What would you tell someone who wants to get started investing?

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
Flaccidsteele
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Re: What would you tell someone who wants to get started investing?

Post by Flaccidsteele »

SkaSka wrote:Back in 2008, I didn't know anything about the markets, nor paid attention to the markets, nor had any interest even reading anything in the news related to the markets.

I honestly went through the financial crisis - the "Great Recession", the "nothing like this before since the Great Depression" - without blinking an eye or even knowing it was even going on. Life seemed to be going just fine from the reality I was observing. I do understand I was young, ignorant, and had minimal responsibilities.

I don't know, maybe an amount of ignorance is bliss and paying too much attention/taking things too seriously makes you more susceptible to fear?
This is a great observation.

I felt like this in high school during the crash of 1987. I looked around and nothing seemed amiss. That's when I convinced myself that crashes weren't that bad and that the stock market always recovers. Always. And if it didn't, then nothing will matter anyway.

My observation is that fear appears to grow over time. It appears to originate from ignorance, and then it stays there and grows. Despite the fact that there are many resources to manage ignorance.

Fear may start in a young adult, but seems to morph into irrational paralyzing fear by the time middle age hits.

Again, I'm just putting the idea of 'fear' out there. I'm not convinced that a person can be taught to manage their fear or if it's just how things are.
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Re: What would you tell someone who wants to get started investing?

Post by kcowan »

izzy wrote:
kcowan wrote:
AltaRed wrote:4. Spend well below your means, or viewed another way - pay yourself first
5. Don't invest money you cannot afford to lose
That 4th point should be first because otherwise it is all margin investing and violate point 5! It might be restated as "5. Only invest money that you can afford to lose."
The corollary to that is that the only money you can AFFORD to lose is money you can easily replace .
Good point.

(Or being retired, is surplus to your plans but then starting to invest after retirement is probably a bit absurd. For those of us at that stage, it would have to be within our margin of recovery.)
For the fun of it...Keith
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Re: What would you tell someone who wants to get started investing?

Post by BRIAN5000 »

Anyone recommending iShares PACC plans for new investors? With a little help to set up help pick AA and which Etfs might be ok.

https://www.blackrock.com/ca/individual ... -en-ca.pdf

$50 minimum into each Etf you already own, two or three Etfs and you could have a pretty easy global diversified portfolio.

XIC, XAW, XQB ? $150 per month, dirt cheap, get used to brokerage interface, can grow with investor etc.
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Re: What would you tell someone who wants to get started investing?

Post by cannew »

ThisGuyNelson wrote: 09 Jun 2016 23:17 If someone you know said to you "I really want to save, invest, and really do more with my money" where would you get them started?
I'd tell them to visit The Connolly Report website. Lots of good information from a guy who has been following his strategy for over 36 years successfully. He does not recommend specific stocks but recommends a strategy to follow. It may not be for everyone but those starting out should look into the different strategies and decide which suits them.
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Re: What would you tell someone who wants to get started investing?

Post by BRIAN5000 »

cannew wrote: 19 Jun 2017 17:50
ThisGuyNelson wrote: 09 Jun 2016 23:17 If someone you know said to you "I really want to save, invest, and really do more with my money" where would you get them started?
I'd tell them to visit The Connolly Report website. Lots of good information from a guy who has been following his strategy for over 36 years successfully. He does not recommend specific stocks but recommends a strategy to follow. It may not be for everyone but those starting out should look into the different strategies and decide which suits them.
Yeah I should have included the request in my first post

"I'm looking to start investing in something so I can save just slightly faster for vacations, retirement, etc.
I don't want to have to watch it everyday, I just want to have to put deposits in on a regular basis and not worry about it"

and my bias

This is from my daughter who I hope will take over "family portfolio" at some point. Can pick her own strategy but I hope depending on what she picks will be familiar with TDI interface etc.. I will not recommend individual stocks or anything that steps to far away from passive management but she gets to choose.
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Re: What would you tell someone who wants to get started investing?

Post by cannew »

BRIAN5000 wrote: 19 Jun 2017 18:05
"I'm looking to start investing in something so I can save just slightly faster for vacations, retirement, etc.
I don't want to have to watch it everyday, I just want to have to put deposits in on a regular basis and not worry about it"

and my bias
For our grandkids, my wife started DRIP's for both of them (one bank stock each). When the grand daughter turned 18 she took over hers. However, she considers it a long term savings account and has been adding $100 per month, by direct deposit, into it since she took it over.
She has never looked at the account, checked the price of the stock, read any financial news, worried about the total value, gotten excited when the dividend was increased or that there are no fees involved. She just plans to keep adding funds to the account assuming that the value will grow over time and the income keeps growing as it has in the past.
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Re: What would you tell someone who wants to get started investing?

Post by JaydoubleU »

Good question and some good answers from people I've never met but admire and respect more than many I have!

1. First, I'd start as early as possible. The magic of compounding, as mentioned, can never be underestimated.

2. Buy large, well-established companies with wide moats and predictable cash flows. This means in Canada, the banks, the telecoms, the pipelines, utilities.... smallcaps can win big or collapse spectacularly. Why take the risk?

3. Agree with anyone who said that investing really isn't that complicated, but the industry wants to make you believe it is, so leave your money to them..... read point #2 again.

4. Invest your extra money in well-established large companies, and then devote your energies to other, more important things: your health, your relationships, your children, your hobbies. Happiness and success usually come to those who aren't focused on those as goals, but are busy doing better things, such as living full lives.

5. If you don't want to spend the time or don't have the time, put it all in a very well-managed fund, such as Mawer Balanced. I understand the arguments for ETFs, but asset allocation still requires your knowledge (time) and energy. I wouldn't begrudge a pro his fees for effective long-term performance.
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Re: What would you tell someone who wants to get started investing?

Post by JaydoubleU »

If I might add a point to the above, it would be,

#6. Forget about hitting homeruns. A series of steady singles and doubles will win the game. You can fret about the expensive level of the market and sit there in cash, while those established companies mentioned above just keep on making money and handing over a chunk of it to investors. So ignore market noise and just buy those good companies, but plan to stick with them for 10 years or more.
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Re: What would you tell someone who wants to get started investing?

Post by 2 yen »

cannew wrote: 19 Jun 2017 18:43
BRIAN5000 wrote: 19 Jun 2017 18:05
"I'm looking to start investing in something so I can save just slightly faster for vacations, retirement, etc.
I don't want to have to watch it everyday, I just want to have to put deposits in on a regular basis and not worry about it"

and my bias
For our grandkids, my wife started DRIP's for both of them (one bank stock each). When the grand daughter turned 18 she took over hers. However, she considers it a long term savings account and has been adding $100 per month, by direct deposit, into it since she took it over.
She has never looked at the account, checked the price of the stock, read any financial news, worried about the total value, gotten excited when the dividend was increased or that there are no fees involved. She just plans to keep adding funds to the account assuming that the value will grow over time and the income keeps growing as it has in the past.
Same approach my offspring just took. Set a DRIP and let it run. Once a year buy more stock with the monthly contributions. Pretty simple actually.

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Re: What would you tell someone who wants to get started investing?

Post by CROCKD »

cannew wrote:For our grandkids, my wife started DRIP's for both of them (one bank stock each).
I am interested in the mechanics of how to set this up. Can you buy the stock in their name somehow? Hopefully a forum member might have some insight about this.
I am well into my 70s. I have two grandchildren and through my son got him to set up a family plan RESP at TDDI and give him money for it - it goes into Mawer Balanced.
My grand daughters are 3 and 1 respectively so I do not expect to be around when they need to draw on it.
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Re: What would you tell someone who wants to get started investing?

Post by rishitibriwal »

Crockd, we went through this for our kids a few years ago. As far as I remember, the first step is to buy a physical share or have a share certificate issued from your holdings. There are some companies that allow direct purchases and there are a few websites where you can buy from other holders of these physical shares (http://www.dripprimer.ca). Put the kids as the buyer for the seller to sign the transfer documentation.

You then have to register these at Computershare and, I believe, also set up an automatic withdrawal from your bank - make sure you put the kids SIN at registration and sign up for the auto investment option at Computershare.

Once a quarter you get the statement showing your holdings and dripped shares.

Hope this helps.
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Re: What would you tell someone who wants to get started investing?

Post by cannew »

CROCKD wrote: 21 Jun 2017 07:49
cannew wrote:For our grandkids, my wife started DRIP's for both of them (one bank stock each).
I am interested in the mechanics of how to set this up. Can you buy the stock in their name somehow? Hopefully a forum member might have some insight about this.
I am well into my 70s. I have two grandchildren and through my son got him to set up a family plan RESP at TDDI and give him money for it - it goes into Mawer Balanced.
My grand daughters are 3 and 1 respectively so I do not expect to be around when they need to draw on it.
Couple of ways to set them up:
1. If you own shares you can have your broker transfer some shares (must be full shares, 1 or more) to the Transfer Agent of the company. Be sure the shares allow additional Share Purchases. ie: RY and TD don't but BMO, BNS and CM do.

2. You could buy shares from a broker and have then have them transferred.

3. You could as suggested buy 1 share from The DRiP Investing Resource Center
http://www.dripinvesting.org/Boards/BoardMsgs.asp?BID=8
This process takes a bit more work and time but will cost less.

Once the shares(s) are with the Transfer Agent (Computershare or CST) than you fill out the DRIP forms and you can add additional money if you wish. When dividends are paid they will automatically buy more shares, if only a fraction of a share.

The account will be in an Adults name and In Trust with the child. You specify who when you set up the account and purchase the shares.

Just an additional note. Our grand daughter now owns about 225 shares with a value of about $18,000. Before the shares were transferred into her name the Adult claims the dividends with their taxes. Now that they are in her name she claims the dividends. As long as she does not have to pay taxes because of low earnings, she'll leave them in the DRIP. At some point in the future taxes may become a concern. At that point or before she will open her TFSA and transfer most of the shares. There may be Capital gains but that won't be a big concern. The idea is to get the shares into the TFSA to continue to grow and compound tax free. The DRIP allows her to invest small or large amounts with no fees.
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Re: What would you tell someone who wants to get started investing?

Post by adrian2 »

Since there were many pro-DRIP arguments stated, let me reiterate my conviction:
I would avoid DRIP's like the plague in a non-registered account.

For a person just starting investing:
1. if they have RRSP room, I would advise them to setup a mutual fund RRSP, and invest regularly (e.g., pre-authorized contributions)
2. if they have TFSA room, I would advise them to setup a mutual fund TFSA, and invest regularly (e.g., pre-authorized contributions)

The mutual fund account can be with Tangerine / PCF, or with most other banks that offer index funds.
cannew wrote:At that point or before she will open her TFSA and transfer most of the shares. There may be Capital gains but that won't be a big concern. The idea is to get the shares into the TFSA to continue to grow and compound tax free. The DRIP allows her to invest small or large amounts with no fees.
Taxes on capital gains in the scenario above may be orders of magnitude more than "saving fees" by using DRIP's.

Using Computershare may have been a smart idea decades ago, when broker commissions had been hundreds of dollars. Nowadays it's irrelevant.
All the talk about reinvesting the last dollar and cents has no material effect on long term results. Same thing with investing every month vs. every quarter; the important thing is, quoting Nike, just do it!

I would avoid DRIP's like the plague in a non-registered account.
Last edited by adrian2 on 21 Jun 2017 12:39, edited 2 times in total.
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Re: What would you tell someone who wants to get started investing?

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cannew wrote: 19 Jun 2017 18:43
For our grandkids, my wife started DRIP's for both of them (one bank stock each). When the grand daughter turned 18 she took over hers. However, she considers it a long term savings account and has been adding $100 per month, by direct deposit, into it since she took it over.
She has never looked at the account, checked the price of the stock, read any financial news, worried about the total value, gotten excited when the dividend was increased or that there are no fees involved. She just plans to keep adding funds to the account assuming that the value will grow over time and the income keeps growing as it has in the past.
So you set her up to think it's a good idea to treat a single stock as a savings account, and not worry about any of the mechanics of the account. At the very least, she'll get tax slips for it and will need to know the adjusted cost base of her bank, in what is probably about the worst possible scenario to keep track of the cost (DRIP plus monthly buys).
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Re: What would you tell someone who wants to get started investing?

Post by adrian2 »

peter wrote: 21 Jun 2017 12:36 At the very least, she'll get tax slips for it and will need to know the adjusted cost base of her bank, in what is probably about the worst possible scenario to keep track of the cost (DRIP plus monthly buys).
Amen, brother!

All banks / brokers have disclaimers that they are not responsible for the correct calculations of the ACB.
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Re: What would you tell someone who wants to get started investing?

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[
Last edited by cannew on 21 Jun 2017 13:22, edited 1 time in total.
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Re: What would you tell someone who wants to get started investing?

Post by cannew »

peter wrote: 21 Jun 2017 12:36
cannew wrote: 19 Jun 2017 18:43
For our grandkids, my wife started DRIP's for both of them (one bank stock each). When the grand daughter turned 18 she took over hers. However, she considers it a long term savings account and has been adding $100 per month, by direct deposit, into it since she took it over.
She has never looked at the account, checked the price of the stock, read any financial news, worried about the total value, gotten excited when the dividend was increased or that there are no fees involved. She just plans to keep adding funds to the account assuming that the value will grow over time and the income keeps growing as it has in the past.
So you set her up to think it's a good idea to treat a single stock as a savings account, and not worry about any of the mechanics of the account. At the very least, she'll get tax slips for it and will need to know the adjusted cost base of her bank, in what is probably about the worst possible scenario to keep track of the cost (DRIP plus monthly buys).
We set up the single stock DRIP back in 2006 and added additional funds periodically till 2011. Then stopped. Did the stock got down 2008\2009, certainly, but as we were not selling additional funds and reinvestments bought a lot more shares. The value has fully recovered and is considerably higher. As for the dividends the yield was 3.4% initially and is now 5.43% on the invested dollars. Annual total returns have been around 12%.
Every transaction is recorded in Excel, 4 entries for the dividends and now 12 for the monthly investments, so 16 entries per year to determine ACB. If she waited till yearend it might take 15 to 30 minutes.
As her income is low she's not had to pay any tax on the dividends. When her income grows she'll transfer to a TFSA so the Capital Gains will also not affect her taxes.

For those who dislike or wish to AVOID Drips that your choice.
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Re: What would you tell someone who wants to get started investing?

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cannew wrote: 21 Jun 2017 13:20 Did the stock got down 2008\2009, certainly, but as we were not selling additional funds and reinvestments bought a lot more shares.
You keep bringing up this red herring about "reinvesting buying more shares". In a non-registered account, money is fungible: salary, interest earned, dividends received, saving money by buying "on sale", etc.

A DRIP transaction when the shares are down buys more shares.
A generic buy transaction when the shares are down buys more shares.
Can you spot any difference? It does not matter what's the source of the money used in the buy transaction.
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Re: What would you tell someone who wants to get started investing?

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Now that they are in her name she claims the dividends.
Not if she's a minor, if the money came from you dividends must should be claimed on your tax return. Just like a GIC in your wife's name if you were the one giving her the money to invest in a GIC the T4 comes in her name interest should be claimed on your tax return.
Using Computershare may have been a smart idea decades ago, when broker commissions had been hundreds of dollars. Nowadays it's irrelevant.
All the talk about reinvesting the last dollar and cents has no material effect on long term results. Same thing with investing every month vs. every quarter; the important thing is, quoting Nike, just do it!

I would avoid DRIP's like the plague in a non-registered account.
+1 :thumbsup:

It's best just to avoid drips no reason to use them these days.
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Re: What would you tell someone who wants to get started investing?

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cannew wrote: 21 Jun 2017 13:20 As her income is low she's not had to pay any tax on the dividends. When her income grows she'll transfer to a TFSA so the Capital Gains will also not affect her taxes.
The 0th tax bracket for capital gains is around half of the 0th tax bracket for dividends, so "when her income grows" it may be already too late to avoid capital gains taxes.

Also, I will caution about using "official" tax brackets, especially for young people with kids, who can easily find themselves in a 70%+ tax bracket.
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Re: What would you tell someone who wants to get started investing?

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BRIAN5000 wrote: 21 Jun 2017 13:28
Now that they are in her name she claims the dividends.
Not if she's a minor, if the money came from you dividends must should be claimed on your tax return. Just like a GIC in your wife's name if you were the one giving her the money to invest in a GIC the T4 comes in her name interest should be claimed on your tax return.
Using Computershare may have been a smart idea decades ago, when broker commissions had been hundreds of dollars. Nowadays it's irrelevant.
All the talk about reinvesting the last dollar and cents has no material effect on long term results. Same thing with investing every month vs. every quarter; the important thing is, quoting Nike, just do it!

I would avoid DRIP's like the plague in a non-registered account.
+1 :thumbsup:

It's best just to avoid drips no reason to use them these days.
Earlier post stated that she took over the account when she turned 18. Prior to that we claimed the dividends.
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Re: What would you tell someone who wants to get started investing?

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adrian2 wrote: 21 Jun 2017 13:27
cannew wrote: 21 Jun 2017 13:20 Did the stock got down 2008\2009, certainly, but as we were not selling additional funds and reinvestments bought a lot more shares.
You keep bringing up this red herring about "reinvesting buying more shares". In a non-registered account, money is fungible: salary, interest earned, dividends received, saving money by buying "on sale", etc.

A DRIP transaction when the shares are down buys more shares.
A generic buy transaction when the shares are down buys more shares.
Can you spot any difference? It does not matter what's the source of the money used in the buy transaction.
When the dividends are $150 and reinvested at no cost, compared to a generic buy?
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Re: What would you tell someone who wants to get started investing?

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I am going through this with my daughter. This is what we have done/are in the process of doing.

1. I asked her to identify the largest amount she felt she could sustainably set aside to invest every month. She has done that. (As it happens, the amount approximates the aggregate of her annual RRSP contribution room (after workplace DC plan) and her annual TFSA contribution room. She's happy. I'm happy. Could she save more?? Will this amount be a budgetary strain?? We'll revisit that in six months to a year.)

2. I asked her to open a TFSA account and an RRSP account at the discount brokerage connected to her financial institution. (Easiest way to get help as needed, easiest way to move money between checking account and investment accounts, etc. Never mind that the discount brokerage in question isn't the cheapest, isn't the highest rated, doesn't have this gadget or that gadget). She has done that.

3. Set up pre-authorized contributions congruent with (1) above into accounts set up under (2) above. Done. Contributions have just started.

4. Costs matter. Diversification matters. I'll do the first few trades. I'll do so in a pattern easily replicable. She can take over when she cares to. No trade for less than $1K. XAW or VXC for ex-Canada. VCN and VDY for in Canada. (Refinements like NG to buy US domiciled ETFs in an RRSP can wait.)

5. No fixed income?? No emergency fund?? Bank of Dad will continue to cover that, as it always has.

6. DRIPs?? Last thing on my mind.
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Re: What would you tell someone who wants to get started investing?

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cannew wrote: 21 Jun 2017 14:19 When the dividends are $150 and reinvested at no cost, compared to a generic buy?
I think the point is that $150 is cash no matter where it comes from. It just goes into the pool of cash (revenue side of the ledge) and when one decides to make an investment buy, it comes out of that side of the ledger. So a person then makes a $500, or $1000, or $5000 investment. It's a $10 commission regardless of the amount that is invested, and where that cash came from, e.g. dividends, interest and/or salary. It makes no sense to specifically treat the $150 in dividends as if it is unique.
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Re: What would you tell someone who wants to get started investing?

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cannew wrote: 21 Jun 2017 14:19
adrian2 wrote: 21 Jun 2017 13:27
cannew wrote: 21 Jun 2017 13:20 Did the stock got down 2008\2009, certainly, but as we were not selling additional funds and reinvestments bought a lot more shares.
You keep bringing up this red herring about "reinvesting buying more shares". In a non-registered account, money is fungible: salary, interest earned, dividends received, saving money by buying "on sale", etc.

A DRIP transaction when the shares are down buys more shares.
A generic buy transaction when the shares are down buys more shares.
Can you spot any difference? It does not matter what's the source of the money used in the buy transaction.
When the dividends are $150 and reinvested at no cost, compared to a generic buy?
I've recommended investing with no transaction costs, so my "generic buy" does not involve commissions.
So the answer to your question is: the same number of shares / units are purchased with $150 in a DRIP vs. $150 in other money.
Money is fungible, the $150 of dividends is the same as the $150 you have in your bank account / wallet from whatever source.

Investing today vs. next week vs month end vs. quarter end makes no difference; just do it.
The more frequent transactions (e.g., $150 in dividends) would be more of a headache in tracking. For a taxable account, it's going to be a bigger headache.
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