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How much do you know about financial independence?

Oct. 1, 2016, 10:15 p.m.
Posts: 33354
Joined: Nov. 19, 2002

Just doing some light reading:
- TFSA account gives 0.8% annually
- Inflation is slated to average at 1.6% this year

Simply put, my TFSA account just lost 0.8% value and seems like a bit of a dog compared to some sort of diversified investment portfolio with some mutual+index funds and a few individual stock options. Given my younger age it seems prudent to add minimally to my TFSA (why even bother…) and go mostly in on the above.

Comments? Yes I've been following this thread since the beginning.

You didn't lose money - you made 0.8% compared to keeping the money in your pocket, and there was zero risk of losing your money.

It is easy to dodge our responsibilities, but we cannot dodge the consequences of dodging our responsibilities.
- Josiah Stamp

Every time I see an adult on a bicycle, I no longer despair for the future of the human race.
- H.G. Wells

Oct. 1, 2016, 11 p.m.
Posts: 0
Joined: Sept. 20, 2006

Ok now we're talking.

- Any recommendations for the best brokerage firm to set one up?
- Simple as transferring from one TFSA to another?

Oct. 1, 2016, 11:03 p.m.
Posts: 0
Joined: Sept. 20, 2006

You didn't lose money - you made 0.8% compared to keeping the money in your pocket, and there was zero risk of losing your money.

Logic says that my money didn't keep up with the rising cost of goods. If I had $10k in 1900 I'd be rich, but if I kept it in my pocket the whole time and went to spend it in 2000, it wouldn't be worth a whole lot…

Anyways, you know that. 0.8% is ridiculous, even for guaranteed return. Laughable even.

Oct. 2, 2016, 8:03 a.m.
Posts: 17870
Joined: Oct. 28, 2003

Before you jump in, make a plan and understand your options

I would start in these two places and read everything linked from there if you plan to go at it as on your own.

https://www.bogleheads.org/wiki/Getting_started

http://canadiancouchpotato.com/couch-potato-faq/

Oct. 2, 2016, 8:10 a.m.
Posts: 17870
Joined: Oct. 28, 2003

Most important is to understand your risk tolerance. Youve discovered your risk tolerance is more than barely keeping up with inflation.

What about losing half of your equity over the course of 2008? Are you willing to keep buying stocks while they crash hard?

What about when interest rates start rising and the value of your bond fund drops 4%? Do you know enough to hold that fund and not panic sell? After the bond funds duration is up, the higher interest rate will recover your lost capital. That might be ten years out if you buy med/long term bond fund.

Oct. 2, 2016, 8:13 a.m.
Posts: 17870
Joined: Oct. 28, 2003

As to your immediate quedtion, moneysense allows only 3? unpaid views of thier articles per month. Copy/paste it for reference.

http://www.moneysense.ca/canadian-online-brokers-at-a-glance/

Read the overcontributions and transfers section below carefully. Dont withdraw your TFSA. Have your new account transfer funds from the old one with no impact. If you stick with your current bank, the transfer will likely be free. If not, ask your new brokerage if they cover transfer fees from the old bank.

http://www.finiki.org/wiki/Tax-Free_Savings_Account

Oct. 2, 2016, 8:24 a.m.
Posts: 17870
Joined: Oct. 28, 2003

The favourite broker on most forums is Questrade because they allow free ETF purchases. I decided to stick with my big bank broker who charges $9.95 per trade. This was due to personal reasons, mostly knowing my big bank will most likely still be in business 50 years from now.

What you plan to buy and how much/often you plan to save plays a big role in where you're best to set up shop. Think long term. Automate contributions for best longevity.

http://canadiancouchpotato.com/recommended-funds/

Oct. 2, 2016, 9:23 a.m.
Posts: 1084
Joined: May 29, 2003

Ok now we're talking.

- Any recommendations for the best brokerage firm to set one up?
- Simple as transferring from one TFSA to another?

Adding to Heckler:

Two 'big' ways to do this.
A) Do as you said, and setup with a company. They will assist with everything.
Or
B) Do it yourself.

Details on A)

  • firms will charge you. There's a bunch of terms for this but they all basically take % of your earnings off the top (or in some setups even the remaining principle in the case of loses). Say your investments make 7%, and the fees are 3%, your left with a 4% net.
  • One big term is management expense ratios (MERs), look them up and how they can eat away at an investment. It's a lot over long periods of time.
  • fees range from 0% to +3%. anything over 2% is considered robbery. acceptable MERs are generally around 0.5 to 1.5% range. Lower is always better.
  • firms act in their own interests. This is obvious, but important. They make a living off of you. Fullstop. Everything said to you should be treated with huge skepticism followed by you hitting the google and asking others you trust.
  • The big pro: They are super easy to use. You give them money, they assess how comfortable you are investing, (known as risk tolerance) and then manage it accordingly. Often there is other advice that will come along with these firms for free. Such as an adviser sitting down with you and getting your expenses/finances in a row. This is always good thing to do anyways, but keep the previous point in mind. A financially healthy you means they will benefit as well so use that to your advantage.

Details on B)

  • It's more work but not a lot. For better or worse, you are the one at the helm. You dont have to cram all at the start, but getting involved in this stuff is truly a life skill worth developing over time.
  • With most banks it's a simple online application to setup a TFSA investment account. usually [HTML_REMOVED]24hrs for approvals and shows up as just another online account. Transfer money from chequeing or savings into it and then start buying funds. Usually your bank will have online resources to show you how to do this functionally. otherwise ask questions :)
  • There are tonnes of online guides to help you self manage and plan these things. mrmoneymustache.com and canadiancouchpotato.com are two great ones to start getting into. The CCP links directly to model portfolios.
  • Research something called ETFs. By example: Vanguard ETFs have some of the lowest MERs around and have huge offerings; by definition ETFs are not a single holding of one company, but instead you own units that hold a small % of hundreds or even thousands of individual stocks within. This make them great ways to invest while diversifying and lowering risk without really thinking about it.
  • Once your account is setup, you can buy and sell ETFs as if they were a stock ticker. For simplicity at the start, stick to ETFs that are offered on Canadian exchanges (eg: TSX) as getting into other markets is a deep well of things to consider. (eg: foreign exchanges, with-holding tax etc.)
  • TSFAs should be boring as hell. To offset trading fees, save up a few thousand over however long it takes, then do a bulk buy. Dont try to 'time the market' just pull the trigger. Remember that time horizons are usually decades so no need to twitch out on these things and micro manage.
  • What ETFs should you buy? well there's a lot of info out there. This is where the feelings of self induced overwhelminess can creep in. Everyone want to do the best thing to max their money, but what most dont say is that there are a whole load of ways to be do exactly that that. The links above (and Heckler's) will help, and good setup examples are in the CCP link I gave above. For ME, I broke my ETFs into 4 parts all through ETFs offered on the Canadian exchanges. I bought 1 Canadian only ETF, 1 US only ETF, 1 Developed markets outside of North America (Europe) and 1 Developing countries ETF (China/India etc). I set a goal that portioned out a certain target % that I think is good for each, Say 30, 30, 20, 20 = 100%. this is Just one way to do things. Going 100% US only ETF is perfectly fine too. Sometimes I 're-balance' my portions when I bulk buy. Sometimes I put the buy all into one, sometimes I put it into all 4. Depends on the money I've saved and how 'off' the buy makes my target goal. Like I said, there's no single "right" way of doing things.
  • When I did my first go at this self managing thing I ended up learning a lot more about ETFs in the year after I started. When I had my next chunk of money, I didn't even look at the gains/losses on ETFs I had and sold the whole thing and re-bought the funds I wanted in the proportions I wanted. Excluding the gains/losses, it was a $50 lesson. No big deal. But I'm glad I just jumped in and started and didn't wait for 'the perfect time, with the perfect ETFs' or else nothing would've happened for me.

Whatever you do, don't over worry and dont over think - doing almost anything TFSA or savings related is 90% of the battle. Ignore the ups and downs, check on them whenever you've saved enough to buy again, and ask a lot questions. BAM! You're now doing great!

If that doesn't sound like you, then maybe a firm is the way to go. I first started that way myself - I didn't even know self managing existed. The more I learned tho the more I said "I want to do this myself" and Bam! I don't regret the fees, it was just one step in a long learning process. Either way, welcome to your first step.

Oct. 2, 2016, 10:04 a.m.
Posts: 2906
Joined: June 15, 2006

EFT = emotional freedom techniques??

Or ETF = exchange traded fund??

This trip to Kelowna was definately an undertaking - Liam and I had been planning this project for 24 hours. We worked really hard to pull out all the stops in this video. We had slo-mo goggle shots; time lapses; pedal flips; outrageous product shots; unloading and loading the bike; walking through the field with your hand in wheat. At the end of the day this trip was all about just getting out and riding with all my friends.

www.letsridebikes.ca

Oct. 2, 2016, 10:25 a.m.
Posts: 1084
Joined: May 29, 2003

EFT = emotional freedom techniques??

Or ETF = exchange traded fund??

Morning plus lack of coffee = Typos
:P

(but thanks for catching that)

Oct. 2, 2016, 4:25 p.m.
Posts: 0
Joined: Sept. 20, 2006

Cheers. I've got quite the to-do list now.

I heard about this blog on CBC Radio and there's quite a bit of good stuff, lots that mirrors what is said in this thread.

Time to start with a few things:
- TD E-Series account
- Switch my TFSA to a different bank.

Oct. 2, 2016, 5:52 p.m.
Posts: 583
Joined: June 6, 2006

i just shove everything into ING Streetwise. but i know little about this stuff nor am i interested enough to learn, and i'm sure someone here can tell me why it is bad. but it seems to do well compared to the amount of effort i put into it. key point for me though is the amount i don't spend on it and can do other things i'd rather do

Oct. 2, 2016, 8:26 p.m.
Posts: 17870
Joined: Oct. 28, 2003

i just shove everything into ING Streetwise. key point for me though is the amount i don't spend on it and can do other things i'd rather do

Theres nothing wrong with simple, as long as you understand your options. Just understand the fees please. Say no to 4% DSC (deferred service charge) and 6% FEL (front end load) mutual funds.

http://canadiancouchpotato.com/2012/04/09/ings-streetwise-fund-v-td-e-series/

Oct. 2, 2016, 9:32 p.m.
Posts: 1172
Joined: Feb. 24, 2017

the ING streewise stuff is quite low cost and seems popular with the index low fee pundits. simple and similar to the TD e-series stuff.

Oct. 3, 2016, 7:14 a.m.
Posts: 14534
Joined: Nov. 20, 2002

I used ING for a mortgage and they are good to deal with Did it all over the phone

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