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Financial Friday #61: Getting Started with the Markets

Friday, May 7, 2021   /   by Mario Daniel Sconza

Financial Friday #61: Getting Started with the Markets

Getting Started with the Markets
Low interest rates have been around for years and it might be a long time before they go up enough to make holding cash a viable piece of your wealth building strategy. Financial markets provide much higher returns, but there are some hurdles to jump...

  • Do I need a financial advisor and how much will that cost?
  • What do I invest in... blue-chip stocks? index funds?
  • How do I evaluate and manage my risk?

These are all great questions and if you have some time next week on Wednesday, why not ask Enriched Academy Co-founder Kevin Cochran yourself?

No time on Wednesday? No worries, we compiled the basics below to get you started.

DIY isn’t just for home repairs
Using some level of DIY for basic investing has become popular due to the low cost and relative ease. Financial advisors are skilled professionals and another option, although they may offer limited investment products and their value is higher in more complex investing scenarios.

Automated advisors vs going it alone
Robo advisor is a plug-and-play application that analyzes your financial situation and recommends a passive, low-risk strategy with returns aimed at  the overall market. They require little sophistication on the user’s part and charge fees less than 1%. As you get more knowledgeable, you can transition to complete DIY options and drop your fees to as low as 0.20%.

Fees can take a real bite
Canadians pay some of the highest fees in the world on their investments and a lot of us don’t even know how much we are paying. A 2.5% annual fee on your TFSA or RRSP funds will easily cost you tens of thousands over your investing lifetime. If you currently have funds in an RRSP or TFSA, you should run, not walk to confirm your fees!

How do I pick stocks?
The short answer for most people is, "you don’t". The internet is full of gurus who bought Amazon, Google or Apple at some ridiculously low price years ago. However, that old adage about the risk of numerous eggs in one basket also applies to stocks. If you want to do the research, have the time, and are aware of the risk, you could devote some of your portfolio to individual stocks.
Putting the fun in funds?
If researching stocks sounds about as much fun as watching paint dry, you should be investing in funds. Exchange Traded Funds (ETF’s) and mutual funds are two popular types. Funds are baskets of stocks, commodities, bonds, or a mixture of investment types all wrapped up together and then sold in individual units. There are 1000's of funds and they often target a particular industry or geographic region, so their risk can vary widely depending on their scope.

Index funds are popular because they mirror the movement of an entire stock exchange. If the TSX is up 2%, so is your TSX index fund. They offer comparatively low risk and are a great option for "set it and forget it" investors.
One final caveat on funds, mutual funds do not consistently perform better than ETFs and have much higher fees.
We recommend everyone gain a good understanding of investing basics before diving in yourself. If you like the full-service route, make sure to confirm how much it is really costing you.

For an in-depth and somewhat shocking look at bank and investor fees in Canada, check out our FREE upcoming webinar with Beat the Bank author and 35-year banking executive Larry Bates. Larry wrote the book on DIY investing for Canadians and is now a Board Member and Transparency Task Force Ambassador for FAIR Canada.

?? Resources

Sure they talk about BRK's performance, but CEO Warren Buffett and right hand man Charlie Munger also dish out plenty of sage investing advice in an entertaining and straight-up manner.  If the article leaves you wanting more, the full 5-hour YouTube video is here.

What do you get for $716,828?
That's the average cost of a home in Canada these days and while prices are rising everywhere, what you get for that price ranges from a 1-bedroom condo in Vancouver, to a detached home complete with wine cellar in Moncton.

Crypto going to the dogs?
There has been no shortage of love in 2021 for cryptocurrency Dogecoin (dohj coin) and it's Shiba dog mascot as its value surged 13,000% to $80 billion -surpassing the market value of General Motors!

Warren Buffett and Charlie Munger aren't the only ones upset with Robinhood. Canadian regulators have also put the kibosh on the no-commission online trading app - but Canada does have some pretty good alternatives.

Sounding the alarm on inflation
When you're worth $100 billion and notice the price of most everything is going up, then it's time for the rest of us to take note! You might need these eight strategies to ensure your wealth is keeping pace.