FirstTimeInvestor #Investing30k #HowToInvestSavings #InvestmentTips
Introduction: Congratulations on Taking the First Step!
Investing can be both exciting and overwhelming, especially when you’re starting out with a significant amount like $30k and an extra $2k per month to invest. You’re in a great financial position, and with the right guidance, your money can work wonders for your future. Let’s break it down step by step to make this journey a pleasant experience for you.
Understanding Your Financial Goals 🏡
Your primary goal is to buy a house within the next 5-10 years. This determines the type of investments you should consider. You’ll need a good mix of low-risk and moderate-risk options to balance growth while preserving your capital.
Types of Investment Accounts
RRSP (Registered Retirement Savings Plan)
- Limit: $15k
- Employer Matching: Up to $3k/year
- Best For: Long-term retirement savings with tax benefits.
TFSA (Tax-Free Savings Account)
- Room: $57k
- Best For: Flexible savings and investment with no taxes on gains.
FHSA (First Home Savings Account)
- Room: $8k
- Best For: Saving towards your first home with tax benefits.
Recommended Investment Options 📈
ETFs (Exchange-Traded Funds):
ETFs are a great choice for beginners as they offer diversification and lower fees. Here are some popular options:
- XEQT & VEQT: 100% equity ETFs, ideal if you’re comfortable with higher risk for potentially higher returns.
- XBAL & VBAL: Balanced ETFs that combine stocks and bonds, offering a mix of growth and stability.
- ZSP & ZCN: Canadian-focused ETFs recommended by your bank, but independent research is advisable to ensure they align with your goals.
Investing Strategy:
Consider starting with a balanced ETF like XBAL or VBAL for a mix of equities and bonds. This provides steady growth while minimizing risk.
Step-by-Step Guide to Start Investing 🚀
-
Maximize Employer Match:
- Enroll in your RRSP plan.
- Contribute enough to get the full employer match—free money adds up over time!
-
Open a TFSA:
- Utilize this tax-free option for flexibility.
- Start with a balanced ETF such as VBAL.
-
Utilize FHSA for Home Savings:
- Allocate funds here for long-term house savings with tax benefits.
- Diversify Investments:
- Spread your $30k among RRSP, TFSA, and FHSA.
- Consider setting up automatic monthly contributions of your $2k to these accounts.
- Example Allocation:**
- RRSP: $5k
- TFSA: $15k
- FHSA: $8k
- Monthly: $1k to TFSA, $500 to RRSP, $500 to FHSA
DIY vs. Professional Management 🤔
Self-Manage:
- Pros: Lower fees, more control.
- Cons: Requires time to learn.
Professional Management:
- Pros: Expert advice, less time-consuming.
- Cons: Higher fees, potential bias.
Suggestion: Start self-managing with a robo-advisor like Wealthsimple or Questrade, which offer automated investment with lower fees.
Platform Recommendations 🏦
- Wealthsimple: Great for beginners with automated investing.
- Questrade: Low-cost trading platform, ideal for those who wish to self-manage.
- BMO InvestorLine: Convenient if you prefer sticking with your current bank.
Conclusion: Your Roadmap to Financial Success 📅
Start by understanding your accounts (RRSP, TFSA, FHSA) and then allocate your savings wisely. Choose a balanced ETF for stable growth and consider using a robo-advisor to ease into self-managing your investments. Remember, every dollar invested wisely today brings you closer to owning your dream home tomorrow.
Good Luck! You’ve got this! 🙌
1. RRSP matching >FHSA>TFSA > rest of rrsp if you make 100k or lower
2. yes self manage right away, less fees if you have to time to learn about it
3. BMO investorline is fine since they have non trading fee etfs that are common, but they do have account fees and trading fees outside of those ETFs. Wealthsimple is a nice and cheap option, besides wealthsimple cash have a nice and enticing interest rate
4. just pick a all in one portfolio that fits your risk tolerance. boring is good, but you have to remain disciplined. https://canadianportfoliomanagerblog.com/model-etf-portfolios/
Good luck OP
E: I wouldn’t worry too much about your credit score, if it is above 750 you are doing fine. don’t pay more interest trying to reach a number that is mostly meaningless once you are above a certain number
Decide on the level of risk you accept and your time horizon which will determine your asset breakdown. This will help you decide which etf. Some popular “more risk” long term options include:
– 100 percent equities – XEQT/VEQT
– 80 percent equities/20 percent fixed income – XGRO/VGRO
These are examples and all excellent choices. V/X/Z etc just determine who is the fund manager, Blackrock, vanguard etc.
You could always start with something like wealthsimple which can do a similar service that is a bit more user friendly. Maybe do that for a few years until you get the hang of it or get significant assets built up. When you’re ready to jump in all the way you can open up an account at a discount brokerage like Questrade.
Pay attention to what kind of account you’re opening, either a TFSA, RRSP, etc. In your shoes it probably makes the most sense to start with a TFSA or FHSA, but this will be up to you.
1)Order of investments
1) RRSP match
2) FHSA – so you can buy a house one day
3) RRSP (if your income is over $100k), otherwise TFSA
4) TFSA
I would put the $30k you have, into TFSA today. THe $2k/month is what you allocate to the list above.
2/3) Self directed. I like WS for simplicity when buying ETF’s. But any self directed brokerage is fine.
4) all your ETF’s are fine. THe difference is based on your risk tolerance. Every bank has similar product0s to all the other banks, with different names. Its like trying to choose between 5 types of apples, they’re all good.
XEQT/VEQT are for the same people, BMO has an alternative, I’m not sure what its called.
The “all in one” ETF’s are designed for people who want to be hands off. Good for everyone.
After a while, you can re-evaluate. Nothing you do today is irreversible.
I’m not an expert, but I feel like I was in a similar position a few years ago so I’ll weigh in!
1) Get that RRSP matching set up first!! Free money. Then I’d probably start with the FHSA and TFSA, but that’s without knowing any particulars of your situation. For instance, I (annoyingly) am advised against having a TFSA at all, as my other country of citizenship would tax my earnings.
2) Passively managed is how I like to roll, but I think you could be fine with just picking a couple of “boring” ETFs like you mentioned and making your own portfolio.
3) When I was at this stage, I switched from a big bank to opening up my investment accounts with WealthSimple. It’s been super easy and the fees are lower. I really like it.
4). I don’t know squat about the particulars of choosing ETFs. That’s why I ended up with the managed portfolio with WS, but I have it at a high risk level since I’m still decades from retirement, so that it’s 85% a bunch of ETFs in there, 15% of the portfolio in bonds and gold. THAT SAID, to compare, I also put a hundred bucks into one Vanguard S&P 500 to compare performance over time between that and my portfolio. Over the last couple of years, my portfolio is up 15% and my S&P 500 ETF is up 38%. Soooo hindsight, I might have been better off dumping it all in there, or a mix of ETFs like that. But a passively managed portfolio is much more in my comfort zone.
> My only debt is a $450/month car payment, which I haven’t just paid off in full because apparently it’s really helping my credit score (north of 800).
Yeah, that score isn’t helping you like you think it is. If the interest rate on the loan is ~5% then you should be paying it off.
You are interested in a house so I think the priority is FHSA > TFSA > RRSP. With your shorter time frame (5-10yrs) is relatively short and being new to investing I’d probably lean towards going VBAL/XBAL/ZBAL ETF to set and forget. If you haven’t seen your investments go from $100k to $50k, then you don’t truly know what your risk tolerance is. Better to lean on the safer side in my opinion. I think one of the important questions to ask yourself is “What if I’m wrong?” when choosing an investment. Is it a minor under performance and not much impact or will it derail your plan completely for years.
For platform, Wealthsimple is free etf buy/sell I think. Questrade is free purchase but commission on sale. I use both for different purposes. For you, Wealthsimple simplicity is likely a good option.
My .02 cents.
the video in !InvestingTrigger along with the rest of the wiki are also good beginner resources.
investing itself is actually pretty easy, understanding the theory so that you’re confident in you decisions and aren’t tempted by the litany of misinformation online takes a bit more time. but there’s no rush it’s hard to go wrong as long as you’re willing to learn.
also your intuition was right about financial advisors, they’re essentially sales reps and there was a recent CBC piece on bad business practices, again.
The fact you’re taking the time to post on PFC, ask questions, and are open to learning puts you way ahead of the majority of people.
Good luck on your investment journey!