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I haven't done stocks, as of yet. It's something i'm eying up. Those tech startups are where to invest though. My brother however invested a bunch into the pot stocks, and so far has made a bunch off of that, even my cousin invested in those, and he hasn't worked for a year, cause his stocks are paying for his rent, food, extracurriculars.
There is also TFSA.. tax free saving accounts. These dont provide the income tax shelter at the time of investment but they grow tax free forever. And you can add about 5k per year of investment.
Rule of 8 is a nice little rule to know. Take any sum... invest it @8% for 8 years and the initial investment doubles. So invest $5000 @ 8% for 8 years and you now have $10 000.00 all tax free. You will never pay a penny of tax on anything in your TFSA. Because you start with after tax income.
What I did for my wife was got her a money manager that she liked, and that she understood. I researched and interviewed a few. Any good one will show you what his investments earn typically and for the last 20 years say.
Banks provide this service but gouge you and you typically only make 1/4 what a manager will do for you. But that part is upto you.
my mother likes her small town banker so doesnt care if she gets 4% yearly return...where my wife's investments have averaged 16% over the same period.
But Doos is right.... investing works best when you pay it and forget it. automatic withdrawls... say $50/month forgets the RSVP and just put it in a TFSA. And forget it.... everytime you get a raise... call them and have them take a little more. When you TFSA is full each year... then go to RRSPs. This is retirement money.... leave it alone for 30 years and just keep adding a little bit each month... in 30 years I will be 85 years old and you can buy me a nice bowl of soup with your millions.
Well, a 401k and a Roth IRA are both US pension plans. So you can forget about them.
An RRSP is a Registered Retirement Savings Plan.
Registered means it's being watched and regulated by the federal government. It means it has all sorts of rules, basically. An unregistered investment is basically, holding shares, a savings account, stuff that you don't have to declare. Basically.
Retirement Savings Plan speaks for itself. You're saving for retirement, easy.
The tricky part about an RRSP is that if you contribute money into it, you can't get it out without triggering a tax event. A tax event is basically any time you earn money.
So, just to be clear let's play this out:
You go to work. You earn $1000 at work. You pay income tax on those earnings.
THEN you contribute 10%, $100 of your gross (Gross is money before tax) earnings into a RRSP.
So now you have a RRSP worth $100. If you were to have an emergency and NEED that $100 you will now be taxed AGAIN on that $100.
So if you DO contribute to a RRSP, you need to be certain you won't need the money until you're of retirement age.
The upside to an RRSP comes in two ways.
1) A RRSP can earn you money.
Basically you can ask your bank what they are going to invest your money into. They'll probably have a hedge fund or a GIC or something low risk. Low risk means low reward. Maybe 1.8 or 3% interest earnings annually.
Not terrible. Your money is making you money. This is good.
2) The money you donate to your RRSP does not count as income.
This is where RRSP's really start to shine, Tim. Listen up:
So, you made $20000 last year and you paid income tax on the whole amount. Let's say for shit's and giggles you paid 10% income tax on that 20k.
So that's 2k in income tax that you paid.
BUT you contributed $4000 last year into your RRSP.
Now when you do your taxes at the end of the year the tax man goes:
Ok, he made 20k, was taxed at 10%, oh but look, he contributed 4k to RRSP, well, then he only made 16k last year, so now we owe him money.
So you would in this made up scenario get $400 back at tax time.
Do you see?
RRSP's are considered like.. non-income. And they can REALLY start paying off when they bump you into a lower tax bracket.
So instead of paying that 10% maybe now you only need to pay 5% on that 16k.
These are all made up numbers.. you'll have to look into your provincial tax brackets but that's where RRSP's really shine.. when you start using them strategically to knock yourself into a lower tax bracket.
There are other benefits too. First time home buyers program where you can borrow against your own RRSP up to 25k if you're buying a house. (I did that)
Plus you're saving for retirement.
RRSP - you contribute til you're old and making very little money because you're retired. Then you fund yourself from the fruits of your savings which have grown for years.
You get more money back at the end of the year because RRSP's count as a minus on your income.
You can use them to buy a house or pay for education.
I'm sure Jux can expand on this.. as I'm just kind of going by memory and rambling away.
I don't believe I'll die at retirement age but I definitely could. I mean, I can die tomorrow.. I can die right NOW! AHHH!
But no, I don't plan that way I just know that I'm not currently enjoying my money aside from the fact that I enjoy being responsible with it.
I'm not miserable though. I hang with friends once or twice a week.. I buy the little things I want to buy, I never, ever worry about money because I planned for tomorrow instead of enjoying today.. but I wanna go somewhere warm every year and that's still a little ways off. But it's coming!!!!
And you're right, Jux.. at it's base, it's gambling. Stock can go up, or it can go down. You're basically betting that 'I'm buying it now, selling it then and I hope it's up when I want to sell it.'
But it's not like gambling at a casino where it's stacked against you. You're betting on a company to gather shareholders.
But you can certainly hedge your bets by buying into a solid company that you think is going to perform well. And you're never forced to sell. If a company's stock tanks and you're holding it, you don't have to sell that shit. You just keep on holding. That's why it's important to invest in a company you believe isn't going to go bankrupt any time soon. But they could. Oh shit yeah, they could.
But it's all up to the individuals level of risk. You wanna get into some crazy volatile market? Like investing in Crypto? Woo... what a rollercoaster.. but you try to buy the dips and sell the peaks and you can make stupid money over night.. or lose it all.
I don't recommend that shit but it's fun as hell when you win.
Not so fun when you have to wait for a month for it to climb back up to where you bought it and then sell.
Time in the market is better than timing the market.
I mean, here's the thing and we all see it every day. Everybody deserves the nice stuff in life. We really do. Nice phone, nice car, nice house, nice clothes. I feel like we all should have these things.
But we all can't afford them and people don't care that they can't afford them.
I have a lot of friends that make similar money to my wife and I and every year they go on a nice vacation and every year they buy something big or nice. I say to myself 'How come they can afford those things and I can't?' and the answer is always the same.
They're accruing debt and we're not or they're spending the money they could be saving and we're not.
But the flipside is what I'm doing isn't the best thing either. The wife and I rarely get to enjoy our money. It's all savings for the kid and paying off the mortgage and investing and blah blah blah. There's not a lot of joy being derived from our money other than the joy we get from knowing that we're being responsible paying for our future.
I mean, if I don't spend it now and then I eat shit and die at 57 when I plan to retire, what was it all for? I didn't go on vacations, I didn't go visit my friends and family and have a good time, you need to enjoy the money too.
So there's this fine balancing line people have to walk in order to get the best of both worlds.
Luckily my job keeps getting a little better every year, people are retiring, I'm able to make a little more, the wife too so we'll have enough to save the way we want to save AND enjoy the fruits of our labor as well. But for me we HAVE to put in the time doing the saving and paying things down NOW instead of later. That's how I feel while others may go about it the opposite. Spend now, save then.
How do I know what to invest in?
Let me tell you about my history with the stock market and I bet it corresponds with some of ya'll.
When I first took notice of a stock it was when Steve Jobs announced the Iphone in 2007. I said 'Holy fucking shit that thing is the future.' but I didn't know anything about the stock market or how to invest or buy shares.
In 2007 when I noticed that, their stock was valued at $15-20/share. 7 years later it was $750/share. In 7 years it went up over 3000%. So if you owned 1 share of apple at $20 and sold it at it's peak you would've profited around $600. Imagine if you'd owned 1000 shares, right?
But I did nothing because I knew nothing.
Then I noticed Netflix coming. I saw it when it was first coming to Canada around 2010. It went from around $15/share to $350. An increase of over 2000%.
I did nothing because I knew nothing.
But I saw them coming.
Right now, I see weed coming and I finally pulled the trigger. For me, I see weed being bigger than either of those two. But there's a big difference between those examples and weed.
Netflix and apple are singular companies, they meet the need by themselves. The weed industry is going to have hundreds of small producers at first but what is likely to happen and is happening already is that those small companies are going to get bought up by bigger companies and soon there will likely (Likely, not definitely) be one big ass weed producing company.
Who is it going to be? I don't know but the front runner right now for me is Canopy Growth. Stock ticker: WEED
Am I saying you should invest in Weed? Nope. But you should invest in a company or industry that you're familiar with. That you see doing something that you think is going to be a good idea.
We all like videogames, who's killing it right now? Are they on the stock market? Do you think that they're priced fairly? Are their stocks going to continue to go up? How long term do I want to invest in this?
Is Netflix going to start streaming Live sports? Because $300+ sure is expensive for a share but it's not that expensive if it's only going to keep going up.
Google and Amazon trade at over 1k+ per share. Is Netflix going to get there too?
What about Disney?
Oil and Gas?
How's Gold doing these days?
Hell, maybe just invest in a blue chip stock and collect the dividends every year. Will you make 1000% in a year? Probably not buy you'll probably make more than you would in a savings account.
Or you can lose it all.
Because THE STOCK MARKET IS GAMBLING.
BUT and this is the most important thing in the whole wide world when dealing with the stock market.
First: You only put in what you're willing to lose.
Second but just as important: You're only down if you sell and you're only up if you sell.
If you buy a stock and it tanks as soon as you buy it and you're like 'Holy fucking shit I'm down 50% of my investment.. fuck me.. fuck ME!!!' then you're doing it wrong.
You buy into a share because you believe in the company, you have an idea of where you'd like to get out and you leave it there and forget about it.
Warren Buffet is a genius trading billionaire and he says, all the time, 'Time in the market is better than timing the market.'
That means that long term investments will almost ALWAYS pay more than trying to buy low sell high on a daily, weekly, monthly basis.
Day traders are trying to buy sell all day long. They usually don't hold stocks in their account at the end of the day. They buy, hope for an increase, sell and are usually all cash at the end of the trading day. All sorts of videos on YouTube about this.
Swing traders are guys who do the same as day traders but don't mind holding a stock for a couple days, weeks, whatever.. they're not looking to make a million trades a day.. more like a couple.
Then there's investors. You buy a stock, you hold it for x amount of years or until it hits a number you like and then you sell it.
That's the safest but still, a recession can happen (That's a great time to buy stock, by the way) and you can watch it all just tumble down but you don't sell, you keep holding and hey look, we're out of the recession and stronger than ever.
Time in the market.
What do you want to invest in?
Long term investments have a better chance to pay out than short term, but short term can pay now and woo, it's exciting.
What's happening in the world right now that you think you can capitalize on?
Hey dudes, I've recently been actively fucking with the stock market and I know from my personal life, work life and everything in between that most people do NOT fuck with it and it's confusing as hell and there's a lot to figure out so I'm going to break it down into a couple of easy steps because I know it's overwhelming but once you get a couple of the things it makes sense:
So, you want to buy some shares in a company. What the fuck do you do!?
You're going to need a couple of things:
1) A trading account through a broker of your choice.
2) Some money.
3) A company you want to invest in
The very first thing you need to do is pick a broker. Your bank probably has a broker if you're with any of the major banks. CIBC, RBC, TD, Scotia. They all have brokerages.
There's also lots of online ones to choose from too.
So what the fuck is a broker? They're the arm of your bank that can actively trade stocks. You tell them you want to buy/sell (over the phone, online, in person) and they get in touch with a buyer/seller and it's done for a fee.
This can be as easy as clicking a few buttons on your phone using an app. Or you can call the motherfuckers like all the old people do because they don't understand apps.
The commission fee these days is usually a flat rate of anywhere from 6.99 per trade up to around $15.
Do you need to have a broker with YOUR bank? No, no you don't. You can have an account with any broker. You can have 10 accounts with 10 brokers.. nobody cares. It's just more accounts for you to look after.
I went with CIBC right off the bat because they had the cheapest commission. $6.99. Their UI is outdated as fuck though so I started a different one with TD and it's a much nicer setup but the trades cost $9.99.
So ok, you picked a broker, cool. Now you'll need to start the process of opening an account. This was the lamest part because I actually had to go into the bank to do it a couple of times. For me it was a little different than it might be for ya'll because I was also transferring shares from one place to another and it was a little convoluted... but for ya'll, call the place you want to use and start the process of opening an account.
Here's the important part:
YOU WANT YOUR TRADING ACCOUNT TO BE A TFSA.
"I want to open a trading account. I want it to be a TFSA"
This is very important. So a TFSA means 'Tax free savings account'. That means the investments you hold in that account, be it shares or just straight cash, any gains you make are NOT TAXABLE.
If you buy shares at a dollar that are 20 years later worth 1000 bucks, you won't have to pay tax on those gains.
It's huge and Canada is currently one of the only countries in the world that has such a thing.
I mean, really, that's all there is to it.
Find a broker.
Open an account.
Add a TFSA to the account.
Transfer money into the TFSA.
Buy some shares.
^The buy some shares stuff has lots of silly things around it too. Market Order, Limit Order, what do these things mean?
Market order says 'Gimme the stock at the price it's at RIGHT NOW!' and Limit is 'I want that stock at this price that I've chosen.'
Man, all the info is out there, it's super easy once you start messing with it.
So, just throwing it out there.
I'm no pro at this but I've done it a couple of times and man, there's money to be made out there.
Hit me up if you want to know more.
I'll talk about what hasn't been mentioned in regards to finances yet:
Are you carrying any debt? If you are you need to pay that first. Unless the investments you have are paying more than the interest your debt is accruing (doubtful, but entirely possible) you need to pay the debt away first.
Secondly, if you don't own a credit card, get one. It doesn't matter too much what it is but if it has any type of rewards those can add up nicely. Most of the 'high' reward cards aren't accessible unless you make 60k+ a year etc but your bank will have the details about that.
I feel like you must have one though because of all the purchases I see you post but if you don't, get one, put EVERYTHING on it. I mean EVERYTHING. If you have recurring bills, like phone, hydro, insurance, internet, TV, WHATEVER, put it on that card and pay it off in full every month. EVERY month.
Your credit rating will sky rocket in a few years and now because of that when you want to buy a car, get a loan, etc. you will get better interest rates.
You'll also have the added benefit of being able to quickly and pretty easily see your spending habits because they'll all be contained in one place. Then you can start trying to improve them. Spend a little less here every month, etc.
You can get a free credit report (annoyingly, by mail, online you have to pay) here's an article with links.
Check where you're at, check again in a year!
So there's a good step 1. You're debt free, you've got a credit card, putting everything on it, paying it off every month. Easy peasy. Your credit score is improving.
Next, we want to make some money with our money, what now?
So many options but you need to have goals.
Is it a long term investment? Do you want to have access to the money in case of emergencies? Do you want to try to double your money within a year? Do you want to save for a down payment on a car or a house or a cool big thing?
All of that aside, Tim, you're doing the right thing anyway just by saving some money. That's the MOST important thing and you're doing it. You're ahead of approx. 75% of the country if you're carrying no debt and have savings. So good for you.
just invest and the sooner the better. you want to figure out how much you can afford to invest every year. Then do 12 equal monthly payments. That adds the strength of dollar cost averaging to your portfolio.
Surprisingly the most important part of the investment is the term. Not the amount. Think about it this way. If you were to invest 1 dollar a day for 35 years and average 8%-10% return on your investments you will be a millionaire when that term expires. And if it is grown in a tax free saving account then 100% of that growth is tax free.
It is nice to be 50 and only have to work to be challenged not because I want to eat.
My all-time favorite Canadian book is called THE WEALTHY BARBER. Reading it is the single best thing you can do for your retirement. Again... the sooner the better.
Any of you young parents out there.... start putting a dollar a day in your kids tax free saving account today. they will thank you when they can retire and pursue hobbies at 40 years of age
And yes all this works. I met my wife 9 years ago.... at that point she was recently divorced with a small investment nest egg but no retirement savings. Her net value now is about half a million but that has cost her around 750-1000 dollars a month...whereas if she had started 30 years ago... the amount she would have needed to invest would have been much less.