4 Easy Ways To Start Investing

Owen Winkelmolen

Fee-for-service financial planner and founder of PlanEasy.ca

Investing is one of the best ways to build wealth. When you invest, you buy small a piece of a company and become part owner. And as a part owner of that company you get to share in the profit that they create. This profit can be distributed to shareholders in the form of cash dividends every few months (ie. Coke) or it can be invested back into the company to help it grow even faster (ie. Netflix).

When you invest you put your money to work. Rather than letting your money sit in a high-interest savings account, where it does next to nothing (earning minimal interest, sometimes less than inflation) instead, you give your money a real job.

When you invest, you get a higher return but this return isn’t for free. A higher return comes with higher risk. Investing is risky. When you invest it’s possible to lose a big chunk of your savings over a few years, months, or even days. The benefit is that over the long run you can earn a better return than your bank account, and this is important when you have long-term goals like financial independence or retirement (Note: you should never invest when you’re saving for short-term goals, for short-term goals a high interest savings account or GIC are the best options).

Related: My biggest financial mistake

What is the best way to invest? That depends on your specific circumstances. It depends on how much time you have, how involved you want to be, and how much you want to pay in fees etc. Investing today is easier than ever. There are new and easy ways to invest in a highly-diversified portfolio of stocks and bonds.

Which method you choose will depend on a few factors…



Factors To Consider:

Fees: Fees are one of the post important factors that an individual investor can control. High investment fees can easily cut a portfolio’s value in half when compared to lower cost alternatives. To make the most of your investments it’s important to limit the impact of investment fees over the course of your plan. Fees should ideally be below 0.5% of the portfolio value each year.

Asset Allocation: One of the best ways to reduce risk is through asset allocation. When choosing the right asset allocation, it’s important to minimize risk but still ensure investments are able to grow for the future. Figure out your risk profile and choose an asset allocation accordingly. Typically this means allocating your investments between stocks (more risky) and fixed-income investments like bonds and GICs (less risky).

Diversification: Within your investment portfolio it’s extremely important to diversify across different companies, sectors, and geographic areas. This can be done by purchasing broad index investments that encompass many different companies/sectors. This can also be done by purchasing broad index investments with exposure to Canada, the US, and internationally.

Rebalancing: Each year your various investments will perform differently. To minimize risk, it will be important to rebalance your investments at least once per year to get back to your target asset allocation. Some investment options make rebalancing easy (or automatic!) while others take a bit more work.




Option 1: Robo-Advisor

A robo-advisor uses software to create a portfolio of investments that are managed electronically. Rather than having a person manage their client’s investments the robo-advisor uses technology to do this faster and for less cost. This means you can have a highly-diversified portfolio that is automatically rebalanced at a very reasonable cost.

  • Fees: 0.75% to 1.0% per year
  • Asset Allocation: Set based on portfolio they help you select
  • Diversification: High
  • Effort: Low
  • Rebalancing: Automatic
  • Example: WealthSimple and WealthBar



Option 2: e-Series Portfolio

The e-Series funds are a group of low-cost mutual funds provided by TD Bank. Unfortunately, the only way to access the e-series funds is by having a TD direct investing account. The benefit with the e-series funds is that buying and selling mutual funds are quite easy when compared to exchange traded funds (ETFs).

  • Fees: 0.44% per year
  • Asset Allocation: Self-selected based on mix of mutual funds purchased
  • Diversification: High
  • Effort: Medium
  • Rebalancing: Manual
  • Example: CCP e-Series Portfolio



Option 3: All-In-One ETF Portfolio

A relatively new option in Canada is the all-in-one exchange traded fund (ETF). This type of investment is basically a basket ETF that holds multiple different types of ETFs inside it. The benefit of this approach is that you only need to purchase one ETF but you get exposure to Canadian stocks, US stocks, international stocks, US bonds, Canadian bonds etc.

  • Fees: 0.24% per year
  • Asset Allocation: Set by ETF provider
  • Diversification: High
  • Effort: Low
  • Rebalancing: Automatic



Option 4: Simple 3 ETF Portfolio

The last option is a simple portfolio of three exchange traded funds (ETFs). The benefit of ETFs is that you can minimize your annual fees and you can have greater control over your asset allocation. As an added benefit, some discount brokerages now offer free ETF purchases, so you can build your investment portfolio at minimal cost.

  • Fees: 0.14% per year
  • Asset Allocation: Self-selected based on mix of ETFs purchased
  • Diversification: High
  • Effort: Medium to High
  • Rebalancing: Manual
  • Example: CCP Simple ETF Portfolio



Disclaimer: These are just a few examples of investment options that you may consider. This shouldn’t be considered investment advice. If you’re in doubt it’s always best to speak with a professional who can help guide you through the process.

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Owen Winkelmolen

Financial planner, personal finance geek and founder of PlanEasy.

New blog posts weekly!

Tax planning, benefit optimization, budgeting, family planning, retirement planning and more...

New blog posts weekly!

Tax planning, benefit optimization, budgeting, family planning, retirement planning and more...


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