# Newb not sure what todo with savings



## Jglover (Nov 2, 2011)

I'm 22 fresh out of university and started my first real job a couple weeks ago. I've always been very frugal and have been saving up for most of my life. I'm currently debt free and have about 56k total in my ing savings and tfsa. On january 1st each yeari have the whole 5k for the year automatically inserted into my Tfsa. With my new job within the year this should roughly double. I also still live at home so I have very few expenses and am able to save a large portion of my paychecks each month, though this will likely change soon.

My problem is I just have no idea what I should be doing with this money, while the interest rates at ing are alright I know it is less than inflation so I am losing money just letting it sit there in a savings account.

I'm hesitant to throw money into the stock market because it seems a lot like gambling to me, but if I can get some better returns it might be worth it. My grandpa was telling me to buy dividends in banks and just keep reinvesting in them each quarter. Does this sound like a good strategy to look into? Am I also too young to start trying to plan for retirement?

Any advice is greatly appreciated


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## Montrealer (Sep 13, 2010)

My advice to you (since your 22 and young) is to buy a condo or a small house, something that you can afford the payments on or possibly flip for profit in a year or two.

Get pre-approved for a mortgage a.s.s.p.

Then do the following:

- Keep $40,000.00 as a down payments
- Keep $16,000.00 for closing costs, taxes and emergency savings until you move in
- Do not borrow more than 3 to 3.5 times your annual gross salary and live below your means
- DO NOT pay rent and live in this condo or house for a few years before flipping it
- Good luck!

If you want any other information, advice or help with real estate and investing in it, please message me and I can help you.


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## humble_pie (Jun 7, 2009)

well. well. well.

i guess we all know what sector montrealer is toiling in.

my suggestions to jg:

- don't even think of messaging to montrealer

- don't encumber yourself with real estate at such a young age

- don't put all your investment eggs in one basket such as real estate

- do: accept congratulations for a magnificent job of savings done so far. Particularly, do accept congratulations for having already established your tfsa

- do: realize that in your grandfather you have an ace source of information & advice

- do: try to have conversations with your grandfather about as many aspects of investing as he cares to discuss

- do: select for study as investments a couple of banks, perhaps your own bank (if you like it) plus another recommended by your grandfather.

- do: begin reading & studying about investments over the course of the next year. All or nearly all the books can be borrowed from a library. Other members here will hopefully supply you with titles. One book that's universally recommended is Investing for Dummies. CMF member toronto.gal has an excellent small list, perhaps she wouldn't mind posting it again.

- do: read as few as 3-5 books in a year, enough to be familiar with forms of investment such as exchange-traded funds, common stocks, preferred stocks, bonds & bond funds, foreign stocks bundled as US-traded ADRs & ADSs, real estate investment trusts, and so on. Read enough to understand the differences between interest, dividend & capital gains income. You can also look up many topics in Investopedia.

- do: learn about e-funds portfolios (best known is TD's, these are restricted to e-funds) & discount brokerage accounts (can hold all types of securities)

- do: perhaps think about jan 2, 2012 as the day on which you will set up a tfsa or other account with equity (ie common stock) exposure. By january 2012 it looks as if you will have saved close to 60,000. A young investor newcomer in these happy circumstances might commit 20-25% of such an amount to common stock exposure. The rest could remain at ING for the next year, while you continue to study. Ideally, in the end, once you have found your investment feet, a young investor could easily tolerate equity exposure of 50-80%.

- do this only if your earned income warrants it: establish an rrsp if this would truly provide tax savings, based on your salary.


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## the-royal-mail (Dec 11, 2009)

^I completely disagree with that. There is NO money to be made in flipping houses after only a year or two -- unless you're a real estate agent/broker and hotshot renovator. I believe the advice above is biased.

Seriously Montrealer, you're telling a 22 year old fresh out of school to put down deep roots in an inflated housing market? That was terrible advice.


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## Toronto.gal (Jan 8, 2010)

*Jglover:*

- 1st: congratulations on graduating & getting a job so fast. 
- 2nd: welcome to CMF!
- 3rd: fantastic post by hp; lots of great advice & there is really nothing more I can add, except emphasize the reading part.

If you've never read any investment books, you need to start with the very basics. I would recommend the following:

- The Lazy Investor - Derek Foster 
- Investing for Canadians for Dummies [also get the Taxes for Canadians for Dummies]
- The Wealthy Barber Returns - David Chilton
- One up on Wall Street - Peter Lynch
- The Four Pillars of Investing/The Intelligent Asset Allocator - William Bernstein
- The Intelligent Investor - Benjamin Graham
- The Little Book That Builds Wealth - Pat Dorsey

*I'll also repeat to completely ignore Montrealer's advice.* 

Best of luck!


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## HaroldCrump (Jun 10, 2009)

We've always had a steady stream of wannabe RE investors (not the OP here, but in general) and agents equally willing to egg them on, but the trend seems to have accelerated in recent weeks.

All signs pointing to a market top....


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## petea4 (Dec 24, 2010)

Talking from pure experience in Toronto. 

In 2000 I was 22. I found myself in a similar situation. I had already put monies into some energy trusts and mutual funds in my late teens with Dundee/Fairfax. I wasn't happy with their small returns. So I pulled out the cash and at 22 bought a detached house/duplex. Over the next few years I was putting 15k-ish into RRSP's/market. I was also putting monies into real estate. Taking a 30% hit in '08 turned the lightbulb on for me. No more additional money in the markets. I have been dumping my monies soley in real estate since then. Much further ahead today on the real estate side of the ledger. I still own that duplex and it has doubled in value with my initial 37k investment. The 15k I put in the markets that year is nowhere close. 

So back to the OP. I would look at real estate. Your living at home with no real expenses, or dependants. You can't control the markets, but you can control the value of real estate. Buy a big lot, rent the house while you sever, and sell
to a developer? Buy a Pre-construction house/condo? If you plan on living at home for a while, go with real estate. If your handy, buy a POS in the best location you can afford. Cleaning it up will bring you a better payday than any bank div. While your looking for the next deal, you can always have those monies sitting in bank stocks. 

Looking around I see many people that have done well in real estate. I have too many fingers on one hand to count those that are comfortable by way of the markets.


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## Cal (Jun 17, 2009)

Generally just try to learn as much as you can, and soak up as much knowledge as possible. Figure out what investing type works best for you, set some goals....

You seem to hav the saving part under control, which many others have trouble with.

Any of Derek Fosters books are good for dividend investing, and they are all very simple reads.

You would probably enjoy the Millionaire Mind and the Millionaire Next door.

And the little book of Big dividends was good too.

Enjoy the forum.


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## marina628 (Dec 14, 2010)

I definitely qualify as a Real estate investor and if the OP was going to buy a small one bedroom one bathroom to get out on his own that carried for same as rent I would probably say this is ok but IMO if he is happy to live at home I would not venture into real estate these days.With all the crap going on these days staying out of Debt would be my best advise.I look at my utility bills and property tax bills , I can justify it for my family but quite a bit of extra money to put out for a single person.


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## m3s (Apr 3, 2010)

marina628 said:


> I definitely qualify as a Real estate investor and if the OP was going to buy a small one bedroom one bathroom to get out on his own that carried for same as rent I would probably say this is ok but IMO if he is happy to live at home I would not venture into real estate these days.With all the crap going on these days staying out of Debt would be my best advise.I look at my utility bills and property tax bills , I can justify it for my family but quite a bit of extra money to put out for a single person.


+1

Buy a house if you want a house (and want to clean and maintain it as well) Don't buy a house just expecting to make money on it. Investing all your eggs in 1 basket (house) is more akin to gambling it all on red than a broad portfolio of stocks

I wouldn't rush into investing. If you pay someone else to do it there is still no guarantee you'll make money in this market but you pay them either way. I had about the same as you at 22 and I didn't start investing seriously for awhile after that.

There's no rush imo because you need capital before your investments really pick up steam anyways. I would just ease into it as you feel comfortable. If anyone tries to push you into anything like Montrealer, run run fast! Good job on saving money so young! It's pretty rare


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## Plugging Along (Jan 3, 2011)

Welcome to the forum!
As others have said, it's impressive on how much you have managed to save and still graduate.

In terms of investing, there's a lot different ways to go. I think the most important first step is learning the type of investor you are and this will help guide what kind of investments you will want to go in. At the end of the day, it is your money, and you need to be able to sleep at night. I would start with some of the books and materials others have recommended.
I would also take a look at what your goals are. What is the time frame you will think you will need this money. What is your risk tolerance? How active do you want to be in managing your investments, and how much time do you have? 

My thoughts on RE, is that there is money to be made, but they are long term investments (possibly decades, with this market). You take a high risk by thinking you can buy and flip like the first response suggested. I would not buy to flip. I have real estate and it’s been my parents’ first choice over the years, I’ve been helping them manage their real estate for years now. If you want to get in to it, then you really need to educate yourself as a landlord, and be really comfortable picking good tenants, and dealing with the issues. Also, you need to make sure that you’ll want to stick around in the city for the long term (management fees really kill any profits).
For other investments, a well picked out mutual fund or stock portfolio will also have risks. Fortunately, you have time on your side, so could potentially wait out the cycles. I think you grandpa is on the right track, and you should really see how he is doing. When I was your age, I actually thought dividends were really boring, but now as I become a little wiser (and a lot older), I realize that investments are meant to be exciting, they should be performing, and reliable.

Your final question of if you’re too young to think about retirement – my answer you don’t need to think about this as retirement. I consider my savings and investments really my future. That could mean retirement, it could mean a career or life change. The savings I have will allow me the freedom to make the choices.


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## Montrealer (Sep 13, 2010)

Alright Jglover, *don't listen to me*, don't invest your money in Real Estate at such a young age (to reap the benefits faster than 90% of people) and invest it in the stock market, mutual funds and keep it in savings at a mere 1.5% to 2% with low risk if you like.

My advice to you, make money with the banks money and invest in "bricks and mortar", the only way it will go is up over the next 10 years and think of where you will be at the age of 32. 

Good luck!


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## Young&Ambitious (Aug 11, 2010)

Montrealer, I am curious on your thoughts of making profits in the RE, not to say that I am disagreeing with you by any means, I just bought a place myself and I, like the OP, am 22; but what with the example of the United States housing market just south of the border do you think we are immune to such an occurance happening in Canada? I look forward to hearing your thoughts on making money thru RE at this time in this market


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## kcowan (Jul 1, 2010)

petea4 said:


> ...So back to the OP. I would look at real estate. Your living at home with no real expenses, or dependants. You can't control the markets, but you can control the value of real estate. Buy a big lot, rent the house while you sever, and sell
> to a developer? Buy a Pre-construction house/condo? If you plan on living at home for a while, go with real estate. If your handy, buy a POS in the best location you can afford. Cleaning it up will bring you a better payday than any bank div. While your looking for the next deal, you can always have those monies sitting in bank stocks.
> 
> Looking around I see many people that have done well in real estate. I have too many fingers on one hand to count those that are comfortable by way of the markets.


If you decide to pursue RE, follow this advice. Look for discontinuities in the local market. The idea of severing property and/or rezoning it still represents an opportunity for quantum leaps in the market. Because you are living at home, you have the opportunity to be patient and learn. Our second house was a nasty divorce and we timed a low offer for when they had to come up with cash for the final settlement. We fixed the place up (sweat equity) and sold it for an increase in equity of 47.6% in 2.5 years. There are many other examples but you get the idea.


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## Jon_Snow (May 20, 2009)

For the sake of all that is good and decent in this world, read Garth Turner's blog! 

Before it is too late!


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## humble_pie (Jun 7, 2009)

there is a world of difference between the OP, a young graduate only weeks into his or her first job, and a kcowan, who is an experienced businessman with capital & knowledge to support any risky forays he might undertake.

other than the self-serving real estate agent attempting to sell his services in this thread, most of the other parties answering jg the OP were sincerely focusing on how to launch him towards a lifetime of diversified investments, not just one decade of results in one limited sector, stellar though those short-term results may be.

it would be absurd to believe that residential real estate in canada can repeat the trajectory it enjoyed during the previous decade. Beyond absurd. It would be suicidal.

in addition, a poster asking for a personal message & offering services to "help" with the same is assumed - in this forum - to be trolling for customers.


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## Cal (Jun 17, 2009)

Montrealer said:


> Alright Jglover, *don't listen to me*, don't invest your money in Real Estate at such a young age (to reap the benefits faster than 90% of people) and invest it in the stock market, mutual funds and keep it in savings at a mere 1.5% to 2% with low risk if you like.
> 
> My advice to you, make money with the banks money and invest in "bricks and mortar", the only way it will go is up over the next 10 years and think of where you will be at the age of 32.
> 
> Good luck!


I don't think anyone is recommending mutual funds, maybe e funds we mentioned. And I don't think anyone recommended the OP to keep their money in savings.

It is true RE investments may go up....but I would not recommend a 22yo being anchored down by a property, so much could happen and change over the next few years for them. Even if returns for RE and investments were equal, the liqidity and portability of financial assets has to win for a 22yo.


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## Causalien (Apr 4, 2009)

From the life perspective.

A real estate really ties you down. You are 22, you don't know where you will settle in the future and chances are, you will not stay in the current province. Which means that when it comes time to move and sell, you lose out because of all the fees and commissions. Until one day, you realize that your house becomes part of all your decisions. When you are renting, being late or missing the rent has lesser consequence than when you bought a place. Things must be paid because the consequences are worse and you will have to build up a larger buffer if you own RE. Which leads to lesser spending. Which is very important at your age. You will have more money to go out and join activities as a renter and in the process network with people. This human capital is more important than stocks or RE and sadly, often requires spending money for "bonding" activities. 

That being said, I also lost all 10k of my life savings while I was still in university during the high tech collapse. That is the consequence of letting someone else manage your money in stocks.

What the stocks market gives you is freedom and risk. What the RE gives you is chains and obligations. They are both necessary for growth, but RE's chain and obligation requires a larger capital to entry in the current environment. I suggest waiting till 25 to consider whether or not you want RE.


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## Young&Ambitious (Aug 11, 2010)

^ I disagree, not with the points themselves, but with the generalizations. I think the OP should ask themselves if they are responsible, ready for a commitment, does this affect their short/long term plans and goals, would such an investment hinder to aid their success in said goals (business, personal etc), and evaluate which path is as such 'most' right.


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## humble_pie (Jun 7, 2009)

what a riot. The OP never asked about real estate. Not even a hint.

it's obvious the OP needs a knowledge base first, before he throws himself into collecting spiderman comix, gold coins, silver bars, chinese railway bonds, antique kilim rugs, desert castles in morocco, fire-sale casitas in spain, flipped condos or any other kind of marketable security.

not clear why folks keep trying to hijack this thread into the pros & cons of owning RE.


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## MoneyGal (Apr 24, 2009)

Moroccan castles, perhaps like this one? 

http://youtu.be/YF4-r2MpRMs

p.s. Essaouira is one of my top travel spots in the whole planet, and was the inspiration for this song about castles made of sand...


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## Toronto.gal (Jan 8, 2010)

humble_pie said:


> what a riot. The OP never asked about real estate. Not even a hint.
> 
> not clear why folks keep trying to hijack this thread into the pros & cons of owning RE.


I thought the same, hilarious indeed. 

OP said that he/she is:

- 22 years old 
- just graduated
- started a new job 2 weeks ago
- has $57K saved
- has no idea how to invest it
- wondering about bank stocks

Where is he talking about RE investments? I'm sure he/she will have a good laugh when he reads all the advice.


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## Cal (Jun 17, 2009)

For simplicities sake, start with a few bank shares, as your grandfather suggested.

And buy an etf or two, with low mer's, and follow their holdings. 

From that you will get a good introduction into the markets, with some asset diversification.


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## Eclectic12 (Oct 20, 2010)

Jglover said:


> I'm 22 fresh out of university and started my first real job a couple weeks ago.
> 
> [ ... ]
> 
> ...


First off congrats on have a good nest egg. I wish I'd started out that way!

As for the stock market, I'd start by reading a few books and learning about it before trying putting a significant amount into it.

You may decide on a set amount to buy bank stock with and discuss your options with your grandpa. When you decided which stocks, watch them for a while before buying.

At the end of the day, the key is to understand the basics and then decide if you want to take on the work.

If you don't, other possibilities are to invest using ETFs or hire someone to manage your money.


Perhaps the most important thing is your approach. I've seen too many people give up because they seem to believe they must know everything about investing in a short time frame.

Learning to invest is similar to learning any new hobby or skill. Learn what you can at your own pace - apply what you've learned at your own pace.


By the way - if you decide you are interested in Real Estate as an option, the same holds true. Knowing the basics goes a long way to avoiding mistakes or rip-offs.


Cheers


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## Eclectic12 (Oct 20, 2010)

petea4 said:


> Talking from pure experience in Toronto.
> 
> [ ... ]
> 
> ...


Okay ... this strikes me as funny.

The value of stocks is risky so it's a good place to park money while looking for a good Real Estate (RE) deal?

One can "control" the value of RE?

IMHO, due diligence will help avoid mistakes and increase the chance of success but I doubt the value can be "controlled". And that applies to both stocks and RE.


After all - a big enough slowdown in the economy is going to affect RE broadly. Just like everyone in the stock market selling is going to drag down most, if not all stocks - regardless of the business outlook.


Cheers


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## petea4 (Dec 24, 2010)

^^ 

My comments were giving insight to a 22yr old looking for advice, as I found myself in an almost exact situation at 22. My thoughts at that point was shoot for the moon. IF I had lost, no biggie, not like i had mouths to feed, people to support.


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## Eclectic12 (Oct 20, 2010)

petea4 said:


> ^^
> 
> My comments were giving insight to a 22yr old looking for advice, as I found myself in an almost exact situation at 22. My thoughts at that point was shoot for the moon. IF I had lost, no biggie, not like i had mouths to feed, people to support.


What's the disclaimer commonly quoted?

Oh, yes ... past performance is not an indicator of future performance.


IMO - part of the danger of with boards like this is that it easy to over-simplify.


Mind you, I've watched people dive into RE without considering the commitment or risks and hate it. And I've seen others do quite well. 


At the end of the day, it's one of many options that the OP would be wise to get a high level knowledge of before deciding what works best.



Cheers


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