Author Topic: Advice Sought - Investing at 50  (Read 4434 times)

Prudence Debtfree

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Advice Sought - Investing at 50
« on: October 14, 2014, 08:40:50 PM »
I am a newbie who has just registered. You badasses are way more expert than I am at all things financial, so I approach with humility : )
My husband and I are on track to become debt-free. We are following Dave Ramsey's steps. So far we have paid off all consumer debt ($21,000) and we are well on our way to paying off a business debt ($51,000 down; $29,000 to go). Once that business debt is gone, we will start investing 15% of our gross income - and will continue to do so until as we pay off our mortgage. Once the mortgage is gone, we'll invest more aggressively.
Here is my question: As a couple in our 50s, how should we invest? (I am a teacher with a good pension plan, so our situation is not dire.) We live in Canada. I know next to nothing about investments - probably because I have felt I didn't need to know about them given my pension. Please give advice in very basic terms. Thank you.

smilla

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Re: Advice Sought - Investing at 50
« Reply #1 on: October 15, 2014, 10:21:36 AM »
Hello Prudence,

You're plan sounds great to me.  I think you would want to start with maxing your TFSA before your RRSP since you have a pension.  Not sure about your husband though. 

For more thorough help, here are a bunch of links to get you started.

http://forum.mrmoneymustache.com/investor-alley/beginning-investing-in-canada/msg407891/?topicseen#msg407891
http://forum.mrmoneymustache.com/investor-alley/the-basics-for-a-canadian-re-index-funds/msg409469/?topicseen#msg409469
http://forum.mrmoneymustache.com/investor-alley/index-funds-vs-etfs-help/msg349389/?topicseen#msg349389

Also canadiancouchpotato.com - start with the faq page and then model portfolios.

And there's a book called Millionaire Teacher which seems pertinent :)

Bob W

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Re: Advice Sought - Investing at 50
« Reply #2 on: October 15, 2014, 10:35:57 AM »
Love Dave for those in debt.   He is wrong on his approach to investing,  which is basically to buy full load mutual funds from one of his approved (kick back) brokers "with the heart of a teacher."

On this site we generally preach "no load" vanguard index funds.   The trick is to use Dave's gazelle intensity on your investing approach.  Invest like crazy.  Cut your expenses even more.   

NP

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Re: Advice Sought - Investing at 50
« Reply #3 on: October 15, 2014, 10:55:03 AM »
Here are some pieces of extremely basic advice in no particular order, maybe you'll find them helpful as a starting point if you're indeed a complete newbie:

Even the most experienced people in finance can't, on average, predict the future. Putting large stakes in any narrow segment of the markets, or trying to time when to buy and sell what, is extremely risky. In very rare cases it's spectacularly profitable, which is why it gets a lot of attention and generates lots of dangerous advice. Best stick with a very diversified portfolio at all times.

You want low-cost index mutual funds (or ETFs), as more expensive or actively managed funds tend to underperform the market on average despite frequent claims to the contrary. (This doesn't mean there aren't a few good active or expensive funds out there, which may be sensible choices in some unusual situations, but as a newbie your chances of identifying those funds or situations are almost zero, just like your chances of identifying those people who could give good advice about them.)

You most likely don't need a financial advisor given that you can get plenty of help here and extremely simple investment portfolios can work really well. However, if you do hire one, stay away from those that work for a percentage, you'd probably be much better off paying a flat fee.

There may be good reasons to subtly vary the weights of various market segments (e.g. stocks of small companies) in your portfolio and you'll see lots of discussions about such strategies. But the potential gains are modest and as a newbie you'd have a hard time deciding if something like that may be appropriate for you. Best stick with broad total index funds at least until you become much more experienced.

Canada is a tiny economy and even the USA is smaller than the rest of the world and it's relative weight is shrinking. Even in today's globalized world any single country could lag behind others and be badly affected by local economic conditions, natural disasters, political turmoil etc., especially in the very long term. Whatever the international situation may look like at any given moment, I wouldn't put all my eggs in one basket. Don't forget international stocks.

Get some specific advice about Canadian tax rules, retirement accounts etc.

The most important decision you'll have to make is the percentage of equities (stocks) versus fixed-income (bonds). For people nearing retirement, a sizable bond allocation is usually recommended because you need some stable value in your portfolio that you can withdraw retirement money from even during times when the stock market is down, which could last years. Keep in mind, however, that the longer your time horizon (and considering today's life expectancies it could be very long), the better off you are with a higher percentage of stocks.

There are some mutual funds that do all rebalancing for you to ensure that your selected asset allocation (the percentage of bonds, domestic and international stocks etc.) is always maintained. As long as it's a very low cost fund, it's a perfectly acceptable option in case you decide you want to keep things as simple as possible.

Allen

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Re: Advice Sought - Investing at 50
« Reply #4 on: October 15, 2014, 11:12:10 AM »
Not saying Dave is right or wrong but he does tell people to invest into international stocks.  I think he says to buy mutual funds in "Growth, Aggressive Growth, Growth and Income and International"

Prudence Debtfree

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Re: Advice Sought - Investing at 50
« Reply #5 on: October 16, 2014, 05:14:48 PM »
Thank you very much - smilla, Bob, NP, and Allen. I understand your advice, and I appreciate it!
smilla, you mentioned not knowing my husband's situation. In his case, he contributed to RRSPs - as did his employer on his behalf - for 13 years. His employment history is complicated, but to make a long story short, he rode a rough roller coaster for 4 years at the time of the high-tech bust at the turn of the millennium, and started his own (now successful) business after a few years of underemployment. It has been over 10 years since he has invested. His money has either been extremely tight, goint to his business, or going to business-debt repayment.
So while I have a pension, his retirement savings (in RRSPs) are limited. I don't know if that information changes any of the advice you have given. If it prompts you to add more, I welcome it. Thanks again.

Dances With Fire

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Re: Advice Sought - Investing at 50
« Reply #6 on: October 17, 2014, 03:55:20 AM »
Love Dave for those in debt.   He is wrong on his approach to investing,  which is basically to buy full load mutual funds from one of his approved (kick back) brokers "with the heart of a teacher."

On this site we generally preach "no load" vanguard index funds.   The trick is to use Dave's gazelle intensity on your investing approach.  Invest like crazy.  Cut your expenses even more.

+1 The Global Couch Potato Portfolio is a GREAT starting point. The "classic" 60% stocks & 40% bonds. To suggest an all stock, aggressive growth portfolio for someone in their 50's or 60,s is crazy IMO. Growth funds in your 30's and 40's is a totally different situation. Good Luck.

Tai

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Re: Advice Sought - Investing at 50
« Reply #7 on: October 17, 2014, 12:05:03 PM »
I like the Wealthy Barber Returns by David Chilton. I think he does a good job of explaining investment basics. Read everything you can and always remember to consider whether someone pitching something is actually trying to sell you it.

Also, with your pension being the bulk of your retirement income, you may be able to play with the 60% stock 40% bond allocation, although stay in your comfort zone to avoid panicked decisions.

I often see TD e series recommended, and Questtrade, for low commissions, but the competition has forced others to drop their fees as well, which is good for all of us. I have an account (TFSA) at Qtrade myself. Before opening any accounts I would check directly with the brokerages you're interested in to see what their fees are as they seem to falling so rapidly.

EDIT: Also, if you haven't already done so, educate yourself about your pension, go to the workshops that they offer for members.
« Last Edit: October 17, 2014, 12:18:03 PM by Tai »

sleepyguy

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Re: Advice Sought - Investing at 50
« Reply #8 on: October 17, 2014, 12:52:48 PM »
Well Canada pension for Teacher is FANTASTIC.  Take my advice for what it's worth.

1. I assume you'll be taking in 80% of your best 5yrs when you retire at 60?  That will be like 40-50k?  Plenty enough money if you are MMM lifestyle

2. RRSP is pointless for you, put your excess cash in TSFA (depends on some circumstances though)

2b. also look into pension splitting and such if it applies.

3. Get good life insurance for yourself as if something happens your husband is covered and I don't beleive he would recieve your pension payouts.

4. remember you still get OAS at 65-67 so there is that as well.

My GFs parents were both teachers.  They knew early that they would work until 60 (husband to 65) so really they just invested in real estate (and made a killing).  Their equities investment holdings was nearly nothing as their combined pension was over 90k/yr in retirement.
« Last Edit: October 17, 2014, 12:57:50 PM by sleepyguy »

Prudence Debtfree

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Re: Advice Sought - Investing at 50
« Reply #9 on: October 18, 2014, 02:06:55 PM »
Thank you Sleepguy, Tai, and Dances With Fire. Lots to consider here, and much appreciated.

Kaspian

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Re: Advice Sought - Investing at 50
« Reply #10 on: October 20, 2014, 01:49:24 PM »
Love Dave for those in debt.   He is wrong on his approach to investing,  which is basically to buy full load mutual funds from one of his approved (kick back) brokers "with the heart of a teacher."

On this site we generally preach "no load" vanguard index funds.   The trick is to use Dave's gazelle intensity on your investing approach.  Invest like crazy.  Cut your expenses even more.

+1 The Global Couch Potato Portfolio is a GREAT starting point. The "classic" 60% stocks & 40% bonds. To suggest an all stock, aggressive growth portfolio for someone in their 50's or 60,s is crazy IMO. Growth funds in your 30's and 40's is a totally different situation. Good Luck.

+!  Amen!  Crazy and irresponsible!