At some point during every seminar, I get asked the question, “How do you personally invest?” The goal of my seminars is to teach YOU how to make the best investment decisions for YOU, NOT to get you to do what I do.
The first step in investing for yourself is to GET INTERESTED in YOUR money! What I mean by that is, where does your money go? How much are you saving, and most importantly how much are your saving making for you?
Many of my students are really proud of the fact that they have an RRSP and a TFSA. They should be. These are very important accounts for Canadians to have. In the US they are 401Ks and IRAs, and the less used ROTH.
Then I ask the really important question. What type of investment is in your RRSP/TFSA? Now come the blank looks. Occasionally I get an answer like, a GIC, or a Mutual Fund. That is a better answer, but then I ask, how much was your return on investment last year? Back to the blank look.
Being interested in your money means, at least understanding what you are invested in, and how to determine if it is a good investment. Learning those things can be very difficult. Asking your local bank, often will return an answer that is more beneficial to the bank, than you.
I invest using GICs, Stocks, and Real Estate. I do not use Savings Accounts any longer than necessary. Savings accounts currently pay 0 – 1.75%. Inflation last year was just under 2%. If you were not getting an interest payment that was over 2%, you were losing money! GICs are currently in the range of 2% – 3%. That at least puts them over the rate of inflation, so you are making a very little bit. I use GICs as storage place, till I have enough for a better investment, or till a better investment shows up.
I also invest in individual stocks, through Online Trading Accounts. (yes I have several) I have both RRSPs and TFSAs. I max out my TFSA before I use my RRSP. Both accounts allow investments to grow tax free, but RRSP withdrawals will eventually be taxed. TFSA withdrawals have NO TAX payments. Since Tax is an issue, my RRSP holds Canadian Dividend Paying Stocks, (Lowest tax rate) while my TFSA holds equity stocks that I think will go up in value.
Dividend paying stocks return dividends anywhere from 1% to 14%. In the Resources section of this site, there is a list (updated monthly) of the top 20 dividend paying stocks. One list for companies that pay dividends monthly and the other is companies that pay dividends quarterly. (Every 3 months)
I do 3 times more trading in my TFSA than I do in my RRSP. If I find a worthwhile Real Estate project, taking money out of my TFSA is simple, fast and has no tax consequences.
Being interested in my money means I spend at least an hour a day on reviewing my stocks, and finding new ones to invest in. I spend about 3 hours a week (average) on training and education. Some of this time is spent taking online presentations or paid for training. Some of these are really good, but most (of the free ones) are not. But if you don’t take them, you will never find out which ones are which. I have found that even some of the not so good ones, will have one thing that is good to know.
I invest in Real Estate because the returns are bigger, and often quicker than stock trading. I do the Real Estate investing because I love looking for properties, making unusual deals, and taking a not so nice property, and turning it into a great property.
Part of why I like Real Estate is, because I love building stuff. I make good money on a property, because there is not much that I have to farm out to a contractor. It is definitely cheaper to do something yourself than paying a contractor. You also have more control over scheduling. (I’m getting too old to do roofing.) Real Estate often gets me the largest return for my investment. I invest $60,000.00 between down payment and renovation material, and clear $40,000.00 to $80,000.00 after the sale. You can make large sums a couple of times a year. This is a really good way for trades or handy people to create wealth. Just watch TV to learn how. I’m kidding.
Realistically this takes having the capital for the down payment, and the renovation work. This is real life in Canada. Most of the Real Estate investing courses, and evening seminars, that come to town, are based on American banking and Real Estate rules. Much of what they promote (Wholesaling) is not as easy as they let on here in Canada. We have completely different banking rules than the US.
Real Estate also has tax implications. There is a thing called Capital Gains Tax. This is a tax of 50% of 50% of the profit. So, if you made a profit of $50,000.00 the tax would be 50% of $25,000.00 or $12,500.00. Buying and selling property in a Holding company does offer some substantial tax breaks, but now you have to understand incorporation, and run a company.
Investing for yourself is not difficult. It does not require an MBA or a degree in Accounting. It does require patience, additional work, the knowledge of how the system works with money, basic mathematics, (add, subtract, multiply, and divide), decent people skills, and most importantly a willingness to learn and ask questions.
Just like any skill from walking to juggling, to get good at it, you need to practice. NEVER trade securities, with real money, until you have practiced enough to have 75% of the trades be successful!! Never trade till you understand how to read a stock chart, and understand how to use all the different order types offered by your trading platform. Understanding and using the scans and research tools they offer is also important. Just because it’s not hard, doesn’t mean its effortless.