More Money Podcast - 204 Your Investing Questions Answered - Jessica Moorhouse

Episode Date: June 6, 2019

For my final episode of Season 8 of the Mo’ Money Podcast, I’ve got a solo episode for you, and it’s all about answering your investing questions. I get investing questions all the time at events I organize or speak at, via email or even through social media. So, since I just did my Level Up Your Moneyevent with Erin Lowry which included a Q&A (but wasn’t part of the recording we did), I thought I would do an episode focused solely on answering all your most pressing investing questions. Now, as a disclaimer, nothing in this episode should be considered financial or investing advice. Heck, nothing on this website or any content I create should be considered advice. It is simple information, facts and opinion. And when it comes to investing specifically, it’s hard to even give a straight answer. You may have noticed that in the panel discussion recording, and some attendees voiced their frustration. I totally get it, but unfortunately, there’s no such thing as one-size-fits-all investment advice or recommendations. We’re all at different stages in our lives, with different incomes, circumstances, goals and time horizons. It would be ridiculous to say “Do this and you’ll be fine.” And if someone does tell you that, remember, even if they are an investment advisor, that is their opinion on what they think you should do. Nothing is guaranteed when it comes to investing, and it’s not black and white. Paying Down Debt. vs. Investing: Which One Should You Do First? If you’ve got consumer debt (credit cards, line of credit, etc.), focus on paying that all off before investing because it’s unlikely you’ll be able to earn the same or higher interest on your investments that those debts are charging you. If you have student loans or other low-interest debt like a car loan or mortgage, I would say pay down debt and invest. The interest you’re paying is most likely below 5%, and 5% or higher is a very possible return you could make on your investments. Also, no matter what type of debt you have, make sure you have a fully funded Emergency Fund before you start investing. How Do You Know When You’re Ready to Start Investing? You’ve got to have that solid financial foundation first before you start investing. That means you have a budget, you’re tracking your spending and net worth regularly, you have a debt-repayment plan, you have a fully funded emergency fund, and have outlined all of your financial goals (short and long-term) first. How Much Money Do You Need to Start Investing? There’s no perfect number, but I say once you’ve got your financial foundation set, then work on saving up $1,000 as your initial contribution to your investment plan. For full episode show notes visit https://jessicamoorhouse.com/204 Learn more about your ad choices. Visit megaphone.fm/adchoices

Hello, hello, hello, and welcome to episode 204 of the Mo Money Podcast. I'm your host, Jessica Morehouse, and welcome to the final episode of season eight of the show. So as promised a few episodes ago, I, well, let's back up here. So for my recent episode that I, that was the live recording of the Level Up Your Money event that I did with Aaron Lowry, it was a panel discussion that lasted 30 or so minutes or whatever. And then we did a live Q&A with the audience. I didn't want to make that episode crazy long. And also, I kind of figured, hey, wouldn't it just be kind of a little bit more fun to do an episode where I gather all those questions, plus all the questions that me and

Erin got individually one-on-one when we were talking to people, you know, after the panel, at the event, at the kind of mix and mingle part, and just do an episode that's really, you know, sharing all those questions other people have that are probably very similar to your questions and giving you some real answers. Now, obviously, I can't give you advice in this episode. What I can give you is I can give you facts and I can give you my personal take on things, my personal opinion. So without further ado, let's get started to some of the questions that I got. And hopefully, by the end of this

episode, you'll feel a lot more like, oh, okay, I think I know what to do after. I think I know, I think I'm okay, or I am not okay, and I need to hire somebody to help me. Or I need to, you know, I don't know, sign up to Jessica's Investing Foundations for Canadians online course so I can, you know, educate myself. Highly recommend I really recommend that actually, this is actually usually what I do during the summertime, I usually sign up for a course because I have a little bit more free time during the summer months. So, you know, if the investing is something that you really want to get better at and, and understand, you know, better, well, you know, I got in my course, and I may if you stick around to the

end of this episode, maybe giving you a very special promo code that only you as a listener of this episode will get to use. Okay, so let's jump right in. One very common question that me and Aaron got a few times actually at the event was this, and I'm sure you've probably thought about this too. Student loans versus investing. Now this is different than if you were to ask me, hey, I've got a bunch of consumer debt. And what that means is, you know, I've got a lot of credit or credit cards. I've got a personal loan, hold up. Let's not do that. Let's pay attention to paying off that really expensive consumer debt. And once that is all paid off, or at least you have a very good plan that it will be paid off soon, then you can start investing. I will also caveat that with, make sure you also have a fully funded emergency fund. Because without one, that is how you get back into debt or get into debt in the first place. So if the question, if your,

you know, first question when I said student loans versus investing was, but what about a credit card? If you have any kind of consumer debt, but you want to invest, I would say hold up on that investing. I know you're eager and you want to get started. Really focus on building up that emergency fund, which is, of course, three to six, or even if you want to be very conservative like me, nine months of your living expenses. So how much you require to live, which you will know if you download my budget spreadsheet

and put in all of your info, jessicamorehouse.com slash budget. But get that emergency fund intact so you can protect yourself in case there's an emergency. And then really focus on just paying down that really expensive consumer debt. And then once that is done, then you can start saving up some money, have some cash ready, and then you can start investing. But the question was student loans versus investing. Very different than expensive consumer debt. I would kind of parallel it to, hey, I have a car

loan or hey, I have a mortgage. So in my personal opinion, I say if you have student loans and if you know I have 10 more years on the student loan, I would never say, oh, you should wait until that student loan is completely paid off before investing. If you've got 10 years to pay this thing down, I don't want you to wait 10 years to start investing. You know, that's a good amount of time in your life. And, you know, time is so, so important when we're talking about investing. The more time you have, the better off you will be. The sooner you start, the richer you'll be in the future. So if you have a student loan and you've got many more years to pay it off, I would say, you know, still aggressively pay down that student loan. But I'm guessing that the interest rate on your student loan is probably something to like a four, five, six percent.

And if that's the case, well, you can potentially make that investing or quite honestly, you'll make more if you are investing that money. Now, going back to that consumer debt thing that I was talking about, you're probably paying 15, 20, maybe even 30% on that debt. It's very, very, very unlikely that you'll be able to make those types of returns if you invest your money. So because student loans are usually relatively low interest rate and you can earn more if you invest, and I'm obviously not guaranteeing returns, but typically if you look at historical returns, you can make more than that. Then in my personal opinion, I would say do not delay. Make a good repayment plan for that student loan and still pay attention to it and make that a good goal. But I think, yeah, you're ready to invest. And again, same thing goes. If you have a car loan, do not wait to invest. Just keep on having a good plan to pay off that car loan. Same with that

mortgage, but also invest at the same time. So that is my personal opinion about student loans versus investing. Another kind of touched on this, when do you know when you are ready to start? So I mean, I kind of answered that, but let me kind of go back. You need to have that good financial foundation. And what does that mean? I want you to have a budget. I want you so this is me telling you what I want you to have in place before I feel you are, you know, particularly ready to start investing. I want you to have a budget, which is really just a spending plan. You need to know what you're doing with your money. Where do you want to put it? What are your long-term, your short-term, your intermediate

savings goals, your financial goals, and then what are your expenses? Have that all locked down. You need to know what's going on. Also, in my personal opinion, you should be tracking your spending. It is literally the only way you'll know where your money is going. And it's not hard to do. And then track your net worth because you need to know where you're at financially. What are all of your liabilities? What are all of your assets? Where are you? Are you actually in a financial place where it does make sense to start investing. Now, if when I said the question, how much or you know, when do I know I'm ready to start investing? Sometimes what you're actually asking is, how much money do I need to, you know, have to start investing? Well, I would say really, there's no real number. But my view, if I were to give you a number and that's what you're

asking, I'd say $1,000. I'd say have $1,000 in cash ready to start investing. And quite honestly, if you want to invest using a robo-advisor, that's usually their minimum initial contribution. So that's actually kind of their gateway. It's like, you need $1,000 to start investing with us. Now, if you wanted to work with an you know, an investment advisor at a bank or even investment firm, they'll have their own kind of minimums. So you have to kind of figure out, ask them what they are. And if you want to be a DIY investor, you know, technically you just need, I don't know, maybe a hundred dollars or maybe even no dollars to actually open up a discount brokerage account. But still, if you want to make your own portfolio and all that kind of stuff, you still need some capital.

So in my view, if you have $1,000 cash that is not earmarked for another financial goal, it is not part of your emergency fund, you've got your whole debt repayment plan on lockdown, you know what's going on there, then you can use that $1,000 and start investing. So there you go. All right. Another question that I get, and honestly, is one of the most common questions I get when I'm doing an event or anything to do with investing is, is Wealthsimple a good robo advisor? Would you recommend using Wealthsimple? And now there's a reason why I feel like I keep on getting that question. And no one's asking, is JustWealth a good robo-advisor? Is NestWealth or PlansWell or ModernAdvisor or WealthBar? I think I've noted most of them. No one's really talking about those. They're always just talking about WealthSymbol. And the big reason is they're one of the biggest

robo-advisors in Canada. And they also have the biggest marketing budget. They spend a lot of money in advertising. That is why you know about them. They've been a sponsor of my show. I've worked with them and I do personally use them for my investments. I use a couple other robo-advisors as well. I also do some DIY investing. But yes, so I personally use them. That should mean nothing to you. It really shouldn't. I have a personally good, I've used them for a number of years now, actually, almost almost three years, I've had a good experience with them. But I cannot say here that because I've had a good experience with them, and I like them that, oh, yes, you should use them

automatically. I can't, because what's good for me may not be good for you. And believe me, there's been times and I've gotten emails from people where I will say, oh, yeah, I like this, or this is a pretty decent company. I've done my research and I can confidently and honestly say, yeah, it's a good company. And people were like, oh, they're terrible, or I didn't have a good experience with them, or their customer service is crap. So I mean, there's kind of no way for me to win personally. But so what I'm trying to say really is there are many more robo advisors besides Wealthsimple. So let's first back up and be like, okay, so you've decided that you want to use a robo advisor for your investment portfolio. Great. I'm a big fan of that because I am a big fan of passive investing, of indexing, of low cost index-based ETFs. I am all about that whole strategy. So yeah,

I'm on board for that. Then when it comes to what robo advisor is right for you, that's where, sorry, you can't just take someone's recommendation. That would be, I mean, just, it just wouldn't make sense. You need to do your due diligence. And so what I'm going to give to you is my kind of recommendations list. And this is on my website. If you go to the page called recommendations on my website, uh, there's a whole list of all, not only, um, the list of different robo advisors that have the whole list in Canada, just Canadian ones. Sorry guys. Um, but also comparison sites. So there's two that I would suggest that you look at. One is called

Hard Bacon. One is called Auto Invest. They're comparison sites that show you all the different robo-advisors in Canada, the different fees, the different initial contribution minimums, and a bunch of other information. So that's a starting point for you to compare what's out there. And then you can take a look at their portfolios. Almost all of those companies have their portfolios public on their website. So you can see, okay, well, what kind of ETFs and what kind of portfolios and what kind of asset allocations are they offering? And then what kind of other benefits do they offer? For instance, like Wealthsimple does have a couple other, they have a couple of different tiers. You can just do

regular Wealthsimple. There's Wealthsimple black, if you want to invest over $100,000. There's one called wealth simple generation that I believe is new, which is like you can invest over $500,000. And then they give you a bunch of, you know, other bells and whistles and some other things that may be good for you. But other robo advisors have similar things where it's like if you invest a larger amount of money, they may reduce the amount of fees you have to pay and they may have some other benefits. So what I'm trying to say is, is WellSimple a good robo-advisor? In my opinion, yes. I like them. I trust them. I've used them for over three years. I've never had a bad experience. That being said, don't take my word for it. Do your own due diligence. See what else

is out there. Look on all of their websites. Call them. Don't just do their investor profile questionnaire. Call them and see, is their customer service up to par? Will they give you some help or investment advice? And did you find their website easy to use? And then make your own call. So that is, unfortunately, a kind of non-answer answer, but that's the best I can do because I just can't, I can't ever say use this bank, not this bank, use this robo-advisor, not this one, because that just, it doesn't make sense. There's so many different financial products out there that have their own use cases. And just because I bank somewhere doesn't mean it may be right for you. And that's why whenever I work with my financial counseling clients, I'm never pushing them to go with a tangerine or something because I bank with

tangerine. Who cares that I bank a tangerine? Who cares? What are your specific banking needs and do they fit that? Do they not? Then let's not bank with them. Let's bank somewhere else. The one thing I always do kind of say, hey, let's take a look at how much you're paying in fees. And are you getting value for that? If you're not getting value for those fees that you're paying, then, you know, maybe look at your other options. There's so many different, you know, no fee banks in Canada now. And also going back to the recommendation page on my website, I have a list of all the no-fee banks out there. There's one, two, three, four, five, six. There's six different ones.

You may not have done that, but there's six different ones. All right. So that's the Wealthsimple question that I got. Another question I got was real estate investing. What do I think? Well, I'll throw my hands up. I am certainly not a real estate investing expert at all. But when I get that question, what I think what's actually being asked is,

I understand real estate. Maybe I have friends, I have family that have done really well. Hey, so do I. And it's something tangible and I understand it. You buy a property, you either rent it out or you live in it and maybe you rent out a section of it or you just live in it and you wait for that value of that property to grow. Great. Here's the thing. So personally, I would not consider a home that I own and then live in as part of my investment portfolio because it's definitely not liquid. It's something that I'm like, if I needed cash, I couldn't easily sell. It would be very, very difficult. If I own a property and I rented that out and then I needed some cash and I had

the value in that property, I could sell that place much more easily than the place that I currently live in. So for me, I don't consider the place that you own, that you live in as part of your investment portfolio. It should definitely be part of your net worth because there is value there and you can sell it, but I personally wouldn't include in your investment portfolio. Now, I've talked to a lot of guests on the show about investment portfolios and asset allocation. And so I think that's kind of where that question is headed. How does real estate fit into a typical, you know, portfolio or asset allocation? So obviously, the traditional asset classes are, we've got cash, and we've got stocks, and we've got bonds, also called equities and fixed income.

So what's real estate? Is it equities? It's not equities. I would consider it an alternative investment. And so yes, that is a thing. And usually it's not a big portion of your portfolio. Some people and you can look around, say, oh, don't ever have more than five to 10% of your overall investment portfolio in an alternative. For instance, I had a guest from Copower at the beginning of the season, and we talked about green bonds. And I'm like, oh, is that considered fixed income? Because it has bond in the name, and it is kind of a bond. You are lending your money, you're getting interest back. And she's like, well, it's not like a, government or corporate bond. So I would actually consider it an alternative investment. So with real estate, personally, I would consider that an alternative.

And so when you are figuring out what's my asset mix, I want to maybe have, you know, 70% in equities and 30% in fixed income. Well, we want to put real estate as part of that piece of the pie. How can we fit it in? And do we want to make sure it stays within like 5% or 10% of that portfolio? Or do we want to have it as a bigger chunk? There's nothing wrong with that. And also, there's a lot of great benefits to doing real estate investing, as well as traditional investing in the stock market, because it is not tied to the movements of the stock market. The real estate market is doing its own thing. Just because the stock market crashes does not necessarily mean the real estate market will also crash, even though in 2009, that was kind of what happened

in the States. That was kind of a different situation. But in general, they're not linked together. They're kind of different things. So it is kind of good to have your eggs in multiple baskets. So what I would say is, if you do want to invest in real estate, I think that's great. You need to do a lot of research. You need to understand the risks. There's a lot of risks and they're very expensive risks, right? And don't forget that you should never put all of your eggs in one basket. So don't just invest in real estate, you need to invest in lots of different things. Diversification, we've talked about this on so many episodes, how key diversification is, it reduces your risk. There's a kind of a saying where it's like diversify the risk away,

right? And so you want to make sure if you're doing real estate investing, great, but also make sure that you are invested in other asset classes, like those traditional ones, stocks and bonds. All right, another question I get is, so I've got a work pension, you know, it's a defined benefit pension, it's really great, do I still need to invest for my retirement? And yes, the answer is, of course you do, because your pension, even as great as it will be, it may not be able to afford you the retirement that you want. I would refer you back to listening to episode 180 of the Mo Money podcast. It was the live recording of the last Millennial Money meetup I did back in the fall in Toronto. It was the live recording of the last Millennial Money Meetup I did

back in the fall in Toronto. It was sponsored by the Financial Services Commission of Ontario. And it was surprisingly, like I'm not, no shit, like surprisingly, it is the most downloaded podcast episode I have. I have no idea because it's called Retirement Planning and Pensions. It doesn't sound super sexy, but I think a lot of people have questions about retirement planning and pensions. So it is like a crazy amount of downloads for that episode. It's insane. And so anyways, for that event and for the recording, I was joined by Tim Thompson at Fisco. And we talked in depth about what it means to retirement plan. What are the different vehicles we can use? How do we know how to save up enough? Definitely go to the show notes, jessicamorales.com slash

180 for that. There's a really helpful infographic and important links that you may want to click on and check out. There's a whole retirement section on the Fisco website. But we go really in-depth specifically about pensions, the different types. There's one called defined benefit pension and a defined contribution pension. So you need to know the difference and how they work. But regardless, what Tim suggests and what I also agree with is you can't just rely on that pension. It is great if you have one. You're one of the lucky ducks that gets one. These are very few and far between these days, but you also need to personally save for your retirement as well. And then also when you are

doing your calculations on like, okay, what are all my savings buckets to afford my retirement? Well, you'll have your pension, you'll have your personal retirement savings, and then you'll also have the Canada Pension Plan, CPP, and then Old Age Security, OAS. And all of those work together to form your retirement income. So that's kind of a convoluted way of saying, no, you can't just rely on your work pension. And also, there's a very good chance if you're a millennial that you may not stay at that job until you retire, really, right? So you need to make sure that you're still investing. It's definitely important that you do all of the things. Now, I want to talk a bit more about contributions. So there's a couple of things you need to know

when you are figuring out, okay, how much do I need to personally save to afford my retirement? How much should I start with? And how much should I regularly contribute to? And what is that big number I need to reach? Is it 1 million? Is it 2 million? What I always kind of tell my financial counseling clients and people that I'm talking to at events is, well, let's back it up because there's something that you need to do before all of that. You need to define what your retirement looks like. What do you want your retirement to be? I know it may be 30 to 40 years from now, but it's really important for you to at least have a plan that you can adjust over time.

And then you could also adjust your contributions and your investment plan over time. So what that means is, well, first, I'm going to recommend a book right now that I read a few months ago, and I really, really loved it. It's called Victory Lap Retirement. It really goes into the idea that this idea of kind of traditional retirement or full-stop retirement is over. The idea that by 65, or now I think it's probably changing to more like 67, or even 70 is when we're all retiring. You don't just stop working. You don't just hang out at home and play bridge. That sounds awful to me. That doesn't sound like a vacation or sounds super exciting. And you're certainly not going to be just walking on the beach every freaking day. You're going to need to keep busy. You need to plan. You need to be fulfilled. And very well, it could look like you still are working in some capacity

and earning income. Or if you're not, maybe you're volunteering or just, you know, taking care of your grandkids or whatever. You just need to know what your retirement looks like so you can determine, well, okay, how much do I need to live? How much is that going to cost? And then what is my, you know, required annual gross and annual net retirement incomes? And so once you figure out what those incomes that you need are, and you'll probably see online when you do some more research, lots of people say you need maybe 70% to 80% of your current income. I feel like that really does depend on what stage you are in life. If you're in your 20s,

you're like, there's no way I could live on less. I'm broke. And maybe when you're even in your 30s, you're like, yeah, no. I think they're more, personally, I think they're more talking about when you're in your middle age to maybe getting close to retirement. So you don't need that good chunk of change that you're finally earning because you're older. You maybe only need 70 to 80%. But even with that, like, rule of thumb, I think it's a good to know. But the most important thing is figuring out what do we want retirement to look like? And then doing some calculations, making a retirement budget in today's dollars to figure out, okay, in today's dollars, how much would I need in order to afford that? What would my gross and net incomes be? And then you can kind of work with those numbers to figure out what is the big number I need if I want to have a retirement the last 30 or 35 years. And then you'll be able to figure out, okay, how much am I starting with? And then how much do I need to continue to contribute in order to reach that goal? So going back to this idea of how much am I starting with? And then how much do I need to continue to contribute in order to

reach that goal? So going back to this idea of how much do I need to contribute on a regular basis to reach that, you know, a million dollars or $2 million, that's where you, you know, test out some retirement calculators or work with a retirement planner that, you know, their job really is to help you make a specific retirement plan. And one of the good things, honestly, is if you do use a robo-advisor, a lot of them have their own retirement calculators or they have investment professionals that can help you figure out how much I need to contribute to reach the school. Again, a lot of them probably use similar algorithms or similar just kind of data being like, okay, on average, we assume that you may

earn 5% on your portfolio. And so with that, to reach $2 million, you need to contribute $500 a month or whatever to reach that. I've also seen, maybe not so much robo-advisors, but some other kind of suggestions that other people are talking about retirement planning is a good thing to do is, okay, you've got that number you need to reach, but there's no way to guarantee your future returns, right? So it's important when you're making your plan to figure out, okay, so what is kind of like the most likely situation? Maybe it is a 5% or 6% return. What's my best case scenario? Maybe that's an 8% or 10% return, and that's an annual return I'm talking about. And then also what's my best case scenario? Maybe that's an 8% or 10% return, and that's an annual return I'm talking about. And then also, what's my worst case scenario? What if for the next 20,

30 years, my annual returns are 3%? You want to kind of have a bunch of different scenarios so you can still determine, no matter what happens, can I still reach that goal? I think that's really, really important because a lot of those calculators just assume a 5% to 6% return, which may or may not happen. But guess what? No one has to crystal ball. No one. And so no one can really tell you this is definitely what's going to happen. They're just projections. They're just estimations. So I know that makes it way more annoying and confusing. You're like, I just want to know, am I doing it right? And no one's going to tell you yes or no, because no one can guarantee anything. They don't want to get sued. So that is kind of my long-winded answer on that. I hope that was sort of helpful. One question I want to get in

here before I forget is something I always get asked. And in my mind, it's kind of a no-brainer is, hey, I work with an employer. They do offer an employer-sponsored RRSP program where they match my contributions dollar for dollar for, let's say, 3% of my paycheck or 5%, whatever. Should I opt in? And I always say, hell to the yes. If they are matching you dollar for dollar, that is free freaking money. Just do the math. It is, it doesn't even matter what your returns are, honestly, because you're getting free money from that employer. And all you have to do is contribute. Obviously, you will be making some returns. But if I know, well, I've been working for, I have worked with a lot of different companies, you know, when I worked in corporate,

and almost all of their employer sponsoredsponsored RSV programs are with one of the big insurance firms, like a Manulife or a Sunlife or something like that. And of course, what they're offering you in terms of investment portfolios are high-fee, actively managed mutual funds. I have my thoughts and feelings about high-fee, actively managed mutual funds in that I'm not a big fan of them. I used to be invested in them. I did poorly with them because the fees were so crazy high. And so yeah, so that's most likely what you're going to get as your option for an investment portfolio. Not necessarily, but most likely. And so if you are faced with that and you're like, oh, but I know mutual funds kind of suck because they don't necessarily always outperform the index benchmarks and they have very high fees.

Should I not do this? I would still say, heck yeah, do it. Even if you get paltry returns and your MER is like 2.5%, because your employer is matching your contributions dollar for dollar, you're still in the plus. You're still earning money and you're never going to notice it get off your paycheck. You literally will just adjust and you won't even notice. My personal story about this is my last job, I was there for two years, eight months, and they had a specific rule as kind of a way to incentivize, I think, employees to not leave in that you can contribute to our RSP program, but we're not going to match you dollar for dollar unless you've been with the company for two years. And we will match you retroactively for any contributions you've made. So you bet your

bottom dollar that as soon as I passed my three-month probationary period and was allowed to enter this program, I started. I'm like, yes, take. I think I was only allowed to contribute 2% of my paycheck and then they were going to match it dollar for dollar. Anything excess of that, they wouldn't match it. So I'm like, well, then I'm only going to do 2%. And I did that for two years. And honestly, quite honestly, I probably wanted to leave before this two-year time frame. But I also knew, no, stick around, get that dollar for dollar matching. Come on, it's stupid.

And so I did. I stuck around for two years and eight months. I got that dollar for dollar matching. Come on, it's stupid. And so I did. I stuck around for two years and eight months. I got my dollar for dollar matching, their retroactive payments. And when I left, I had a bonus $3,000 from those contributions. So for me, I didn't even notice the money was being taken off my paycheck. And once I left, I left with a couple grand in my pocket that then I moved on over to some low-cost index ETFs. So for me, yeah, it's a yes. And you wouldn't believe how few people actually enroll in these programs. I remember because I was obviously the blabbermouth about money in my department when I worked there. I'm just like, is anyone else? No one else participated. Like, it was crazy. I'm like, what are you? This is free money. You're leaving money on the table. So anyways, that's my two cents. Do it. Just do it. Now, this is a specific question for DIY

investing, also known as self-directed investing, which I've talked about on the show before. So when you're trying to figure out, okay, I want to do this, how can I build my own portfolio? Now, most people say, hey, there's a bunch of model portfolios that these bloggers, you know, Canadian Couch Potato, the Sustainable Economist, Canadian Portfolio Manager, I believe that's the right one. But there's a couple others, and they have free model portfolios that, well, you know, here's, they obviously are saying, like, this isn't a guarantee, and this isn't advice, do it at your own risk or whatever. But they're basically like kind of outline, here's how, what to buy for your portfolio. These are the ETFs or the index funds that we recommend that you buy. And so that is

one way to go about it. But one other, you know, question that I get often is like, okay, so there's all these robo-advisors out there and most of them have their portfolios public on their website. Couldn't I just replicate their portfolios and do it myself and not use them and not work with them? Yeah. Yes, you can. For robo-advisors, they're pretty much across the board have the same fee structure. Their management fees are almost always 0.5%. But if you're a DIY investor, you want to save as much money as possible. You want to do it yourself. You can save that 0.5% and just do it yourself. And yeah, technically, you could just kind of copy what they're doing. I mean, I think it's fair to do that because they post those portfolios publicly on their website.

Really, you're not paying for like, you are sort of paying for like this pre-packaged portfolio by the robo-advisor, but what you're really paying for by using them is for, you know, maybe their expertise, but also they're rebalancing. Like that's what you're paying for. You're paying someone to rebalance your portfolio for you. If you'd rather do that yourself and save the money and then yeah, go ahead. Go on those robo advisors websites, see what portfolios they offer. And if it makes sense, like, yeah, you can just replicate what they're doing. There's nothing wrong with that. Oh, this is another thing that I want to make sure I get in here. So for episode 198, I did with Erin Lowry. It was, you know, a live interview I did with her in her hotel. We

were just chatting. And at one point she mentions, because we're chatting about protection when you're investing. And a lot of people are just wary about investing because they're afraid they're going to lose all their money. That is a very natural fear to have. I used to have that fear as well. And she was talking about how there are protections for your investments in the USA protected under the Securities Investor Protection Corporation, SIPC. And for me, when we were chatting, I'm like, oh, I'm not sure if we have the same thing in Canada. I'll have to look it up. Basically, I just blanked when we were chatting. I was very tired. I had an event to put on the next day. So I got a very nice email from a listener, thank you, who basically said, hey, correction, there is, and you should know this. And like, yeah, that was a dummy moment.

So I put that in the show notes, jessicamorehouse.com slash 198. But I'm going to explain it to you now because you're listening. So yes, in Canada, we have a very similar thing, an equivalent really, called the Canadian Investor Protection Fund. It provides investor protection if you use a robo-advisor or a discount brokerage who is a member of CPIF. I also have a link for more information if you want to learn more about how CPIF works. But if you've ever wondered, hey, I have my money with a Questrade or a TD Direct Investing or a RoboAdvisor like a Wealthsimple or a JustWealth or whatever. What happens if that company goes bust? What happens to my money? Am I protected or am I totally screwed? No, you're not totally screwed.

There is protection through the Canadian Investor Protection Fund. Again, I'll link also in the show notes for this episode for some more info about that. The only thing that you are obviously not protected from is if your portfolio loses value. If you invest in something and that stock tanks or that bond defaults, you're not protected. That's just the name of the game, the risk that you take as an investor. So yeah, just wanted to clear that up. And I appreciate the email I got from that. And it felt kind of like a dummy because I totally had a section on that in my investing course and I just totally blanked. So anyways, everyone makes mistakes. I'm not perfect. Okay, guys. I want to talk a little bit about ETFs just for a second, because I get a lot of questions about what exactly are they. And it's because they haven't been around that long. So they were

actually, the first ETF was launched actually in Canada before the US, we beat them, in 1990 on the Toronto Stock Exchange. And at the time, it was called TIPS or the Toronto 35 Index Participation Fund. Super exciting. Today, it's known as iShares S&P slash TSX 60 index ETF or XIU is its ticker name. And it's owned by BlackRock. So that's all some information you may or may not care about. But anyway, so it launched in 1990. So that's really not that long ago to exist. And so I think there's and they really have only gained popularity, in my opinion, in the past decade. No one was talking about ETFs like a decade ago. Now that's all we can talk about. Now, the natural form of the ETF, like why

it was created was to track the movements of an index benchmark, right? So when people are talking about ETFs, in general, they're talking about that type of ETF. So that is called an index-based ETF or a standard ETF. Most people don't usually put that kind of thing before it. I usually do when I'm talking to people because I want to really put that in your mind, index-based ETF. Because even though that was the original type of ETF, it is not the only type anymore. There's so many different versions of ETFs. They all work differently. I'm going to give you a little list right now. There's rules-based ETFs. There's active ETFs, synthetic ETFs, leveraged ETFs, inverse ETFs, commodity ETFs, covered call ETFs.

Active ones are kind of, I think, the most popular type in my opinion. So when you may have seen in the media or someone talking about, oh, I have this weed ETF, I think I've even mentioned that myself. So that does not track the TSX. It just tracks a benchmark of top weed companies in Canada. So there's so many different types of ETFs. So it's just important to just remember, there's like the index-based ETFs, the ETFs that are tracking the market index, like the workings of a stock market. And then there's these other ones that are just like weird evolutions that are doing kind of different things. And you may or may not need to know more about them unless

you want to get really into investing. But it's just important to know there's different types of ETFs. They're not all the same, but the first original version, index-based. Okay. Oh, on that, and this was a question that I actually put in the FAQs of my course, why do people sometimes use index fund and ETF entertainably as terms? I get so annoyed when people do this because they are very different investment products. I just explained what an ETF is. Index funds are different. They're actually index mutual funds is the proper way to say index fund. The thing is, in Canada, index mutual funds are not that well-known or popularized. So the main places you can get them are Tangerine has index funds, and then TD has the TDE series that were really popular. Those were the kind of two main popular

ways to get into index funds. Now, all big banks also offer index funds, but they usually like to push you to their more expensive, actively managed mutual funds instead of their index funds. In the US, index funds were invented by Vanguard in the 70s, 1972, I believe. And they have been very popular for a while. They never became super popular. And I believe this is actually in the, I'm going to link to this in the show notes of this episode, but a blog post and kind of interview I did with someone at Vanguard Canada, we talked about that. I'm like, why aren't index mutual funds as popular in Canada as they are in the States? They're so big in the States. And it's like, he said, I think they just never caught on for some reason,

but ETFs did. So we kind of went from actively managed mutual funds and then to index ETFs as kind of just like trends. Whereas in the US, it was actively managed mutual funds, then index mutual funds became more popular. And now their index-based ETFs are becoming more popular. We just kind of missed the index mutual fund phase or trend. I don't know. And so for that, I think because a lot of the kind of investment information books and authors and experts come out of the States, they say index funds. So I feel like in Canada, we use that term to actually mean ETF, not index mutual fund. That is my take on it. But if you want to be annoying like me and you're talking with someone,

you can correct them to be like, are you talking about index mutual funds or ETFs? And most likely they'll have no idea what you're talking about, which means they also don't know what they're talking about. So that is, I think, why people use those two terms. Interchangeably, they mean ETF, but they're saying index fund if we're talking about Canadian investments. All right, I'm going to wrap this up real quick because we're getting to that 40-minute mark. So this is one question that I also get very frequently, and I think it's really important to really think about. Some people say or ask me, I want to go back to school or I want to own a home or whatever. Those are kind of the two main ones, really. It's like going back to school

or owning a home. It's not going to happen until like five or maybe even seven, 10 years from now. What should I invest in to reach that goal? Now, those are very short-term goals. And when we're talking about short-term financial goals, you want to make sure that you're invested in something that is conservative because you don't want to use your capital. What if you have this plan that you want to buy a house in five years and you want your money to grow? You don't want to just sitting in a savings account entering like hardly any interest. And so you invest it in the stock market and then you lose a bunch of capital by the time that you want to actually put a down payment on a place. That would suck, right? So that's why in general,

most people say just keep it in something conservative. Now that could look like a high interest savings account. And I think at this moment, the last time I checked, there is of course, EQ Bank, they offer a 2.3% non-promotional rate. That is just the rate that you get as a customer. I've been with them for a couple of years. They're great. I think Motive Financial, relatively new online bank in Canada offers 2.8% and it is not a promotional rate. I just recently looked at that. So that is something that you can look at. So that is like a savings account that you could just tuck your money away in there. Another option is to invest in GICs, Guaranteed Investment Certificates.

Lots of the rates, especially the big banks, are not very high. EQ Bank, I believe, has some GICs that are like 3% or a little bit more than 3%. But again, look at like lots of online banks, they can offer higher rates for GICs. And then the other option really is you can invest in, you know, an ETF portfolio or even mutual funds or whatever, but you just have to invest in something conservative, which would mean something more balanced and not high in equities and fixed income, maybe something like a 50-50 in equities and fixed income or 30 or 40% in equities and then the remainder in your fixed income or something like that. Those are kind of your options. I know that sounds kind of annoying and I totally get

that. I was actually recently talking to my sister. She just bought her first place with her husband and she had basically been saving up for this down payment for, I don't know, eight to 10 years, like a while. I think I thought she was going to buy something sooner than she did, but just like she lives in Vancouver, the market has been crazy. So it's never been, she was waiting for that good time. And this is actually probably pretty decent time just because prices in Vancouver are cooling. They're so crazy expensive, but they're cooling down. So, but she looks back, she's like, had I known what I, you know, if I had had like

a crystal ball and knew how the market would have performed, I would have invested in something more aggressive. But the thing is, she didn't know, she didn't know when she was going to buy or when the right time for her was going to buy. So she kept it in something conservative And so even though yeah, she could have grown that money so much more It's it's a hard call because there's no guarantees Like yes, she could have made a lot more money if she'd done that but that was just that could that was just luck

There's no way to determine what's going to happen in the eight to 10 years. So if you want to make sure that you do need that money in five to even 10 years, you need to weigh all your options to understand your risks. And so at the end of the day, it doesn't really matter. She bought her place anyway. It is what it is. But it is different for long-term investing. That is where you can take some more risks and be a little bit more aggressive. But for those short-term goals, yeah, you only got those kind of three options, really. So that's what it is. Okay. Well, I hope that was helpful. And I certainly had fun. I love talking about investing. I think I should definitely do another investing webinar. I did one a few months ago. And it was really honestly just to get a gauge on what people's questions were because I am building my second investing course. I know I've been talking about that for a little while, but

it is coming. I'm hoping that I'll actually have some time over the summer to fully build it. But that being said, I do have my Investing Foundations for Canadians online course available. And if you feel like you don't have a good foundation for investing, like you want to maybe work with an investment coach or investment professional, but you just don't understand how the whole process works, that is exactly what this course is for. You can find more information on the landing page, jessicamorez.com slash investing foundations. I'll link to it in the show notes, jessicamorez.com slash 204. But it will break down basically just all the important things you need to know about investing.

And then really at the end of the course, you should be able to make that decision for yourself on how to make an investment plan for yourself, which means determining what your investment goals are and what kind of products that you need to invest in for those goals and to reach those goals in your deadlines. But I think you will be confident to figure out, do I want to do DIY investing and then go down that rabbit hole and figure out how to do that? Do I want to use a robo-advisor where it's kind of a little bit more guided and it's very simple to get started now? Or do I want to hire an investment firm? The thing with investment firms, quite honestly, if you're a younger adult, usually they don't want to work with someone that has no money. They usually say you need at least $200,000, $300,000 in your portfolio already before we even look at you. So that kind of sucks, which is why I'm a big

fan of robo advisors because they, you just know my sentiments. Anyway, so those are kind of your options. But if you want to make sure that you know how it all works, if you didn't understand a lot of the terms that I was talking about, which is totally, totally normal and fine, because I certainly didn't like five years ago. This is all learned stuff. This isn't, you know, I'm not just, you know, a genius. I'm certainly not a genius, but I'm not just like, oh, well, you just know this stuff. I know this stuff because I've taken the time to read a ton of books, research and educate myself and do my due diligence. So I knew what was going on so much so that I felt confident enough to build this investing course. So if you wanted to try it out for yourself, I'm going to give you a very special

discount. I'm going to give you 30% off the cost if you use promo code SEASON8. That's right, promo code SEASON8. You'll get 30% off of my investing course. And I'm going to leave this promo code up until the end of summer. So as of the beginning of September, it won't work. So make sure to take this time. If you want to educate yourself, this summer is the time to do it. And yeah, go ahead and do it. So thanks so much for listening.

I'm sad to say goodbye, but I'm not really going anywhere. I'm going go ahead and do it. So thanks so much for listening. I'm sad to say goodbye. But you know, I'm not really going anywhere. I'm gonna be on social media. Like you'll find me on the gram. You'll find me on Twitter, on Facebook. Maybe I'll even get my stuff together and do some more YouTube videos because that is what I promised wasn't it? And I do have a nice setup. I just have to get her done. But anyways, I want to just say thank you so much for supporting the show. I've met so many of you you so much for supporting the show. I've met so many of you at events that I've done recently. I've gotten so many great messages online and emails from you lately. It's really awesome. This is why I do it. It's for people like you. I want to make sure I'm making a difference in your life and I'm helping you.

So when I get a nice message from someone saying that that's exactly what I'm doing, that like just, it really, really, really, really means a lot to me. So thanks. If you want to do something as a nice gesture, send me an email or a message or give me an iTunes review and I'll love you forever. But yeah, that's it. That's it for me. I am on hiatus until about the end of September. And make sure to get on my email list to find out updates of what I'm up to over the summer. I will be doing, you know, more things, probably some webinars and some events and some other cool things and contests and whatnot. JessicaMorales.com slash subscribe. But yeah, that's it for me.

Thanks again. Have an amazing, amazing summer. You rock. You should be so proud of yourself for listening and taking the time to educate yourself and just like rock your life. Like you're, you are amazing. I just want to say that. I hope you know that. And I'm going to see you back here for season nine of the Momany podcast. See you later. This podcast is distributed by the women in media podcast network find out more at women in media.network