INVESTING DIY – 1

WHY DIY?!

There are a thousand reasons to do so but they all pretty much translate in “because nobody care for your money as much as you do”.


The so called “investment agents” are simply “sales agents” and once they make their commission, they will forget about you until next year. You might say to yourself, for good reasons: how am I going to get the knowledge of the markets, or understand all those terms like derivatives, options, beta, EPS, P/E etc. Well, let me tell you the level of knowledge of some of the people you entrust your money with. Before migrating my RRSP investments to Questrade, I asked what fees I will be charged if I wanted to sell them. My agent redirected me to his secretary, being told “I don’t know this kind of thing”. My “agent” didn’t know what are the fees associated with my investments! How much worse can I do?!
My ex went to another agent and asked some trivial questions and made some savvy comments to let her know that she is not completely unaware of investing terms. The investment agent was so enthusiastic that couldn’t help herself ask “Did you ever consider a career as an investment agent?! You seem sooooo knowledgeable”. Otherwise she readily agreed with everything that Brindusa suggested. One would think that you walk into an “expert’s” office to get some insights, not smiling nods.


I will not badmouth a whole profession. I am sure there are good investment agents but, from what I’ve heard, those guys have their hands so full that they mostly focus on big-money and for the smaller investor they are pretty much out of touch. Indeed, you might have an active, REAL investment agent who makes you good money but then stick to him/her and thank God you are so lucky.


It just makes sense that the average investment agent will not necessarily recommend you the best investments but the ones that bring the best commission. A standard mutual fund that very seldom, if ever, beats the index mutual fund (the index of the industry the mutual fund is focused on), would charge you 2.5-3%. And that is yearly coming out of your pockets. A well managed fund, with no load – like Phillips, Hager and North (PH&N), which charge 0.8-1% will not be recommended by agents because the commission is too small. I calculated that the front-loads and back-loads (fees for purchasing a mutual fund: either paid upfront or when you sell them if they are sold before a certain period) cost me with my late agent about 2500$. Those loads are traditionally going into the pockets of the investment agent. Why would they recommend you something that makes YOU money and doesn’t leave much for them?!


I know it seems scary. I heard too the stories with people who lost everything. People asked me if I “play on the stock market”. Oh, God, NO! No such thing, not now and probably not ever. I will NOT play with my hard earned money.
Yet things are not as complicated as the fear of unknown makes them seem. After all, it’s a guessing game and, while nothing is certain, you can make safe, educated guesses as well as the “agent”, just less expensive. The point is not going for the “get rich quick” scheme, because there is no such scheme. For smart ones amongst us a “get rich slow” scheme is good enough and there are plenty of strategies. I never aim at outrageous performances – since most of the time they try to hide huge risks and weaknesses. Even so, one could get 5-7-9% dividend from perfectly sound companies, which reinvested, in time, can make the difference between a comfortable retirement and a stingy one.


Here are some initial steps to take:

  • Subscribe to some good newsletters such as (you can tell they are good if they have been for a number of years on the market – if they gave poor advice, they would not have survived long):
    • Read and understand the basics of investing without bothering too much with the higher level economical knowledge:

    • Complete Idiot’s Guide to Investments
    • follow the tutorials on Investopidia that will guide you with baby-steps to financial success.
    • Use a portfolio simulator, such as this one offered by Investopedia here – where you invest virtual funds and make virtual gains or losses.
    • Read what other people have to say, follow the financial news and try to get up-to-date with the global economy. By reading constantly the economy news from your newspaper, you’ll start understanding what industries are making money and which are in a volatile position.

Here are some facts to chew on until part II. Did you know that:

  • 300 shares of a stock paying 14% dividend, which you reinvest (DRIP), in 10 years will become 1160 shares?!!!
  • by investing 25,000$ in a mutual fund with 0.87% MER (management fees) instead of one with 1.72% MER, with 5% yearly average return, would save you almost 3000$?!!!!
  • most of brokeragers in Canada, when you purchase a US equity will charge you 1% currency conversion fee AND, if you sell the equity, they will automatically convert it to CAD, even if you want to purchase another US stock and then charge you another 1%?! Do this thing 2-3 times/year and you doubled the losses that a normal inflation (3%) would bring to your savings.

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