Hello Reader!
It’s hard to believe that we are already in February - I don’t know about you, but this January flew by, and somehow we’re 1/12 of the way through the year already.
The good news is that I’ve been feeling really inspired lately. I’ve been writing down all my goals and assessing what has been working (or not) and I feel good about the changes that I am making.
My question for you: Where will you be one year from now? Better yet, what about five years?
I want to you to take a second to imagine it:
Picture this: You've been investing and have been very diligent. Your portfolio is paying you dividends each month, maybe even every week! You've seen your capital grow, and even though there's been ups and downs along the way, your net worth has never been higher. Your goals have all moved closer. Your financial future is more secure.
Then the magic really happens: you start to dream bigger.
You start thinking maybe retiring with $1M or $2M is aiming too low and a bigger number seems within reach. Or better yet, early retirement. Is that really possible? You run the numbers and see that it is. Then you think, maybe I can do something even before then: put the kids through school, take an epic around-the-world trip, go on a Paris shopping spree.
You suddenly realize that investing has given you more than wealth, it has given you choices.
For the first time, you're not just hoping and praying things are going to be okay, you're trying to pick from a dozen incredible experiences.
Getting started with investing doesn’t have to be overwhelming. What if I told you that in just one year, you could confidently invest and build wealth? It's not a pipe dream. Let’s dive into it in another issue of The Investory with simple investing tips and news for you.
I hope you have a wonderful week ahead and enjoy this issue!
In this edition:
Investing Term: Learn about Self Directed Investing and how to start investing your 1st $1,000
Resources: BrokerChooser, ETF Database, ETF Overlap
INVESTING TERM: SELF-DIRECTED INVESTING
What is Self-Directed Investing?
The stock market is an excellent place to build wealth. There are several approaches to investing in the stock market. Self-directed investing or Do-it-yourself (DIY) investing is an approach to investing where you build and manage your own investment portfolio.
I’ve been investing my money completely by myself for exactly two years now! To be clear, I’ve been investing in general since 2009 (any other elder millennials out there 🙋🏽), and intentionally investing for about 5 years, but I’d never done it completely by myself (until February 2023). Up until then, I’d been using a financial advisor (2009-2018 😬), then shifted to using a robo-advisor (2018-2023). After realizing that I’d built up the confidence to invest on my own, and that I could bring down the fees I was paying substantially, I decided that it was time to make the switch from managed investing to self-directed investing.
What can you invest in?
As a DIY investor, you can invest in stocks, bonds, GICs, exchange traded funds (ETFs), and more. Over the past 30 years, the stock market has yielded over 8% annual return adjusted for inflation. Not too shabby 🤑.
I have a pretty boring (yet effective!) investing strategy. I invest for the long-term in broadly diversified, low fee ETFs. I can automate my investments and don’t always have to keep up with business news or read company financial statements to feel confident in my investments.
ETFs are an ideal starting point for beginner investors. Why? Because they offer a basket of similar stocks, providing instant diversification and reduced risk. Exactly what ETFs you should buy depends on your personality, risk tolerance, and financial goals. Whether you’re looking to grow your nest egg or generate more passive income, there is an ETF to help you meet your investment goals.
How can you buy your 1st investment in the stock market?
If I had $1,000 sitting in my savings account right now, here’s what I’d do:
Step 1: Choose a brokerage
A brokerage is a company that allows you to buy and sell investments. For a quick and easy way to choose your brokerage, use the Find My Broker tool. Popular options for Canadians include: Questrade (my personal favourite), Wealthsimple, TD Direct Investing, RBC Direct Investing and Scotia iTrade.
Step 2: Pick an investment account(s) within the brokerage
Open an investment account within your chosen brokerage. There is an investment account for every goal. Whether that’s planning for long-term retirement, buying a home, paying for your children’s education, or just simply investing to become filthy rich. In Canada, this might be a TFSA, RRSP, RESP and FHSA. Determine which one makes the best sense for you here.
Step 3: Select your investment(s)
Vanguard offers some of the best Asset Allocation ETFs in the market. Use their Investor Questionnaire to define your asset allocation based on your goals, risk profile, time horizon and more. So, here is an example of a super simple portfolio:
VGRO. Here is a single ETF that gives you access to:
- ~81% stocks and ~19% bonds - asset allocation addressed, if you feel this is suitable for you
- Geographically speaking, the entire world. That is, 77% North America, 10% Europe, 12% Pacific (Asia, Australia), 1% Africa/Middle East.
And there you have it. A single ETF that you can start off with, giving you access to a number of companies (large and small companies) across regions and industry sectors. That's right, it's like a hidden gem for DIY investors.
Other ETFs I encourage you to check out:
Step 4: Purchase your First Investment
This is the final step. There are various ways to purchase an investment but the most simple is a market order. This means that you are purchasing the investment immediately at the current market price.
Type in the correct ticker symbol for the ETF you want in your brokerage account. For example, for the S&P 500, you can use the ticker symbol VFV, SPY or VOO. I like VFV because it is traded in Canadian dollars and Questrade allows for free trades of Canadian ETFs.
And just like that, you’re an investor!
This is a huge milestone that is worth celebrating. But if you’re still confused, hire a coach or mentor who will help you step by step. I’ve worked with beginner Canadian investors to develop their investment strategy and I will do the same for you.
Step 5: Rinse and Repeat
Glad you did the easy part. The hard part is actually remaining in this cycle.
RESOURCES
P.S. Have a personal finance question you'd like answered? Reply to this email, and it might be featured in next week's newsletter!
See you in 2 weeks,
Angela @ The Investory
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