Investing now for the future, my personal strategy to ensuring an enjoyable retirement.
This is a three part blog and I hope you enjoy my personal journey to successful investing.
It was not easy to get where I am, a lot sacrifices were made. I read a lot of books and attended a lot financial seminars. Paid for professional advice, some good and some not so good. I’ve lost a few bucks buying stocks on a tip from a co-worker. We all have our different styles of investing and our own success stories and failures. I would love to hear from you about how you plan to have a successful retirement or better yet if you found the secret to retire now, please share, we would love to hear from you!
There are many ways to save for your retirement. Some people are lucky to have a pension with their employers. If you work for the government, you’re in an even a better position as these programs are very generous. In the private sector, only 25% of employers offer some sort of benefits, and according to a 2013 report by Global these programs are in jeopardy!
I am not one of the lucky ones with a work pension, but I don’t want to count myself out. I’ve read many books and webpages that have aided to guide me down to the path of success. My investing journey started 27 years ago, my aunt, a tax preparer for one of the large commercial tax companies, advised that for every $1000 I invested I would received $300.00 to $400.00 back in tax returns. At the time, this seemed like a wonderful proposition, I was hooked almost possessed. My goal was to get the biggest return possible so I could enjoy trips, clothes or use the refund to enhance my car (so silly I know). Little did I know I had the whole concept so wrong. More on that later. When I decided to invest into RRSP the logical choice was to contact my bank. The bank of course introduced me to mutual funds which I was fine with until I learned more about fees like MER, Manage Expense Ratios. This article is not to start a debate on whether mutual funds are good or bad because despite some of the bad press you may have seen on TV, some do very well and I actually still own a few in my portfolio. Some of these mutual funds are doing quite well and I have no plans to get rid of them anytime soon.
As I got older, I’ve changed my strategy numerous times in the pursuit of higher returns. In this pursuit, I’ve made many mistakes but I’ve also made some good choices as well.
My current investing styles
I currently, buy ETF’s that buys the whole market, such as the TSX60 index, are a group of stocks that consist of largest 60 companies based on capitalization in Canada. The TSX60 is a way of owning many stocks with one purchase, much easier than buying individuals stocks (by buying the whole market you never have to guess on what stock to buy). There are many ways to buy ETF’s to build a completed portfolio, the name of the game is diversifying. One market may do better than the other but they all seem to recover sooner or later. The best strategy is to allocate your portfolio in every market.
I also dabble in individual stocks, but I only allocate this portion to 10% of my portfolio. I have some stocks like Visa and RioCan that have rewarded me really well. The EFT strategy is a little boring but very successful. Here’s my portfolio make up!
20%= Bonds (corporate or government)
Every year around my birthday, I reallocate my portfolio back to 80/20. I sell the ETF stocks that did well and put the money towards the ETFs that did poorly, see doing the opposite. People tend to buy stocks that are hot in the news or from stocks tips from friends gave around the water cooler!
Putting the strategy to work
For example, in January every year my portfolio would look like this- 85% stocks, 15% bonds. Most people would buy more stocks, as it’s doing very well, right? Well no! I would sell 5% of the stock and put the 5% into bonds. This will bring my portfolio back in-line to 80/20.
As I aged, I would increase the bonds to match closer to my age. So, when I’m 60 yrs old, I would increase the bond allocation and decrease my stocks position. So, no matter what happens in the market my portfolio will weather the storm. I wish I can take credit for this style of investing but it’s from these sites: Canadian Couch Potato, Moneysense and Canadian Money Savers. I would suggest subscribing to anyone of these sites.
What I’ve noticed every time I go to one of these free financial events is it seems not a lot of people who look like me are at these event, which is sad! I’m hoping to share what I’ve learned in the past 27 years with the community on www.liveinthesix.com, to teach others about financial health and also to learn from other’ reader’s experiences.
Part 2, How I rebounded from a market crash. I will share how I rebounded from a 40% loss in my portfolio.
Disclosure : I am not a financial advisor and you should always consult a licensed professional before making any purchases in stocks or real estate.