- Save 10% of your income.
- Every once in a while buy the Vanguard product with the symbol VGRO.
- Do this over and over again, every year for 40 years and there’s a really good chance you won’t have to worry about money when you stop working.
It seems so simple. This is the sort of advice I’ve been dishing out to friends, family, students and casual acquaintances for years. The problem is almost no one follows it.
I never really found out why it was almost universally ignored. I just assumed either it wasn’t important enough for people to actually do it or they were so worried about messing things up, they were willing to pay a bank or financial advisor to do it for them.
Maybe they couldn’t believe that investing for themselves would be a better bet than paying a financial advisor or perhaps they just needed reassurance from time to time from that advisor.
Faced with a choice of learning something that is probably as interesting as watching paint dry or going to your bank and having it done for you by a smiling confident salesperson, most people are going to chose the smile.
That’s too bad. Does it really matter if you have $500,000 instead of $800,000 to retire on? Maybe not, but it still does seem like a bit of a shame you couldn’t have spent the extra $300,000 yourself instead of slowing dolling it over the bank decade after decade.
Fees you pay to the bank or an advisor do matter. The average mutual fund in Canada charges a yearly fee slightly over 2% per year. This is not a one time fee. You pay 2% ever year and if your mutual fund increases in value, you pay the 2% on the profit as well. This never ends until you sell.
Contrast this with the fee for buying Vanguard VGRO (mentioned above) which has a yearly fee of 0.22% or about 10 times less than your bank’s mutual fund.
When you’re 24 years old and barely saving, the difference between 2% or 0.22% doesn’t really add up to much. However, as you age and continue to invest, the difference between 2% and 0.22% becomes huge. Hundreds of thousands of dollars huge for lots of people with middle class salaries.
And for what? The annual sit down to tell you to keep on keeping on? The Christmas cocktail party or gift basket.
Doing it yourself is not difficult. Anyone who can hold down a job that will allow them to save some money for retirement can do this stuff.
Find someone who can sit down with you and show you how this works. Or take a one day course at your local library or community centre. Join a DIY investing club. Read more blogs like mine to build your knowledge. There are lots of ways to learn to DIY and you will never regret knowing more.
Last resort, I consult on DIY Investing with my fellow Canadians. $199 for up to 3 hours of one on one lessons that should be more than enough time to get you up and running. If you’re interested, contact me.
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.