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Simplify Your Portfolio


When it comes to investing your money it can be a daunting task. There are so many options, there are so many opinions, and there’s so much media influence in the money world that it can often become so confusing that we do nothing. Doing nothing always seems like the most logical choice because it requires the least time, least thinking and least risk. But we should all know that doing nothing will also never get you to financial independence. So with all these confusing choices around us, what’s the best thing to do?

Just Do What You Do

The most common question I face all the time is “what should I invest in?” There’s always some kind of magical notion that someone who knows anything about personal finance has the magical answer of the perfect investment. It’s always common for someone that doesn’t know anything to copy what someone else has done, but that’s not always the best solution. Every investor is different, every investor has a different risk tolerance than another person, and every person also has different financial goals and objectives.

Someone who is saving for say an MBA will ultimately have a different objective than someone trying to save to buy a home. Perhaps one person is saving for retirement purposes only while another is saving for a child’s education. All of these things should factor in to what the right investment is for you. You simply can’t try to copy someone.

Keep It Simple

If we can’t copy someone else’s portfolio then what can we do? We’re still lost and this blog is telling me I shouldn’t copy my friend’s investment advice. So what gives? This is where many individuals overthink their investment solution when they first start out. They feel like they should be emulating their friend’s portfolio when it might not be the best fit for their goals. When this happens I prefer to give this advice: Keep it simple.

I’ve already wrote how saving money, not choosing the right investment, is the most important decision to make when first starting to invest. When you are first starting out and lack the necessary funds and knowledge to build a cost effective investment portfolio, it’s best to choose something that is a simple all in one solution. Thankfully these kinds of solutions exist.

For instance, for someone that likes to be hands off and accepts technology as the future. A simple way to invest is to use a robo-advisory service like WeatlhSimple or Wealthbar. Both offer simple single investment accounts where money can be added and money automatically invested. The beauty of using robo-advisors is that you don’t have to worry about re-balancing your portfolio. This takes away all the headaches of figuring what to buy and what not to buy. It’s so simple to open up one of these accounts. You can sign up for one online and then just transfer money into your account. Presto, you’re invested!

For those that don’t like or trust computers because they have no heart, one can use the simple Tangerine investment funds. The Tangerine funds act almost like bank accounts and it’s run by one of the reputable big 5 banks (Scotiabank). Tangerine funds only charge around 1% in management fees making them a very economical choice. Since these funds act almost like a bank account it’s easy to buy. Just deposit money into your account and you’re done! No rebalancing, no calculations, these all in one funds do everything for you  and builds a diversified portfolio all with one fund. It doesn’t get any simpler than that.

Stop Overthinking

When you first start out investing, there shouldn’t be as much emphasis on looking for about gains or even minimizing expenses. Everyone wants to make money, but making money takes time and requires savings. That’s why it’s more important to come up with a strategy to save, come up with a strategy to diversify and most importantly keep it simple.

Once you can get into the habit of saving and building up a large portfolio then you can decide whether ETFs are better for you or a simple single fund. As I’ve mentioned before, if you don’t even have $50,000 in assets, it’s not worth the time to debate funds vs ETFs. Pick the way that makes it easier for you to manage and save.

Remember that investing is a long term game. There is plenty of time to go back and revisit your strategies. So if what you start with doesn’t work, then there is time to change it. Just remember that what you think might work well might not work at all, but if you don’t try, you will never know what works.

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  1. Fille De Finance
    Fille De Finance January 17, 2018

    Great post! It’s important for people to think about their investment style, or else investing can become much more stressful than it needs to be. The other thing I think people forget to think about is fees- a 1% decrease in fees can mean thousands of dollars over 10s of years!

    • bkwan
      bkwan January 17, 2018

      You’re right. Fees do matter, but for someone starting out and confused I don’t think it should be the number one thing on your mind.

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