Author Topic: Canadians need investing help ...  (Read 6121 times)

SweetLife

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Canadians need investing help ...
« on: September 21, 2015, 04:10:13 AM »
So proud .... first time in (I am ashamed to say) 10 years that my Line of Credit is below 50,000 ... now at 48,800 and falling ... putting $1000 a month on it and whatever else "extra" that comes in ... I set it up so that it automatically comes out on each pay and for the last 3 months I still have at least $500 in bank by end of month. I am going to get it over with before i turn 50... in a little less than 5 years ... Also happy to say ALL my credit card debt is GONE  and am tracking our spending much closer!!!


Now this is where I ask for help ... I really really really want to understand the ins and outs of investing ... but truthfully I have read so much and still understand so little here is what I would like to do ... I would like to get some kind of Vanguard stock (I have an extra $220 per month to invest) - I live in Canada and would like the dividends to reinvest themselves (so I would have to check maybe 1x per year to make sure all is ok and otherwise everything would work like time work ... So my question is ... IS this possible????? I registered for a Vanguard canada account but am still scratching my head as to how to use it ... I also have $4000 in RRSP's I would like to move into it ... but again the bank where I have them isn't very helpful (though it is a pitiful amount) ... so ANY help I would really appreciate!!! I know my numbers aren't big (yet) but I am hoping if I keep it up they will be better soon!!!

I posted this on a Facebook Mustachian page but we were ALL in the same boat lol... everyone looking for advice but no one was GIVING any ... so any advice I get here I will repost for the rest of the waiting Canadian 'staches

PharmaStache

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Re: Canadians need investing help ...
« Reply #1 on: September 21, 2015, 06:53:17 AM »
-read the Canadian couch potato website, especially the model portfolios.
-read the book "count on yourself"- this one is VERY basic and should help you with some practical stuff
-read the book "the millionaire teacher"

You cannot invest directly with Vanguard in Canada.  You must buy Vanguard ETFs through a provider like Questrade.  Sign up for a free practice account through them.  Then you can sign up for a real account.  You will then request (by filling out a form through Questrade) that your old bank transfer your RRSP to them.

Kashmani

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Re: Canadians need investing help ...
« Reply #2 on: September 21, 2015, 07:14:13 AM »
Here are a few "informational" (as opposed to advice) points. Use at your own risk:

1) Control what you can control. that usually means costs. The Management Expense Ration (MER) in many Canadian funds is very high.

2) Consider using index funds rather than actively managed funds. Index funds are funds designed to essentially track the market, emulating the TSX or the S&P 500. Their MERs are significantly lower than for actively managed funds. The statistic I have read is that 86 percent of actively managed funds in any given year fail to beat the market. I know that I am not smart enough to pick the winners (either winning fund managers or winning stocks), so I made the conscious choice to pick the market instead and buy ETFs.

3) TD Bank offers a series of index funds that are called "e-series" funds. You have to buy these on-line. The MER is significantly lower than for other funds and the trade-off is that you do not get service. Google "TD e-series". I have used these for my RRSP since 2007 and have been very happy with them. I use four funds in my RRSP. These are (1) TD Canadian Index - e; (2) TD US Index - e; TD International Index - e; and (4) TD Canadian Bond Index - e. When buying them, make sure you are picking the ones with the "-e" designation, as each one of them also has a "regular" version with a higher MER.

4) If you are planning to invest large sums at once, you may benefit from buying Exchange-Traded Funds (ETFs) rather than mutual funds. The difference is that exchange-traded funds have a lower MER but you pay a commission to buy them. If you are only investing a few thousand dollars a year from your paycheque, you are likely better off buying mutual funds. I do both. My RRSPs are in e-series mutual funds, but through my professional corporation I invest a lump-sum into ETFs. For this, I use the TD discount brokerage, which charges a $10 fee per trade. I use Vanguard index funds. They have a very low MER but 2015 is my first year of using them. So far I am in the hole, but that is because the market tanked this summer.

5) There is an excellent Canadian blog called Million Dollar Journey (www.milliondollarjourney.com) that I have followed since 2006 when I started my career. It has a lot of discussions about e-series funds and index funds strategies. When you have two to three hours to kill you should review some old posts.

6) The is another blog called Canadian Couch Potato that can also offer some wisdom.

7) Whatever you do, recognize that you are most likely NOT smart enough to actively trade. I certainly am not. I simply put money into my RRSP funds every two weeks since 2007. It took a lot of self-discipline throughout 2008 and 2009 but over time, dollar cost averaging works wonders. The most important thing (and the hardest) is to ignore short-term performance and simply leave the money in the account.

8) Based on your situation, I would suggest that your best option is to go the mutual fund route. If you set up an account with four TD e-series funds, you can divide the $220 equally by putting $55 into each account. You will develop a balanced low-cost portfolio over time at relatively minimal cost.

Heckler

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Re: Canadians need investing help ...
« Reply #3 on: September 21, 2015, 09:47:28 AM »
Just starting out, you don't have enough for Vanguard ETFs to make sense.  I'd go with Otion 1 or 2 on CCP.

http://canadiancouchpotato.com/model-portfolios-2/

Keep paying down that debt emergency!  What's the interest rate on the LOC?

Heckler

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Re: Canadians need investing help ...
« Reply #4 on: September 21, 2015, 09:49:06 AM »
CCP have a wealth of knowledge. Start reading!

http://canadiancouchpotato.com/category/indexing-basics/

K-ice

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Re: Canadians need investing help ...
« Reply #5 on: September 21, 2015, 06:03:33 PM »
I started investing in Vanguard with very little.  (Exactly, $4000 coincidentally).

It sounds like this is what you are interested in so read up a bit more on Couch Potato as suggested.  You are probably already familiar with VAB, VXC and VCN.

http://canadiancouchpotato.com/wp-content/uploads/2015/01/CCP-Model-Portfolios-Vanguard.pdf

You will need some kind of Direct investing account.  I am with RBC but they do not DRIP (Dividend Reinvestment Plan) the Vanguard dividends from VAB, VXC or VCN.  I don't know why not, they DRIP other things, so this is very annoying. (My conspiracy theory is that it is so you will purchase their RBC mutual funds and custom bundles.) 

Quest Trade may be better for this but I am not sure. Can anyone confirm the DRIP and fees with QuestTrade?

Also the fee is quite high per trade at RBC. $10. Check for an annual fee too.  If you are just investing $220 per month this will cut into your profit ~5% off the top so not worth it. That is proably why some say Vanguard is not right for you right now.

So either: find a direct investing broker with better fees, save more per month, or stock pile in a savings account and invest every 4 months.  Then the "fee" is only about 1% per trade. Remember this is just a one time fee. Most mutual funds and “investors” will charge you 1-2% per year to “manage” your funds. No thanks. 

Since my dividends do not DRIP they sit in a savings account (within my direct investing) for a few days until I add them to my next month’s investment contribution. Not a big deal, and I can effectively redirect them into the one VAB or VXC or VCN that needs rebalancing.

Oh, yeah. To keep fees lower. I only ever purchase one thing each month.  This slightly unbalances my portfolio, but then the next month the next lowest thing gets the addition. This may be a bit harder for you if you invest only 3-4 times per year. 

Let’s say you want the couch potato “balanced portfolio”  40VAB:20VCN:40VXC.  (Deciding what couch potato you want may be your toughest choice. )
I would start
$4000 VAB (month 0)
$1000 VXC (month 4)
$1000 VCN (month 8)
$1000 VXC (month 12)
$1000 VXC (month 16)
$1000 VCN (month 20)
$1000 VXC (month 24)
Two years from now your portfolio is balanced and you have 10K invested.  My method may drive a rebalancing freak crazy but it works for me.

Sorry, even with a DRIP, I don't think you can just go to sleep for a whole year. Every month you stash some savings in the highest interest savings account you can find. Every 4 months (or $1000) you make a Vangaurd purchase.  Every year you double check your rebalance, and then direct the next investment or two to keep the balance.
 
Whoever you open your direct investing with should be happy to help you move that $4000 over from your bank. But again, check for fees, probably on your banks end, as punishment for leaving them.    You may even be able to do the direct investing at your bank. CIBC has something as does TD.  However, I agree, the bank or their "investment advisors" are usually not that happy to help you set up something so you can direct invest (no commission for them). 

I hope that helps give you some advice on how to start investing with Vanguard in Canada.

Kashmani

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Re: Canadians need investing help ...
« Reply #6 on: September 22, 2015, 07:30:26 AM »
I started investing in Vanguard with very little.  (Exactly, $4000 coincidentally).

It sounds like this is what you are interested in so read up a bit more on Couch Potato as suggested.  You are probably already familiar with VAB, VXC and VCN.

http://canadiancouchpotato.com/wp-content/uploads/2015/01/CCP-Model-Portfolios-Vanguard.pdf

You will need some kind of Direct investing account.  I am with RBC but they do not DRIP (Dividend Reinvestment Plan) the Vanguard dividends from VAB, VXC or VCN.  I don't know why not, they DRIP other things, so this is very annoying. (My conspiracy theory is that it is so you will purchase their RBC mutual funds and custom bundles.) 

Quest Trade may be better for this but I am not sure. Can anyone confirm the DRIP and fees with QuestTrade?

Also the fee is quite high per trade at RBC. $10. Check for an annual fee too.  If you are just investing $220 per month this will cut into your profit ~5% off the top so not worth it. That is proably why some say Vanguard is not right for you right now.

So either: find a direct investing broker with better fees, save more per month, or stock pile in a savings account and invest every 4 months.  Then the "fee" is only about 1% per trade. Remember this is just a one time fee. Most mutual funds and “investors” will charge you 1-2% per year to “manage” your funds. No thanks. 

Since my dividends do not DRIP they sit in a savings account (within my direct investing) for a few days until I add them to my next month’s investment contribution. Not a big deal, and I can effectively redirect them into the one VAB or VXC or VCN that needs rebalancing.

Oh, yeah. To keep fees lower. I only ever purchase one thing each month.  This slightly unbalances my portfolio, but then the next month the next lowest thing gets the addition. This may be a bit harder for you if you invest only 3-4 times per year. 

Let’s say you want the couch potato “balanced portfolio”  40VAB:20VCN:40VXC.  (Deciding what couch potato you want may be your toughest choice. )
I would start
$4000 VAB (month 0)
$1000 VXC (month 4)
$1000 VCN (month 8)
$1000 VXC (month 12)
$1000 VXC (month 16)
$1000 VCN (month 20)
$1000 VXC (month 24)
Two years from now your portfolio is balanced and you have 10K invested.  My method may drive a rebalancing freak crazy but it works for me.

Sorry, even with a DRIP, I don't think you can just go to sleep for a whole year. Every month you stash some savings in the highest interest savings account you can find. Every 4 months (or $1000) you make a Vangaurd purchase.  Every year you double check your rebalance, and then direct the next investment or two to keep the balance.
 
Whoever you open your direct investing with should be happy to help you move that $4000 over from your bank. But again, check for fees, probably on your banks end, as punishment for leaving them.    You may even be able to do the direct investing at your bank. CIBC has something as does TD.  However, I agree, the bank or their "investment advisors" are usually not that happy to help you set up something so you can direct invest (no commission for them). 

I hope that helps give you some advice on how to start investing with Vanguard in Canada.

All sound advice on how to use Vanguard, but this also highlights why low-cost mutual funds may be better for you. The difference in MER between e-series funds and Vanguard ETFs is only about 0.15% per year, so don't pay $40 of commission on a $220 investment just to get a lower MER.

Heckler

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Re: Canadians need investing help ...
« Reply #7 on: September 22, 2015, 06:00:28 PM »

All sound advice on how to use Vanguard, but this also highlights why low-cost mutual funds may be better for you. The difference in MER between e-series funds and Vanguard ETFs is only about 0.15% per year, so don't pay $40 of commission on a $220 investment just to get a lower MER.


and if your broker has a $9.95 fee to reinvest a dividend, you'll really want to consider the cost of reinvesting ETFs over low-cost mutual funds.

http://canadiancouchpotato.com/2012/07/30/comparing-the-costs-of-index-funds-and-etfs/

Likely though, with $4000 to $10,000 invested, K-Ice's ETFs aren't producing enough dividends anyway to reinvest a full unit.  This again is where low-cost mutual funds would reinvest their dividends in partial units and help growth when your dollar amounts are low. 

I have $11,000 of VAB in one account that still occasionally pays out just a smidge under the unit cost and then ends up with ~$25 cash instead of another VAB to compound next month. 

Cecil

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Re: Canadians need investing help ...
« Reply #8 on: September 22, 2015, 06:05:50 PM »
Questrade has free ETF purchases now, as well as free DRIP reinvestments.

kylereid

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Re: Canadians need investing help ...
« Reply #9 on: September 30, 2015, 01:36:56 PM »
As a few people have said, Vanguard ETFs probably don't make sense. They have a lower MER, but you have to pay a transaction fee. Someone feel free to correct me if my understanding is wrong:

Example, using TD:
Vanguard FTSE Canada Index ETF, MER: 0.09%
Transaction Fee to purchase ETF: $9.99

TD e-Series Canadian Index Fund, MER: 0.33%
Transaction Fee to purchase fund: $0.00

At these rates, you need to invest a minimum of $4,162.50 to break even. If you are investing more than that amount at a time, then the Vanguard ETF is cheaper than the e-Series Index Fund. However, if you are investing less than $4,162.50 per transaction, then the e-Series fund is cheaper. Since you are talking about investing $220 at a time, I would recommend buying the TD e-Series Index funds.

Is my understanding skewed?

K-ice

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Re: Canadians need investing help ...
« Reply #10 on: September 30, 2015, 09:51:02 PM »
Your math is correct for the first year.

After that, the Vanguard pulles ahead until you need to sell & pay the 9.99 fee again. 

But considering what people have said about Questrade that sounds like the best option.
No fees & Drip on vanguard.


batbatmanne

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Re: Canadians need investing help ...
« Reply #11 on: October 06, 2015, 02:34:35 PM »
I found myself preferring to build myself an etf portfolio with questrade to the other options canadiancouchpotato recommends (tangerine and e-series) even with a small initial investment (<$10,000) just because the new questrade policy of free etf purchases makes it competitive from a quantitative perspective and regular contributions allow for free rebalancing. I also like the peace of mind knowing that I can build and maintain the same simple etf portfolio in various accounts for the rest of my life.

For those who may think that getting involved with an online discount brokerage like questrade is daunting I highly recommend the following video and all of the videos produced by moneygeek, although my own portfolio more closely resembles something like a canadiancouchpotato portfolio compared to those that moneygeek recommends.

https://www.youtube.com/watch?v=7Okw7S1h2cE

SweetLife

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Re: Canadians need investing help ...
« Reply #12 on: November 15, 2015, 03:38:03 PM »
Thank you everyone!!! I have been away at a month long training so now I know I need to buckle down and get some reading done ...
Looking forward to getting jump started on this ...

dess1313

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Re: Canadians need investing help ...
« Reply #13 on: November 15, 2015, 04:52:32 PM »
Big helps for me:
Books
The Bogleheads guide to investing
The Millionaire Teacher By Andrew Hallam

Canadian Couch Potato site

The boglehead book was awesome for me.  that got me understanding a lot of stuff.  I'm starting with tangerine for now and seeing where everything goes

Goldielocks

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Re: Canadians need investing help ...
« Reply #14 on: November 15, 2015, 05:19:46 PM »
-read the Canadian couch potato website, especially the model portfolios.
-read the book "count on yourself"- this one is VERY basic and should help you with some practical stuff
-read the book "the millionaire teacher"

You cannot invest directly with Vanguard in Canada.  You must buy Vanguard ETFs through a provider like Questrade.  Sign up for a free practice account through them.  Then you can sign up for a real account.  You will then request (by filling out a form through Questrade) that your old bank transfer your RRSP to them.

Pharmastache - are the vanguard ETF's a lower MER than the recommended couch potato ones?  Any issues with Vanguard ETFs and dividends (US) going into TFSA's?

I have not looked at vanguard ETF's because they weren't offered when I was setting up, but would like to know...

ETA : kylereid answered this one thnx
« Last Edit: November 15, 2015, 05:54:17 PM by goldielocks »

Kaspian

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Re: Canadians need investing help ...
« Reply #15 on: November 16, 2015, 11:06:34 AM »
Thank you everyone!!! I have been away at a month long training so now I know I need to buckle down and get some reading done ...
Looking forward to getting jump started on this ...

Good article for you from Gail:  "Are YOU Ready to Be an Investor?" http://gailvazoxlade.com/blog/archives/7067

dess1313

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Re: Canadians need investing help ...
« Reply #16 on: November 16, 2015, 08:03:46 PM »
For me Tangerine is easier/cheaper because i am investing with small amounts monthly.  MER is ~1.07%  Still getting my feet wet

For Vanguard, you need to set up an investment account through someone else which can incur fees, so it would only depend on the amounts and fequency of your investments.  The MERS are much lower.  Lots of times under .25%  You can set this up via a lot of banks.  For example i can do many vanguard accounts via my bank at CIBC as a self directed brokerage.  I just don't due to fees involved, for example there its a $6.95 fee per trade.  unless i'm investing large amount at once time, i'm not going to start that yet.

nobodyspecial

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Re: Canadians need investing help ...
« Reply #17 on: November 17, 2015, 10:50:10 PM »
Most online brokers let you buy ETFs for free.
In Canada Questrade do.

daverobev

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Re: Canadians need investing help ...
« Reply #18 on: November 18, 2015, 09:24:42 AM »
Most online brokers let you buy ETFs for free.
In Canada Questrade do.

Disagree with "most", but some allow some. Eg, Scotia iTrade have a very short list of not great ETFs you can buy for free.

Questrade is very nearly free. As long as you have $5k there are no account fees, and the per unit cost to buy is minute - they charge some ECN fees which are absolutely minute, or rather that pass those costs along to you.

Tangerine is great to begin with, and if you are super lazy can be set up to auto-withdraw from your bank and invest. If you can be bothered to check your account and invest any money at least every month, I'd go Questrade. On $100k, that 1% MER will cost you $1k a year. Vs say 0.2% with good ETFs through Questrade, $200. Saving $800.

dess1313

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Re: Canadians need investing help ...
« Reply #19 on: November 18, 2015, 10:32:53 AM »
Most online brokers let you buy ETFs for free.
In Canada Questrade do.

Questrade is very nearly free. As long as you have $5k there are no account fees, and the per unit cost to buy is minute - they charge some ECN fees which are absolutely minute, or rather that pass those costs along to you.

Tangerine is great to begin with, and if you are super lazy can be set up to auto-withdraw from your bank and invest. If you can be bothered to check your account and invest any money at least every month, I'd go Questrade. On $100k, that 1% MER will cost you $1k a year. Vs say 0.2% with good ETFs through Questrade, $200. Saving $800.

For those of us starting out with minimal balances the 'lazy' method of tangerine does work.  Not everyone has 5k to invest right off the bat when they are starting.  When you start off with small monthly amounts something like questrade isn't for everyone.........yet........

nobodyspecial

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Re: Canadians need investing help ...
« Reply #20 on: November 18, 2015, 10:50:19 AM »
For those of us starting out with minimal balances the 'lazy' method of tangerine does work.  Not everyone has 5k to invest right off the bat when they are starting.  When you start off with small monthly amounts something like questrade isn't for everyone.........yet........
Didn't know there was a 5K minimum with Quest - I transferred my Tangerine TFSA to them

Big drawback with Tangerine is that their funds are all heavily Canadian. IIRC 50% Canadian stocks/bonds - which in practice means 5 banks and 1 potash company, Canada isn't a very diverse economy!

daverobev

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Re: Canadians need investing help ...
« Reply #21 on: November 18, 2015, 11:17:08 AM »
For those of us starting out with minimal balances the 'lazy' method of tangerine does work.  Not everyone has 5k to invest right off the bat when they are starting.  When you start off with small monthly amounts something like questrade isn't for everyone.........yet........
Didn't know there was a 5K minimum with Quest - I transferred my Tangerine TFSA to them

Big drawback with Tangerine is that their funds are all heavily Canadian. IIRC 50% Canadian stocks/bonds - which in practice means 5 banks and 1 potash company, Canada isn't a very diverse economy!

It's not even a $5k minimum. It's $5k min unless you're under 25, else they charge you a $15 quarterly fee I think it is - BUT if you make a commissionable trade (including a free ETF purchase), the fee doesn't apply.

So if you stick $20 in every three months and buy one share of (ETF < $20), you're good.