40 years ago trying to invest by yourself was almost unheard of. Buying stocks and trying to invest in companies always involved a lengthy conversation with your broker. Only the rich would do it, since employing a broker to work for you was always an expensive endeavour.
Fast forward a decade later and the advent of the Internet allowed many normal consumers to start purchasing stocks using an online platform. Perhaps many of you have never heard of E-Trade, but it was one of the first platforms to allow people to trade stocks online. This opened stock to many more people, but the cost of stock ownership and the knowledge necessary to know what and how to trade stocks put many people off from trying to invest themselves.
Moving forward to the present and we now have many discount brokerages like Robin Hood in the US, WealthSimpleTrade and Questrade in Canada that are offering zero commission trading for consumers. This has meant that the costs to trade stocks have virtually been reduced to $0.
So the only thing stopping individuals from investing now is knowledge. With the vast number products like mutual funds, ETFs and individual stocks, what chance does a regular Joe have at understanding what to buy? Thankfully, in the last few years things have been simplified.
Just like many other good investment blogs, this one preaches the same thing as the other ones. Make sure you keep a balanced investment portfolio. That means you don’t put all your money in Bitcoins or weed stocks no matter how well they are doing.
We don’t pick individual stocks to buy like Amazon or Apple, or try to find the next big stock that takes off. Yes, these stocks and commodities are doing well now, but what will that picture look like in 10 years, 15 years or 25 years? Balance is what helps us reduce risk in our investment portfolio and let’s us sleep without worry for the next 25 plus years.
This blog has always been a fan favourite of the Canadian Couch Potato formula of passive investment, but more recently simpler products have emerged that have made it easier than ever for a beginner to start investing.
E-trade changed the investment landscape by empowering regular consumers the ability to purchase stocks with a click of a button using the Internet. In more recent times, robo advisors like Wealthsimple or Wealthbar have made it extremely easy to invest.
Most regular individuals always get stuck on what to buy and how to buy. These robo advisors are great. Sign up and deposit money. That’s it! Let the robot invest for you based on your risk tolerance. There’s no need to decide what to buy or understand how to do the math to re-balance your portfolio.
Robo advisors are extremely easy to use and require no investment knowledge. All an individual needs to do is open an account and deposit money into their investment account like a bank account. Everything else is done for you.
This is an extremely simple way of investing. Anyone can do it, and it provides you with a balanced portfolio that doesn’t cost that much in management fees either. As a beginner that’s starting out and wants to be completely hands off, a robo advisor is highly advisable.
One Stop Funds
Individuals that don’t trust a robot to do their investment or want to be more hands on have other alternatives that are just as simple. One of the biggest questions many people ask when buying ETFs is what to buy and how much of each ETF they should buy? Well these questions have been eliminated.
I’ve written about the Tangerine funds before. They are a set of mutual funds that mimic a balanced, aggressive or conservative investment portfolio. Just like the robo-advisors, with these funds an investor would just deposit money into the fund and the buying and balancing would be done for them. This simplifies a lot of the work and there’s nothing to do.
Perhaps the only downfall of using these funds is the higher management cost, but for someone that is just starting to invest, the extra fees don’t overcome the cost of trading the and knowledge that is required to trade.
For those that are a little bit more experienced and want to have lower fees but also have the convenience of a one ETF solution, Vanguard Canada has created a solution. If you’re looking for an extremely low cost solution, with only a MER of 0.22%, Vanguard provides a 60% equity 40% bond portfolio that can be purchased through a single ETF.
The Vanguard ETF holds over 12,000 different stocks. It’s also free of commissions to purchase if you are using a platform like Questrade. One could argue that the single ETF by Vanguard is far superior to the one advertised by Canadian Couch Potato that requires purchasing 3 different ETFs. That could be true. The simplicity of holding one fund that does the 60/40 balancing completely simplifies any need for investment knowledge. It becomes a simple purchase, just like buying stuff off Amazon.
With all the simple solutions that are now available to beginner investors, there’s really no excuse why one shouldn’t be able to invest. If you’ve been a diligent saver, then jumping on one of these solutions should be a priority to getting yourself towards financial independence. Remember, the best day to start investing was yesterday.
If you’ve already started investing and unsure whether these simple options are for you, it really comes down to whether it’s advantageous to simplify your current portfolio and whether you will have to pay taxes on gains. For some, the simplicity might far outweigh the amount of time spent re-balancing their funds annually.
Having a simple portfolio makes it much easier to invest and less time consuming. It also allows for more frequent purchases without worrying about re-balancing if you are using a zero-fee trading platform like Questrade.
With so many advances in the world of investing, it’s now easier than ever to get started. So what are you waiting for?