I have been thinking a lot about my investment strategy lately and over the last 6 months I have changed my focus. I don’t get into my investing strategy because I feel that what works well for some won’t work for others but since Scott shared last week I felt like sharing as well.
I started investing in August 2011, a month before we got married. I had saved money before that but it was just in a savings account and it was likely going to be spent at some point in the future. As I shared before I was interested in opening up an RRSP (Registered Retirement Savings Plan) but an advisor talked me out of it. But in 2011 after we bought a house in April and were going to get married a month later I was more comfortable in investing. I was also making money in my adult job so I would benefit from the tax break.
I didn’t have a lot to invest at the time, maybe about $100/month. While my parents instilled the habit of saving it was not really clear what the next steps were. When they were in their late 20s, in the late 80s-early 90s a 5 year GIC had a return of 8-11%. I was lucky to get 1 or 2% so I had to go with a more aggressive investment.
Starting with Mutual Funds
The only purchase of individual stocks that I had made was through work programs and I didn’t know I could invest myself. Like many Canadians I started with mutual funds. Remember this was 2011 and there weren’t many robo-advisors (Wealth Simple didn’t come out until 2014). Because you can buy a little at a time you can invest more regularly and take advantage of dollar-cost averaging. In Canada mutual funds have a very high fee which sucks but at the time they were the only good thing for investors starting out. I wouldn’t have gotten started in mutual funds at all with the products available on the market now.
The biggest problem I had with mutual funds (since I didn’t know how expensive they were at the time) was the amount of effort that I needed to put in to buy one. I could get something but either needed to go into the bank or needed to call someone on the phone to change the contribution or buy a new fund. I didn’t have time for that.
Going Out on My Own:
I discovered that I could open my own brokerage account through my bank. At the time that I opened it trades online cost $28.95! Luckily it is much lower now. But those fees really made you focused on what you want to buy and cut out unnecessary trades. I opened it in Jan 2013, however it took 6 months to get all of the paperwork sorted out so I wasn’t able to complete a trade until July 2013.
My first 4 purchases were following the couch potato investing strategy focusing on growth, 25% Canadian bonds, 25% TSX, 25% S&P and 25% International ETFs. After that I purchased a couple of individual stocks focusing on dividend paying stocks. The concept was great, I could get money for investing in a company. When the fees were high I also turned on the DRIP feature (Dividend Reinvestment Plan) on my account. Basically if I got dividends that were high enough to purchase a stock it would do that. No fee to buy and increasing the stocks that I wanted to have. It seemed like a win-win.
DIY Investing Only:
When we needed to stop contributing to RRSPs back in 2016 to prepare for Scott’s job loss I finally stopped contributing to my mutual funds. When we started contributing to RRSPs again I only went to my investment account. Recently I made the call to move the money from my mutual funds to my investment account under the RRSP umbrella. I’m going to save a ton in fees and have fewer accounts to worry about.
Where am I now?
At this point I own 4 ETFs and 1 stock (APPL). I bought Apple right after it split and it has done well for me on a growth level. I started getting rid of some of my non-performing stocks. They weren’t growing and the dividends weren’t great. A couple of weeks ago I finally sold all of my remaining stocks (excluding Apple) and invested the money into my 4 ETFs. I try not to focus on what the market will do from one day to the next and focus on my 25 year plan instead.
I like index investing. I don’t really have time to be constantly looking at the stock market, picking out what I want to invest in and selling stocks. Also I don’t like wasting money buying something that I wwon’t keep very long. Sure I’m at home right now, but I don’t want to waste my time with that. The ETFs still pay me dividends and I still re-invest those dividends into the ETFs. I don’t pay any fees on the account right now and my investments are pretty locked and loaded at this point. I balance them every year and purchase more when I have enough money to do so to make the fee worthwhile.
At this point this is my strategy and I’m sticking to it. It gives me growth from the stock market across the world and the fees are 0.12% which is pretty good!
I would like to hear your investment strategy! Share in the comments.