# Where do I start?!



## NewInvestor (Aug 25, 2009)

Hi Everyone,

I am new to the forums, but have been reading MDJ for some time. Here are some quick numbers on myself and finances:

Age: 27 (Wife: 24)
Income: $80K salary with perks (Wife: $55K)
Mortgage: approx $190K owing.
House Value: approx $325-340

Now that my wife and I are settled into our house, and know monthly expenses etc better, I think it is time to budget in some investment money every month.

I am thinking that I will start out small ($300-400 monthly), and invest in Mutual funds. The RRSP will provide a nice tax return, and that can go against my mortgage. 

I am looking for more info on Self-Directed Mutual funds. Where is a good place to begin? Would something like TD's eStock allow me to purchase into DRIPs as well? I thought that a small investment into DRIPs may also be a good thing.

Where do I start?! 

Thanks!
John


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## FrugalTrader (Oct 13, 2008)

Hey John,

Welcome to CMF! The TD e-series and buying DRIP are two separate entities. The TD product has to be purchased through a TD mutual fund account (perhaps through td waterhouse as well?) and DRIP/SPP are purchased directly from the company that offers them.

Synthetic DRIPs can be setup at most discount brokerages but they will not purchase partial shares. For example, if you bought some shares of CIBC and wanted to DRIP the shares, you need enough in the quarterly dividend to purchase at least 1 share or else the dividend just gets paid in cash.

Hope this helps!


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## NewInvestor (Aug 25, 2009)

Thanks!

I am leaning more to the Mutual Funds through TD E-series.

Any Advice or links for beginers? I read your blog, but some of the info is above my expertise in the field 

-John


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## DrStan (Apr 5, 2009)

The TD e-Series are an excellent way to start investing in monthly amounts. You don't specify whether you already have other investments, but the e-Series can be purchased in small instalments with no additional fees, plus their expense ratios are low compared to other mutual funds.

You could consider opening up a TD Investment account, and then converting it to an e-Series account. It's fairly easy to do, just contact your local branch and meet with an advisor to open your Investment account. Invest your first lump sum deposit in the TD Money Market Fund. Once the account is opened, you can fill in the paperwork to convert to e-Series, which gives you the full range of mutual funds and cheaper e-Series versions. Plus you can make your contributions weekly, monthly, or whatever you choose.

Decide what you would like to purchase (Canadian Equity, Bonds, U.S. Equity, International Equity) and in which proportions (%), and set up automatic withdrawals from your bank account. I think that would be a good start. Nice and simple. You could start researching stocks, etc., and eventually open a brokerage account once your savings are substantial enough and you feel like wading into ETFs and other more sophisticated investment vehicles.

I think your instincts are good; this approach would allow you to build a good portfolio at reduced fees, and to get your feet wet with relatively low risk. Good luck!


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## NewInvestor (Aug 25, 2009)

Thanks DrStan!

The research now is where to invest... Canadian Equity, Bonds, U.S etc). 

Right now, I dont have much saved. I withdrew $20K for the HBP in January, so I am starting up now 

Thanks
John


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## Shayne (Apr 3, 2009)

My opinion is to pay off all debt before investing, but I think I am a minority. I am just very debt averse and want the security of being totally debt free. 

Paying down your mortgage with your tax refund is a good stragedy, but this will help you out just a little bit more:

http://www.debtfreeby43.com/2009/07/06/free-money/

Good luck!!


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## Rickson9 (Apr 9, 2009)

Low fee index funds.


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## Jon_Snow (May 20, 2009)

In early July I took the plunge into the world of investing. I constructed a "couch potato" portfolio consisting of 4 different TD e-series low cost index funds. I am approaching 7% gains since early July. And to think that this money was sitting in my "high interest savings account" earning a whopping 0.75% interest.


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## steve41 (Apr 18, 2009)

The first thing you want to determine is how your cash flows might look. You have to determine the level of risk/return you can stomach, what inflation rate, how you expect your salary to behave (indexed to inflation, greater than, no indexing) when you plan to retire... etc.

Based on you both working to 60, salaries indexed to inflation, a market return of 6%, inflation at 2%, mortgage 6%-25 year, dying broke at age 95 and living in BC.... you could expect to enjoy a constant lifestyle (after tax) of $87K. 

Start there and work backwards... less risk, retiring earlier/later, wife leaving workforce, adjusting lifestyle downwards post retirement. $87K is a pretty comfortable lifestyle, IMHO.

Unless kids factor into the equation... then you start RESP-ing, etc.


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## dogcom (May 23, 2009)

Jon Snow it is great you have taken the first step and had a good start in investing. The only thing that bothers me is you said. "I constructed a "couch potato" portfolio consisting of 4 different TD e-series low cost index funds. I am approaching 7% gains since early July. And to think that this money was sitting in my "high interest savings account" earning a whopping 0.75% interest."

It is great that you had that gain but it could just as easily been a loss and 0.75% would look really good. If you are investing on a regular basis and you don't care about the short term ups and downs except the odd bragging about how well you did then that is fine. I am sure you already think this way, but I say it just in case.


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## Jon_Snow (May 20, 2009)

dogcom said:


> Jon Snow it is great you have taken the first step and had a good start in investing. The only thing that bothers me is you said. "I constructed a "couch potato" portfolio consisting of 4 different TD e-series low cost index funds. I am approaching 7% gains since early July. And to think that this money was sitting in my "high interest savings account" earning a whopping 0.75% interest."
> 
> It is great that you had that gain but it could just as easily been a loss and 0.75% would look really good. If you are investing on a regular basis and you don't care about the short term ups and downs except the odd bragging about how well you did then that is fine. I am sure you already think this way, but I say it just in case.


Oh, I am quite aware that I could easily lose the gains I have made... I was merely stating that I am quite happy with things SO FAR. Am I right in understanding that you viewed my post as "bragging"?


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## dogcom (May 23, 2009)

Sorry about that Jon Snow, it seems you are doing well and you are not bragging.


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## Rickson9 (Apr 9, 2009)

Jon_Snow said:


> Oh, I am quite aware that I could easily lose the gains I have made... I was merely stating that I am quite happy with things SO FAR. Am I right in understanding that you viewed my post as "bragging"?


Some people are more sensitive than others. Just leave it alone. It's not about you, it's about them.


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## leslie (May 25, 2009)

I disagree with the OP's first two decisions.

1) Why decide to buy mutual funds? He may be talking about low-cost, passive, index mutual funds ... but I think he would have said so. I think almost everyone agrees that index funds are better than active mutual funds. You can buy them as ETFs through a stock broker, or as mutual funds directly from the issuer, or through TD e-broker's mutual funds. 

2) There is always an optimal use of your funds. One investment will always give a higher return than another. Your decision to make RRSP contributions and use the tax credit to pay down the mortgage is just repeating all the canned advice you get from advisors. Learn how RRSPs work. Watch 2nd video at least.


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## Underworld (Aug 26, 2009)

I personally aim to have no money in mutual funds as I think its a dodgy old business. I quite like the idea of ETFs for investment though. They seem to be cheaper and easier to buy into and sell too.


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## WealthyBarber (Aug 28, 2009)

*Some ideas.*

Hello John,

Hard to give proper investment advice without seeing your full story, but here are some ideas:

1. You seem to make a decent salary. But, what if you or you wife gets layed off (heaven forbid!)? Do you have an emergency fund? Experts often recommend 3 months' salary. A high interest savings account like the one offered by ING should do the trick. I'd recommend your TFSA for this.

2. Your plan for RRSPs seems decent. (Use the tax refund to pay down your mortgage). I'm with another poster here: pay down your mortgage faster. I assume you live there, so you cannot write off the mortgage interest (which you can for rental properties). According to your article, you have 58% debt to equity (190 divided by 325). That is healthy, especially for someone as young as you, but I'd personally aim for 50% or less within a year or two. So little of your mortgage payment is actual principal at the beginning. Also this is insurance, because I think housing prices could still fall a little.

3. As for mutual funds, I'm not a big fan. Most mutual funds do not beat the index they follow. As a couple of posters have mentioned, an index etf can often accomplish the same thing or better. To get a full picture, you may want to talk with a fee for service advisor (do not go to a bank - too much conflict of interest) to get some formalized advice.

4. In these uncertain times, I think the advice of "buy for the long haul" "dollar cost average" "buy and hold" is starting to come into question. I don't know how active you want to be in your trading, but you may want to research this idea further.

5. Also, as hedge against inflation (trust me, it is coming), I'd recommend buying physical gold and silver. The American dollar I figure is very vulnerable to a depreciation because of their astronomical and unpayable debt, increasing budget deficit, plus an American public that is very adverse to tax hikes to pay for it. The Canadian dollar is stronger, I think, but 75% of our trade is with America, so we are fooling ourselves if we think a market calamity in America won't flow north.

Just my 2 cents. Good luck.


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## NewInvestor (Aug 25, 2009)

Thanks for all of the replies everyone! 

A couple of points:

1) Why invest when I can pay down the house? Well, with a low interest rate, I am confident that my investments will yield better than the 4.35% I am paying on the mortgage.

2) Not much of an emergency fund exists... well, near $5000. We didnt spend as much as we could have on our house for a couple reasons. We dont have children yet, and we wanted to be in a position that if someone lost their job, we could still manage to get by. Not easily, but feasibly.

3) Mutual Fund vs ETFs? Hell if I know  I know very very little, and understand even less when it comes to these things. I am good at budgeting and earning money, but investing is foreign to me. I would rather do the work, than pay someone out of my earnings. 

4) I am young and foolish. A somewhat aggressive portfolio does not scare me much. Perhaps something between aggressive and medium... hehe

5) I should have mentioned that I currently contribute 2% into my employer's SPP (and they match dollar for dollar up to that 2%) (account has maybe $6000 in it). My wife also does the same at her work, and has maybe $13000 in hers.

I like the idea of the e-series and low fee index funds more and more that I read, but need to know where to start gathering all i can know!

Thanks
John


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## Rickson9 (Apr 9, 2009)

Low fee index fund and forget it.

Buy and hold works very well if you know what you're doing. Most people who say this, however, don't know what to buy and what price to pay. Then they hold until they panic, sell, rinse and repeat and wonder why they aren't wealthy.


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## leslie (May 25, 2009)

The OP has made two contradictory statements:
"*The RRSP will provide a nice tax return, and that can go against my mortgage.*" 
and
"*I am confident that my investments will yield better than the 4.35% I am paying on the mortgage*."

Let me reiterate my first comment. This idea that the optimal investment is to make an RRSP contribution and use the refund to paydown a mortgage is simply wrong, wrong, wrong. http://www.retailinvestor.org/rrsp.html#paydebt

There is always one or the other option that gives the best return. Given the OP's second statement he should NOT be using the refund to paydown the mortgage. He should be saving it for the next year's RRSP contribution or putting into an TFSA or saving it outside a tax-sheltered account if he can earn an after-tax return that beats the mortgage.


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