When I started investing, I had no idea what I was doing. It’s true.
I was in my early 20s, and my local newspaper had a column about personal finance. I’m older than the internet, so I grew up reading newspapers. I’ll never forget a column about David Chilton’s book The Wealthy Barber. That book changed my life. I bought it, read it from cover to cover, and decided that I knew enough to start investing. So I promptly took myself to the bank and I opened my RRSP when I was 21 years old.
I had the right idea, but I certainly had more confidence than knowledge at that point. After opening my RRSP, I went on with the rest of my life. Every year, I dutifully contributed to my RRSP… which my parents’ accountant told me wasn’t particularly smart since I was a student and my tax rate was super-low. However, he did tell me that I could eventually take advantage of the the RRSP Home Buyer’s Plan so I kept investing. I didn’t know what I didn’t know, so I didn’t ask the right questions in my 20s.
I got a little bit smarter in my late 20s. By then, I knew enough to stop buying GICs. Rates were no longer super high as central banks got a hold of inflation. And there’d been some chatter in the system about something called mutual funds. Great! That was where I’d put my money. So I did. I opened an investing account at one of the Big Banks and dutifully contributed money into it from every paycheque. I even met with the same banking officer each time, thinking that I was “building a relationship” with a financial advisor. After our third meeting, she told me that I didn’t have to personally make deposits with her each time.
Message received! Obviously, I was wasting that bank’s time so I opened an account at Phillips, Hager & North, now known as PHN. They helped me arrange for an automatic transfer of funds that coincided with my paycheque. I picked a few funds and barely thought about my investments unless I received a statement in the mail. I loved PHN! And would have little hesitation in going back to them if I had to leave my current brokerage.
The only reason I moved is because, sometime in my early 30s, I learned about exchanged traded funds and how they have way cheaper management expense ratios. The MERs at Vanguard Canada were much lower than the MERs I was paying on my mutual funds at PHN… so I moved my money again. Similar investment products for a lower price made more sense to me. Why pay more if I didn’t have to?
By the time I’d hit my mid-30s, my house’s mortgage was paid off and I’d heard of something called the FIRE movement. There were tales of people who pursued something called Finance Independence, Retire Early. It was an idea that spoke to my heart. Several years of working had disabused me of the belief that everyone grows up and is lucky enough to work at careers they love. Early retirement sounded like a brilliant idea!
Some how, some way, I stumbled across Mr. Money Mustache and I fell into a deep, multi-year dive into the world of personal finance blogs. It was intoxicating! So many people who had transformed their dreams into reality. Some of them were a decade or more younger than me, but so what? They had the knowledge that I wanted to have so I absorbed as much of their message as I could.
And I learned so very much! My perspective changed from wanting early retirement to wanting financial independence. In my mind, being financially independent is necessary. Being FI is a way to control your time, your autonomy over your life. It gives you the power to say “No!” to whatever it is that you don’t want in your life – atleast the things that can be controlled with money. Early retirement is still something I want, but it’s an option that becomes available to me (and to anyone else) as a result of financial independence. So many of the bloggers I followed used their FI-status to start working at things that they loved. They still made money, but they did so via endeavours that meant something to them. Unlike working for a boss, they were no longer fulfilling someone else’s dream but were busily and happily fulfilling their own.
Eventually, my self-tutelage led me to the sad realization that my dutiful bi-weekly investment contributions were going into the wrong type of investment. I love dividends! Passive income makes me dreamy. So a steady 4-figure monthly cashflow seemed like a marvelous thing…until I realized that I hadn’t taken proper advantage of the bull-run that existed between 2009 and March 2020. I would have seen much higher returns if my money had been going into equity ETFs instead of dividend ETFs! Had I been investing “properly”, I could have retired by now.
(Big sigh goes here.) There’s no sense crying over spilled milk. Once I realized the error of my ways, I corrected my path. All new contributions are going into equity investments. The longevity charts tell me that I have another 40-50 years***, so I still have a fairly long investment horizon. My course correction cannot change the past, but it can certainly prevent me from continuing what I perceive to be a big mistake.
Why am I telling you all of this?
Simply because I want you to start where you are and build from there. Would it have been better to have started 20 years ago? Sure, but you didn’t so stop dwelling on it. You have today so start today. The information is out there. And, no, you won’t understand all of it at first. So what? No one understands all of anything at first. Have you ever watched a baby learning to walk. Poor little buggers can’t figure out that they can’t move both legs at the same time. The slightest twitch of their heads means they topple over. And the first few steps are always quite wobbly. You know what happens? They always figure it out.
It’s the same with money. Start with setting aside some of your money in a savings account. Then move it to an investment account. Pick a product that has a low MER and invest in it for the long term. Don’t be afraid of the stock market’s daily volatility. You’re investing for years, and the market has always gone up over the long term. Keep learning about investing. Tweak your investing strategy if you have to, but try to keep those tweaks to a minimum. Save – invest – learn – repeat. Start today.
*** Never forget that you need your money to work hard for you, even after you retire. Don’t believe that you can stop investing in equities just because your old age security payments have started hitting your checking account.
