAIL. I have a double sink, so it’s not dire. But yeah, this needs to get done.
  • No coffeeCHECK! The only coffee drink I had this month was a free rewards drink from Starbucks.
  • Limit dairy intake. CHECK! The only dairy I had this month was some cheese and crackers during the fireworks parties, as well as two or three cups of tea (with milk) at work – and that was only because we were out of almond milk. I’m pleased with this, and it’s a lot easier since BF has pretty much cut out dairy from his diet as well.

How I started investing: Part 1

Often I’m asked to write posts about investing. I haven’t wanted to write about investing on this blog because I’m afraid of giving wrong advice. I’m obviously not a professional, but at the same time I think a lot of you have been in my position before: in your twenties, wanting to start investing, but not really sure where to start. Right? So I’m more than happy to share my story about how I started investing, the problems I ran into along the way, and how I taught myself to manage my own portfolio (it’s an ongoing process). :)

So here’s Part 1 of a 3 Part series.

Part 1: The Beginning

When I graduated college in 2006 I was 23. I owed over $20k to student loans and credit cards. Debt was my first priority, but I knew I wanted to start saving as well – even if it was just a little bit. I was making about $30k/year so I was only able to put aside $50/month ($25 into an Emergency Fund, and $25 into an RRSP) – but it really helped me establish a pattern of saving. And in the future, when I was finally out of debt, saving was already something I was used to doing. It made the transition from making payments on my debt, to making payments into my savings account pretty seamless.

When I first decided I wanted to save for retirement, I was really clueless. There wasn’t a lot of information out there on the internet that I could understand, and there were only about 4 or 5 Canadian PF blogs out there. All I knew was I wanted to start saving for my future, but I didn’t know how to start. So I went to TD Canada Trust (my only bank at the time), and spoke to someone about opening up an RRSP mutual fund account.

I remember sitting in her office, feeling very intimidated. I wondered what she thought of me, and the fact that I could only afford to save $25/month. But everyone has to start somewhere, and she was helpful in answering any questions I had. We went through a questionnaire to determine my risk-tolerance level, and eventually she signed me up for the TD Balanced Growth Fund (MER of 2.24%).

After that meeting, I was really pleased with myself because it seemed like this was the first step to becoming financially savvy. It made me feel grown-up to be investing in my future, and I became obsessed with tracking my little mutual fund’s progress. I set up a spreadsheet and tracked its performance on a daily basis. Seriously.

I understood that I wasn’t going to need the money for at least another 35 years, but I didn’t really get what 35 years meant. I wanted to see my money start to grow immediately. So I continued to check on my mutual fund on a daily basis. My stomach would drop every time my fund wasn’t doing well, and I’d cheer whenever it was doing well. This went on for about 6 months before the stress became too much and I told myself that 35 years = 13,000 days, and there was no way I could continue on like this. I needed to chill out. So I did. :)

It was about a year later that I first heard about the TD e-series Funds. I remember reading about it on a blog, and the big discussion was around Management Expense Ratios (MER) and how bad they were. I remember a few people referencing the TD e-series Funds in the comments and acknowledging how low their MERs were, and how they were likely the best mutual funds around.

When I went to check the MER on my Balanced Growth Fund, I was horrified and a bit embarrassed. How dare TD take so much from me! I felt like they were stealing profits from me, and the more I looked into the TD e-series Funds, the more I wanted to give it a try. Not just because I wanted to get away from funds with high MERs, but because I really wanted to learn how to manage my finances on my own. I wanted to know where my money was going, and I wanted to be doing it myself. The idea of DIY investing was really starting to appeal to me.

Part 2 coming soon…