# 25 years old, New Investor



## DP0911 (May 14, 2018)

Hi everyone,

I have been a long time reader of the diaries and investing advice posted on this website and finally decided to create an account.

*Background*
*Age:* 25
*Annual Income:* $48,000

*Savings*
*Chequing Account:* $24,100
*TFSA:* $34,700 - Comprised of various individual stocks (ENB, EMA, FTS, TD, BMO, AC, CNR, SLF, BCE)
*Employer RRSP:* $871 ( I recently started contributing $175 per paycheck (twice a month) to this account. The money is invested in funds I selected based on a risk information that was provided)

*Liabilities*
N/A - I was fortunate enough to have my parents pay for my education.

*Monthly Expenses*
*Car Insurance:*$200
*Cell phone:* $80
*Gas:* $200
*Public Transportation to work: *$250
*Eating Out:* $150

*Question:*
I understand that my chequing account is a bit too high in terms of holding cash. From what Ive read, I should have an emergency fund for 3 months worth of expenses. The problem is that I am still developing my investing knowledge and am extremely nervous when it comes to making decisions with regards to the excess cash. 

I appreciate any advice on my situation, whether it be related to the next steps to take, beginner investing books, adjustments to my current account setup, or savings tools you have used in the past.


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## OnlyMyOpinion (Sep 1, 2013)

DPO, welcome to CMF.
To already be financially aware and literate is awesome. Many never even get to that point - ever.

I can understand your nervousness. I don't see a problem with your cash if you are at the same time systematically contributing to your RRSP and TFSA each year ('pay yourself first'). I would try to put it into a high interest savings account to get some interest on it. You have many possible paths ahead so keeping some of your assets liquid while still putting a percentage into longer term investments makes sense. 

I'd encourage you to think about what you are saving for - is it real estate, family, financial independance, all three, etc., and what time lines those goals involve, and then invest appropriately (equities for longer term growth).

Your TFSA stable of stocks looks like a dividend-tilt, all stocks I hold except for AC. Are these intended as long-term holds? If so, are their sufficient shares to DRIP the quarterly dividend? I like the idea of having a small portfolio of long-term hold shares to 'feel the pulse' of the market more directly (with both it's ups and downs). Added to that, I'm sure you've read that some global equity exposure through a few etf's provides valuable diversity. That's where I'd be looking for long term money.

I look forward to hearing about your journey in the future.


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## motl (Mar 3, 2014)

Prior reply has some good investing advice. Only thing I'd add is that the main decision to make with your cash is how soon you'll need your investments. If you aren't planning a major purchase (ie. real estate) in the next 10+ years then you could do well to move that into ETFs within your RRSP. On that note, are you managing these investments yourself? I thought you were given your TFSA but your RRSP sounds like maybe you're buying bank mutual funds? If so, I'd strongly recommend lower MER options. Even if you're not inclined to do the work yourself with Questrade, you could save yourself plenty going forward using something like Tangerine's investment funds. I realize from your description that you may already be with Tangerine though, in which case disregard.

Was curious about your budget though. You're currently spending $650 per month on transportation. This is actually a massive portion of your current spending but it's a bit odd to me. How are you spending $200 on gas if you're commuting using pubic transportation? Why do you own a car if you commute with public transit? Is parking at your work really more than the $250 you're spending on transit? Not that you're doing anything wrong here but it's hard to understand how these expenses are working together. I'm just wondering if you can't increase your savings/investments by cleaning that up.


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## Jimmy (May 19, 2017)

You should have your age % in bonds. Maybe add a general bond ETF like XBB or ZAG. Good diversification for the stock downturns as -vely correlated to most markets and lowers overall risk. You may want to diversify a little geographically too. Maybe go 1/3 weight in each of CDN, US, and Intl. Maybe add an S&P 500 ETF like ZSP,XSP and and Intl ETF like XEF or ZEA. Or XAW which is the World ex Canada

Here is an article too on couch potato investing. 

http://canadiancouchpotato.com/recommended-funds/

Good general book on finance, saving/investing etc is :" Stop Overthinking your money ' by Preet Banerjee


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## james4beach (Nov 15, 2012)

DP0911 said:


> *TFSA:* $34,700 - Comprised of various individual stocks (ENB, EMA, FTS, TD, BMO, AC, CNR, SLF, BCE)


This actually looks like a nice stock selection for a Canadian portfolio. At your age, I was not doing a good job selecting stocks (I had all kinds of oddball and high risk stocks) but your list is quite solid. Here is some advice I'll offer about your stock portfolio:

1. You'll probably get best results if you either do equal weighting of the sectors, or equal weighting of the individual names. I mean, more or less -- very approximate. The point is that you'll be good as long as you aren't lopsided towards an unusually large single holding, or perhaps one sector that dominates the portfolio.

2. Leave the portfolio alone. Seriously! This is the hardest part... we all get tempted to tinker with the portfolio and it almost always makes things worse. Of course you can still _add_ money (this is a good opportunity to rebalance towards equal weights as I said in #1).

3. Reinvest the dividends. Don't let cash accumulate, as this causes cash drag. If this isn't feasible, use a Canadian index mutual fund to reinvest the spare cash back into stocks. Every brokerage offers some kind of Canadian index mutual fund that should have no trade fees, even for small amounts.

If you can leave your stocks alone for say 10 years, I'll bet that you'll see good performance on par with the TSX index.


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## My Own Advisor (Sep 24, 2012)

I agree. Nice stocks.

As for books, I would suggest you read this one posted on my site - a fellow CMFer who wrote a nice book on how to invest in Canada and an approach I also share:
https://www.myownadvisor.ca/benefits-of-the-6-pack-portfolio-review-and-giveaway/

Other books I would strongly recommend, this one for free:
https://www.myownadvisor.ca/millennials-can-get-rich-slowly-can/

My interviews with Andrew Hallam and his books here:
https://www.myownadvisor.ca/catching-up-with-millionaire-teacher-and-expat-andrew-hallam/

Like James wrote, I'm a HUGE fan of reinvesting the dividends. Compounding in action


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