When you know better, you do better.
Maya Angelou
This past weekend, I celebrated a rather significant birthday. It was also the 30-year anniversary of when I started my investing journey. As I’m wont to do on my birthday, I considered where I was when I started investing my money and just how far I’ve come on my own. I’m pretty proud of what I’ve accomplished. My parents were smart, but they weren’t rich and they couldn’t teach me what they didn’t know. I learned a lot from books and magazines, then from websites and blogs. As I graduated and earned more, I paid off my debt and invested in the stock market. I was even a landlord up until recently.
Did I do everything perfectly? Hell, no!
To be very clear, I am an amateur investor. That means I don’t have any kind of certification to underpin the choices I’ve made. My financial wisdom comes from lived experience and personal observations. I haven’t been qualified by any governing authority to hold myself out as an expert. I’m an amateur who is going to spout a few words at you.
Take what you need and leave the rest.
Best Moves I Ever Made!
One of the things that I did right was to rely on automation. When my paycheque hit my chequing account, my automatic transfer kicked in to whisk atleast $50 away and into my investment account. From there, I bought mutual funds. When I learned better, I started buying exchange traded funds. First, my contributions all went into filling my Registered Retirement Savings Plan. Then the government introduced the Tax Free Savings Account so my priority each year was to fill up my RRSP and my TFSA. Once I was in a position to fill those registered accounts each year, I turned my attention to investing in a non-registered investment account.
Each year, my employer gave me a slight raise. As my income increased, so did my contribution amount. What’s that old saying? Earn $3, invest $2? Maybe that’s just something I say to myself. In any event, my contribution amount increased each year. In other words, I continued to live below my means even as my means got smaller.
I also used automation to build my emergency fund. Even today, I still send a couple of hundred bucks to my Rainy Day Fund. When I was younger, I’d been told that $10,000 was enough. And then I learned that I should have 3-6 months of expenses tucked away. Today, I’m aiming for a year’s worth of expenses. If anything goes seriously wrong, I can live off my emergency fund for a full year before I have to stop my dividend re-investment plan in order to live off my dividends.
The second smartest thing I did after harnessing the power of automation was to get out of debt. I had about $15K in student loans when I graduated. By saying “No” to myself, a lot, I was able to knock that out in 2 years. Then I turned my attention to paying off my car loan within 3 years. I drove my little navy blue car for 8 years then bought my first SUV. I took out another loan, but sacrificed and lived very small so that I could pay that loan off in 6 months. It wasn’t fun, but it was short term pain for long-term gain.
For those keeping track, the third smart thing I did was to live most of my adult life without a car payment. In my circumstances, a vehicle is a means of transporting my body and my stuff from A to B. It’s only transportation and I see no reason to pay a loan to do so. When I had loans, I figured out ways to pay them off as fast as I could. My vehicles seem to ride better when they’re not weighing me down with debt.
By paying off my SUV in 6 months instead of 5 years, I have 13.5 years of living without a car payment. Yeah… I kept that SUV for 14 years. I would’ve kept it longer but it was a 5-speed manual and my left knee was starting to give me trouble. At the point when I felt I couldn’t safely drive my own SUV, I sold it and bought another one with cold, hard cash.
The fourth smartest move I’ve made is to buy-and-hold. Some of my stocks are the ones that my parents bought for me as a baby. I’ve had those for over half a century. They still pay me dividends every quarter. Maybe $500 per year? Again, my parents weren’t wealthy. The dividend payments aren’t enough to buy more shares, so I re-invest the money rather than spend it.
My other holdings are ones I’ve had for 10+ years. What used to be in a mutual fund with a management expense ratio of 1.76% is now in an ETF with an MER of 0.22%. After all, why would I pay the investment company 1.54% more than I have to for the same product?
In terms of category of investment, I’ve had some for 30 years. Like I said above, my dividend stream is finally enough to support me. That’s the result of my buy-and-hold philosophy.
My fifth best move was to hire an accountant. I’ve owned a few rental properties over the years. She knows tax stuff much better than I do. My accountant has made sure that I don’t get in trouble with Canada Revenue Agency. For that, she is worth every penny. She also answers questions about the tax implications of some of my investing ideas. That information has also saved me from making some big mistakes!
Mistakes? Yeah… I’ve Made A Few!
In terms of mistakes, I made a doozy. Early on, I fell in love with the idea of creating a cashflow of dividends to supplement my pension. Sears went into receivership early in my career and I heard the stories of retirees having their pensions cut. The mess at Nortel also shone a light on how pensioners are at the mercy of their employers’ continued corporate success. I wanted to minimize the chances of my retirement income being disturbed if my pension was cut. So I chose to invest in dividend-paying mutual funds and ETFs.
The smarter play would’ve been to invest in equity-based investment products. Between 2009 and 2022, the stock market was on a tear. That means it was growing and growing, year over year. My dividend products were growing too, but not at the rate of the growth products. I would’ve been far better off investing in equity-products. I finally got smart in October of 2020 and have been investing in VXC ever since.
I didn’t sell my dividend-payers!!! After 12 solid years of investing in dividend products, I’ve got a nice secondary cash flow and it’s growing nicely year over year thanks to my DRIP. It would make no sense to sell those investments just to start from scratch in VXC.
God-willing, I’ve got another 30+ years ahead of me. I’ll continue to invest in equity-based products until I don’t need to invest anymore. Presently, I’m considering the wisdom of using my monthly dividends to bolster my monthly contributions to VXC. I would have to give up the DRIP in order to do so but maybe that’s the smart thing to do since the market is currently low and starting to move back up. Buy low – hold forever. That’s kind of been my plan throughout this self-taught investing journey of mine.
My second biggest mistake with money was being too rigid. I know how that sounds. Sticking to my plan and investing consistently is what has helped me reach the Double Comma Club. That said, I was recently asked if I had any regrets about how I’ve handled money to date. For the most part, I’m good with the choices I’ve made. However, you can’t get to my age and not have atleast one or two regreats.
Looking back, I do miss that I didn’t go to a second cousin’s wedding in Paris. Truthfully, I’m not certain how I got invited since we hadn’t grown up together nor had spent much time together as adults. That said, I had just gotten home from Europe when the invitation arrived. I consulted my budget and there was no way to afford to travel to her wedding without going into debt, so I declined the invitation … (big sigh goes here) … Looking back now, I should’ve gone into debt and gone to the wedding. The debt would’ve been paid off within a few months and I would’ve met some interesting people at the wedding. Did I mention the wedding was in Paris? The City of Lights?
Since then, I’ve been thinking more about what I want my money to do for me today. My portfolio is humming along nicely. My total DRIP almost exceeds what I contribute from my paycheque. I can afford to indulge myself a little bit more when unexpected money shows up. I’m correcting the mistake of being too tight-fisted with my money. In the words of Ramit Sethi, I am learning to craft and build the rich life that I want for myself.
My third biggest mistake is thinking I know better. It’s the sin of hubris. I haven’t always listened when I should, and I certainly haven’t always applied all of the lessons correctly. However, I know this is one of my flaws and I’m working to correct it. No one makes the right choices every single time. That said, I can make better choices for myself if I’m willing to be a little more open-minded and consider viewpoints that are different from my own.
I should have spent less time on Netflix and more time learning from people who’ve done exceedingly well with their portfolios:
This is an error that has cost me dearly, but I’m aware of it now. I choose to do better.
My fourth biggest mistake was paying off my house early. When I sold my first two rental properties, I should have lump-sum invested the money into the market via ETFs. Instead, I chose to pay off my mortgage because I wanted to be debt-free as soon as possible.
I realize now that my mortgage would’ve been paid in due course. I got my first mortgage in 2001, and history instructs that mortgage rates continued to fall until 2022. Looking back, I should’ve renewed my mortgage every 5 years. I would’ve gotten a lower rate each time. I could’ve been paying a mortgage while investing, even though my contributions would’ve been smaller due to having to pay for my house.
Shoulda – coulda – woulda… Too late smart and all that jazz. I still did okay. Those former mortgage payments were re-directed to investing for my future. I had to choose between two sacks of gold, so I shouldn’t complain.
Finally, one of my biggest mistakes is thinking that I knew enough to be a successful landlord. If I had to do it all over again, I would’ve learned to crunch the numbers better before buying my rental properties. The first two properties were a cinch to sell – due to the market, not due to my acumen – and they netted me enough money to pay off the mortgage on my home. The third property was not a good investment for me, despite what I thought at the time. I relied on hope… and hope is not a plan. When I finally sold my last property, I did not make money. It wasn’t ideal, but it also wasn’t the end of the world.
And That’s It.
That’s my list of great moves and big mistakes which have gotten me to this point. If I could go back, I would invest in equity-based ETFs from the get-go. Further, I would’ve gone to see a fee-only financial adviser way sooner to set me up on a plan for my money. Having an objective voice and someone to check my progress along the way would’ve been a good idea. In terms of rental property, I would’ve done a lot more research and learned how to crunch the numbers.
Mistakes? Yes – I’ve made a few. They weren’t the end of the world, and my smart choices have balanced them out. Despite a few missteps here and there, I think I’m going to be just fine. Not bad for 30 years of DIY-investing.
