Investment strategies

[Guest *Ste***cque**]

This may be off topic for this board but I'm sure there are some investors out there. Care to share your strategies for creating and maintaining wealth? Any lessons learned? What is a reasonable rate of return for investments over the long haul? Where do you put your spare money?

 

Many thanks!

[Meaghan McLeod 179664]

I just went to a real estate investment seminar. You pay a fee for training, they show you how to find the wholesale real estate, loan you the money for a small percentage, and when you close, you pay that back.

 

They also had a stock market section, and then a precious metals section. Great information. They were saying the average return on traditional investments is 3% - and were talking about 15-20% returns.

 

Diversity is the key it seems - real estate, stocks, and precious metals. They have a great website for doing your own trades too, as brokers earn the reputation for making you broke er.

 

However, I don't really have any real insight - just interesting that I went to this today and you brought this up.

[drlove 37204]

As Meaghan said, be well diversified.... start off by maxing out your RRSPs. Once you start, it will have a cumulative effect as you can re-invest your tax refunds (approximately 30% of your initial investment). It can add up quickly. You can also invest in non registered funds and your TFSA. That's a good spot to park any extra cash you have lying around. Of course, don't forget real estate - Aside from your primary residence, you can purchase investment properties, or if you don't really want to be a landlord, consider flipping. If you know a decent contractor, you can buy fixer uppers, have them renovated and sell them for a decent profit. Just some ideas...

[Guest *Ste***cque**]

Thanks for the info, Meaghan and drlove.

 

I have investments in real estate and stocks. To be honest, my real estate is not the best investment as there is little appreciation in Halifax and the return is less than what I could make if I put that money in the stock market. The reason I bought it was I thought my wife and I would live there in retirement. It's a nice condo on the waterfront. Now she is thinking not until were much older. I'm not sure if we'll see much appreciation over the next 10 years. Halifax is not like TO or Vancouver in that regard.

 

My stocks are only making an average return of 3 - 4%. What happened to the 6% I was promised? On top of that I pay an advisor yearly 1.20% of the value of my portfolio, which seems high for a portfolio of 75% stocks and 25% bonds/fixed income. I use Scotiamcleod. I'm well diversified with mostly blue chip dividend payers but maybe slightly heavy in banks and not enough global exposure.

 

What return do other people typically get from their investments. If you use an advisor, what fee % is reasonable? I know ETF's have low fees but for now I prefer an adviser. Maybe that will change down the road.

[Helena D'Orville 33237]

Very interesting thread! I read books about finances as I love to get educated about this topic, and started investing using this website http://www.questrade.com/ as I do not want to pay fees to someone. All the books I have read so far came up with the same conclusion that we do not earn as much as we could when we pay managers/advisors because of their fees; I have read also that financial analysts/specialists can be totally in the wrong as markets are totally unpredictable; that financial advisors and people who barely know about investments and make their own decisions can reach the same results; that Mutual Funds is not so recommended at the moment, ETFs are, stocks with prudence, and real estate for sure if invested in the right place. Now, for sure diversifying and starting early. Time makes money work if we do not take high risks (compound interests). Which is why it is highly important to explain to teenagers/young adults when they start working that they should start save and invest money.

 

Another interesting website to get educated: http://www.investopedia.com/

[Guest Prufrock Cummings]

I have an investment adviser that I have used for almost 20 years now. My average return for the last three years has been over 7.5% annually (last year 9%) so I am quite pleased. She does a lot better than I could ever do, she does her research and so many decades in the business that she is a wealth of knowledge (excuse the pun).

 

To each his own, but she has always done well for me and is also a trusted family friend.

[Meaghan McLeod 179664]

Remember, you can invest in Real Estate in other areas that you live in.....

 

One thing that's interesting - a broker only requires a 5 day course. A hair dresser requires something like 3000 hours. So, why would we invest our life savings with someone who actually doesn't really care - they get their pay at the end of the week - even if they don't do well. I might be really wrong on this, but I had an investment with my bank - and really, it didn't amount to much. If I had it in cash, I guarantee I could have made it much more, but it was locked in, so I had no choice.

 

I personally would invest a small amount with an online site. Play around. You can start with $100. You pay $30 per month (at least from what I could see) to use the site. If you like your results, you can move from there. They are set up to be user friendly.

 

Remember, however, I am not the one to offer financial advice. Just someone who is willing to look outside the box.

[Regent 35404]

I have a very good financial advisor who I just trust to take care of my money, and he has gotten me a consistently good return over the long term. I have no interest or intuition for complicated financial matters, so as with many things, I find it makes sense for me to pay someone who is very good at it to deal with it for me.

 

Finding a good financial advisor is easier said than done - I certainly lost money with a number of them before I found my current one.

 

Though given what Brexit has done to global markets, right at the moment, few investments are feeling like a good bet.

[drlove 37204]

Thanks for the info, Meaghan and drlove.

 

I have investments in real estate and stocks. To be honest, my real estate is not the best investment as there is little appreciation in Halifax and the return is less than what I could make if I put that money in the stock market. The reason I bought it was I thought my wife and I would live there in retirement. It's a nice condo on the waterfront. Now she is thinking not until were much older. I'm not sure if we'll see much appreciation over the next 10 years. Halifax is not like TO or Vancouver in that regard.

 

My stocks are only making an average return of 3 - 4%. What happened to the 6% I was promised? On top of that I pay an advisor yearly 1.20% of the value of my portfolio, which seems high for a portfolio of 75% stocks and 25% bonds/fixed income. I use Scotiamcleod. I'm well diversified with mostly blue chip dividend payers but maybe slightly heavy in banks and not enough global exposure.

 

What return do other people typically get from their investments. If you use an advisor, what fee % is reasonable? I know ETF's have low fees but for now I prefer an adviser. Maybe that will change down the road.

 

While the east coast is not Vancouver in terms of real estate appreciation, there's always a silver lining. Housing prices are dirt cheap (relatively speaking) which means you can have your home paid off faster. Secondly, while low interest rates are bad news for investments, you can also save a fortune assuming that you have a mortgage. Basically, you have two choices, either play the markets or hide your money under the mattress. At least when things go bad, you can benefit from dollar /cost averaging if you're an investor. The best advice I can offer is to find someone you trust to manage your portfolio. Hope that helps!

[Guest Na****a***mers (RETIRED)]

What I learned from my clients' years of experience:

 

Top financial advisers only have a small portion of their portfolio in stocks and mutual funds. Makes you think, doesn't it?

 

RRSPs are only good if you are self employed and need to evade paying taxes in a higher tax bracket while showing a higher income. TFSAs are a better solution for short-term savings. Remember, RRSP will eventually get taxed HEAVILY and you are better off being in a lower tax bracket before you decide to retire to keep more of your RRSP savings.

[Boomer 33202]

I have a few thoughts on this subject generally based on two themes, diversity and regular contributions. Since I'm already retired my own strategies may be a bit different.

 

Real estate has been mentioned several times. One has to live somewhere so I think it is a great way to accumulate wealth. It is one investment which can be a buy and hold. If selective and not into speculation one of it's attractions is that one locks into regular payments, and if you have a bit of extra cash you can accelerate the payout by extra lump sums on the anniversary. I had two houses and will probably sell the second for 500k in the next few years and help fund my retirement.

 

I no longer manage my investments but pay a percentage based of the asset value. As for diversity, my retirement income now comes from 7 different sources, don't think you will have a comfortable income retiring on the CPP. The only direct investment I do now is in equity in my TFSA. There is an old theory that goes something like you invest an equivalent percentage in relation to your age in safe fixed income and the rest in riskier equities. I am swimming against the current here as I maintain a higher risk tolerance for my age as I subscribe to the notion that I might need the extra income as our life expectancies are increasing.

 

I guess the moral of the story is find a way to save on a regular basis as compounding over the years is your best friend.

[blacklabdog 3049]

I split my portfolio so part is in mutual funds and 1/4 in high quality stocks which is my fool-around part of my portfolio. I dont want to spend too much time so I limit # of stocks I keep track of and worry more about direction of the overall market.

I have an MBA in Finance and have two of the basic courses all financial planners have but am smart enough to know I can't beat the market or time it consistently. I stil prefer mutual funds as long as management fee is super small and I pick sector based on what I think is best

 

I am going into semi-retirement soon so may devote more time to investing but I don't find it fun to do so.

 

Key is really to start early ( I started when I was 18) and try to make regular contributions. Strategies really vary based on age and risk tolerance.

[Guest *Ste***cque**]

Lots of good advice from everyone. Thanks!

 

There are only a few ways I know of for your money to make you more money.

 

1. invest in yourself by starting a business, as an example.

2. Buy real estate, either as a landlord, where the tenant pays your mortgage, or as an owner, where you build some equity under a forced savings plan(mortgage), or through REIT's.

3. Buy businesses via the stock markets.

4. Commodities, gold, silver, precious or rare metals.

5. Art (original works that might appreciate)

 

I didn't include fixed income as the current rate is less than inflation. Oh, to have 10% interest on savings again. Not sure if I missed anything else on my list. I do stay away from anyone who tells me they can get me 12 - 15% or more returns annually. Even Warren Buffet won't promise that, but Bernie Madoff did.

 

Number 2 and 3 are what most people choose. If you just want to buy real estate to live in then you don't have to be too careful, as long as you plan to live there for a minimum 5 years. If you want to own an investment property you will need to be even more careful that your tenants rent will ideally cover your mortgage and expenses and even leave you with some extra cash at the end of the month. Mine doesn't but I accept a certain level of loss as it's an area I want to live in during retirement in another 10 years or so.

Stocks are a little trickier. You should be diversified outside of Canada. We only represent 3% or so of the world economy. You should also diversify among industries such as banks, REITS, industrials, consumables and so on. As well, you should not own more than 5% of your portfolio with any one stock. Blackberry, Nortel and similar stock owners wiould have been glad for this rule. You should also set a point where you sell a stock. If it goes up 25% you shoul sell to take profits and seek another winner and if it loses 25% sell it to avoid following a loser stock to the bottom like many Blackberry and Nortel owners did.

If you're not prepared to follow these guidelines and monitor your stocks regularly then you should choose a reputable advisor to administer your investments and meet with him twice a year to rebalance your plan.

 

If you are in a high tax bracket you should take advantage of RRSP's as you get a tax deduction at 50% but your tax rate at withdrawal in retirement may only be 30%. Big savings! Of course, if you have so much money at retirement that you are in the same 50% tax bracket, think of it as a good problem. TFSA's are also great as the growth is tax free... great for younger, new investors.

 

Finally, you should watch the fees you are charged. Mutual funds in Canada charge the highest fees in the world. If they make you a great return that's fine but if they don't, consider dumping them for something that has better track record with lower fees

 

Even in retirement, you may want to stay invested in the stock market to make your money last 30+ years. Dividend paying blue chip stocks can give you a fairly steady stream of income, on top of your CPP, OAS and whatever else you have coming in.

 

The key to a decent retirement is to start early, create the all important habit of saving, and build from there. Good luck!

[piano8950 32577]

The best answer I know to the 'investment' question is this: http://canadiancouchpotato.com/

 

Any new investors should set aside a day, and read the whole thing. If you are young, old you will thank you.

[TorontoMelanieJolliet 4458]

What is 'fixed income', 'blue chip stocks' and 'REITS' ? Whenever I've googled things like this, i cannot understand it as the industry lingo takes over and I will googling every word or acronym into eternity

[Helena D'Orville 33237]

Hey Melanie! I know what you are talking about ;-) Once we look up a definition, then 2 other new words show up etc... Neverending! Here are two definitions of "fixed income" on Investopedia. Maybe it will help?

 

http://www.investopedia.com/terms/f/fixedincome.asp?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186

 

http://www.investopedia.com/terms/f/fixed-incomesecurity.asp?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186

[piano8950 32577]

What is 'fixed income', 'blue chip stocks' and 'REITS' ? Whenever I've googled things like this, i cannot understand it as the industry lingo takes over and I will googling every word or acronym into eternity

 

Fixed income for the most part is used synonymously with bonds. You buy a bond for, let's say $100 dollars. It will pay $5 a year, for the next 40 years. It will stay $5/year, regardless of inflation. The $5 is 'fixed'. Hence - fixed income.

 

Blue chip stocks - Ever go to a casino? The blue chips are the most expensive ones. The name blue chip stocks was inspired by this, and blue chip stocks are stocks of high worth, reliable companies. For example, GM during the 60s, Apple since recently, Walmart, Visa, etc. The Dow Jones Industrial Average, which is an index of 30 stocks from two exchanges (NYSE, NASDAQ), takes in only the crème de la crème of blue chip stocks, which in turn are supposed to be reflective of the market in general. There are positives and negatives on this, but that's a whole other discussion.

 

My investment strategies is quite boring, and reliable. I like blue chip a lot. I love companies that have a diversified portfolio of products, like P&G, which makes just about a quarter of your household shopping list, or Pfizer which has a strong product portfolio of pharmaceuticals.

 

REITs - Real Estate Investment Trusts. A lot of people invest through real estate. They buy a second house, then rent it out, or they flip houses. It's a fair bit of work. One way people can get exposure to the real estate market without all that hassle is through REITs. Companies set up these REITs, and investors such as yourself put money into a pool. This pool of money is used to buy properties that are usually much larger in scope (office buildings, malls, commercial properties, large residential projects, etc), and usually rent them.

 

Also, as Helena said, investopedia is a great tool.

[Lephturn 2649]

Very interesting thread! I read books about finances as I love to get educated about this topic' date=' and started investing using this website http://www.questrade.com/ as I do not want to pay fees to someone. All the books I have read so far came up with the same conclusion that we do not earn as much as we could when we pay managers/advisors because of their fees; I have read also that financial analysts/specialists can be totally in the wrong as markets are totally unpredictable; that financial advisors and people who barely know about investments and make their own decisions can reach the same results; that Mutual Funds is not so recommended at the moment, ETFs are, stocks with prudence, and real estate for sure if invested in the right place. Now, for sure diversifying and starting early. Time makes money work if we do not take high risks (compound interests). Which is why it is highly important to explain to teenagers/young adults when they start working that they should start save and invest money.

 

Another interesting website to get educated: http://www.investopedia.com/[/quote']

 

I agree on Questrade - another good site is http://canadianmoneyforum.com/index.php

 

Be very careful of the Canadian equities markets - they are very thinly traded. I tend to stick to a couple of the banks (which are excellent) and XIU. XIU is an exchange traded fund like made up of the top 60 stocks on the Canadian exchange.