Author Topic: Ignorant Canadian needs advice.  (Read 3758 times)

Le Poisson

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Ignorant Canadian needs advice.
« on: March 31, 2015, 11:38:58 AM »
The first step is the hardest...

I know next to nothing about investing and markets and so on, and find it all ever so confusing. We have smallish RRSP savings with a IG - and know they have to move.

We also have about 10K in a TFSA we call "The Warchest" at Royal Bank. We are hoping for only a small war because 10K won't go far when the shit hits the fan. This account is our rainy day fund/opportunity fund. It is earning interest at savings account rates since we wanted to keep it as liquid as possible.

Then I was introduced to Mr. Money Mustache, and so now we are staring down this money, the fees we are losing, and thinking we need to move it.

As a start, I am transferring $5K from the Warchest to a TFSA at Questrade. But I don't know what to put it into over there. I am thinking ETF but have no idea about them, or how to judge one against the next. Then there are the foreign ownership rules our advisor at IG was always going on about, and whatever mumbo-jumbo she always said about Mid-Asia small cap manufacturing gains over European Large cap metals based high yield soybean futures in the DOW on the emerging markets BRIC economic forecast. Or whatever it was.

So I have all this Questrade paperwork laid out on the desk in front of me. I'm trying to get on track, but I can't see the start of the race. Where do I put the money for the time being so its working for me at least a little bit while I gain an education - and where do I find that education in a way that works for someone starting at square 1?

The plan is to watch what this $5K does and then move the rest in the best direction we can.

Cookie78

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Re: Ignorant Canadian needs advice.
« Reply #1 on: March 31, 2015, 11:54:54 AM »
http://canadiancouchpotato.com/
http://www.moneygeek.ca/

These two sites helped me get started.

Retire-Canada

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Re: Ignorant Canadian needs advice.
« Reply #2 on: March 31, 2015, 01:00:59 PM »
Questrade is good. They have low cost Vanguard ETFs to buy with no sales commission.

In the long run you need to work out your asset allocation plan, but for now you can invest in a few ETFs and not worry about it while you focus on the saving end of the equation.

VUN - is a US total stock market ETF in CDN dollars
VCN - is a CDN total stock market ETF

There are more complex and fancy portfolios, but if you put money into either of those for now you'll get started in the right direction.

Get a reasonable line of credit and call that your warchest.

-- Vik

Retire-Canada

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Re: Ignorant Canadian needs advice.
« Reply #3 on: March 31, 2015, 01:03:33 PM »


Here is a fancier CDN portfolio. No need to try and hold all the ETFs from the start. I'd get rolling with VCN & VUN and then keep adding each month to move closer to the asset allocation you've chosen.

The plan is to watch what this $5K does and then move the rest in the best direction we can.

BTW - this is exactly what not to do. In a perfect world you'd buy the under performing investments that were going to do well soon afterwards. Which means you'd avoid the investments that are doing well and would soon start to lose steam. In practice you have no idea what is going to happen tomorrow so you want a broadly diversified portfolio and you should invest according to your asset allocation plan which will force you to buy less of the better performing investments and more of the poorer performing investments.

That helps you buy low and sell high.

-- Vik
« Last Edit: March 31, 2015, 01:15:38 PM by Vikb »

Le Poisson

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Re: Ignorant Canadian needs advice.
« Reply #4 on: March 31, 2015, 01:15:21 PM »

Get a reasonable line of credit and call that your warchest.

-- Vik

Thanks both of you. The couch potato site looks interesting, but still uses lingo that is beyond my level :(
Paint me stoopid and put me in the corner. I've put a hold on "Canadian Index investing for Dummies" at the local library. I think a lot of this is just getting comfortable with the ideas.

Our current goal is to destroy our running balance on our lines of credit (PLC). We only have another $20,000 to go...  :S

The good news is that we have $10,000 more in savings and $10,000 less in debt than we did at this time last year. For better or worse, the strategy is that the warchest will step in, in place of the PLC preventing us from absorbing more debt while we dig our way out. And since the washing machine just blew a bearing, it looks like its a good thing to have. So we will go to the warchest for the money to replace the washer, top up the warchest at 0%.

Meanwhile, we are playing a shell game with our outstanding PLC's. Currently they are with MBNA on a pair of limited time offer accounts with 1.99% and 0% interest with the majority of the debt sitting in the 0% account and the 1.99% account being paid off. Since these limited offers are only usually good for between 90 days and 6 months, we are watching for where to move them once the rate increases. FWIW, we have moved them at least 3 times in the last year or so chasing rates.

Our only debts are these PLCs and the mortgage, but we want the PLC's gone. Fast. I see them as a ticking time bomb once we run out places to move them. We've already been denied intro rates once when we tried a repeat application back to a 0% PLC we had used before.

Moving $5,000 to Questrade allows us the other $5,000 as immediate access funds if needed, so I am comfortable having it tied up, but I don't want to put anything more on our lines of credit.

Le Poisson

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Re: Ignorant Canadian needs advice.
« Reply #5 on: March 31, 2015, 01:19:57 PM »

BTW - this is exactly what not to do. In a perfect world you'd buy the under performing investments that were going to do well soon afterwards. Which means you'd avoid the investments that are doing well and would soon start to lose steam. In practice you have no idea what is going to happen tomorrow so you want a broadly diversified portfolio and you should invest according to your asset allocation plan which will force you to buy less of the better performing investments and more of the poorer performing investments.

That helps you buy low and sell high.

-- Vik

You replied while I was typing...

I hadn't thought this way - if we move all $10K into Questrade, how long does it take to get money back if we need to, say, buy a washing machine? I'm guessing about a week? If thats the case, I guess we bridge with the credit cards until we have cash in hand?

Retire-Canada

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Re: Ignorant Canadian needs advice.
« Reply #6 on: March 31, 2015, 01:22:38 PM »
If you owe $20K on your LOCs I would just dump the whole $10K on it and then hammer out the last $10K as fast as you can.

You have more than 1 LOC so there isn't any need to hold cash when you have debt. The LOC will act as your liquidity if you need more money than you have in cash flow in a given month.

The LOC rates are low, but that's temporary and I'd rather spend my time working on finding savings in my budget than chasing promo LOC offers to try and keep my interest payments low.

It takes a few days to get $$ from QT to your bank. The bigger problem with this approach is your investments could be down when you need the money which forces you to sell low. That's why using your LOCs is preferable as an emergency fund plan.

-- Vik
« Last Edit: March 31, 2015, 01:25:56 PM by Vikb »

scrubbyfish

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Re: Ignorant Canadian needs advice.
« Reply #7 on: March 31, 2015, 01:27:18 PM »
Thanks both of you. The couch potato site looks interesting, but still uses lingo that is beyond my level :(
Paint me stoopid and put me in the corner. I've put a hold on "Canadian Index investing for Dummies" at the local library. I think a lot of this is just getting comfortable with the ideas.

You sound like me. I started this thread: http://forum.mrmoneymustache.com/investor-alley/one-%28investing%29-question-at-a-time/msg475335/#msg475335  This helped clear all the blocks in my understanding, so that I could finally make heads and tails of the excellent Canadian Couch Potato recommendations, etc, and get moving. I'm very happy with where I landed, and with my new-found ability to understand the essentials.

I suggest starting a similar thread, asking about each of your confusion-points one at a time.

Retire-Canada

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Re: Ignorant Canadian needs advice.
« Reply #8 on: March 31, 2015, 02:08:48 PM »
Read this ------------> http://jlcollinsnh.com/stock-series/

Covers all the main topics and terminology you need in an easy to understand way.

This link is in the US, but you can get your CDN content from Canadian Couch Potato.

The general principals are the same.

-- Vik

moustacheverte

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Re: Ignorant Canadian needs advice.
« Reply #9 on: March 31, 2015, 06:33:01 PM »
I was in your shoes about 2-3 months ago. Then I read this book: http://www.amazon.ca/Elements-Investing-Lessons-Every-Investor/dp/1118484878/ and a bit of CCC (canadiancouchpotato.com)

It should let you get most of the mechanics of what folks here are trying to do by buying indexes and bonds either in mutual funds or ETFs. It didn't make me an expert but it taught me more than enough to understand what I'm doing and why it works.

Good luck!

Le Poisson

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Re: Ignorant Canadian needs advice.
« Reply #10 on: April 01, 2015, 05:47:22 AM »
Thanks guys. I have a lot of reading to do, and a decision to make re: the PLC's vs investing. I was thinking that earning even 3% would trump paying off a 1.99% debt. I am thinking I'll invest it (despite the advice above) and if we run out of time in the offers, then pull back and dump the money in killshot on the PLCs.

The vanguard funds inside the TFSA sound like a good spot to start from.

Every dime I pay off on the PLC opens a safety net I hadn't considered, so the probability of needing the $10K completely liquid is silly (as pointed out here) and I know I have $20K of room in the PLC today if things really hit the fan. Not that I want to max it out though.

Last night I picked up "Canadian Stock market investing for Dummies" at the library. That can be my bedtime reading for the next little while. So much to learn!!!