Truer words have never been spoken. When it comes to investing your money, procrastination is also robbing your wallet.
See – it’s like this. If you invest $0 today, then you’ll definitely have $0 tomorrow.
On the other hand, if you invest something, then you’ll have way more than $0. The more you invest, the more you’ll have. It’s a simple, direct relationship between the choices you make today and the outcomes that you’ll have tomorrow.
First lesson – invest your money. Start with what you can and work your way up. I suggest increasing your investment contribution by 1% every year. When you get paid capital gains and dividends, re-invest them.
Keep an eyes on your management expense ratios. The MER is the amount of money that is fleeced from your account. I look at it this way. The businesses that offer the investment products need to get paid too. That’s fair. What is not fair is me paying 2% per year instead of 0.35% (or less) for the same product from someone else.
Play around with this investing fees calculator for a little bit. It shows you the impact of MERs on your investment account. The longer you keep your account, the more money is siphoned away to someone else. By choosing good investments with lower MERs, you’ll be keeping more of your returns in your own pocket.
Second lesson – understand the impact of fees. Canada has a reputation for having some of the highest MERs in the world. The longer you pay higher MERs, the less money you’ll have for Future You when you really need it. Try to pick investment products with low MERs.
Don’t be afraid to make mistakes. You’ll always learn more from your mistakes than you will from your successes. Make your mistakes. Learn from them. Don’t make the same one over and over again. Your goal should be to earn-save-invest-learn-repeat. It’s a pattern that should never stop. As you learn better, you’ll do better.
Trust me. I started out investing in mutual funds with one of the Big Six banks. I wasn’t paying a 2% MER, but it was around 1.75%. I didn’t know any better. The Big Six bank didn’t even have a way for me to automatically deposit to my mutual funds every month. I did it in person, which got weird very quickly. So I went to an investment firm. I loved that investment firm, and I got wonderful service every time I called. Unfortunately, while the MERs were lower, they were still pretty high. But I didn’t know any better so I stayed with them.
Eventually, I started hearing about something called exchange-traded funds, or ETFs for short. They offered the same diversification as mutual funds but with MERs that were much, much lower. By the time Vanguard came to Canada, I couldn’t move my accounts fast enough.
Third lesson – make your mistakes fast so you can learn fast. No one is perfect at investing, and everyone makes mistakes sometimes. The key is to learn from your mistakes so you don’t repeat them. The biggest mistake that you can make when it comes to investing is to never start.
If you’re not yet investing, start today. If you’ve started and your MERs are too high, then move your accounts to equally good and less expensive options. If your MERs are low already, then work on increasing your contribution amount by 1%. Make sure you’ve turned on the dividend re-investment plan feature on all your investments. If your brokerage doesn’t allow for a DRIP feature, then move your accounts to one that does. Trust me on this. You most certainly want to have the DRIP in place so that your investment returns compound as fast as possible.
You’re smart enough to learn how to do this. The fact that you’re here, reading my blog, means that you have an interest in attaining financial security at some point. That’s the seed that’s needed to plant your Money Tree. By starting today, you’re preventing procrastination from stealing any more time from you.