Mailbag: How Do I Get Started?

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Sometimes writing articles can get lonely.  You’re not sure what people really care about or what information people actually need in order to make a difference, and you miss the personalized back-and-forth that human interaction is used to be synonymous with.  Because of this disconnect it’s easy to lose positive writing momentum when a blank page lies in wait and your own expectations seem like a mountain rising before you.

There is one thing I never dread or lack focus for however: personal emails.  Logically speaking, writing an article that is viewed by many people should be a more effective way to communicate and help large groups of people than responding individually, but there is just something that is deeply satisfying about helping one person solve their specific problem.  Watching someone have an “aha moment” or having a person thank you for getting them back on track is really gratifying and just a huge overall energy boost.

At heart, I am often a lazy man looking for efficiencies that will allow me to continue to be lazy.  Because of this unflattering truth, I had a brainwave over the past week that will allow me to channel my energy for personalized communication with my goal of helping a broader group of people: a mailbag.

The idea is simply to take actual questions and comments we get from readers and answer them in a public context so that everyone might benefit from the back-and-forth.  I think there is value in using the questions generated from the brave souls who will admit they’re not sure about something, to answer the questions many of us are likely thinking but don’t want to admit.  If we don’t know the answer we’ll look it up and get back to you. (Kind of like calling in the experts on Pawn Stars – for those of you who’s TV is also stuck on the History Channel.)  As a bonus, I’m hoping others might chime in on with a little help in the comments section.

How Much Capital Is Safe To Start Investing WithGoing forward we’d like to encourage people to buy in to this idea and let us know if you have questions around a certain article we’ve written or something you’ve read in the newspaper.  If a part of our free ebook just doesn’t make sense to you or you just have something that is bothering you about a personal finance situation, let us know and we’ll get back to you.  Obviously we’ll always ask if it is ok with you if we answer the question publically and will never reveal anything about your identity or email unless you want us to.  Thanks in advance for taking the time to interact with us and let us know that someone actually is reading the stuff we put out there!  It’s what keeps us going when we’re not sure about things anymore.

To kick off this new segment we bring you a letter from “Rachel”.  Questions are all from actual readers and have only been altered slightly to protect identities and/or for brevity’s sake.

Hi Guys,

In the last few months, I've (unexpectedly) become very enthused about person finance and investing. I am still a student (though I'm 30), and I have spent the last few weeks trying to teach myself how to best navigate the financial world, which has been overwhelming but great. Me and some of my rocking lady friends have decided to get together once a month and teach each other about all this stuff. It's been sweet.

So, my question:

I have very little money saved, and I want to get going in a big way. My Dad (who is a big day-trader and used to be a broker), tells me that I should not start investing until I have at least $10,000 because the fees and commissions eat up too much of your investment if you just don't have enough. He then went on this rant (albeit an interesting one) about how the financial world is catered to people with money, and those with lower incomes often get pounded. This news kind of crushed me.

So, I'm here to ask: is this true? Or is this a more old skool generation of investing that Generation Y-ers can't listen to because most of us just won't make what our Boomer parents did?

Have you guys written any articles on advice of this sort – like, how much capital is safe to start investing with?

My other related question is about trading fees. If I plan to do a more buy and hold strategy, would i not avoid these fees-per-trade this making the whole process way cheaper? I read this in a book by John Bogle – the Vanguard guy.  Have you heard of this guy?

Thanks Rachel!

First of all kudos to you and your “rocking lady friends” for taking it upon yourselves to learn how this whole money thing works.  You have asked some great questions.  Very perceptive.    In my opinion your dad is both right and wrong.  Chances are your dad and I will disagree with a lot of things though because I actually don't believe in day trading as a wealth-building tool for the vast majority of people.

Here's what your dad is right about: the big names of the investment industry are absolutely out to crush small folks.  Here's what he maybe isn't aware of – new ways to invest that target Gen Yers like us. The mutual funds that many of our jobs push us into as part of company-driven retirement plans have terrible fees and almost always do worse than average over the long-term (see this article for more information on that).  On the other hand, managing your own investments through a discount brokerage can see you racking up sale commission fees quicker than dividend cheques and leave your meagre retirement nest egg in bad shape.

Your dad might be happy to learn that all is not lost for us “youngsters” though.  The best resource I've found for the short and sweet version of what’s out there in terms of cheap starting options for Millenials is John Robertson's new book titled “The Value of Simple“.  I did a podcast with him here: http://myuniversitymoney.com/mmfbt-030-john-robertson-value-simple/

You can check out a few of the other podcasts if you're interested as many of them deal with similar topics.

Secondly, you can check out the free eBook I wrote, where I talk about my preferred method of investing – the Questrade Discount Brokerage and their option to buy ETFs for free.  I think that will answer almost all of your questions.  To open an account with Questrade I believe it's still a $1,000 minimum and I think that's a solid chunk to start with, just to get used to the mechanics of it all (as opposed to the $10,000 figure you heard of).  The other two options that Dr. Robertson and I both like are the TD eSeries and the Tangerine turn-key portfolios.

BTW, I'm a huge fan of John Bogle and his research essentially forms the backbone of everything I do investing-wise.  The ebook I sent you to has a bunch of his quotes and the conclusions he reached included in it.

Spoiler alert: Before we published this, Rachel actually emailed me back, so we might post our whole back and forth if that’s cool with all of you!

If you want to have your questions answered email us at young@youngandthrifty.ca or use our contact sheet.

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Kyle is a high school humanities teacher by day, and freelance personal finance author by night. He has been published in academic journals, and has also co-authored the book "More Money for Beer and Textbooks". In his free time Kyle likes to limp up and down a basketball court and pretend to be a tough guy in a boxing ring.

6 Comments

  1. Jordan on April 29, 2015 at 2:51 pm

    I would just add, if you don’t start now with a little bit of money chances are you may never have a whole lot of money. By taking action now, you’ll learn to grow your money and grow with your money too! From there you will better learn how to invest and manage larger sums. The power of starting is a momentum builder and often the toughest part!



  2. Kyle on April 30, 2015 at 9:03 am

    Totally agree Jordan. Almost all of the time a mediocre plan/action is much better than a perfect thought that is never implemented.



  3. John Robertson on April 30, 2015 at 11:06 pm

    Thanks for the mention Kyle! While the minimum to open an account at Questrade is $1000, I’d suggest a bit more just so you can stay above that if there’s a decline in the value of your investments. $5000+ and you can avoid inactivity fees.

    With TD e-series or Tangerine you can get started with as little as $100 (though for TD ~$400 would be a more realistic minimum).

    No need to wait at all!



  4. SST on May 2, 2015 at 10:43 am

    If you want to put your “small” amount of capital somewhere (kudos on saving $10 large!) without getting scalped by fees and costs, start with the Vangard fund family.

    It’s a place to put your money, it’s low cost, and most importantly, allows you to get started and learn, and there’s no better experience than having skin in the game!



  5. Kyle on May 2, 2015 at 12:42 pm

    Absolutely. If you don’t want to go the free ETF route, Vanguard has been the market leader in low cost products since before either Rachel or I was born!



  6. Kyle on May 2, 2015 at 1:41 pm

    Great stuff. Thanks as always for stopping by John!



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