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.
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.