How I Invest My Money

-Written by Cel

When you’re first starting your financial journey, it doesn’t matter much what you put your money in. If you only have a few hundred in savings, the difference between an exceptional investment averaging 10% annual returns and a humble savings account  is negligible. At that point, cutting your expenses and increasing your rate of savings is much more important than finding the best investments.

However, once you build up your net worth – which may be somewhat quick if you’ve gotten to the point where you’re saving half (or more!) of your income, you may be wondering what to put your money in. You’ve already figured out that a sub-1% savings account is not the most optimal place to park your money. So where should you put it?

We at Incoming Assets are big believers in passive investing and index funds.  If you don’t know what that is, an explanation can be found here.

Investing in index funds is objectively superior to most alternatives, which is why all of our investments (not including money in savings accounts) are in index funds. There are some other viable options, of course.  Real estate can, in some markets, be quite lucrative.  Investing in a business that you personally create or manage can be extremely rewarding.

But no other option offers the accessibility and convenience that index funds do. You don’t need a great deal of knowledge to make the right decisions. You don’t need to spend a lot of time and effort to make sure your investments don’t plummet. All you do is just put money in regularly and wait for it to grow (that said, no investments are guaranteed, and index funds can lose money like any other investment).

These are the accounts that I have my money in (excluding a small amount in chequing accounts and regular savings accounts for short-term spending):

People’s Trust Tax-Free Savings Account.

People’s Trust is a little-known bank based in Vancouver. They are CDIC insured just like all the big banks, meaning that the Canadian government will guarantee to repay you (up to $100,000) in the unlikely event that anything goes wrong with your money.

They have among the highest interest rates in Canada; currently, the interest rate on their tax-free savings account (just a regular account that pays out monthly, and can be withdrawn at any time) is 2.25% – quite high compared to most other banks.

The benefit of a savings account is of course, that it is guaranteed to make money, just not at a very high rate.

TD E-Series Index Funds

TD e-series index funds are one place where you can buy index funds. The benefit of the TD e-series is that they have very low fees compared to other index fund providers – among the lowest in Canada.

The downside is that it can be quite difficult to set up a TD e-series account. TD is notorious for jerking people around and making it difficult to create an account. Expect employees to directly lie to your face, or create an account but misfile the paperwork such that it doesn’t go through – both of these happened to me.

However, you only need to do it once, and then you can reap the rewards for decades.

The indexes that I personally buy are:

TD CDN Index-e (i.e. Canadian index)

TD Int’ Index-e (i.e. International index)

TD US Index-e (i.e. American Index)

Tangerine Index Funds

The Tangerine Index Funds have slightly higher fees than the TD e-series. However – they are significantly easier to set up. It took me about 5 minutes to create the investment account entirely on the Tangerine website.

Another plus about the Tangerine Index funds is that it automatically re-balances any money you put into it.

For instance, I have the Tangerine Balanced Portfolio – which is composed of 40% Canadian Bonds, 20% Canadian Stocks, 20% US Stocks, and 20% International Stocks. If I were to deposit $1,000 into the Balanced Portfolio, it would automatically allocate it as per the above distribution.

However, if I wanted a similar distribution with the TD e-series, I would have to make four transactions – purchase $400 of the Canadian Bond Index, then $200 of the Canadian Stock Index, etc. This is a relatively minor inconvenience, but it’s nice to have it dealt with.

And that’s it!

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3 Comments

  1. This is really helpful. I’m totally new to investing, and my husband and I are starting to think of how to invest our savings! These are some great options! What kind of return could one typically expect on the TD or Tangerine portfolios you described?

    • Hi Alexandra, I can’t really say because returns can vary greatly from year to year. You might see 10% or greater returns one year, and then negative returns the next.

      However, I encourage you to look at the historical performance of the index funds you are considering investing in. For instance, the TD Canadian Index-e (which I am invested in) has had a five-year return of 7.96%, and a three-year return of 10.77%. Meaning, if you had invested three years ago and cashed out today, your money would have appreciated by 10.77% each year.

      Of course, the lifetime return (e.g. if you had invested money at the creation of the index fund) is only 6.36% – far lower. And – the one year-return is actually negative 1.42%, meaning you would have lost money if you invested one year ago and cashed out today.

      All these statistics are available on the bank websites that offer the index funds.

      Let me know if that answers your question!

  2. The TD web broker account setting up fiasco happened to me 5 years ago. I had no idea this was their reputation. Why do they do this? I am not seeing it? Are they being selective in who they deal with?

    In my case, they claimed the employee had been let go and that she had thrown out all documentation for setting up my web broker account (and others) so it had never been sent it. When I questioned who supervised this employee and how could ongoing incompetence and/or spitefulness not been noticed. I was also refused a request to speak to this employee’s direct supervisor or even know the name of her manager. Only the branch manager would speak to me.

    I continue to get the run-around from the branch manager there. They have the system of rotating employees around the branches so you never see the same ones.

    Anyway, a few years later, my accounts have grown so now I am in the so called TD Webbroker President’s Club and can call web broker special phone number 24 hours a day and get really good service. And they do deliver excellent and competent service. You never deal with the same person twice however.

    The branch however continues their passive aggressive behaviour. When I have to do a branch transaction now (e.g. a cheque on another FI has to be put into my web-broker account),I have to deal with the manager as the front staff is so poorly trained and cannot listen to clear instructions or even understand a question about how the accounts work. They also say they do things and do not. One example, I gave instructions that a transfer should not pass through a particular account, but they did it anyway, lied about it, and when I pushed the issue, the manager came out to explain how it didn’t matter.

    I have dealt with a very large credit union in Vancouver for 30 years and have never ever experienced such incompetence (pretty much as you say, out and out lying), and poor customer service. Like I said above, the experience with the TD Webbroker folks is completely difference. No problems, love the service.

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