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For my final episode of Season 8 of the Mo’ Money Podcast, I’ve got a solo episode for you, and it’s all about answering your investing questions. I get investing questions all the time at events I organize or speak at, via email or even through social media. So, since I just did my Level Up Your Money event with Erin Lowry which included a Q&A (but wasn’t part of the recording we did), I thought I would do an episode focused solely on answering all your most pressing investing questions.
Now, as a disclaimer, nothing in this episode should be considered financial or investing advice. Heck, nothing on this website or any content I create should be considered advice. It is simple information, facts and opinion. And when it comes to investing specifically, it’s hard to even give a straight answer.
You may have noticed that in the panel discussion recording, and some attendees voiced their frustration. I totally get it, but unfortunately, there’s no such thing as one-size-fits-all investment advice or recommendations. We’re all at different stages in our lives, with different incomes, circumstances, goals and time horizons. It would be ridiculous to say “Do this and you’ll be fine.” And if someone does tell you that, remember, even if they are an investment advisor, that is their opinion on what they think you should do. Nothing is guaranteed when it comes to investing, and it’s not black and white.
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Paying Down Debt. vs. Investing: Which One Should You Do First?
If you’ve got consumer debt (credit cards, line of credit, etc.), focus on paying that all off before investing because it’s unlikely you’ll be able to earn the same or higher interest on your investments that those debts are charging you. If you have student loans or other low-interest debt like a car loan or mortgage, I would say pay down debt and invest. The interest you’re paying is most likely below 5%, and 5% or higher is a very possible return you could make on your investments. Also, no matter what type of debt you have, make sure you have a fully funded Emergency Fund before you start investing.
How Do You Know When You’re Ready to Start Investing?
You’ve got to have that solid financial foundation first before you start investing. That means you have a budget, you’re tracking your spending and net worth regularly, you have a debt-repayment plan, you have a fully funded emergency fund, and have outlined all of your financial goals (short and long-term) first.
How Much Money Do You Need to Start Investing?
There’s no perfect number, but I say once you’ve got your financial foundation set, then work on saving up $1,000 as your initial contribution to your investment plan. I say $1,000 because most robo-advisors actually require that as a minimum initial contribution, and some discount brokerages have similar requirements.
Is Wealthsimple a Good Robo-Advisor?
I get this question a lot, and what I think the real question is is “What’s a good robo-advisor” or “What robo-advisor should I invest with?” Here’s the thing, I do personally like Wealthsimple. I invest with them and have for about 3 years and I like their platform, customer service, and have had an overall good experience with them. But I also invest with Justwealth, and similarly I have had an overall good experience with them too. Heck, I even invest with RBC InvestEase (though a very tiny portfolio with them since I mainly wanted to test them out since I worked with them on a campaign), and I actually really like their platform and customer service to.
The reason so many people think of Wealthsimple first is because they are one of the biggest robo-advisors in Canada, they were one of the first, and they also hands-down do the most marketing. And let’s be honest, their branding is amazing. It’s millennial-focused, it’s beautiful and as someone who used to work in marketing, they are doing everything right.
But, just because I choose to invest with Wealthsimple, or Justwealth, or RBC Investease, doesn’t mean you should. It’s not that easy. You need to do the work to see which one makes sense for you. You need to do your research on each company, the portfolios they offer, the fees they charge, the ease-of-use of their platforms, the quality of their customer service, to see which place makes the most sense to invest with. That’s what I did, and that’s what you as a responsible and smart investor need to do to.
Where to start is by checking out my recommendations page that includes the full list of robo-advisors in Canada, plus two comparison sites that can help you see the difference between all of them (Hardbacon and Autoinvest).
Real Estate Investing: What Do You Think?
The home you live in is not an investment. It’s part of your net worth, but I wouldn’t consider it a real estate investment because you are living in it. This may be a controversial take, but that’s just my point of you. If you own real estate and rent it out, then yes that would be considered an investment.
Now, if you are investing in real estate, you need to determine what portion of your overall investment portfolio is it? Typically, real estate is considered an “alternative investment”, because the traditional investment asset classes are cash, stocks and bonds. So, if real estate is an alternative, most investment experts suggest not to invest more than 5-10% of your portfolio in alternatives.
All I want to really say is that if you choose to invest in real estate, don’t just invest in real estate. Invest in those traditional asset classes, invest in the stock market, make sure your portfolio is diversified. In other words, never put all of your eggs in one basket.
If I Have a Work Pension, Do I Still Need to Invest on My Own for Retirement?
Short answer, of course you do. Even though you have a pension, most likely it won’t be enough, in addition to getting your CPP and OAS payments, to cover your retirement income. To learn more about pensions, I highly suggest listening to episode 180 since it goes in-depth about retirement planning and pensions.
How Much Do I Need to Save Up for Retirement?
One million? Two million? Most people just want a straight up answer but it’s not as simple as that. First, you need to define what your retirement looks like, and then determine how much that will cost in today’s dollars on an annual basis. Then figure out how long you’ll most likely live in retirement. Then make the calculations that include an average inflation rate. Bam, you’ll get a number. The calculation itself is fairly simple, however that doesn’t mean that’s the exact amount of money you’ll need because it’s difficult to predict the future and your future needs. That’s why you need to constantly look at your financial plan and retirement plan every year and adjust when appropriate. I’d also like to recommend to amazing books on retirement income planning:
- Victory Lap Retirement by Mike Drak, Rob Morrison & Jonathan Chevreau
- Your Retirement Income Blueprint by Daryl Diamond
Should I Participate in My Employer’s RRSP Program?
If they match dollar-for-dollar to your contributions then yes. Even if they have you invested in high-fee actively-managed mutual funds, it’s still worth it because it’s free money from your employer.
I Want to Start DIY Investing, How Do I Build My Portfolio?
Quick answer, you can either look at model portfolios other investors or bloggers share (but please do your due diligence first), you can build your own by finding ETFs that match the benchmarks you want to replicate, or you can take a look at the portfolios offered by robo-advisors and just replicate their portfolios yourself.
How Are My Investments Protected?
Your investments aren’t protected through CDIC or when there are ups and downs in the market, but if you’re more concerned about your robo-advisor, investment firm or discount brokerage become insolvent and you losing your investments, you are protected under the Canadian Investor Protection Fund (CIPF).
What’s the Difference Between Index Funds & Index-Based ETFs?
I share way more about this in my investing course, but basically they are two different investment products. Index funds are a type of mutual funds that track the broad market index, and index-based ETFs are more similar to a stock but they also track the movements of the broad market index. So they are similar, but not the same. Also ETFs are typically cheaper.
Should I Invest the Money I’m Saving for a Down-Payment on a House?
In general, no. You should keep it liquid in cash if you plan on buying a place in the near future (so stash it in a high-interest savings account). But, if you do want to invest, invest in something conservative like GICs or a balanced portfolio with a good portion invested in fixed income.