# Novice Investing



## boycapitalist (Feb 11, 2010)

I was looking for some help here. In December I invested about 8 grand in a few different things. I chose iShares and an MD Funds Management Inc. bond fund. I was expecting about a 5% return on these. So my questions are: a) What do you think the return for this year will be? b) I'm looking to invest another 5 thousand some time in the next month. I'm looking at annual returns but I'm only 16 so if there's a long term opportunity I would definitely consider it. 

A bit more about the iShares:
XCB-ISHARES CDN DEX CP BD ETF-Bought 50 shares at $20.71
XMA-ISHARES CD SP/TSX MAT ETF-Bought 100 shares at $18.56
XIU-ISHARES CDN S&P/TSX 60ETF-Bought 200 shares at $17.04
The last $1500 was put into the bond.

I would appreciate any insight you can give.


----------



## humble_pie (Jun 7, 2009)

hola !! Awesome start for a young man. Everybody here should give you a big round of applause.

question. Are these funds in a TFSA? This is an astonishing savings vehicle that the govt will surely trim back once it realizes how many taxable dollars are falling permanently off the tax platter. In the meantime, please think of opening one if you don't already have one. Imagine, by the time you're 60, if all goes well, you could have a million dollars saved up, all to be utilized tax-free.

don't want to rain on your parade, but you've got more than enuf different issues.
are you paying commissions or loading charges for each of these holdings?
it's a good idea to keep costs under control in a small account.
also perhaps there's excessive bond exposure for one so young.
XIU is a great choice for any investor, novice-to-experienced.

all in all, great start. Congratulations.


----------



## andrewf (Mar 1, 2010)

BC,

A question you should ask yourself is: what are my investment goals? I imagine someone your age might be saving for their education, perhaps for a car or a downpayment on a house. This question helps to determine what your investment horizon is--when you would like to make use of these investments. Once you have the answer to this question, you can better answer the question of what investments are right for you. One thing about ETFs: know what's in them. Buying XMA and XIU might have a fair bit of overlap. Some of these might also not be diversified, as they are concentrated in a few large firms.

Congrats on savings you've managed to accumulate so far.


----------



## Four Pillars (Apr 5, 2009)

humble_pie said:


> hola !! Awesome start for a young man. Everybody here should give you a big round of applause.
> 
> question. *Are these funds in a TFSA?* This is an astonishing savings vehicle that the govt will surely trim back once it realizes how many taxable dollars are falling permanently off the tax platter. In the meantime, please think of opening one if you don't already have one. Imagine, by the time you're 60, if all goes well, you could have a million dollars saved up, all to be utilized tax-free.
> 
> ...



You have to be 18 to open up a TFSA account.

Congrats to the kid - $8k is awesome!


----------



## bean438 (Jul 18, 2009)

Way to go, i am impressed. I have a few nephews around your age, and they spend their cash as fast as it comes in on the latest xbox, ipod, ipad, iwhateverstevethelodsaysyouneedtobuy.
Every kid your age blows there money, except you.
40 years from now you will fully understand compound interest being one of the wonders of the world.

Humble, I hope you are wrong about the TFSA being trimmed back. I am waiting for the limits to increase.

But I see your logic, as someone will have to pay for the growing elderly, and native populations.


----------



## Four Pillars (Apr 5, 2009)

humble_pie said:


> hola !! Awesome start for a young man. Everybody here should give you a big round of applause.
> 
> question. Are these funds in a TFSA? *This is an astonishing savings vehicle that the govt will surely trim back once it realizes how many taxable dollars are falling permanently off the tax platter. * In the meantime, please think of opening one if you don't already have one. Imagine, by the time you're 60, if all goes well, you could have a million dollars saved up, all to be utilized tax-free.
> 
> ...


I missed this...

There are no tax dollars being missed - all the money going into a TFSA has already been taxed. 

It amazes me how some people (probably not anyone in here) think that the TFSA is a better deal than the RRSP because you have to pay tax on the RRSP withdrawals whereas you don't for a TFSA.


----------



## humble_pie (Jun 7, 2009)

bean i think i'll invent a character just to entertain you.

he'll be a wise elder from a first nation. Eighty years old. Mind clear as a bell. Black olive eyes that see all & tell you nothing. Smokes a pipe. Remembers the trap lines. Tells creation stories.

his grandson looks after the old man's trapper's shack up in northern manitoba. Rents it out short-term to worshipful German tourists who keep arriving to live the authentic first nation culture.

"It's wonderful," says the grandson. "They collect their own firewood, fish for their own food and sweep up the cabin with twig brooms they make themselves.

"And they pay us a thousand dollars a week."


----------



## boycapitalist (Feb 11, 2010)

Thanks everyone for your quick responses. 
Humble pie,
I'm not sure what a loading charge is, but I'm not paying any commissions. I did pay a broker fee of $29 each for the 3 different stock purchases. Also, to the best of my knowledge you need to be 18 to open a TFSA. 

My next question is this: for my next purchases I'm considering some BRIC iShares or possibly a big cap like Coke. Would these do better than the Canadian iShares like XIU?


----------



## bean438 (Jul 18, 2009)

Four Pillars said:


> I missed this...
> 
> There are no tax dollars being missed - all the money going into a TFSA has already been taxed.
> 
> It amazes me how some people (probably not anyone in here) think that the TFSA is a better deal than the RRSP because you have to pay tax on the RRSP withdrawals whereas you don't for a TFSA.



Pillars, I dont think that is the reason people think the TFSA is "better". Maybe an average layperson but not people in here.

While I cannot be sure exactly what humble meant, I can tell you what I think, and maybe humble can chime back in:

RSP withdrawals (income taxes aside) show up as income, and thus OAS, GIS may be clawed back. 
TFSA doesnt show up as income, so if all you had was CPP, and OAS any TFSA withdrawal doesnt show up as income, therefore more "tax dollars" must be paid out in the form of OAS, and GIS.

You dont get something for nothing, and what CRA giveth, they taketh away somewhere, somehow.

I can see down the line TFSA with drawls not being subject to income tax, but must be included in income for "tax" purposes.

I think this is what humble possibly meant?


----------



## bean438 (Jul 18, 2009)

humble_pie said:


> bean i think i'll invent a character just to entertain you.
> 
> he'll be a wise elder from a first nation. Eighty years old. Mind clear as a bell. Black olive eyes that see all & tell you nothing. Smokes a pipe. Remembers the trap lines. Tells creation stories.
> 
> ...


----------



## andrewf (Mar 1, 2010)

boycapitalist said:


> Thanks everyone for your quick responses.
> Humble pie,
> I'm not sure what a loading charge is, but I'm not paying any commissions. I did pay a broker fee of $29 each for the 3 different stock purchases. Also, to the best of my knowledge you need to be 18 to open a TFSA.
> 
> My next question is this: for my next purchases I'm considering some BRIC iShares or possibly a big cap like Coke. Would these do better than the Canadian iShares like XIU?


Like I said, you need a financial goal, and a strategy to get there. Randomly picking stocks based on what sounds good is not a strategy. You're basically gambling then, and historical evidence shows that many individual investors do poorly when they invest this way (they underperform the market).

One thing I would add is that you're paying way too much in commissions. Go to a discount brokerage like questrade, qtrade, etc.


----------



## humble_pie (Jun 7, 2009)

hello pillars: i wasn't referring to the dollars going into a tfsa. Of course they've been taxed.

what i posted about was the humungous number of dollars that can accumulate, totally untaxed, within a tfsa over half-a-century; and about how all those dollars will be totally untaxed upon withdrawal. These are the dollars that the tax authorities will miss.

one could realistically say today that every dollar deposited in a tfsa is far more lost to the taxman that it would be if it disappeared into growing-more-transparent-daily switzerland or the bahamas. One could also praise the cra for ultimate democracy. No need, now, to fly off to foreign lands where they don't speak english or where the mafia rules. Now every canadian has his own private little tax haven waiting right in his neighbourhood bank.

the contentious issue of which is better, rrsp with pre-tax $$$ or tfsa with post-tax $$$, has already been thrashed to death on this forum, so i for one say let's not hash it over again.


----------



## humble_pie (Jun 7, 2009)

bean i posted the anecdote because you are traditionally so hard on first nations.

as a matter of fact, i know people like the old trapper and his grandson (the part about renting the cabin to stage-struck european tourists who want to live the aboriginal experience in the bush for a week or two is a true story.)

i think there's tremendous value for all canadians in hearing their amazing stories, learning about their culture, honouring the ties to the land we share.


----------



## bean438 (Jul 18, 2009)

Come live in Winnipeg for a year. After you get your car broken into 5 times, and stabbed for 5 bucks you will have a different opinion.
My mind is made up and nothing will change it, save for the "nation" themselves to pick up their feet, forget the past, and get on with it.
I work with a couple of aboriginals (and I do differentiate between aboriginal and "indian") who are also sick of many "nations". Not only do they have to show up for work like everyone else, but they always feel they have to prove themselves above and beyond. They dont take sick days because they are afraid of what people will think. How a group of people can act this way and create stress on their own who decide to be productive is beyond me.
It is not just a native thing, actually it is a welfare thing.
What gives people the god damn right to think they can sit on their *** all day long and contribute NOTHING? plus they will get a nice "income" tax refund on income they did not earn. 
That would be my budget for Canada. Turn off the tap. If you dont work, you dont eat.
Of course this does not include elderly, sick, and disabled people on the system.
But if you can sit all day and play x box on your 58" plasma, smoking cigarettes and butting them out into the beer cans, then you can dam well go and work.


----------



## boycapitalist (Feb 11, 2010)

andrewf said:


> Like I said, you need a financial goal, and a strategy to get there. Randomly picking stocks based on what sounds good is not a strategy. You're basically gambling then, and historical evidence shows that many individual investors do poorly when they invest this way (they underperform the market).
> 
> One thing I would add is that you're paying way too much in commissions. Go to a discount brokerage like questrade, qtrade, etc.


When the time comes, this money will most likely be used for a downpayment on a house. At this point I am not planning that far ahead, I'm looking to have the highest possible return for about a one year period (within reason risk-wise). I made the decision to invest because I felt that the iShares would get me a better return than the mere 1.2% of my savings account. As for the discount brokerages, I will definitely take a look at that. While i realize I do not have any real strategies or financial plans, my goal is to get a return of at least around 5% a year and I'm just looking to raise that number.


----------



## humble_pie (Jun 7, 2009)

morning BC,

as you know, broker fees are commissions. Unlike other posters on this thread, i don't believe a $29 commish in a micro-account is anything to make an investor flee instantly to a cheaper brokerage. On the contrary i believe a young investor should stay put if he feels comfortable and is getting pertinent research or other valuable support at a good online house. After all, we are only talking 3 acquisitive trades here. Furthermore, your account is still below the level at which online houses will pay to subsidize the transfer fee, so if you move your account somewhere else it could cost you up to $125 and possibly more.

as for the MD bond fund, it's a no-load fund, therefore you didn't pay any fee or commish to acquire it. If you look, you'll see that another poster on another thread close by has referred to the high MERs of MD funds. But, although it's true that managed funds have higher fees than etfs, and although MD funds may have particularly high MERs, i still don't believe it's necessary to bolt instantly, because the amount of money involved in your bond fund is so small that the difference in fees amounts only to a handful of change.

turning now to your questions:

_" ... for my next purchases I'm considering some BRIC iShares or possibly a big cap like Coke. Would these do better than the Canadian iShares like XIU?"_

that question about coke is a lolloppadoozer. There are several aspects that are particular to your circumstances. For example coke's dividend will be subject to US withholding tax. Normally this produces a foreign tax credit for canadians, but at age 16 possibly you have no taxable income anyhow, so a potential tax credit would be useless. You would just lose 15% of the dividend in US withholding tax with no recourse.

in addition, do you already have US dollars ? and what would be your outlook for the US currency vis-a-vis canadian, since once you buy coke you'd be fully exposed to currency risk.

ouf. It might be easier for a new investor to take baby steps and start out sticking to purely canadian.

moving on, your goal - to identify a one-year investment yielding 5%, apparently on a near-risk-free basis - is a bit unrealistic. That's the needle in the haystack everybody is trying to find. It probably doesn't exist.

here's a modest proposal. Why don't you stick your next tranche of investments into XIU, which you already hold, so the monitoring "cost" to yourself in terms of time & attention will not increase, and perhaps also a tad of XEG the energy etf. Then spend the next year studying how markets work, using the vicissitudes of XIU's progression as a pilot project and a teaching instrument.


----------



## andrewf (Mar 1, 2010)

If BC buys 5 securities, the round trip cost is $300 in commissions on, what was it, $8000 investment? The have to do some damn good stock picking to overcome that headwind.


I guess I would suggest socking it in XIU and perhaps XCB. For XIU watch the 200 day SMA and if it falls below it, sell your position. If you want to use your cash in the next few years, you can't afford to suffer a large drawdown. Please for the love of god don't randomly pick stocks because they sound cool. It's easy to lose a lot of money in a hurry, especially if you have a shorter investment horizon.


----------



## Racer (Feb 3, 2010)

humble,
A nice attempt to counter the bigotry. But I'm afraid it is a lost battle - at a glance, it is clear that bean plays the role of _provocateur_, who believes he has nothing to learn and therefore has nothing to teach.

boycapitalist,
Thanks for starting this thread. Most of the investing analysis in this part of the forum is still beyond my grasp, but this thread was quite helpful as I was able to follow it. You've made a wonderful start - congratulations to you.


----------



## MoneyGal (Apr 24, 2009)

Racer: Thanks for your post.


----------



## MoneyGal (Apr 24, 2009)

:


----------



## humble_pie (Jun 7, 2009)

ooh là.

CC & frugal, please leave this exchange up. It's totally hilarious. Made my day.

and in other news today, weather is gorgeous, greece is buckling her belt, banks are booming, mkts are up.


----------



## HaroldCrump (Jun 10, 2009)

I luv it!
What's the fun in having an Internet forum if we can't let out some steam every now and then!
I'm sure bean didn't mean it personally


----------



## bean438 (Jul 18, 2009)

I never mean anything personally. Its been a **** week, booked off sick with pneumonia in my left lung. WOuldn't wish it on anyone. Even people who accuse me of being a bigot.

I dont think too highly of MOST natives. I find them to contribute very little, yet take so much in return. They tend to be violent, and abuse the medical systems. These are based on my life experiences with these people. I stand by it, and I am not afraid to speak up. MANY people feel the same way I do, but are too afraid, or to PC to do so.

WHen you make it personal, and piss me off then its time to dance baby.
ALthough my posts seem to get deleted, but not the other offending parties.

Hey if you support first nations then that is your problem. How about we lower my taxes, and those who support the welfare state can pay more taxes because you love them so much?
That means less money for your own family. I find it odd that you put the welfare ahead of your own family.

Maybe i should cough on some people.


----------



## andrewf (Mar 1, 2010)

Not my forum, but I'd say feel free to register your disapproval without using slurs and expletives. This is a personal finance forum--I don't see why discussions of bigotry (real or imagined) are relevant.


----------



## Cal (Jun 17, 2009)

boycapitalist - you are 16, what are your post secondary plans? 

And how have you been able to save so much at a young age? I think most of the people on here want to be able to tell their kids how to do it too!

And good work!


----------



## Racer (Feb 3, 2010)

bean438 said:


> I never mean anything personally. Its been a **** week, booked off sick with pneumonia in my left lung. WOuldn't wish it on anyone. Even people who accuse me of being a bigot.
> 
> I dont think too highly of MOST natives. I find them to contribute very little, yet take so much in return. They tend to be violent, and abuse the medical systems. These are based on my life experiences with these people. I stand by it, and I am not afraid to speak up. MANY people feel the same way I do, but are too afraid, or to PC to do so.
> 
> ...


I suppose I have had a different experience with these people, being married to someone who is half Ojibwe. Not sure if sleeping with a native is better or worse than providing financial support. 

Respond however you want, bean. But a spade is still a spade - nothing personal. Sorry you are sick.

Also: sorry for the hijack folks! Or: you're welcome.


----------



## MoneyGal (Apr 24, 2009)

OT/ 

so, Racer, your future kids will be part bumblebee and part Anishinaabe. "Nishnabee," perhaps? 

(OK, this was cute in my head; perhaps doesn't translate to the written form...)

/OT


----------



## boycapitalist (Feb 11, 2010)

Thank you so much everyone. I've learnt alot about both investments and the varying opinions Canadians have on natives 


Cal said:


> boycapitalist - you are 16, what are your post secondary plans?
> 
> And how have you been able to save so much at a young age? I think most of the people on here want to be able to tell their kids how to do it too!
> 
> And good work!


Cal, 
I'm looking at an undergrad in Business. I will probably major in Accounting or something else finance-related. The schools I've narrowed it down to are Telfer (uOttawa), Desaultes (McGill), DeGroote (McMaster), Ivey (Western), Laurier, or Queens Commerce (unfortunately, probably out of my range financially). 

As for saving, I work part time. I don't spend very much money either. Looking at my T4s from 2009, I finished the year with just under $10k income. Now, I would be the first person to tell you that working part-time can definitely hurt your schooling. I had a very tough time focusing in school and I half-assed alot of assignments and things. I'm probably capable of about a 90% average, but, as much as I wish I was, I will never be someone who achieves that average. So, what I did instead; I got a part time job and set rules, I needed an 85 average, or I had to quit my job. Because I liked the money, this, instead of taking away from my schooling, actually made me improve to meet the goals. Another thing I do, is set plateaus that I need to reach before I make big purchases. Ie. reached $5k, I bought a Macbook Pro. reached $10k, bought a Blackberry. I don't think anyone under 18 needs a Blackberry, but this was something I wanted, so I bought it when I got to that goal. 

I really want to be clear on this; in my opinion, for some high school students, a part-time job can be a very bad thing. For others, it can be great, but this is situational and should be treated as such. Either way, there's nothing wrong with a summer job.


----------



## humble_pie (Jun 7, 2009)

i for one fail to understand why td does not create a special kind of account with ultra-cheap commish for youth under, say, the age of 21. They could even provide a navigation tab with special articles to help new investors on that gigantic new markets & research website they've just opened.

it's true that the big green is disdainful of small clients. But surely there's a marketing problem here. Once those novices gravitate to questrade & cut their teeth on that website, what's going to draw them later to td once their accounts swell to 100k. Wouldn't it be more likely for questrade to expand its research & improve its order execution so as to keep the business. People tend to be brand-loyal.

it's also true that the green is almost alone among online houses to not pay rewards for new accounts (they did, reportedly, recently offer come-back rewards targeted at ex-tders who'd bolted to rbc, but that seemed to be a kind of test pilot marketing project.)

as it happens, td bank has made a good name for itself in shoreline cleanup across canada. This is a great program. Why doesn't waterhouse start a "young shoreliners" rewards program, say with one free trade for every half-day or full day that an under-21 would work on a shoreline cleanup project.

as a matter of fact, which online brokerages (if any) have bothered to develop significant programs to serve those three huge, previously marginalized, rich-and-getting-richer, smart-and-getting-smarter potential client pools. Women. Youth. First nations with land claim & residential school settlements.


----------

