Friday, May 7, 2021 / by Mario Daniel Sconza
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
A 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!
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.
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.
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