Best way to learn to invest?

[sasha520]

Just got off a call with a Canaccord advisor. They want 1.5% annually to invest my 650k. That's a lot of money compounded over time.

If I am investing it myself, do I just plonk down 650k in something like VGRO and hang on? Like what's the strategy here? How do I KNOW the strategy?

Do wealthy people in here actually pay someone that much money to do it for them, or are we figuring it out for ourselves?

Sorry - I feel like i'm at square one.

[GuitarStv]

Index investing is pretty simple and doesn't require complicated analysis or a lot of effort from the person managing the fund.  I think that most of us follow an index investing strategy and self manage it.

There are plenty of people who explain it (all kinda saying the same thing but differently), a few good ones to start out with:
https://mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/
https://canadiancouchpotato.com/getting-started/(From a Canadian perspective, but gets all the basics down for you)
https://earlyretirementnow.com/2020/12/09/how-to-beat-the-stock-market/

[sasha520]

Thank you!

This is what I thought, it's insane to give away 1.5% of your wealth per year...

[sasha520]

Index investing is pretty simple and doesn't require complicated analysis or a lot of effort from the person managing the fund.  I think that most of us follow an index investing strategy and self manage it.

There are plenty of people who explain it (all kinda saying the same thing but differently), a few good ones to start out with:
https://mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/
https://canadiancouchpotato.com/getting-started/(From a Canadian perspective, but gets all the basics down for you)
https://earlyretirementnow.com/2020/12/09/how-to-beat-the-stock-market/

Would this be a good strategy for only a 5 year investment time though?

[dandarc]

It really is simple - find 1-3 index funds. Another version of essentially the same advice:

https://jlcollinsnh.com/stock-series/

And 1.5% seems awfully high even if you're going to hire this kind of advisor (have a friend who hired someone at 1% a couple years ago). And nearly certain that they will far underperform vs simply buying an index fund or two. There's no secret sauce, but there's a lot of people that will try to sell you that secret sauce anyway.

May be defensible for non-financial reasons - perhaps you or someone who stands to inherit are disabled in a way that makes managing the money not really possible on your own. But that's a really small group of people, and even if you think you might be in this situation, you should at least shop it. Because 1.5% fees compounded over multi-decade timelines is an absolutely huge amount of money, so that decision should not be taken lightly.

[GuitarStv]

Index investing is pretty simple and doesn't require complicated analysis or a lot of effort from the person managing the fund.  I think that most of us follow an index investing strategy and self manage it.

There are plenty of people who explain it (all kinda saying the same thing but differently), a few good ones to start out with:
https://mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/
https://canadiancouchpotato.com/getting-started/(From a Canadian perspective, but gets all the basics down for you)
https://earlyretirementnow.com/2020/12/09/how-to-beat-the-stock-market/

Would this be a good strategy for only a 5 year investment time though?

Typically people set up index investments for long term purposes.  You want the investment to last for 30+ years so it needs to see growth over that time.


Short term investments (5 years and under) are a bit different.  Long term you can rely on things dropping in value and then rebounding back.  If you're planning on pulling all of your money out to spend within five years though this isn't the case.  Short term you may not have time for the rebound to happen, so I'm not sure I'd even advise equities or anything market linked for that - you may want something less risky.

[sasha520]

Index investing is pretty simple and doesn't require complicated analysis or a lot of effort from the person managing the fund.  I think that most of us follow an index investing strategy and self manage it.

There are plenty of people who explain it (all kinda saying the same thing but differently), a few good ones to start out with:
https://mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/
https://canadiancouchpotato.com/getting-started/(From a Canadian perspective, but gets all the basics down for you)
https://earlyretirementnow.com/2020/12/09/how-to-beat-the-stock-market/

Would this be a good strategy for only a 5 year investment time though?

Typically people set up index investments for long term purposes.  You want the investment to last for 30+ years so it needs to see growth over that time.


Short term investments (5 years and under) are a bit different.  Long term you can rely on things dropping in value and then rebounding back.  If you're planning on pulling all of your money out to spend within five years though this isn't the case.  Short term you may not have time for the rebound to happen, so I'm not sure I'd even advise equities or anything market linked for that - you may want something less risky.

Ok thank you. A portion of it (maybe around 100k) we want to use as a long term investment in our TFSAs so with this portion I will buy an ETF like VGRO. Maybe the rest I should just keep in a money market fund or something? 5.3% isn’t bad

[GuitarStv]

Index investing is pretty simple and doesn't require complicated analysis or a lot of effort from the person managing the fund.  I think that most of us follow an index investing strategy and self manage it.

There are plenty of people who explain it (all kinda saying the same thing but differently), a few good ones to start out with:
https://mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/
https://canadiancouchpotato.com/getting-started/(From a Canadian perspective, but gets all the basics down for you)
https://earlyretirementnow.com/2020/12/09/how-to-beat-the-stock-market/

Would this be a good strategy for only a 5 year investment time though?

Typically people set up index investments for long term purposes.  You want the investment to last for 30+ years so it needs to see growth over that time.


Short term investments (5 years and under) are a bit different.  Long term you can rely on things dropping in value and then rebounding back.  If you're planning on pulling all of your money out to spend within five years though this isn't the case.  Short term you may not have time for the rebound to happen, so I'm not sure I'd even advise equities or anything market linked for that - you may want something less risky.

Ok thank you. A portion of it (maybe around 100k) we want to use as a long term investment in our TFSAs so with this portion I will buy an ETF like VGRO. Maybe the rest I should just keep in a money market fund or something? 5.3% isn’t bad

You can always kick the can down the road for a year with a 1-yr GIC - they're paying about 5% right now, and this would give you some time to explore all your options.

[MDM]

If you are just getting started (or want a refresher), Getting started - Bogleheads is a good place for that.

[Financial.Velociraptor]

For any plausible rate of return, your savings rate is going to be your biggest driver of results not how you invest.  I recommend you start by flexing your frugality and savings muscles. I'm a heretic around here in that I don't index.  But, of the dozen or so friends/family that have come to me asking for advice on how to invest...after exploring their preferences and risk tolerances, I have recommended an equity/bond mix of VOO/BND to all but one.  The one is my father who has ZERO risk tolerance "It can NEVER go down.  It's everything I've worked for all my life!"  Dad is in single premium insurance annuities (SPIA) and bank CDs.   His house is paid for and his SS is sufficient to live on.  There is nothing to gain by trying to persuade him to take on more risk. He has "won the game".  Takeaway, you probably need to follow the advice you've gotten already.  Index to equity and bonds.  Take less risk with stuff with a short term horizon.

Your plan to do 100k and keep the rest in more liquid position is probably right for you - for now. 

One more resource online you might find useful (bond tent strategy) - https://www.kitces.com/blog/managing-portfolio-size-effect-with-bond-tent-in-retirement-red-zone/

[Heckler]

Sasha,

I suspect you are Canadian and therefore need a Canadian tilt on how to invest.

Getting Started at Bogleheads is a great US place to start, but the Canadian sister site is here, sharing the same info from a Canadian perspective:

https://www.finiki.org/wiki/Main_Page also has a very knowledgeable forum of well experienced Canucks

And many Canadian Index investors started with https://canadiancouchpotato.com/, although Dan Bortolotti has stopped blogging, his site is chock full of information, likely too much.

And yes, with enough research you will likely conclude VBAL, VGRO or VEQT (or the Ishares equivalents) are the simplest, lowest cost for effort Balanced/Growth/Equity, depending in your tolerance for risk and timeline for the funds.

[Heckler]

$9750 per year, yikes.

That pays a lot of time with a fee only independent financial advisor (who isn’t on commission from what they sell you)

https://www.pwlcapital.com/teams/bender-bender-bortolotti/

Oh look, its Dan Bortolotti again and his new Couch Potato book Reboot your Portfolio.  PWL likely wont take on a lower NW as a client direct, instead they choose to eductate the masses for free re:low cost index investing.

https://read.amazon.ca/sample/B09P4G9LR7?f=1&l=en_CA&r=af5afda3&rid=1032PQWCA3NEQAA9XD9Y&sid=138-8181969-5375201&ref_=litb_m

[ChpBstrd]

My method was:

1) Read all the standard financial advice that says buy low-cost ETFs and hold them no matter what in free online brokerage accounts.
2) Disregard all that expert nonsense because high self esteem and things are different now.
3) Proceed to lose tens of thousands of dollars timing the market in ways that seemed smart at the time.
4) Continue for many years, because all those losses must be making you better at it, and now that you're better you have to dig out of a hole to catch up.
5) Get angry at the market for being irrational.
6) Acceptance, to the extent allowed by somehow still-high self esteem.

[blueberrybushes]

A couple of thoughts as you start investing for your future.

Brokerage Account:
To do anything with mutual funds, index funds, bond funds, etc., you need a brokerage account which is different than a bank savings account.  Some banks, like Bank of America, have a brokerage firm tied to them to make the process easier.  While there are many brokerage firms, the big three right now are Vanguard, Schwab, and Fidelity.  Seems most posters on MMM have Vanguard and it is hard to go wrong.  Having dealt with both, I find Fidelity easier to work with.

Time Horizon:
When you need the funds is referred to as the Time Horizon.  This is important because it guides the investments for each one.  There are  really 2 time horizons to consider with your current knowledge base:

• 1)  Short term: 1-6 years.  Investment should be conservative with minimal risk to principle.  Money markets, CDs, bond funds
  2)  Medium term: 7+ years.  Investment can take on risk and recover.  Equities are the place to be - mutual funds (vs individual stocks).  Mutual funds come in many colors.  The best for you at this time is an index fund that tracks a broad equity market.  In the US, this is the S&P 500 or a total market which covers small, medium, and large cap stocks.

Risk Tolerance:
Financial.Velociraptor hit this on the head.  You have to sleep at night vs worrying about it.  My step-grandfather illustrates the extreme - he literally buried money and then died without telling anyone where it was.  It is normal for your risk tolerance to be low when you start.  As your knowledge and net worth grow, your risk tolerance may increase and lead you to greater equity exposure. 

Develop a plan, and get started.  No one ever made any money sitting on the sidelines.  As your knowledge level changes the plan changes.  Long term does not mean invest and do nothing - it does require attention on a regular basis.

I wish someone had taught me Time Horizon in 1978 when I started invested (24 yrs old).  In my mind, this and saving everything you can, are the keys to FI.

Good luck!

[sasha520]

Thank you everyone. I have been trying to absorb as much information as I can.

It just feels like a huge (and good) burden to invest 650k all at once. My husband and I only started investing in 2017 and went from 10k to 300k in 7 years (which feels significant since I was only working part time and my hubby changed careers). This was through using automated deposits into our wealthsimple accounts.

[Taran Wanderer]

The advice I give everyone else:  Put your savings on automatic with money going into one to three broad market or total market index funds within a Vanguard, Schwab, or Fidelity account.  (Fund examples include VTI or VFIAX.)  Don’t ever sell.  Celebrate when the market goes up because you’re richer.  Celebrate when the market goes down because you’re buying on sale.

Of course, I wasn’t that smart with everything, but I was that smart with a lot of it, and it has worked out well.  $650k is enough to start making its own money, so you’re in great shape.  If you’re worried about investing all of it at once and possibly having it drop in value (temporarily), put it all in a money market fund as noted above, and make your 5% on it right now, and then every month roll $10,000 into VTI or VFIAX, or $50,000 every month. Do that for a little over a year, and then you’re invested.

Don’t pay an advisor unless you need someone to talk you out of selling when the market goes down.  A friend just recently found a 0.5% fee advisor through Fidelity, so if you must have an advisor, it looks like you can do that for a lot less than 1.5%.  Or find a fee-only advisor and have a conversation with them once a year.  A knowledgable advisor can good to bounce ideas off.  (I’ve had a couple of conversations with a guy through my former employer’s 401k.)

Good luck!

[ChpBstrd]

It just feels like a huge (and good) burden to invest 650k all at once.

People worry very deeply about "what if I invest right before a correction" but another perspective is to look at the big picture and ask yourself "when was the most rational time to put money into the market?"

In the chart below, about 90% of the time, the correct answer was ASAP.

[Heckler]

Thank you everyone. I have been trying to absorb as much information as I can.

It just feels like a huge (and good) burden to invest 650k all at once. My husband and I only started investing in 2017 and went from 10k to 300k in 7 years (which feels significant since I was only working part time and my hubby changed careers). This was through using automated deposits into our wealthsimple accounts.

The BEST ETF might be hiding here in your learnings on the best way to learn to invest.