# Discount or advisor?



## PennyWise.... (Aug 24, 2013)

Hi there.

So I'm at a bit of a crossroads.

I'm self employed. I earned well over the last few years and racked up a little over 500k that's really just sitting as dead cash right now. My first thought was that I don't really have the time nor inclination to research companies and figure out what to invest in so I should use an advisor. Well, two weeks and 6 appointments later... to be honest, they all seem like guys that aren't going to do a whole lot for a pretty good chunk of change!

To a man (and one woman), they all pretty much told me that they'd pick a few mutual funds along with some safer money market/bonds/etc and stick it in there for the long haul. They all espouse what we all know: "if its in there for 10 years, it'll make money" doctrine. Yeah, sure... but I'd like my money to work as hard for me as I worked earning it! And if its just a matter of picking some mutual funds and sitting on it, well... that screams discount broker to me. I don't see why I have to give up some $7500 a year for that "advice".

Granted, I'm selling them short here because I know they also advise on insurance products, limited tax council (although they all are quick to point out they can't give real tax advice), and stuff like that.

But is it worth it?

Honestly, i thought I'd be handing my money to someone that knows a lot more than me who would be actively trading and earning me a good return. If they aren't doing that, then I can be safe and patient all on my own, right?

What would you do if you were me?

++++++++
Background:

I'm 38. Currently my earnings are near zero and my time is unlimited except for being a father of a 3 year old (in between projects with nothing on the immediate horizon). I plan to start something again within a couple of years. When I am working, I really don't have time for stock research (but I could right now). I have limited investment experience. I've owned a few US securities (some winners, some mega losers). I've never traded on margin or dabbled in options. Roughly 60% of my money is currently in US currency


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## newfoundlander61 (Feb 6, 2011)

"racked up a little over 500k that's really just sitting as dead cash right now" well its obvious to me that if you were able to put away 500k in cash you will have no problem at all going alone and using a online discount brokerage. With that much available you don't need to go crazy with high risk investments, take the turtle approach over the hare approach and you'll be just fine in your retirement years.


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## hboy43 (May 10, 2009)

Hi:

I don't understand all this "work" to invest stuff. I spend about 99% of my reading time on the general business and world news, stuff I'd read anyhow, and about 1% on anything company specific. Of course, I mostly stick to big companies that have been around decades or centuries, that I own for years/decades. I am not trying to find the next Apple.

My goal is the 8%PA long term return of stocks on average, but would not be terribly disappointed if I got 6, 6 being 8- 2%MER of the common alternative path of mutual funds.

The best idea for most of course is to go index ETFs and blindly and dumbly add every month or quarter or whatever. The highest likelyhood of a useful pile of money after 30 or so years with the least amount of sweat on your part.

hboy43


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## PharmD (Dec 21, 2011)

You could try one of the new online investment firms (also known as robo-advisors but that is probably not the best term) such as Wealth Simple, Nest Wealth, Wealthbar or Questrade's Portfolio IQ. The fees will be much lower than with a regular advisor and it takes away the stress of investing on your own through a discount brokerage. I personally have found that while investing through a discount brokerage is easy technically it is psychologically difficult to stick to a plan when doing so.

Wealthbar in particular also offers complete financial planning where as the others do not. A low cost mutual fund company such as Mawer, or Leith Wheeler, or Steadyhand would be another good option if you only need investment advice.


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## Eclectic12 (Oct 20, 2010)

If they are picking MFs for you ... why not setup a coach potatoe portfolio and go from there?

As you learn more, you might do a bit of stock picking ... but it sounds to me that from the types you talked to, an automatic coach potate would be the same or better with less fees.

http://canadiancouchpotato.com/


You have enough cash to start directly with ETFs (some of which have significantly less than 1% cost).

One of the advantages to this is that if you do start something up ... not a lot of time/effort is needed to keep it running.


Cheers

*PS*

You'll find discussions of specific stocks on CMF but I would not suggest "trusting" the CMF discussions without doing your own research.


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## Just a Guy (Mar 27, 2012)

Have a friend who's a higher level investment advisor...always trying to sell my on his services. Now, if you read my posts you'll see I'm far from an active investor (I buy some company I know and understand during a crisis, hold onto it and rarely look at its value). Each year, he looked at my holdings (which have a few companies which tend to have really good returns) and tells me how "risky" my holdings are since they consist of only a few companies.

He then goes on to build a more balanced portfolio which has similar performance, but consists of multiple stocks. The problem is, he uses past performance to justify his picks...

If we looked at what he recommended the previous years as comparables, they didn't do as well as my holdings...but I don't tend to point that out to him anymore because, in reality, he's not a financial advisor, he's just a salesman with an intimate knowledge of his products. He's been trained, by his employer, to think he's really helping people and, for some, maybe even the majority, it's probably true...but the majority don't even put in the small effort that I do.


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## larry81 (Nov 22, 2010)

I was going to recommend Tangerine funds but since you have a good chuck of USD i would suggest a classic 4 fund portfolio

VTI, VXUS, VAB, VCN

VTI and VXUS are in USD$

Since you dont have time and appears to have limited interests, your priority should be to put your investment strategy on autopilot and implement ASAP.

having that much $$$ sitting on the sideline is insane (i have been there...)


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## Bowzer (Feb 25, 2015)

hey Pennywise

I'm in a similar situation, recent successful biz and flush with cash not doing anything. The last few weeks I've read some books, started learning the basics. 

For what advisers collect in fees, and mutual funds... I'm not sure how many people would agree to someone saying

"Put me on payroll for $7500 a year, you might only hear from me a few times and have 1 meeting a year."

Personally, I'll be doing low fee index ETFs, and letting the money ride pretty much.


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## PennyWise.... (Aug 24, 2013)

Thanks everyone! Some very helpful tips. I'll read up on that "couch potato" concept... by name alone, yeah that sounds like me 

It *is* insane to have this much money devaluing @ inflation (it isn't even earning 1/4% in a savings account!)

I thought I would have this all dealt with a couple weeks ago after my first advisor meeting... but I just never got a good feeling with any of them.


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## PennyWise.... (Aug 24, 2013)

Oh, right... meant to ask (and I think I know the answer to this): Is there any point at all in trying to time my entry into an indexed strategy? Take VTI for example... had I invested in that instead of trying to pick stocks, I would have creamed the performance I did realize. So in retrospect, sure I wish I had heard of that kind of thing. But the market is at a historical high, so does it make sense, perhaps, to just throw everything into bonds and wait for a big dip?

I'm guessing not.


Especially since I don't panic. If I invested today and saw it drop 30% tomorrow... I'd be pissed, but I'm comfortable that the market always recovers (unless... well, zombie apocalypse but then we got bigger problems)


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## uptoolate (Oct 9, 2011)

Sorry, I misread the Poll. I thought it was 'what do you do?' not 'what would I do in your shoes?' I would take them off immediately because that is just gross! I have no idea really as I am not you... but it seems like you have a lot of money and time and are pretty bright person so why not start day-trading and turn that 500k into a gazillion dollars?! No, no just kidding! I would go with Larry81 and Eclectic12 and just couch potato it. Good enough for me.


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## Butters (Apr 20, 2012)

i also like larry's post


VTI VXUS good USD holdings


you can go with jason donville (TSX) since you have more than 150k to invest and keep the rest couch potato US
http://www.donvillekent.com/product-historical-perf-CI.php
his returns speak for themselves, he has a 2% mer which is probably the same as the mutual funds recommended by your bank... but he is motivated to earn more as he skims a 20% performance bonus

You could do 200k with him
200k US
100k International

or 170k
170k
160k



or 150k with him
50k VCN
150k US
150k Int


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## RBull (Jan 20, 2013)

+1 on the couch potato. So much easier and there is tons of research to back it up as a good strategy over the long term. Your statement in #10 shows you have the perfect long term outlook for a potato.

Set your asset allocation after doing a risk tolerance analysis along with your investment timeframe/goals and get invested. Rebalance 1x year or as required within the parameters you set.


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## houska (Feb 6, 2010)

Another vote for couch potato, but with a few twists 

1. Couch potato is a great start -- diversified, cost effective -- and you can over time learn more and become more hands-on....if you decide you want to, or leave as is if not.

2. At that size of portfolio, I would stay away from conventional investment advisors who will not deliver value for money *except* in babysitting you from doing something rash out of emotion. And based on what you said, that is not relevant for you. However, cost-conscious, fee-based (as opposed to commission-based) advisors *could* be worth it in the following situations
- Your money is segregated in different places, e.g. in your company (if you have one), in an RRSP, TFSAs, bank account. Or it's all sitting in your bank account but *should* be in RRSPs, TFSAs etc. It's not hard, but it can be a hassle figuring out what to put in what account, implications on rebalancing, etc. 
- You will continue being in a fairly high tax bracket, so that optimizing to minimize tax you pay as you go along (rather than later when you use the money) makes sense. That's stuff like timing when you buy something to either get or not get certain distributions, harvesting tax losses, holding bonds to maturity rather than investing in bond ETFs in the fixed income part of your portfolio. You're at a portfolio size where that can make a difference, and again it's not really hard but experience makes it much easier.

You can probably get an advisor at your portfolio level who would charge you about 1-1.5% per year, invest in low cost ETFs or where not rebate you trailer fees they get. On the one hand, that's an awful lot of money per year for something you could do yourself. On the other hand, if the above conditions apply it will be worth it if you otherwise wouldn't find the time or interest to deal with the details.

3. Final thought. You're at a level where if you have not done so, incorporating your company, perhaps even having a holding company, might make sense. Specifics vary, but one rule of thumb is that this starts making sense whenever your self-employment cash flow *in excess of your living expenses* exceeds $50k/year or so. That's because, depending on specifics of your situation, you may be able to shield that excess cash in your business where it can be invested with taxes effectively deferred until you withdraw it. Govts have generally closed the tax arbitrage oppty if you withdraw money from the company the same year you earn it, but there can be value there if your investments can compound tax deferred - a sort of additional (or replacement) RRSP. You would definitely need advice on this.

PM me should you want contact info for my advisor, exactly due to thoughts 2 and 3 above. He and I are located in Ottawa, however....


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## Rusty O'Toole (Feb 1, 2012)

Some all time great investors like Warren Buffett, Peter Lynch, and Sir John Templeton have tackled this question and come up with similar answers.

1) Shop for bargains. Learn to analyse companies and buy shares in good companies when they are selling at a discount. Or as Sir John Templeton put it " get them while they are cold".

2) If that is too much work index everything. Just buy low cost index ETFs that mimic the stock market averages like the S&P 500 and you will beat 80% to 90% of professional money managers.

If you are nervous about committing your money all at once divide it up into 12 tranches and invest 1 tranche each month. This is called dollar cost averaging. By a mathematical quirk you will end up with slightly more shares at a slightly lower cost, than if you bought at the average price. Because your money will buy more shares when they are cheapest and least when they are expensive.


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## uptoolate (Oct 9, 2011)

Studies suggest that DCA loses to just dumping the lump in about 70 percent of the time. Obvious given that the general trend of the market is upward. DCA may be psychologically more palatable however.


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## Eclectic12 (Oct 20, 2010)

Rusty O'Toole said:


> 2) If that is too much work index everything. Just buy low cost index ETFs that mimic the stock market averages like the S&P 500 and you will beat 80% to 90% of professional money managers...


Actually, the YouTube video of Buffett giving a speech at a Florida university said where one was going to devote all their time/energy, go with less than ten stocks. 

If it was not one's full time job - index.


Cheers


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## Sasquatch (Jan 28, 2012)

I know this community is biased towards index investing and that's cool.
I have almost $ 250 000 invested in just two mutual funds (Maw 104 and Maw 105) with a discount brokerage with NO FEES of any kind, especially since I don't do any trading. Both funds invest actively with MERs below 1% and have a proven record. 
I've been doing very well over the last 5 or so years with these funds and they enable me to leave the day to day investment drudgery to the fund managers for a very reasonable fee. 
In other words, I don't worry about it and just take a look at how I'm doing here and there. It's all available on line and I'm a happy camper 
It's possible I could have increased my profits by going "index" but I can't be bothered to balance and re-balance and worry about market swings.
Both funds are "balanced" funds with MAW 105 being the "tax advantaged" one for my non registered holdings.
Has been working for me and still does


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## uptoolate (Oct 9, 2011)

Mawer has good funds but for less than 0.10% I can do a three fund with Vanguard that should do better over the long-term due to the 0.96% and 0.98% MERs on those Mawer funds. 1% over 60 years can add up to a lot of money. But as you said, it has been working for you and comfort is a very important feature of any plan.


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## PennyWise.... (Aug 24, 2013)

Thanks again for all the great info and direction.

I've opened an account at CIBC (I already have one with TD Waterhouse, but CIBC has some nice incentives right now to move, plus lower trading costs). It'll take a week or so so get funded, so I'll have some time to carefully look at my strategy. At this point, I like the ETF idea... wondering if I should be looking at specific sector ETFs. It seems to me that oil, for example, has to rebound eventually and perhaps something along the lines of VDE might be worthwhile? Or is it better to just stick with broader indices?

Question: can you leverage margin with ETFs? If they're traded like individual securities, I'd guess one could.

Another question: Should i be asking these individual questions in separate threads? Or is it OK continuing a discussion like this? What is preferred here?


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## RBull (Jan 20, 2013)

IMHO. buy a simple traditional couch potato formula. Resist trying to figure out sectors and timing the market which goes against the whole concept of a potato portfolio. Buying a typical Canadian equity ETF is going to give you plenty of exposure to oil. If you *must* "play" a bit do it after you have more investing experience and with a very limited amount of money.

I don't like leveraging with financial investments. Some do it with success and are fine with the added risk however. YMMV.


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## Letran (Apr 7, 2014)

newfoundlander61 said:


> "racked up a little over 500k that's really just sitting as dead cash right now" *well its obvious to me that if you were able to put away 500k in cash you will have no problem at all going alone and using a online discount brokerage. *With that much available you don't need to go crazy with high risk investments, take the turtle approach over the hare approach and you'll be just fine in your retirement years.


How did you manage to make that assumption? Ones does not relate to the other. 

As far as I can tell the fact that it is in *cash right now and for quite sometime* it is likely that he needs help. What kind and how deep is the question?


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## PennyWise.... (Aug 24, 2013)

Letran, you are correct. There is no correlation at all between my ability to accumulate funds and having those funds work smarter for me. I earned the money the old fashioned way (I made crap that people wanted and I sold it). If I had any idea what I was doing with the investments, I'd be a whole lot further ahead. I'm simplifying things here, but I basically put $400k profits into the market and - some 6.5 years later I grew that to about $530k. I'd call myself Buffet Jr. with that, except when you do the math on the timing you'll see I basically entered the market when you couldn't lose. In fact, I bought the bulk of my stocks in March of '09... pretty much "timing" the bottom of the market perfectly, in hindsight. But what do I have to show for that? Barely a 6% annual return at a time when monkeys were doing better. In fact, had I thrown it all into pretty much any of the ETFs recommended so far, I would have about $750k now.

Woulda, shoulda, coulda, right?

As far as having cash for "quite sometime"... not really. I recently divested all my security positions to expedite removing myself from my previous brokerage. Its a situation I don't really need to get into the details, but they were threatening to freeze my accounts unless I updated my profile, and the profile wasn't allowing me to supply true and correct answers. Rather than risk dealing with their website glitch - and because they were horrible at getting back to me during such a worrisome circumstance - I decided "up yours" was an appropriate response.


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## houska (Feb 6, 2010)

PennyWise - a lot of what you're saying makes a lot of sense. But some of it doesn't -- in particular your discussion on leverage should depend more on your financial needs and prospects in the coming years rather than in your current situation. And while wanting to leave your prior brokerage may have been a good idea, I would have tried to avoid liquidating your positions (making tax payable now) while transferring them over in kind would have deferred that tax and essentially let you compound it further (in essence implicitly leveraging by investing money borrowed from the tax man via the tax deferral).

Of course I don't know know the whole story, and as you wrote, woulda shoulda coulda.

Another option if you like the Couch Potato approach some of us have been suggesting, generally favour DIY, but want a bit of help: PWL Capital and CanadianCouchPotato offer their adviced DIY service where for a few thousand $ they'll help you set up, focus you on the right questions, and then you execute. It's described on the couch potato website, top right corner; contacts are I think Dan Bortolleti and Justin Bender at PWL. (I don't know them, and am happy with my current solution, but I think their solution fills a good market niche and the articles they publish are good ones).


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## PennyWise.... (Aug 24, 2013)

I recognized that liquidating brought on tax considerations. I really felt that I had no choice as time was of the essence and a cash wire transfer was possible whereas in-kind transfer (according to the new broker) could take "up to a month" and that would have put my account at risk. I really don't wish to get into those details. Also, I don't expect to earn anything this year outside of investments so it is as a good time as any to take a tax hit.



> in particular your discussion on leverage should depend more on your financial needs and prospects in the coming years rather than in your current situation


Evidence of my naivety, I'm sure, I don't understand what you're saying.

The only reason I brought it up, was the new account guy was asking me if I wanted a cash account or margin. Margin always seemed unnecessarily risky to me, but maybe (I figured) with somewhat less risky ETFs it was worth considering earning money on their dime. I guess I'm not getting how it matters about my current situation vs. future prospects?? But for that matter: I *currently* earn very little, if anything. That is expected to continue for a year or so while my 3 yr old remains a constant... err... "distraction" I guess is a word that comes to mind.


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## Butters (Apr 20, 2012)

Don't look for weakness when you don't know how to find it.
How much do you know about oil.... will it be the same price in 2 years... will oil be around in 20 years.... is solar taking over.... etc
Keep it simple, diversify over all sectors

Couch Potato suggests a 3 stock solution

VCN - Canada
VXC - Outside Canada (50% us, then europe and others)
VAB - Bonds

it's all on Couch Potato
http://canadiancouchpotato.com/model-portfolios-2/

There are ways to break down VXC into other ETFs
(at the bottom of page) see Justin Bender’s blog, Canadian Portfolio Manager.



My recommendation before was to trust your money with Jason Donville...
And pick an ETF for outside of Canada


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## PennyWise.... (Aug 24, 2013)

I looked at your recommendation re: Donville when you first posted it... the numbers, which you said speak for themselves, don't really tell me much because he only shows performance for how they did during the biggest rally in history. I mean, he basically did what I did... got in when the getting was good. Granted, he did better than I did but even I came out significantly ahead and I picked up things like LEAR because I thought they made jets (wrong "Lear". Turned out, they made seat parts almost exclusively for GM right as GM was going bankrupt). I'd like to see how they did pre-2008.

But you're right, I have no business trying to predict trends... except that I have to get some fun out of it, right? I figure devoting 10% to guessing that oil is going to rally isn't a bad thing.

Anyway, I have enough advice to go forward at this point. I appreciate all the helpful comments!


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## Just a Guy (Mar 27, 2012)

I'd say be careful, this is an area where a little knowledge can be a dangerous thing...you seem to know that, but you also seem to be waffling due to temptation.

You're right in the fact that a dead monkey could have picked winners over the last few years, and that any success doesn't mean you are successful.

It looks like you are tempted to go to the next level of investing, but your posts show me that you haven't taken the time to do the real work required to get there (something which you seem to even admit). 

I can understand the temptation to "play" with a portion in order to learn, but if you lost that $50k, combined with the taxes you already had to pay, you'd probably succeed in wiping out the remainder of what you made over the past 6 years.

I'd suggest you pick something simple to start, like the couch potato, and set it up yourself (if you're unwilling/unable to do that, that's your first sign that you're not ready to go to the next level). 

Once you are done that start learning about other investment strategies. There are many, and they often have subtle rules that, if glossed over, can cost you big time. Learn them well, so you understand them...even if you don't like them. Understanding why you don't like a technique is probably more important than finding one you do like, as you're more likely to understand the problems inherent in all investing theories.

Once you actually find a technique, and understand it, take any new money, or dividends produced by the couch potato and try playing with that to see how you do. Start small, as you need to discover if your personality is compatible with your investing technique...they don't always match, even if you want them to. Personally, I discovered I'm a buy and hold personality, I don't like watching the stock's every move...so being a value investor works quite well for me, being a day trader would probably be a disaster even though I understand how it works, and can see the merits of it if done correctly.

Once you've done this for a while, say a couple years, take a step back and evaluate your progress. See how you've done vs. the baseline couch potato. Also, be truthful and see if you've actually invested wisely, with a plan, or just fallen victim to blind luck. For example, I know I'm good at spotting value because I do it in real estate, general shopping, business, and other day to day activities, not just stocks. For me it's a perfect fit with my mindset, and the basis of all my investments. I tried other techniques before, some were successful but, I had to admit, they were more a guess than a plan.

If you think you are on the right track, you may want to consider taking more control of your investments, but you also may discover it's not your thing. If you want to take control, do it slowly around the time you'd normally rebalance. Take a portion out and expand your DIY portfolio...don't take the entire amount.

To truly measure your level of investing success takes years. A snapshot of only a few years can lead you to think you're much better than you actually are. If you show that you can consistently repeat your success, year over year, then you can start transferring over complete control if you want.

Investing is a long term project, you need to constantly learn and expand your knowledge and it takes a long time to really judge the results both in terms of success and, more importantly, your personality and how it relates to investing.

There are many short term results which can lead you astray.


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## PennyWise.... (Aug 24, 2013)

Thank you very much for that sobering post. I know you're right. I'm putting it in print so I can re-read it later and remind myself 

Couch potato it is. It makes sense. It appears to provide a reasonable long-term return and that's really all I want. It should allow me to focus on what I do best.

FYI, I'm glad you included this sentence:


> For example, I know I'm good at spotting value because I do it in real estate, general shopping, business, and other day to day activities, not just stocks.


. I may have been tempted to dismiss some of your opinions as not really understanding me until I read that... because that describes me as well (almost perfectly) and it reminded me that I do so much research when it comes to finding value in my business and daily life (sometimes too much research to save $1.00 on peanut butter and spending an hour of my time to do it... sigh), so why would I throw half a million into something I don't really understand? 

It is kind of odd how my brain views dollars. I'm not an idiot, but I have tendencies to focus on small numbers while ignoring the big. In a way, that has been an extremely useful trait. In my personal life, it allowed for a very frugal existence that allowed me to get through some very meager years. In business, it means I eek out a profit where others don't because I pay attention to the little savings that really add up when you sell a million widgets. But when numbers get bigger... they almost seem meaningless to me. This may sound odd, but I'm not really motivated by money. When I have "enough", I just don't care anymore (sorta). And my frugality (many call me "cheap", but that's not quite accurate) means I really don't need much. So I am tempted to "play" with these bigger values, while at the same time I won't buy a box of saltines unless its on sale. Weird, right?


Anyway, at this point I think I have enough to go forward. I really appreciate the advice folks, thank you.


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## Cal (Jun 17, 2009)

RBull said:


> IMHO. buy a simple traditional couch potato formula. Resist trying to figure out sectors and timing the market which goes against the whole concept of a potato portfolio. Buying a typical Canadian equity ETF is going to give you plenty of exposure to oil. If you *must* "play" a bit do it after you have more investing experience and with a very limited amount of money.
> 
> I don't like leveraging with financial investments. Some do it with success and are fine with the added risk however. YMMV.


I agree that a Couch Potato Portfolio is a good way to get started, you don't have to worry about stock picking, or take alot of time with your portfolio, other than semi annual re balancing if you wish.


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## uptoolate (Oct 9, 2011)

Couch Potato is very simple. I would not rebalance it any more than annually. If you wind up contributing new money along the way just add it to the underweight asset class to avoid selling anything. Good luck.


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## PennyWise.... (Aug 24, 2013)

Just an FYI... only today did my account become fully available to me at CIBC. I can't say I'm too impressed that it took a month. I got excuses about mail being mishandled and delays because I opened my account right at RRSP insanity season... but a month? Anyway, I'm here now and today I begin picking my stocks with all out reckless abandon. Just kidding.


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## Eclectic12 (Oct 20, 2010)

PennyWise.... said:


> Evidence of my naivety, I'm sure, I don't understand what you're saying.
> 
> The only reason I brought it up, was the new account guy was asking me if I wanted a cash account or margin.


Likely this is just whether you want that type of account setup from the get go ... I think Questrade is the only brokerage that seems to roll margin & cash accounts into the same account.

Regardless ... when I had my brokerage account setup, there was no cost so I had both cash & margin accounts setup. I did not plan to use the margin as I was not familiar with what situations could trigger having to add more money but I figured that after I learned about it, if I saw an opportunity ... there would be no paperwork to fill out to set it up as it would already be available for use.

I'd say if there are no costs or inactivity fees, have it setup and don't use it until you've learned all the ins/outs/risks.




PennyWise.... said:


> Margin always seemed unnecessarily risky to me, but maybe (I figured) with somewhat less risky ETFs it was worth considering earning money on their dime.
> 
> But for that matter: I *currently* earn very little, if anything. I guess I'm not getting how it matters about my current situation vs. future prospects??


Margin is leverage and is borrowing to invest so the risks are the same no matter what the investment is. Where everything goes according to plan, life is good where nothing more is needed (ex. stock being borrowed against keeps going up in value and the stock bought with the borrowed money keeps going up in value). 

The trick is where there's a downturn ... both stocks going down mean that one might have to come up with cash from other sources as when certain thresholds are hit, the broker will want more money or if the money isn't available, will sell the stock.

If you currently earn little, there won't be many sources to come up with money should everything go badly. As an example, when the tech bubble crashed around 2000, one of the investors profiled who thought he "knew tech" was saying he'd turned $136K into $40K and was facing a third margin call from the broker (i.e. he had to add more cash or the stock would be sold at a loss).

I haven't spent the time to figure the margin risks out thoroughly, have a HELOC at a low rate and have employment income with reasonable free cash flow so I prefer to use the HELOC to borrow. I understand the risks better plus the current trading price of the shares bought will not trigger a need for any extra cash ... only rising interest rates (or should the HELOC be called but with a lots of assets, there's no reason for it to be pulled).


Bottom line is that it sounds like there's more important things to learn compared to diving into leveraged investing through margin. 


Cheers


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## shecky (Mar 27, 2015)

*burger with fries*



PennyWise.... said:


> Just an FYI... only today did my account become fully available to me at CIBC. I can't say I'm too impressed that it took a month. I got excuses about mail being mishandled and delays because I opened my account right at RRSP insanity season... but a month? Anyway, I'm here now and today I begin picking my stocks with all out reckless abandon. Just kidding.


That month long wait turned out to be a nice bit of market timing on your behalf, I took charge of my RRSP's by pulling them from mutual funds and self invested into vangaurd/ishares ETFs on the day you started this topic; this past week has seen everything tank considerably so you can get in at a much lower cost than i did, nice little bonus for you!


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## PennyWise.... (Aug 24, 2013)

Indeed... but I was commenting on the service rather than the market 

I can't help to wonder though: 2001 -> 2008 (7 years) -> 2015 (hmm)


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