Personal Finance

Need some investment advice

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Deal Fanatic
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Jun 19, 2009
6135 posts
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Scarborough

Need some investment advice

Hello everyone, I'm a relatively young individual with a knack for value (as are most visitors on this forum). I noticed many if you were offering investment advice and I was wondering if someone could help me out.

As previously stated, I'm a pretty young individual (22 to be exact). I don't have a permanent position but I am working full time at a fairly large finance company for the forseeable future and it has gotten me interested in investing (I already knew a bit about it).
My investment horizon is long term and my risk tolerance is low, but since I'm still young, I'd be willing to take on more risk so that even if I lost, I would have time to recoup my losses. I don't have many expenses since I still live at home.
My family is not rich so I would like to help provide for my parents in the long run, as well as move out, start a family, basically living a normal life.

As for my financial situation, I have no outstanding debt. I have 20k cash parked in a TFSA earning 3% at peoples trust. I'm not sure if I should invest that or keep it as an emergency fund of some sort.

I also have 30k in a savings account. I would like to invest most if not all of this money. The sooner the better due to compound interest. I was reading up on couch potato funds, and I really like index ETFs as an investment strategy.

I also have a 5k GIC maturing in September. The interest I earned on that is negligible lol. I also have no RRSP account, but I would like to create a self directed RRSP as it would allow me to control my investments.

If I had to guess my annual income, it would probably be <30k. This year I don't think I even made 20k because I was still in school but now I should be working full time and hopefully my compensation should increase as well. (also a reason why I choose not to get an RRSP yet).

If anyone could provide me with some investment advice, I would really appreciate it. Thank you all for reading :)
55 replies
Deal Fanatic
Mar 24, 2008
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Toronto
With your income of less than 30k, you won't have too much benefit from RRSP. Save your room for later years when you make enough to have any real affect... 60k+

Open a TFSA brokerage account and build a couch potato portfolio in there. As far as emergency fund goes, leave 3 months worth of expenses in there and invest up to 20k in your TFSA. For asset allocation, I think you should go for 20% short term bonds and 80% equities.
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Jun 19, 2009
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Scarborough
Thanks for the advice. I'll invest using my TFSA for now, then use my after tax income to supplement it later when I get more money.

I was looking at the Complete Couch Potato with a few modifications -
Canadian equity 20% iShares S&P/TSX Capped Composite (XIC)
US equity 20% Vanguard Total Stock Market (VTI)
International equity 20% Vanguard Total International Stock (VXUS)
Real estate investment trusts 20% BMO Equal Weight REITs (ZRE)
Real-return bonds 10% iShares DEX Real-Return Bond (XRB)
Canadian bonds 10% iShares DEX Universe Bond (XBB)

I've heard good things about REITs and Emerging markets, so I decided to increase both of those. I lowered Fixed Income ETFs (Just an aside question - These are still considered equities, should I invest in true fixed income securities?) to 20% combined due to my long time horizon. Does this look good?
Sr. Member
Jan 25, 2007
925 posts
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Skim... you are doing quite well all on your own! Congrats on being in such a nice position! You have a long outlook going forward. Me.. like buying just enough Blue Chip stocks to qualify for a DRIP. Sit back... not worry about ups and downs (like today) and let things grow.
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Dec 8, 2010
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Isn't 3% a pretty good rate for a TFSA right now?

And don't dividends get preferential treatment vs other earnings?

Might want to keep the TFSA where it is and instead drip feed your non-tax sheltered money into ETFs.

My personal opinion: as you are so young you can take more "risk" with having less in bonds. One "rule" is have roughly your age as fixed/safe income and push the rest into stocks. The fact you use the stock dividend income to buy more stocks means you benefit when the price goes down; the fact you drip feed the buys also means you get to buy more when prices are down.

Also - having a purchase of $500 of fund X vs $250 of fund Y and $250 of fund X means half the transaction (purchase) fee... just another reason to think about having fewer ETFs.

There is more "risk" but over the next what, 25? 45? Years... we'll go through several booms and busts. Start quietly pushing stock money into safer money 10 years before you want to retire. Then you get low risk, good growth, but less exposure to fluctuations right when you retire.
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Dec 8, 2010
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Oh yeah: one other thought:

The $CAD is strong right now. So, again IMHO, a good time to buy foreign stuff.

For example you used to buy 2.5CAD for one GBP. Now you can only get 1.6 - the inverse being, buying UK and European stocks are, assuming you don't think the 2/3 of a billion Europeans are all going bankrupt, will do pretty well.

Not only are the Euro stock markets low, you are buying them cheaply with the strong CAD - so if/when the CAD weakens, any dividend payments or capital increases are multiplied by the currency change.

Yes there is more risk in some ways there. But business is cyclical - I was reading somewhere, look at the bust/boom/bust cycle and how people at the bottom thought it was never going to get better, people at the top thought it could never get worse!

But - you say you don't want to take more risk and you don't have to, the Couch Potato is a great website.

If you are interested - something like the Eurostoxx50 index (find something that tracks that, like H50E.L) is the biggest 50 european companies.
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Oct 4, 2009
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Montreal
SkimGuy wrote: I've heard good things about REITs and Emerging markets, so I decided to increase both of those. I lowered Fixed Income ETFs (Just an aside question - These are still considered equities, should I invest in true fixed income securities?) to 20% combined due to my long time horizon. Does this look good?

Buy high, sell low. You've "heard good things" because they've performed well recently which is exactly the worse time to overweight. BTW the portfolio you posted is actually underweight EM. Reduce ZRE to 10% and increase VXUS to 30% for a more balanced approach.

Not sure you need RRBs in your portfolio but not that big a deal. I'm afraid you are once again jumping on recent past performance. With real rates just above breakeven it's tough to make a case for them for a 22 YO. I'd allocate all FI to VAB(cheaper than XBB).
Deal Fanatic
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Jun 19, 2009
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Scarborough
Thank you all for the posts. I really like the concept of DRIPs as well, I'll probably use them for my investments along with yearly contributions. I'm still debating whether or not to use my TFSA to shelter the tax or if I should save it for something else, but for now I want to get the asset allocation of my portfolio correct.

As per what S5 was saying...
S5 wrote: Buy high, sell low. You've "heard good things" because they've performed well recently which is exactly the worse time to overweight. BTW the portfolio you posted is actually underweight EM. Reduce ZRE to 10% and increase VXUS to 30% for a more balanced approach.

Not sure you need RRBs in your portfolio but not that big a deal. I'm afraid you are once again jumping on recent past performance. With real rates just above breakeven it's tough to make a case for them for a 22 YO. I'd allocate all FI to VAB(cheaper than XBB).

I don't disagree with what you've said about Emerging markets. It doesn't make sense that a country can continue to grow without ever plateauing. The only concern is if I've missed the boat on investing on EM while it was still seeing double digit gains like it was a couple years ago - I'm not sure if I should invest so heavily into international equity if that is the case. Of course there will always be emerging markets but I feel like I'm allocating too much of it to emerging markets. You're probably right about the thing about REITs. I don't know a lot about REITs.

For the RRB, I just copied what was on the Couch potato strategy. I don't know if they're a good investment or not, which is why I need some help. Combining both Bond ETFs into one would help reduce transaction costs though, lol but I don't want to make an investment decision based on that.
Deal Guru
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Jun 26, 2005
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Toronto
SkimGuy wrote: Thanks for the advice. I'll invest using my TFSA for now, then use my after tax income to supplement it later when I get more money.

I was looking at the Complete Couch Potato with a few modifications -
Canadian equity 20% iShares S&P/TSX Capped Composite (XIC)
US equity 20% Vanguard Total Stock Market (VTI)
International equity 20% Vanguard Total International Stock (VXUS)
Real estate investment trusts 20% BMO Equal Weight REITs (ZRE)
Real-return bonds 10% iShares DEX Real-Return Bond (XRB)
Canadian bonds 10% iShares DEX Universe Bond (XBB)

I've heard good things about REITs and Emerging markets, so I decided to increase both of those. I lowered Fixed Income ETFs (Just an aside question - These are still considered equities, should I invest in true fixed income securities?) to 20% combined due to my long time horizon. Does this look good?


Yes, everything will work as long as you know WHEN to buy in (to go long). Market timing is very important. Learn the basics of technical analysis and you'll see why today was such a big drop in price. Knowing how to read charts will also tell you WHEN is the time to buy all the above ETFs that you spoke of. It is silly to buy these now (high priced) and only to have S&P drop many points down, bringing all your ETFs to negative.

Of course, the smart people would have been in shorts before today and is making a nice profit today.
Deal Fanatic
Jul 23, 2007
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The investment process that worked for me was to buy individual Canadian dividend growth stocks for the taxable portfolio due to the dividend tax credit. Wish I'd started doing that over thirty years ago, but spent too much time and waste of money trying this and that investment idea which turned out to be unsuccessful.

I've left the index funds and ETF's (including foreign) for the RRSP's, but off course these investments weren't available when I first got started. It's so easy and low cost, and because of that, too many people scoff at the idea that it can't possibly be successful. How wrong they are.
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Dec 26, 2010
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Calgary
Yes, everything will work as long as you know WHEN to buy in (to go long). Market timing is very important. Learn the basics of technical analysis and you'll see why today was such a big drop in price. Knowing how to read charts will also tell you WHEN is the time to buy all the above ETFs that you spoke of.
Just for fair disclosure to the OP. This form of investing has been proven academically to be as effective as basing your investment advice on your horoscope or having a monkey throw their feces at the stock pages as a means of choosing stocks. Just fair disclosure.
Sr. Member
Dec 6, 2006
674 posts
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wm009 wrote: This form of investing has been proven academically to be as effective as basing your investment advice on your horoscope or having a monkey throw their feces at the stock pages as a means of choosing stocks. Just fair disclosure.

Hey!... That is how I pick my stocks too... Except I don't have a monkey... I make do with what I have! :cheesygri
Member
Jul 17, 2011
285 posts
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TORONTO
wm009 wrote: Just for fair disclosure to the OP. This form of investing has been proven academically to be as effective as basing your investment advice on your horoscope or having a monkey throw their feces at the stock pages as a means of choosing stocks. Just fair disclosure.

+1 :D

I am sure no one has ever timed the purchase of even most investments at the optimal time. You have such a long investment horizon, I wouldn't get caught up in timing the market, but rather invest as early in life as you can, investment at regular intervals, and buy what you know and what you're comfortable with. This has served me well over the last 20+ years, and the only things I really regret is getting caught up in the latest market fads and trying to time certain investments.
Deal Addict
Oct 4, 2009
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Montreal
wm009 wrote: Just for fair disclosure to the OP. This form of investing has been proven academically to be as effective as basing your investment advice on your horoscope or having a monkey throw their feces at the stock pages as a means of choosing stocks. Just fair disclosure.
Give me the monkey everytime against an RFD market timer.
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Jun 19, 2009
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Scarborough
I was going to make a long winded post about how I didn’t know the first thing about “timing the market” but as I can see, most of you share the same sentiment with me. Sure I could try and buy low/sell high but in my opinion, I would have the same chance of making money and losing money, so I decided to play it safe and just invest for the long run.

But another thing I want to bring up, I’ve been looking at the yields/distributions of the ETFs I’ve chosen, and they aren’t that impressive. Are most of the gains from these ETFs appreciation of capital? Does that strategy make sense for someone who is willing to buy and hold for the long run? I know that dividend investing a popular strategy but it is mostly because it provides an income, something that I wouldn’t mind, but then I have to get into the whole discussion of investing for value versus investing for dividends and I don’t want to think that hard about it 
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Dec 21, 2005
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BigRFDfan wrote: +1 :D

I am sure no one has ever timed the purchase of even most investments at the optimal time. You have such a long investment horizon, I wouldn't get caught up in timing the market, but rather invest as early in life as you can, investment at regular intervals, and buy what you know and what you're comfortable with. This has served me well over the last 20+ years, and the only things I really regret is getting caught up in the latest market fads and trying to time certain investments.

Not even once??? It's hard to "optimal" time the market every time, but I have to admit that there were some nice picks from late 2008 to early 2009 (i.e. Teck); then again towards the end of last year (i.e. Taseko, or the big5 banks)

Although, I definitely agree with the bolded part --> sometimes EVERYTHING sells off when people have to liquidate. Then, if you know the fundamentals of a company and see the market not properly valuing those companies, you have to be bold and buy when everyone else sells.
💡😃😂😄
Member
Jul 17, 2011
285 posts
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TORONTO
charliebrown wrote: Not even once??? It's hard to "optimal" time the market every time, but I have to admit that there were some nice picks from late 2008 to early 2009 (i.e. Teck); then again towards the end of last year (i.e. Taseko, or the big5 banks).
Of course, one can always get lucky, but most would agree that it's pretty hard to buy stocks at the lowest point they will ever be for the remainder of your life.
charliebrown wrote: Although, I definitely agree with the bolded part --> sometimes EVERYTHING sells off when people have to liquidate. Then, if you know the fundamentals of a company and see the market not properly valuing those companies, you have to be bold and buy when everyone else sells.

This is true -- I've done some buying then myself. If one has a large and diversified enough portfolio, built up through years of experience, you can recognize these points in time. Plus, you probably won't find yourself in the position of "having to liquidate".
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Jun 19, 2009
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Scarborough
Has anyone dealt with QuestTrade? I'm thinking of using them as my discount broker due to the cheap commissions.
I also need some help with my asset allocation - This topic got sort of side tracked with the discussion of timing the market when I have no intention to do so. I think combining both Fixed income ETFs into VAB sounds like a good idea, should I just go 20% everything else (except 10% REITs) and put the extra into Canadian equity?
Deal Addict
Feb 5, 2010
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SkimGuy wrote: Has anyone dealt with QuestTrade? I'm thinking of using them as my discount broker due to the cheap commissions.
I also need some help with my asset allocation - This topic got sort of side tracked with the discussion of timing the market when I have no intention to do so. I think combining both Fixed income ETFs into VAB sounds like a good idea, should I just go 20% everything else (except 10% REITs) and put the extra into Canadian equity?

Been using them since 2006 and no issues. They have a new platform and its easy to use. The cheap commissions is where the true value is. I'm a former TD Waterhouse customer and the $29 per transaction to $9.95 for Questtrade was a big difference, especially if your an active trader.
Deal Addict
Oct 4, 2009
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Montreal
SkimGuy wrote: Has anyone dealt with QuestTrade? I'm thinking of using them as my discount broker due to the cheap commissions.
I also need some help with my asset allocation - This topic got sort of side tracked with the discussion of timing the market when I have no intention to do so. I think combining both Fixed income ETFs into VAB sounds like a good idea, should I just go 20% everything else (except 10% REITs) and put the extra into Canadian equity?

As I already told you the extra should go into VXUS. This will put your non Canadian allocation almost perfectly in line with world market caps. See VT's region allocation for proof of this. https://personal.vanguard.com/us/funds/ ... st=tab%3A2

Go ahead and compare that to 20% VTI and 30% VXUS and report back. Haven't done it in a while so perhaps with the Euro problems VTI should be ever slightly higher but it's close enough.

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