# New High Income Job, and need guidance



## Ecaliam (Nov 30, 2014)

Hey everyone, 

I have been self-employed for almost 6 years now, and in the last 3 years have steadily grown my income to a very high level (statistically in the top 1% of Canada, based on 2012 GOV stats). I would prefer to not disclose my actual job title for professional reasons.

I am fairly frustrated at this time because I honestly do not know how to invest my money properly. Neither myself, nor my wife, come from wealthy families, so we lack the guidance and/or knowledge that may have accompanied such an upbringing. I have friends that are financially comfortable (i.e. earning six figure salaries), but none of them have a disposable income quite at my level. Most of the websites I have come across deal with people who have average incomes and I find the strategies to be way too conservative.

While on vacation recently with my wife and children, I had a conversation with an acquaintance who happened to come from a wealthy family. He recommended that I create "generational wealth"; something that would not only provide my wife and I with a good life, but would continue to serve future generations of our family. 

Like many people with new money, my spending habits were bad, or rather ARE bad. I bought a lot of items I didn't need, including expensive Scotch, high-end clothing, monthly trips, etc... I am doing my best to be sensible with my spending now, but it's sometimes difficult when only 4-5 years ago I was struggling financially. 

I have recently paid off all of my debts (i.e. VISA, all small loans, credit lines, etc...) with the exception of my mortgage, which is only at $145,000 remaining on a starter home we purchased 9 years ago. I refuse to go to the bank for help as most representatives lack the necessary knowledge and experience to properly assist me. My friends cannot help, and even my accountant seems reluctant to provide assistance.

Based on the last 3-6 months, and into the foreseeable future, I should have about $20,000-$30,000+ to invest monthly (conservatively). The amount may be higher, but I am also struggling to learn how much to put away for taxes each year. Despite my better judgement to not share financial information publicly, I felt the need to disclose a rough estimate as most advice I get or find does not fit my situation. 

I would greatly appreciate any feedback on how to manage/invest my money, including suggestions on good books to read.

Thanks for your time, 

Financially Lost


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## Eclectic12 (Oct 20, 2010)

Part of what you will have to learn is what you want to do yourself (i.e. DIY) and what methods to use.

For the reading, check out the "Investing" section which has a sticky "Eight with Weight: A Reading List for New Investors". There's also threads discussing books people recommend.

Since you are learning, you might want to check out http://canadiancouchpotato.com/.
It has some simple ways to gain exposure ... you may decide to pick individual stocks as some do ... but this would be an easy, cheap way to do well while you learn.

There's no mention of a TFSA so I'd also suggest starting there as with one exception (US stock dividends), it is tax free.


Depending on what is being paid on the mortgage, paying it off may give a nice return, freeing up cash flow to invest without risk.


Have to run shortly ... so I'll stop here for now.

Cheers


*PS*

Part of the trick is to balance what you are spending versus what you enjoy. One extreme or the other is usually not healthy or enjoyable.


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## Ecaliam (Nov 30, 2014)

Eclectic12 said:


> Part of what you will have to learn is what you want to do yourself (i.e. DIY) and what methods to use.
> 
> For the reading, check out the "Investing" section which has a sticky "Eight with Weight: A Reading List for New Investors". There's also threads discussing books people recommend.
> 
> ...


Thank you kindly. Any additional reading is greatly appreciated.


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## lightcycle (Mar 24, 2012)

Yep, paying off the mortgage is an easy win - guaranteed return by punting the interest that you can't write off.

Do you have an emergency fund? Is this kind of income relatively secure or are there factors that might diminish or cut-off that stream entirely? Health, economy, etc. Depending on where you land, falling from a $30K monthly discretionary budget is a pretty high drop and can hurt if you're not prepared for it.

Other posters will obviously point you in the direction of their own bias (couch-potato advocates, Armageddon gold bugs, market timers). With that kind of income, I'd try a little of everything, proportioning the appropriate amounts to "safe investments" and "high fliers" depending on my risk profile. Diversification is never a bad thing.


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## jaybee (Nov 28, 2014)

Congrats on the "problem" that you have . First off, I see no reason at all to take on new debt. With that income you can have a luxurious lifestyle, and save a tonne and build wealth. Take a large portion of your income, and set it aside for long term growth.

If you are interested in in learning to DIY. Start with the Canadian Couch Potato http://canadiancouchpotato.com/. Read and read and read everything you can get your hands on. The investment zoo by Steven Jarislowski is a great place to start! If you are too busy to spend the time learning how to go it alone...I would spend some time finding a highly recommended *fee only financial planner*, and Lawyer and accountant. Get references, second opinions etc.


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## OurBigFatWallet (Jan 20, 2014)

I agree with the above. It depends on what you want to manage yourself versus having someone else manage for you. I have a few high net worth clients who have their money managed by fee-only financial planners. Nothing wrong with that route. You'll also want to look for an accountant who can structure your investments in the most tax efficient way possible. I'm an accountant so I'm obviously biased towards tax planning - but I have seen many just invest blindly without thinking of the tax consequences. Surround yourself with people who have your best financial interests in mind and have a long term focus. Avoid anyone looking to sell you any complicated investment products you don't understand. Investments are like consumer reward point programs - if you can't understand the basics of them and what their value is, they're usually not that great. 

Good luck and congrats on your financial situation.


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## Underworld (Aug 26, 2009)

Wow 20-30k to invest per month thats hardcore! I thought I was doing well with my 5k per month 
You must be making 700k or so and investing half of it.


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## Ecaliam (Nov 30, 2014)

Thank you so much everyone. I do greatly appreciate the feedback. I have heard of fee-only financial planners, but heard that most of them don't look at you unless you have $1 Million net. My goal is to invest monthly, DIY, until I hit that mark and then shift to a fee-only financial planner. Guess I have a lot of reading to do  Again, thank you.


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## GoldStone (Mar 6, 2011)

+1 to OurBigFatWallet. A fee-only planner is a good option for someone who is too busy to manage their own money.

Whatever you decide to do, keep it simple and cheap. Just because you have 20-30K to invest monthly, doesn't mean that you have to do something out of the ordinary. Beware of the sales sharks who pitch "exclusive" investment options not available to regular folks (such as hedge funds and private equity). High fees will eat you alive. We have a few members here who qualify as HNW individuals. You would be surprised how simple some of their portfolios are.

The Five Reasons Hedge Funds Underperform

Getting Over Hedge Funds


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## Moneytoo (Mar 26, 2014)

Another great place to start: http://www.moneygeek.ca/start_here


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## GoldStone (Mar 6, 2011)

Moneytoo said:


> Another great place to start: http://www.moneygeek.ca/start_here


I disagree. He sells memberships. I clicked on a few random posts. They all read like a thinly veiled sales pitch enticing you into buying a membership. That's not a great place to start.


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## Moneytoo (Mar 26, 2014)

GoldStone said:


> I disagree. He sells memberships. I clicked on a few random posts. They all read like a thinly veiled sales pitch enticing you into buying a membership. That's not a great place to start.


He has tons of useful videos (books don't show you how to trade online for example) and I found his articles much easier to read and understand - so as a recent beginner myself, gave a link to the start page that has more info than few websites  never paid for a membership, and not suggesting to do so - but he explained why he charges for portfolios: http://www.reddit.com/r/PersonalFinanceCanada/comments/24pgz5/what_do_you_guys_think_of_moneygeekca/


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## GoldStone (Mar 6, 2011)

Let's agree to disagree. I would never recommend MoneyGeek as a starting point to a novice investor. A good book is a much better place to start.


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## scorpion_ca (Nov 3, 2014)

@Ecaliam - This is how I started to invest -

"I read an article in the Financial Post that some people made around $35K out of their TFSA limit $25,500 whereas I made only $600 in 5 years by keeping the money in savings account. Some people also made around $50K-$300K but those were exceptional. So, I started to find out how to improve returns. I have been reading lot of blogs especially http://canadiancouchpotato.com/model-portfolios/ since then and I follow "Complete Couch Potato" except Real-return Bonds. I opened a self-directing brokerage account last year and transferred my TFSA there. I also contributed $5,500 this year and the returns (9%) have improved significantly though I purchased only ZRE and ZAG in this account. I bought TDB900, TDB902 and TDB911 in my RSP and the returns are around 10%.....planning to sell TDB900 & TDB902 next year and buy VCN & VUN respectively.

I also read following books to improve my knowledge. I would suggest to read Millionaire Teacher at first.

Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor-	John C. Bogle
*Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School-	Andrew Hallam*
*The Investor's Manifesto: Preparing for Prosperity, Armageddon, and Everything in Between-	W. M. Bernstein*
How to be a Billionaire: Proven Strategies from the Titans of Wealth- Martin S. Fridson
*The Elements of Investing: Easy Lessons for Every Investor-	Burton G. Malkiel & Charles D. Ellis*
*The Four Pillars of Investing: Lessons for Building a Winning Portfolio-	W. M. Bernstein*
The Lazy Person's Guide to Investing-	Paul B. Farrell
*The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns-	John C. Bogle*
Warren Buffett and the Art of Stock Arbitrage: Proven Strategies for Arbitrage and Other Special Investment Situations-	Mary Buffet & David Clark
The Little Book that saves your Assets-	David M. Darst
*The Wealthy Barber Returns-	Dave Chilton*
The Investment Zoo-	Stephen A. Jarislowsky

Good Luck.


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## lonewolf (Jun 12, 2012)

Ecaliam

I would invest for safety & not so much for growth. Hold some money in the one major currency of each continent hold money in Switzerland with a bank that is 100% or more liquid & or use Swiss insurance companies to purchase annuities that does not lock money in they use rock solid banking practices. Hold some junk silver coins & gold in Switzerland. Hold a few of the Cryptos currencis. For help with staying financially independent would consider using "safe wealth group". As for being guided for speculation would consider paying one of the best Arch Crawford 10,000 a year. With that kind of money I would also consider buying land in a few places in case of unrest in North America. Once your set up for safety some money can be used to speculate in the higher risk investment such as stocks.


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## donald (Apr 18, 2011)

Nice problem to have!will say(easier saying than doing)Technically the sums are not a majoring factor(at least imo,once past a certain threshold of course)You just have more money so It can magnify things.
You should invest the same if I was 4k a mth or 30.(things are just 'amp' up but it is a relative


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## My Own Advisor (Sep 24, 2012)

Absolutely with that kind of wealth and just starting out, go fee-only-planner.

After a few years, if you decide to DIY, you can do so because you have an excellent financial foundation.

I would recommend reading _Millionaire Teacher_ by Andrew Hallam.

No doubt there are a few CMFers who are HNW individuals. "You would be surprised how simple some of their portfolios are." Like Goldstone says, simple is good


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## GoldStone (Mar 6, 2011)

Ecaliam said:


> I have heard of fee-only financial planners, but heard that most of them don't look at you unless you have $1 Million net.


This is not exactly true.

*Fee-only* planners charge by the hour. The amount of assets you have shouldn't matter. They typically prepare a financial plan for you but don't handle the execution. You execute the plan on your own. You come back once in a while for a checkup.

*Fee-based* planners charge a percentage of assets. The percentage is a sliding scale based on the amount of assets. More assets --> lower percentage. Once you reach $1 million, you should be able to negotiate ~1% fee all-in. A fee-based planner handles both the planning and the execution.

The challenge in both cases is finding someone you can trust. This is easier said than done.


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## PrairieGal (Apr 2, 2011)

Here is a list of fee only financial planners compiled by Moneysense magazine. Some seem to have more credentials than others. http://www.moneysense.ca/directory-of-fee-only-planners


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## lonewolf (Jun 12, 2012)

Ecalaim making that kind of money & not knowing much about investing my bet is your a hedge fund manager.


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## Eclectic12 (Oct 20, 2010)

^^^^

I would hope a hedge fund manager would know the basics of investing .... but stranger things have happened. :biggrin:


Cheers


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## Guban (Jul 5, 2011)

Ecaliam said:


> Thank you so much everyone. I do greatly appreciate the feedback. I have heard of fee-only financial planners, but heard that most of them don't look at you unless you have $1 Million net. My goal is to invest monthly, DIY, until I hit that mark and then shift to a fee-only financial planner. Guess I have a lot of reading to do  Again, thank you.


As Goldstone has indicated a fee-only planner will help you out, no matter you financial situation. You only have to pay them for their time.

A fee based planner may also help you out. You may not qualify based on current assets, but with the contribution pace that you are quoting, I am going to guess that there are many that would be interested based on what they will be able to earn from you going forward.


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## banjopete (Feb 4, 2014)

With that contribution amount capital preservation and modest returns will get you your generational wealth quite safely. 

There's also no harm in talking to any potential advisors as a sort of interview process to hear what they have in mind, what they think they can offer, and keep in mind too that getting a reference or two from existing clients is a good way of getting some answers about how she might interact with you over time as well.

Good luck.


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## uptoolate (Oct 9, 2011)

Some great advice. You are 'High Income' and now you need to parlay that into 'HNW'. I liked much of the advice. Scorpion's reading list is excellent and I would put a third plug in for Andrew Hallam's 'Millionaire Teacher' and also for the Canadian Couch Portfolio website. I'd encourage you to read 'The Millionaire Next Door' as well so you don't get too carried away with living large. Even high income people can find themselves living paycheque to paycheque and unable to escape the treadmill when they get tired. 'Fee-only' yes, 'Fee-based' no way! I cringe at the amount of money some throw away in this area. Beware the sharks - there are many and they come in all guises. Spend some money on a good accountant - especially one with extensive tax and estate planning experience. A good accountant is worth his/her weight in gold (in the case of of your potential earning power and ultimate asset levels, this could be literally true!). Avoid investments that aren't easily understood and don't think that many (most?) HNW individuals (especially those with high incomes) didn't get to be that way by sticking with the KISS priniciple. Get term life insurance, disability insurance, maybe critical illness insurance if you're so inclined. Don't fall for the permanent life insurance pitch until you have totally maxed RRSPs, RESPs, and TFSAs and even then make sure your independent accountant verifies that it makes sense in your particular situation. 

Are you incorporated, can you incorporate and take advantage of the small business tax credit and rate? If you can then it likely makes sense but again, talk to a good accountant. Also gives you the opportunity to income split, issue dividends and defer taxes. Nice thing about accountants is that they have a fiduciary duty to you - unlike almost all 'financial advisors' - who as a group have strongly resisted any suggestion that they should be held to this standard - 'nuff said!


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## Cal (Jun 17, 2009)

I find it a little surprising that your accountant can't provide you with forecasts in regards to profit and taxes payable. They should be able to do this to keep you in line in that regard.

All good advice thus far. It is good that you are taking interest in your finances. Soak in as much as you can.


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## alanlo (Nov 29, 2014)

Like on the other post I disagree with Goldstone's comment on overlooking private equity altogether. This industry has matured considerably in the past years under the guidance of securities regulators, with some products having excellent risk/return profile. The benefit of having private equities in a portfolio is that it allows diversification away from the traditional market, which is somewhat broken in my opinion because of its over-liquidity. A prime example would be 2008 when perfectly fine stocks were driven down in price because of market trend. For tax saving options, flow-through investment might be something that you can explore. This sector is generally high risk but there are products that are safer than others (ex: real estate over oil & gas exploration). The key again with any type of investment is to do your homework to make sure it fits your investment profile and risk tolerance.

Family office is another option which provides a one-stop shop for generational wealth planning. Although there are fees associated with this type of service, it might still be worthwhile as time saved from investing on your own can be used for other things such as expanding your business.

Another suggestion would be to diversify your income stream so that you are protected for the long run. This can be done through a diversified portfolio of investments such as equity, fixed income, private equity, real estate, or even other business ventures. Once you have created a steady flow of income - it may then be time for you to think about early retirement.


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## GoldStone (Mar 6, 2011)

alanlo said:


> The benefit of having private equities in a portfolio is that it allows diversification away from the traditional market, which is somewhat broken in my opinion because of its over-liquidity. A prime example would be 2008 when perfectly fine stocks were driven down in price because of market trend.


Over-liquidity? What is that? Try googling over-liquidity definition. The search comes up empty. There is ain't no such thing. You can have too little liquidity but never too much.

The problem in 2008 was lack of liquidity. The bid disappeared, just like it does in any crisis.

You are kidding yourself if you think that poor liquidity of private equity protects valuations. You cannot get a daily market quote on your private equity stake - that is true. Doesn't mean that its value is unaffected in a crisis. Just ask US home owners about 2008. They too thought that lack of daily market quote makes they investment less volatile than the stock market. Yeah right.

If I wanted exposure to private equity, I'd simply buy a *listed* private equity firm such as Onex. More listed PE names are available in the States. See S&P Listed Private Equity Index. I'd sleep much better at night knowing that I can sell my listed PE stake at 9:30 in the morning with a few mouse clicks.


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## HaroldCrump (Jun 10, 2009)

^ + 1.
Those interested in Private Equity have 4 excellent options - Berkshire Hathaway, Onex, Brookfield Asset Management, and lastly Fairfax Financial.


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## alanlo (Nov 29, 2014)

Try googling high frequency trading or algorithmic trading. A group led by RBC has launched a new exchange last year to combat over liquidity of the market.

There are private equity investments out there that has no restriction on trading but transactions have no effects to their valuations. Many pension and endowment funds have portion of their portfolio on private equity too for good reasons. I am not dismissing traditional equity or fixed income but rather to have diversification on each.

People have different opinions about their investing methods - some stronger than others - and I respect that. I personally favour value trading over index trading when it comes to equity. However I do see the benefit of index trading as well and have no issues with it. Can't monopolize a discussion and dismiss other methodologies altogether. The market is always evolving and the private equity sector is growing for good reasons.


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## HaroldCrump (Jun 10, 2009)

alanlo said:


> Try googling high frequency trading or algorithmic trading. A group led by RBC has launched a new exchange last year to combat over liquidity of the market.


If you are thinking of Brad Katsuyama & IEX, it is not backed by RBC.
Brad _used to_ work for RBC, but IEX is an independent platform.



> There are private equity investments out there that has no restriction on trading but transactions have no effects to their valuations.


That doesn't make sense...transactions _should_ have an effect on valuations.
If there are more sellers than buyers, price should go down, and vice versa.
Every private business has a value...for instance, Berkshire's "value" also includes the value of all its private businesses, even though they don't trade on a stock exchange independently.

A conglomerate like BRK or BAM cannot keep inflated values of its private businesses on its books.


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## 0xCC (Jan 5, 2012)

uptoolate said:


> Some great advice. You are 'High Income' and now you need to parlay that into 'HNW'. [...snip...] I'd encourage you to read 'The Millionaire Next Door' as well so you don't get too carried away with living large. Even high income people can find themselves living paycheque to paycheque and unable to escape the treadmill when they get tired.


I will second this. The Millionaire Next Door isn't really an investing book but it shows what to be aware of during your journey.

I'd also second the advice of other here that say either work with a fee-based planner (that doesn't sell any financial products at all) or go with a basic (probably slightly conservative) style of couch potato strategy for at least 3-4 years at which point you should be close to the $1M mark barring any reduction in your capacity to save and/or a major (and lasting) market correction.


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## fraser (May 15, 2010)

After dealing with both, we would only ever deal with a fee for service financial advisor/investment advisor.

Why? I like to know the exact cost of the service. Then we can make a fair assessment of cost vs. benefit. Free is never free, and free can sometimes be more expensive or less easily compared to other similar services. Especially if you get a no fee advisor who likes to churn your account or buy those funds that provide him/her with higher commissions and/or back end commissions.


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## alanlo (Nov 29, 2014)

The exchange is called Aequitas Innovations.

Your assessment of valuation applies to stocks as companies are valued based on the number of people interested in buying the operation. For private equity, however, the valuation is based on the operation itself and therefore the transactions will have no impact to the price of the security.

Think about starting a business with hundreds of silent partners. The withdrawal of a partner should have minimal impact to the operation as a whole. As such, the valuation of the company remains unchanged.


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