Personal Finance

What Should I do with my money ? ( up to 20k )

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  • Dec 14th, 2010 12:36 pm
[OP]
Newbie
Sep 15, 2010
25 posts
1 upvote

What Should I do with my money ? ( up to 20k )

Alright,
Back in 2005-2006 , I put what I considered to be lots of money into mutual funds and segregated funds. In total I invested about 20K, about half of it is in RRSP. It was doing ok, and I was happy, but then the financial crisis came and it was awful... the funds I had were supposed to be relatively reliable, but they still went down a lot... only NOW has my market value reached the level of my book value... right now part of the funds are making a little and others are losing a little but overall I am breaking even... finally...

During those bad times, I was really stupid and didnt want to invest anymore, and actually I am still very apprehensive , deep down inside of me I have a very bad feeling about the whole system, the economy I think will crash again and it will be brutal next time... the only question is when... but anyways, thats another topic, the point is that instead of investing i've just been saving my money in a crappy desjardins account and now i've got about 20k sitting there doing nothing and realize its time to do something... I know, I realize that I should have invested before, but I was pissed at the fact that I lost money on my relatively safe investments already and had no confidence in the economy...

I have a mortgage to pay and my income is not "steady", because I am self employed ( have my own company ) and you never know, one month I can be overloaded with work and the next there is nothing so I need to keep a certain amount of money that can be accessed relatively easily without penalties.

Right now I have no clue what to do with this money, I was thinking, maybe put half of it in a high interest saving account, at like 1.5% / 2%, which is crappy but is much better than what i get now ( almost nothing ) , also I was thinking to get some more mutual funds with the rest of the money, I think the lowest lock down period is 60 days so its ok...

In the medium/long run, I hope I can take all my money and invest in either expanding my current business or open a new one with my girlfriend ( maybe a franchise/restaurant ) something... Right now Im just trying to figure out what to do with this 20k I have, for the short/medium term....

any advices ?
7 replies
Member
User avatar
Nov 30, 2009
458 posts
17 upvotes
You should put all of it into a good penny stock and let'er ride
Deal Addict
User avatar
Sep 26, 2007
3960 posts
146 upvotes
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gic or bonds
learning more towards gic so your principle is protected.
"We don't have a soul... We are a soul. We have a body." ~C.S Lewis
[OP]
Newbie
Sep 15, 2010
25 posts
1 upvote
any specific recommendations ? which specific fund, stock, gic whatever... and why.

I dont know much about investments... basically, I have an advisor which manages stuff for me but am trying to get more involved now... its pretty overwhelming ...

I had thought about opening an account to do stock trading, but there are 3 things that turns me off :
1. lots of initial research involved, to find out which companies to invest in.
2. then you have to constantly be aware of whats happening, always check your stocks, try to predict whats gonna happen etc...
3. it seems that there are lots of fees associated with trading, so i need to invest a lot in order to offset the transaction fees

Of course, i understand that all these negative points are balanced out by the potential high profits, but its not a guarantee this will happen. Maybe I should try it out with a small portion of my money...
Newbie
Jan 31, 2010
50 posts
8 upvotes
If you don't want to lock your money long term into the market and be able to access it within a few years for your business then one of your easiest bets would be a five year 3.3% GIC from Ally.

You really shouldn't be trying to beat the market. You want to diversify sufficiently and manage your exposure and risk so that your portfolio stays where you want it to be. The idea would be to identify different sectors in the market, invest according to a distribution that works for you, employ dollar cost averaging, and passively manage your portfolio so that you maintain you original asset allocation. An important strategy is to hedge your investments by investing in historically opposed markets, while you wont make as many gains during booms you wont take as large losses during slumps. It pretty much boils down to market exposure.

Yes, transaction fees can be brutal so don't day trade with small amounts. You can use a low cost online investment firm that will give you access to cheap trades (~$10 vs $30 for large banks), and try to focus on low cost investment vehicles like ETFs rather than mutual funds which tend to have high management expense ratios. ETFs are useful for lower value portfolios as it lets you reasonably diversify without the transaction fees that would be incurred by individually buying shares for all the equities represented in that fund. There are a lot of ETFs out there nowadays so you can establish a fairly well diversified portfolio by investing in a couple different ETFs.

And you really can't get away from the research. If you want to play the market you need to be informed. Especially when you lay out your initial strategy. If you put in some time doing research your choices will be way better than those recommended to you by a financial advisor as advisors make money by encouraging clients to buy into funds that benefit them through commission and not the client. Also if you have a low value portfolio you wont get personalized management; you'll just get boiler plate mutual fund garbage advice from the most junior staff as you wont be worth the research time required for better advice.

Until your portfolio reaches six figures I wouldn't even both with financial advisors.
Deal Fanatic
Jul 1, 2007
8526 posts
1684 upvotes
You're making every investor mistake in the book, from investing only when the markets are high, avoiding dollar cost averaging strategies when they're low, to once again basing decisions on past returns.

Honestly, if you had the mortgage back in 2005/2006, I think you shouldn't have invested anything in the markets in the first place. Your mortgage rate is probably higher than any "high interest" savings rate or GIC rate and probably much higher than your return from the past 4 or 5 years. Also, did you have any specific goals in mind for the money when you invested it in 2005? ie: what the eventual purpose would be for the money, when you would eventually use it? If you matched the investment with a goal, and if the goal was to use the money now (2010) or within a relative short time horizon then you wouldn't have taken on the level of risk you did with the original investment. Otherwise, if the goal in fact was long term, why the heck did you take it out of the markets?

The other mistake you made was getting into segregated funds, but that's a story for another day.
Money Smarts Blog wrote: I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
Deal Addict
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Sep 26, 2007
3960 posts
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Rasta_Cook wrote: any specific recommendations ? which specific fund, stock, gic whatever... and why.

I dont know much about investments... basically, I have an advisor which manages stuff for me but am trying to get more involved now... its pretty overwhelming ...

I had thought about opening an account to do stock trading, but there are 3 things that turns me off :
1. lots of initial research involved, to find out which companies to invest in.
2. then you have to constantly be aware of whats happening, always check your stocks, try to predict whats gonna happen etc...
3. it seems that there are lots of fees associated with trading, so i need to invest a lot in order to offset the transaction fees

Of course, i understand that all these negative points are balanced out by the potential high profits, but its not a guarantee this will happen. Maybe I should try it out with a small portion of my money...

1. yes
2. not really
3. sure?

i don't wanna give away my best stocks... i'm actually starting up my own mutual fund..well i guess i can't call it that since i'll be the sole owner.
i had my eye on this one but decided it's not for me. it may be for you... it's pza.un

reasons to get
11-12% yield in cash
next year they will retain trust status and pay out in dividends. the amount distributed will be less.
it's pizza pizza won't they always be around?

if you ever wanted to see how a failing stock behaves, take a look at qsr.un
"We don't have a soul... We are a soul. We have a body." ~C.S Lewis
[OP]
Newbie
Sep 15, 2010
25 posts
1 upvote
Thalo wrote: You're making every investor mistake in the book, from investing only when the markets are high, avoiding dollar cost averaging strategies when they're low, to once again basing decisions on past returns.
So are you saying that NOW is a bad time to invest ? what should I do with my money then ? when will be a good time to invest ? just wait until the next major market crash again then invest it all ? Yes I am a noob at financial stuff, im good at saving money but i dont know what to do with it, this is why im asking for help around here...
Thalo wrote: Honestly, if you had the mortgage back in 2005/2006, I think you shouldn't have invested anything in the markets in the first place. Your mortgage rate is probably higher than any "high interest" savings rate or GIC rate and probably much higher than your return from the past 4 or 5 years.
My mortgage is recent, started back in november 2009. 3.95% interest rate ( minus some "dividen" return or ristourne, whatever they are called, desjardins is supposed to return a certain amount of the interest I pay, so it is has if the rate was lowered a little )
Thalo wrote: Also, did you have any specific goals in mind for the money when you invested it in 2005? ie: what the eventual purpose would be for the money, when you would eventually use it? If you matched the investment with a goal, and if the goal was to use the money now (2010) or within a relative short time horizon then you wouldn't have taken on the level of risk you did with the original investment. Otherwise, if the goal in fact was long term, why the heck did you take it out of the markets?
Ok first, I didnt take out the money, I just said that after the financial crisis, only NOW my market value was reaching the same book value ( so im not making any money, but not losing any money anymore ). Also, the level of risk was supposed to be relatively mild, before the crash, everything was going up smoothly, little by little. When I invested in 2005, I didnt have any specific goal... I had some money in my bank account and knew that its not a good thing to let it sit there and do nothing, sort of like same situation has today. I didnt put the initial 20K all at once, I put maybe 10K upfront and then I made monthly payments, in 2008 i stopped some of the monthly investment and in 2009 I stopped all the remaining monthly investment payment because I knew I was getting the condo and needed some money for buying all the crap in it and pay the mortgage. Now after 1 year, im ready to think about investing again with some other money that I saved, which is also roughly 20k ... so I have 20k that is already invested in seg funds, mutual funds, and I have also another 20k that is in my bank account doing nothing.
Thalo wrote: The other mistake you made was getting into segregated funds, but that's a story for another day.
Right, well, I dont know why this is bad, but the seg funds I have, are the ones that actually reached their initial investment value the fastest after the crash, one of them is 33% over my initial investment, i know this doesnt mean that seg funds are good, but, in my case, they arent the ones that are still lagging behind...
cowofwar wrote:If you don't want to lock your money long term into the market and be able to access it within a few years for your business then one of your easiest bets would be a five year 3.3% GIC from Ally.
I live in quebec and ally isnt available here. However even if it was, it seems like 3.3% is very low for something that is locked away 5 years. no? I mean, there are High interest saving accounts with like 2%, and you can deposit/withdraw money at any time almost instantly, so i dont see why locking it away for 5 years is only worth a little 1.3% extra... doesnt seem worth it.

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