Index Card Investing
Investing doesn’t have to be complicated. There are plenty of people who have figured out how to invest for themselves with fantastic results. When you invest for yourself, you are able to control costs and that is very important, as fees you pay to investment advisors take a huge toll on your nest egg as you get older.
Here’s the latest good idea that has come my way with respect to simplifying investing.
The idea behind index card investing came from University of Chicago professor Harold Pollack who was being interviewed on how the financial industry tries to overly complicate investing. The index card was his brilliant response.
To translate for a Canadian audience, here are his simple steps to investing:
Accept any employer matching contributions to your RRSP
Invest in low cost broad based index funds (VGRO or VEQT for Canadians)
Save 20% of your income
Pay off all credit cards in full every month
Maximize your government assisted saving programs (RRSP and TFSA)
The 20% savings rate is a little high in my opinion and means you will have more income in retirement than you had while working and raising your family. Our Canadian experts recommend a savings rate of between 10 and 15% to achieve to same standard of living in retirement that you had while working. If you are planning on retiring before age 65, then increasing your savings rate makes sense.
One disagreement aside, this index card advice really does do a great job of visually showing that you can do it alone. Take a few moments to consider how doable it is to become a DIY investor and how much money you will save over your working life.
For more information and to see the actual image of the index card that Professor Pollack created, check out this Wikipedia page.
I’m a department head for a high school in Toronto. I graduated from the Ivey School of Business at Western University and have been a DIY investor for over 20 years.