When you’re learning something complex, it can help to break it down into small steps and figure out what sequence is right for you–especially if there are lots of other people who want to influence your decision.
Let’s take investing, for example. There are all sorts of businesses built around making you want to earn more, all sorts of complex instruments that seem to enrich advisors more than clients, and all sorts of decisions that you can make that can either help you or screw up your life. Me, I’m trying to learn slowly.
I’m a simple investor. I don’t need to beat the market. In fact, I’d like to stay as close to average as I can. I don’t need to be smarter than other people who are buying and selling. Even if I have plenty of time, I don’t want to spend that time and attention on tracking financial news. Baby steps – one lesson at a time.
I started by saving up. Then I opened up an investing account with TD and started with their e-series funds, since those had low management expense ratios and no commissions. After years of annually stashing money into TD e-series index funds, I’m now relatively confident about my ability to not panic based on the ups and downs of the market. The stock market has been practically all up since I started, actually. I’ve been investing at the rate I previously set for myself. I haven’t figured out the best way of transferring larger amounts from the corporation yet, but that can wait. In the meantime, it’s a good buffer for emergencies, and it means I can think of corrections as a good thing.
Over the past two years, I’ve gradually learned to think of my TFSA + RRSP + locked-in RRSP + non-registered investments as one big bucket to manage instead of having multiple allocations in multiple accounts. I sold some units (for the first time!) in order to shuffle my allocation around, simplifying my paperwork a little. I still have some duplicates because there’s only so much each account can hold, but ah well. I’ve only ever sold units within tax-sheltered accounts, so I still haven’t gone through the exercise of calculating my adjusted cost base for the e-funds in my non-registered account.
I briefly considered real estate, but I don’t think real estate is the right fit for me (yet? at all?). It’s a big commitment that I don’t know enough about. Sure, there are probably upsides, but there are also scary downsides–especially with Ontario’s tenant laws, which make it difficult to evict people if there are problems.
I’ve also thought about ETFs. After crunching the numbers, I don’t think my portfolio size is large enough to justify switching. I’d probably save a little in fees, but it adds complexity.
For me, the next step is probably to sell a token amount from my non-registered holdings so that I can practice calculating the adjusted cost basis (and so that any tax penalties are also pretty small in case I totally mess up). Slowly leveling up!