Where to go from here

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
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Alan76
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Where to go from here

Post by Alan76 » 17 Jul 2016 00:10

Hello. I am a 39 year old male living in BC, Canada. I have always worked and saved my entire life, and have a fairly secure construction job which pays $75000 per year. My wife and I have a mortgage on our house which is $800 per month which we can pay easily. I have a tax free savings account which contains $30000 and my chequeing account contains $20000. My wife is not so good at saving and has a government job with a good pension which she feels is all she needs to worry about for now. I don't have a pension or retirement plan, although I do own a property in the uk worth $500,000 which I own outright with no mortgage. I want to keep that property separate from my cash investments and so would like to ask this question as if I didn't own it. My question is I feel as though the money I have in my tfsa could be way better invested, and I also plan to invest $100 per month into the $30000 pot. I am completely new to investing but would like to get into it. How should I go about investing my 30000 tfsa and then $100 a month into it to get decent returns over the long term. I think the tfsa gets about 0.5% interest which is terrible. Any help would be great thanks.

OnlyMyOpinion
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Re: Where to go from here

Post by OnlyMyOpinion » 17 Jul 2016 13:18

If I can ask one additional detail, what is the intent of your TSFA savings - are you saving for a specific purpose and timeline? For example, is it your 'retirement savings plan', is it to help pay off the mortgage, or is it just savings at this point without a specific timeline & purpose?
And, have you read through the finiki link at the top of the Forum. It is a good summary of the elements of a financial plan, saving and investing.

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AltaRed
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Re: Where to go from here

Post by AltaRed » 17 Jul 2016 13:34

From the OP's post, I gather the TFSA will be a primary component of his retirement plan, at least until he runs out of contribution space.

I agree the OP needs to spend some time reading key chapters of finiki but I sense the current frustration is with 0.5% interest. We don't know if the OP has a TFSA with a bricks and mortar bank, or an online bank, or? Point being there are TFSAs out there with online banks like Oaken Trust that pay way more interest in HISA accounts and/or GICs. It is not hard to quadruple the interest rate he is now getting. https://www.highinterestsavings.ca/ is not a bad place to go to see what online banks have in TFSA offerings.

Longer term, the OP needs to develop an asset allocation he can live with, whether Conservative, Balanced or Aggressive, but somewhere, some equity allocation needs to figure into the plan. And as we have articulated many times, that can be in the form of something like a TD e-series index mutual fund portfolio with TD, or a balanced mutual fund like Mawer 104. There are a number of ways to skin this cat without having a discount brokerage account IF the OP wants to avoid being a complete DIYer.
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newguy
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Re: Where to go from here

Post by newguy » 17 Jul 2016 14:06

A couple points.

-The interest on the mortgage is higher than 0.5% so you're lending to the bank at much less than they're lending to you. Pay the mortgage before saving. Even consider using the TFSA to pay anniversary payments.

-The wife's TFSA, if not used, can be used by you. All the caveats about divorce apply. But she should use it since she'll have minimal RRSP room and a decent taxable income at retirement that a TFSA may be better anyway.

-If the UK property is rented, it could have a tax deductible mortgage but sounds way too complicated for me.

-Don't bother reaching too hard for yield unless you realize it means more risk.

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8Toretirement
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Re: Where to go from here

Post by 8Toretirement » 20 Jul 2016 10:04

Best us of funds from a family perspective may be to pay down the mortgage first.

However, if his wife doesn't believe in saving then he may be better off looking to secure his own retirement as hers appears to be secure.
I had this problem earlier in life, very frustrating when a saver is mated with a non saver.
He should research investment ideas. Staring with his risk tolerance, and develop an asset allocation that works for him. Finiki book list would be a good place to start. Bernstein's Investors Manifesto is a quick easy read to start.
Agree with AltaRed, he might want to start off by placing half his funds in MAWER 104 (balanced fund) until he gets his investment knowledge under wraps, and branch out from there.

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Re: Where to go from here

Post by izzy » 20 Jul 2016 10:23

If you guys are from the UK it MAY be worth at least looking into the possibility of making enough voluntary National Insurance contributions to qualify for a UK State pension bearing in mind the frozen pension issue and the risk of UK default.
If you are sure you want to stay in Canada it makes little sense to earn taxable rental income from a property in the UK which would be subject to capital gains tax whist paying for a non deductible mortgage on your Canadian principal residence which would not be subject to capital gains tax.
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Flaccidsteele
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Re: Where to go from here

Post by Flaccidsteele » 20 Jul 2016 15:53

Alan76 wrote:I do own a property in the uk worth $500,000 which I own outright with no mortgage.
This sounds like a massive financial anchor. Is it?
Retired @ 40 after reading Munger/Buffett. I avoided a fragile retirement by avoiding conventional volatility management (diversification, re-balancing and asset-allocation). "Put 90% in a very low-cost S&P 500 index fund...the long-term results will be superior" - Warren Buffett

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Wallace
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Re: Where to go from here

Post by Wallace » 20 Jul 2016 18:19

8Toretirement wrote:Best us of funds from a family perspective may be to pay down the mortgage first.

However, if his wife doesn't believe in saving then he may be better off looking to secure his own retirement as hers appears to be secure.
I had this problem earlier in life, very frustrating when a saver is mated with a non saver.
He should research investment ideas. Staring with his risk tolerance, and develop an asset allocation that works for him. Finiki book list would be a good place to start. Bernstein's Investors Manifesto is a quick easy read to start.
Agree with AltaRed, he might want to start off by placing half his funds in MAWER 104 (balanced fund) until he gets his investment knowledge under wraps, and branch out from there.
I've been married to a non saver for 49 years. Mrs W knows nothing about investing and I think my son will have to take over the investing program (simple though it is) if I take the one-way mystery-tour before her. Yet she has made some of the biggest (and wisest) decisions of our relationship. She is the one who insisted on buying a cottage, which has given us untold benefits in our relationship with our grandchildren. She is the one who decides to move house, go on vacations, and I am reluctantly dragged along but always enjoy it immensely when I get there. Perhaps if Scrooge had married a non-saver he might have ended up with riches of a different kind....

I would contest the advice to pay off the mortgage first. It's not an "either or" situation. At some point you will have to decide where the money goes, and it is never too early to learn about investing. At 39, you would be starting earlier than I did. I would agree with Altared that you have to think about equities for at least a percentage of your investments, and I would start with a stock that pays a dividend and whose product you like and that you think has a future, eg Canadian Tire, Royal Bank, or a REIT paying a dividend. It will get you used to how stocks actually perform individually. I'm assuming you have opened a trading account with one of the banks or financial institutions but if you haven't you should. I would start with a minimum investment of $5,000-10,000 on something, so that the $9.95 charge on buying and selling doesn't become a significant percentage of the investment to overcome. Almost all of them have practice accounts where you can invest with "play money". This is where you take your wild guesses on the roulette wheel and believe me it will humble you! All this wasn't available when I started investing and I made LOTS of mistakes. Just watch what your investment does, stay on the forum, figure out what is happening, and you will gain confidence and sense as time goes on.

Welcome to the forum. There are lots of people here who can answer any question you are ever likely to have.

Cheers,
Wallace.
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hamor
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Re: Where to go from here

Post by hamor » 20 Jul 2016 19:06

the one-way mystery-tour
That's a new one (for me) LOL

Sound advice, Wallace.

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