Investing

Looking for investing advice

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  • Dec 15th, 2019 6:30 pm
[OP]
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Looking for investing advice

I am wondering how to begin investing. I am looking at a 25-30 year timetable and currently have no investments. I am looking for relatively passive investing, but of course diversified.
There is no employer match or anything of that sort indicated in my case.
I know of index funds but do not know how to invest in them, and i might be interested in a few specific stocks but only as a very small part of my portfolio. I am also interested in other areas but not sure what to look at for good returns.
Are there advantages to dividend stock/funds over index funds?

I assume i need an account/brokerage to buy the investments from, are some much better then others?

TIA
In fact in Rand McNally they wear hats on their feet and hamburders eat people
154 replies
Deal Fanatic
Jul 1, 2007
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Don't buy individual stocks.

Save what you can.

Ensure you are completely free of consumer debt (everything that isn't mortgage or maybe car loan). Swear to yourself that you will never go into debt for consumer purchases and you will never carry a balance on your credit card.

Build up an emergency fund of 3-6 of cash flow needs, or around $20K, whichever is higher.

THEN start saving long term via your TFSA/RRSP. Just keep shovelling money into there as you make it and are able to save. Don't expect to ever touch it until you're retired. Invest it in a low cost index portfolio that maintains the majority of its allocation to global (outside Canada) stocks.

That's all you need to know.
Money Smarts Blog wrote: I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
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Jul 23, 2007
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As far as dividend funds, each to their own, but I didn't enjoy the ride through the 2008 - early 2009 financial crisis. My individual Canadian dividend growth equities held up much better at the time and I've stuck by them ever since in the taxable account. The TFSA and RRSP are all in index funds/ETF's since around 2010/11.

Everyone has their own preference for online brokerage, but I've been with TDDI for well over two decades now, and I've had no complaints.

For more on index funds/ETF's check out

https://canadiancouchpotato.com/
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Jan 27, 2006
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Don't expect a free lunch just because you are looking at index funds. You will be well-served if you:

1. Understand your risk tolerance.
2. Understand what those index funds invest in and how they perform in various market conditions.
3. Understand what your expectations are for those funds over the next 25-30 years.
4. Understand what a diversified portfolio is and how it affects your returns.
5. Understand that there is no such thing as a 'set it and forget it' plan. You need to regularly spend some time to see what your investments are doing, adjust for any changes in your life, and to investigate new investment vehicles.
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Sep 1, 2013
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Quentin5 wrote: Are there advantages to dividend stock/funds over index funds?
Most people should buy index funds. For more details, check out:

https://canadiancouchpotato.com/
Quentin5 wrote:
I assume i need an account/brokerage to buy the investments from, are some much better then others?
Assuming you are not trading frequently, it really doesn't matter what discount brokerage you use. You should probably just open an account at whatever bank you currently have your chequing account with
Member
Oct 31, 2014
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Edmonton, AB
There are a few brokerages!

I chose Questrade 5 years ago and have been please.

It's free to buy ETFs, you can buy one like VGRO.to which has thousands of stocks, across the world. And keep adding to it monthly.
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Aug 2, 2001
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a) Index funds allow you to spread your risk over a large group of stocks. Investing in one or two stocks puts your risk in there. Imagine if you had invested solely in Nortel or Blackberry?
b) Questrade is a great brokerage with low fees. It also allows free investing in ETFs. Remember that ETFs are often treated like stocks and you pay for each trade - so if investing regularly that could add up. The online brokerages like Questrade and Qtrade seem to have lower fees than the big banks.
c) Stocks that produce dividends are simply stocks that decide to return part of their profits to shareholders. Does that mean that their return is always better than stock with little to no dividends? No. You should be judging a stock based on it's overall return, not just it's dividend return. Don't get me wrong - some are pretty solid investments but it's not because of their dividend but because of their overall return.
d) You can read up on ETFs that are comprised of a series of other index funds to create a mix of equities / bonds. For example, look up VGRO and VBAL. These are often a good choice for someone that just wants to put their money into a fund that does all the management at a very low fee.


Good luck!
[OP]
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Thalo wrote:
Ensure you are completely free of consumer debt (everything that isn't mortgage or maybe car loan). Swear to yourself that you will never go into debt for consumer purchases and you will never carry a balance on your credit card.

Build up an emergency fund of 3-6 of cash flow needs
Covered.
THEN start saving long term via your TFSA/RRSP. Just keep shovelling money into there as you make it and are able to save. Don't expect to ever touch it until you're retired.
This is the basic idea
Invest it in a low cost index portfolio that maintains the majority of its allocation to global (outside Canada) stocks.

That's all you need to know.
Thats my thoughts as well (though i would include Canada as well) but i want to know more about the other options, partially to be sure i am making the best choice, partially out of interest in learning more about how things work.

Stryker wrote: As far as dividend funds, each to their own, but I didn't enjoy the ride through the 2008 - early 2009 financial crisis. My individual Canadian dividend growth equities held up much better at the time and I've stuck by them ever since in the taxable account. The TFSA and RRSP are all in index funds/ETF's since around 2010/11.
What are Canadian dividend growth equities?
Everyone has their own preference for online brokerage, but I've been with TDDI for well over two decades now, and I've had no complaints.
I have read elsewhere about TD being a good brokerage and i have also come across Vanguard several times.
For more on index funds/ETF's check out

https://canadiancouchpotato.com/
Will do
craftsman wrote: Don't expect a free lunch just because you are looking at index funds. You will be well-served if you:

1. Understand your risk tolerance.
2. Understand what those index funds invest in and how they perform in various market conditions.
3. Understand what your expectations are for those funds over the next 25-30 years.
4. Understand what a diversified portfolio is and how it affects your returns.
5. Understand that there is no such thing as a 'set it and forget it' plan. You need to regularly spend some time to see what your investments are doing, adjust for any changes in your life, and to investigate new investment vehicles.
1. My risk tolerance is i don't really care how things do in the short term as long as when i get close to retirement it has recovered. If that makes sense.
2. If index funds mirror an index then as i understand it thats how they perform (minus MER). As for other funds i am interested in learning more. Do some do better then others in downturns
3. I would hope for something similar to historical returns, while knowing past performance is no guarantee of future results. However if i am not mistaken beating the index long term is uncommon.
4. Obviously i want the highest returns in the end but i'm not interested in high risk of losing everything. If i invest beyond index funds what are the other vehicles to consider?
5. It would be nice to be low maintenance but if new instruments come along i am happy to look at them.
Last edited by Quentin5 on Oct 14th, 2019 1:30 am, edited 1 time in total.
In fact in Rand McNally they wear hats on their feet and hamburders eat people
[OP]
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CheapScotch wrote: Most people should buy index funds.
Why?
CheapScotch wrote: Assuming you are not trading frequently, it really doesn't matter what discount brokerage you use. You should probably just open an account at whatever bank you currently have your chequing account with
Do some have lower fees then others or other reasons to consider them?
My credit union does not allow me to buy any fund i wish, they don't have index funds, and are even more restrictive with the funds they do offer, i explain a bit more below.
I don't know what Simplii offers, i can look into that
SheaButters wrote: There are a few brokerages!

I chose Questrade 5 years ago and have been please.

It's free to buy ETFs, you can buy one like VGRO.to which has thousands of stocks, across the world. And keep adding to it monthly.
Is there a list of them and are there advantages of some over others?

TrevorK wrote: a) Index funds allow you to spread your risk over a large group of stocks. Investing in one or two stocks puts your risk in there. Imagine if you had invested solely in Nortel or Blackberry?
This would be a small amount of disposable fun money on individual stocks, not a serious investment meant to beat the market and make me rich overnight. I would not complain if that happened (and i get hit by lightning twice and then a meteor).

b) Questrade is a great brokerage with low fees. It also allows free investing in ETFs. Remember that ETFs are often treated like stocks and you pay for each trade - so if investing regularly that could add up. The online brokerages like Questrade and Qtrade seem to have lower fees than the big banks.
So far TD and Questrade have been mentioned and i have come across Vanguard in reading. I am interested in knowing more.
c) Stocks that produce dividends are simply stocks that decide to return part of their profits to shareholders. Does that mean that their return is always better than stock with little to no dividends? No. You should be judging a stock based on it's overall return, not just it's dividend return. Don't get me wrong - some are pretty solid investments but it's not because of their dividend but because of their overall return.
I am assuming there are funds that are mainly dividend stocks?
I also have heard of REITs, bonds, equities and so forth. I don't know much about them or what else is available.

I also do not understand the difference between a mutual fund and an ETF
d) You can read up on ETFs that are comprised of a series of other index funds to create a mix of equities / bonds. For example, look up VGRO and VBAL. These are often a good choice for someone that just wants to put their money into a fund that does all the management at a very low fee.
All the management vs what extra work on my behalf?
Why would i choose these over an index fund?
I recently met with someone at my credit union and they gave me several prospectus including Fidelity Global Growth Portfolio, but on the next meeting mentioned there was a minimum buy in of over 75K then offered me a much lower return fund option instead...
Good luck!
Thanks
In fact in Rand McNally they wear hats on their feet and hamburders eat people
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Jul 23, 2007
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Quentin5 wrote:
What are Canadian dividend growth equities?
Personally, I'm always on the lookout for Canadian companies that can consistently grow their dividends faster than inflation.
[OP]
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Stryker wrote: Personally, I'm always on the lookout for Canadian companies that can consistently grow their dividends faster than inflation.
I worded it badly, i meant what is an equity. From a quick google search it seems to mean the same thing as a stock.
That said are you willing to share some names with us?
In fact in Rand McNally they wear hats on their feet and hamburders eat people
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Jul 23, 2007
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Quentin5 wrote: I worded it badly, i meant what is an equity. From a quick google search it seems to mean the same thing as a stock.
That said are you willing to share some names with us?
Well, one can always start with the holdings of the dividend aristocrats on the S&P/TSX that have increased their dividends for at least five straight years. Make your own watch list for those companies that interest you. That's what I do.

https://www.blackrock.com/ca/individual ... index-fund#/

Another place when just starting out is to pick from the highest yielding stocks on the TSX 60 the one's that also increase their dividends each year. You can find them at Barchart. Just go down about a third on the page. Where it shows Main View choose Fundamental and click on dividend yield. Not all, but most of the equities in my own portfolio are already listed on the TSX 60.

https://www.barchart.com/ca
Last edited by Stryker on Oct 14th, 2019 7:10 am, edited 1 time in total.
[OP]
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Stryker wrote: Well, one can always start with the holdings of the dividend aristocrats on the S&P/TSX that have increased their dividends for at least five straight years. Make your own watch list for those companies that interest you. That's what I do.

https://www.blackrock.com/ca/individual ... index-fund#/

Another place when just starting out is to pick from the highest yielding stocks on the TSX 60 the one's that also increase their dividends each year. You can find them at Barchart. Just go down about a third on the page. Where it shows Main View choose Fundamental and click on dividend yield. Not all, but most of the equities in my own portfolio are already listed on the TSX 60.

https://www.barchart.com/ca/stocks/indices/tsx/tsx60
Interesting, thanks
Your barchart link goes to
"http://www.jdoqocy.com/click-749547-111 ... &sid=rfdcb"
In fact in Rand McNally they wear hats on their feet and hamburders eat people
[OP]
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Stryker wrote: Nope, it doesn't seem to like the link. Best to search for TSX 60 on google and you should find the link for barchart part way down.
Weird, in my quote of your post the link changed again to something else.
RFD has been possessed by great evil

Anyways i did find it, thanks
Do you find your getting better then market returns?
In fact in Rand McNally they wear hats on their feet and hamburders eat people
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Jul 23, 2007
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Quentin5 wrote:
Do you find your getting better then market returns?
No idea. I don't benchmark. Never have since I started investing in the early 80's. All I have is observation of my own world index funds/ETF's against the taxable Canadian individual equities and if there's any outperformance of one over the other since 2011, I haven't noticed. I just stay focused on investing into a few equities each year, keeping track of any dividend increases or cuts, and confirming annually that my dividend income stream is in fact increasing each year. I just let compounding slowly do it's magic over the years.

I do tend to my index funds monthly. It's not like they remain idle, Whatever asset class is down gets the new money from savings/distributions.
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Quentin5 wrote: Why?
Picking individual stocks successfully (i.e. beating the market avg. return by enough of a margin to justify the time/effort involved) is difficult, and there is quite a bit of evidence out there to show that most people will not be successful.

Warren Buffet says that most people are better off buying index funds.

Bear in mind that I not saying you should not try, but just be realistic about your odds of success.
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Investing in the broad market by way of index funds: all historical evidence proves the odds are in your favour, especially if you diversify globally.

Investing in individual stocks; historical evidence is that the odds are against you. Google "Dalbar", and if you have the time read this study
Money Smarts Blog wrote: I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
Deal Expert
Jan 27, 2006
16724 posts
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Quentin5 wrote: 1. My risk tolerance is i don't really care how things do in the short term as long as when i get close to retirement it has recovered. If that makes sense.
2. If index funds mirror an index then as i understand it thats how they perform (minus MER). As for other funds i am interested in learning more. Do some do better then others in downturns
3. I would hope for something similar to historical returns, while knowing past performance is no guarantee of future results. However if i am not mistaken beating the index long term is uncommon.
4. Obviously i want the highest returns in the end but i'm not interested in high risk of losing everything. If i invest beyond index funds what are the other vehicles to consider?
5. It would be nice to be low maintenance but if new instruments come along i am happy to look at them.
1. That's good in theory but many people have a hard time putting that into practice. If you lost 25% of your investments over the next 2 days and an additional 25% over the next 3 weeks afterwards let's say within the next 2 years, would you still be OKAY with it? <- basically a stress test for your risk tolerance.
2. The question would be which index and how much you would allocate to that index... There are tons of indexes out there especially when it comes to overseas funds. Heck, even in the US, there are a handful of different indexes from everything from just the 500 largest stocks (the S&P500) to just mid-caps to a whole market (every stock in the US regardless of size) - each one reacts differently with various bits of news. To mix things up a bit more, those indexes may be cap-weighted (the larger the company, the more it's weighted in the index) or equal weighted (each company makes up the same percentage of the index regardless of size).
3. In larger funds, yes for the most part. However, there are exceptions and many of them are easy exceptions. For example, if you use a dividend growth methodology over 20+ years, the dividend that you receive will most likely outperform the average historical returns of the indexes.
4. Different indexes and equal vs. market weighted to keep things simple. Historically, equal weighted outperforms market weighted. And mid/small caps vs larger caps - historically, once again, mid/small cap stocks out perform large caps. Of course, you can go into individual stocks as well using something like a dividend growth philosophy. I would however, wait until your porfolio size gets into the 6 figures before moving into individual stocks.
5. The idea of low maintenance is relative - ie one person's idea of low maintenance may not be the same as another's.
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Quentin5 wrote: So far TD and Questrade have been mentioned and i have come across Vanguard in reading. I am interested in knowing more.
I wouldn't think Vanguard falls into the same category and I don't think it's an online brokerage. I assume you could setup an account to buy strictly their funds but that would be a seemingly poor idea given you want to dabble in other areas.

Here is some comparison of brokerages. I think in most comparisons Questrade and Qtrade come out on top:
https://www.moneysense.ca/save/investin ... in-canada/
https://youngandthrifty.ca/the-ultimate ... rokerages/
https://www.stockbrokers.com/guides/best-brokers-canada
I am assuming there are funds that are mainly dividend stocks?
I also have heard of REITs, bonds, equities and so forth. I don't know much about them or what else is available.
Yes, you could purchase ETFs that are geared towards dividend investing. For example XDV is one:
https://finance.yahoo.com/quote/XDV.TO/holdings/
I also do not understand the difference between a mutual fund and an ETF
Typically mutual funds are actively managed. The fund managers are buying and selling stocks within their funds risk tolerance/category to make as much money as possible. They try to "beat" the markets.
ETFs are passive in nature and meant to mimic the performance of their sector / target (their index). They try to "mimic" the markets.

A mutual fund generally has a higher management fee (it's actively managed). You are betting on the fund manager being able to out perform the markets as a whole so there is slightly more risk. A mutual fund however could allow you to invest in areas that ETFs do not track, but I suspect that's not for a beginner.
All the management vs what extra work on my behalf?
Why would i choose these over an index fund?
I recently met with someone at my credit union and they gave me several prospectus including Fidelity Global Growth Portfolio, but on the next meeting mentioned there was a minimum buy in of over 75K then offered me a much lower return fund option instead...
You should be investing based on your risk tolerance. This includes a mixture of equities (companies) and bonds/fixed income. Within your equities you should have global exposure (Canada, US, Euro, Asia, etc.). You generate a formula to determine your "ideal" mixture - say 80% equities and 20% bonds (just like VGRO). You then determine your mix of equities - say 50% US, 15% CAD, 15% Euro, 10% Asia, 10% Emerging Markets.

If the US has a great year, which it has had in the recent years, you will end up with an imbalance in your portfolio. Perhaps instead of a 50% weighting the US equities now have a 65% weighting. According to many you now need to sell off the US equities to bring your percentage back down to 50% and invest in the other areas (which dropped in comparison) more heavily.

This is called "rebalancing your portfolio".


An ETF like VGRO (or XGRO) does all this for you. They maintain the ratio of equities and bonds, then further ratios inside each of those. You can obviously mimic this yourself without issue as they post what they invest it (just their own ETFs), it just involves making more trades. With VGRO (or XGRO) they do everything for you and you just buy a single ETF.


Also I see in a comment above you mention you believe you have a high risk tolerance as long as the money is there when you retire. Remember that the closer you get to retirement you are likely lowering your risk tolerance and should be shifting money from equities into fixed income because you may be less tolerant of large drops (could actually delay your retirement). Things such as "bond ladders" are concepts to research for this scenario. I just wanted to point this out to show that your risk tolerance may very well change over time and that you need to look at it regularly.

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