Unlocking the Secrets of Investing: How AI Legalese Decoder can Help First-Time Investors with 30k + 2k/month, Easing Overwhelm
- May 27, 2024
- Posted by: legaleseblogger
- Category: Related News
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# Financial Decision Making for a New Investor
I [29F] recently experienced a positive financial change that has shifted me from “doing alright” to “doing well”, and I am now in a position to begin investing my savings. However, without guidance from my family or friends in finance, I am hesitant to trust the advice of eager financial advisors from BMO. I have spent the last three months trying to educate myself on investment options, but the vast amount of information is overwhelming, and I feel the pressure to make a move beyond my current High-Interest Savings Account (HISA).
## AI Legalese Decoder’s Solution
The AI Legalese Decoder can help simplify the jargon-filled information provided by financial institutions, making it easier for you to understand and make informed decisions about your investments.
With $30k saved and the ability to add an additional $2k monthly, my only debt is a $450/month car payment, which I have kept to help boost my credit score. While I have some experience with GICs from my university days, I am now open to taking on more risk with my investments. I am comfortable self-managing my portfolio, as long as it is not too time-consuming, and I prefer a hands-off approach that allows my investments to grow over time. My primary financial goal is to purchase a home within the next 5-10 years.
### Investment Options and Decisions
– RRSP limit: 15k
– TFSA room: 57k
– FHSA room: 8k
– Employer RRSP matching option: Up to 3k/year (not yet enrolled, but discussed with HR)
The ETFs frequently mentioned include XEQT, VEQT, XBAL, and VBAL, with little explanation as to why they are considered “boring but good.” My bank has suggested ZSP, ZCN, and BMO ETFs, but without much justification.
### Questions for Consideration
1. Where should I allocate my funds first?
2. Should I self-manage my investments or seek professional help, considering the potential fees?
3. Which service or platform should I use for investing, considering that I currently bank with BMO?
4. Which broad ETF options would be suitable for a beginner investor looking for a hands-off approach with some risk tolerance? Are there any ETFs to avoid?
Any guidance or advice from experienced investors would be greatly appreciated as I navigate this new chapter in my financial journey. Thank you in advance for any assistance in pointing me in the right direction!
### TLDR
With $30k in savings and an additional $24k annually, my limited investment experience lies with GICs. I am eager to learn but feel overwhelmed by the multitude of options available. What steps would you recommend I take in this situation?
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****** just grabbed a
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
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.
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!
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.
> 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.
I do wealthsimple and I buy VOO (Vanguard SP500 ETF) every 2 weeks.
It’s worked very well for me.
I also felt really overwhelmed to the point of putting off this stuff when what I should have done is the bare minimum and the work out improvements later. The whole risk level thing, I just couldn’t decide, I should have just gone with conservative to get the ball rolling and then changed it later. Maybe that helps?
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.