MoneyMaaster’s Summer Stock Screen. 13 stocks to check out.

Stock Screener: Canadian Edition

It’s been a while since I’ve posted any top picks, stocks buys or analysis.  The summer is usually a bit slower around here, the days are longer, the beers are colder, the kids are actually able to get out and enjoy some fresh air, so finding time to write, or even think about stocks gets a little tough.

Summer Beer

That said, we recently decided to officially list/sell our cabin, which means we will have a little extra money to invest.  The goal is to invest about 70% of the proceeds, use 20% on renovations to the house, and save the rest. This means I need to start doing some research.

I decided to do a custom stock screen of Canadian stocks, which are listed on the “Canadian Dividend All Star List”.   This list contains Canadian stocks which have increased their dividend for 5 consecutive years in a row, or more.  The list also has other valuable information, such as:

  • How many consecutive years of dividend growth
  • Current stock price
  • 3 & 5 year dividend growth
  • Payout ratio (Trailing 12 month & estimated next year)
  • Earnings per share (Trailing 12 month and estimated next year)
  • Price/Earning Ratio (Trailing 12 month & estimated next year)
  • Current & Quick Ratio
  • Analyst Price Target
  • Market cap
  • Yield
  • Much more

The list has about 100 stocks on it.  I decided I wanted to narrow this down to the best of the best (based purely on the fundamentals).  Some factors I looked at were:

  • 5 year dividend growth of at least 10%
  • 5 year EPS growth
  • TTM Price/Earning under 15
  • Estimated PE/Next 12 months under 15
  • Current ratio (extra points to Current ratio of 1.5+)
  • Price Target and % currently discounted (point to stocks trading at  10%+ discount)
  • Payout ratio under 40%
  • Consecutive years of dividend increases

I like visuals, so I went through the entire list, highlighted in green any stocks that looked great in the metrics listed above, and highlighted in red the ones that looked bad.  I then sorted the entire list and ranked the stocks by which ones had the most green (positive metrics) minus any negative metrics.  This is not 100% scientific obviously, however I find it’s a great starting point to narrow down the list to 10-15 stocks to look at in more detail.  There were 13 stocks that had at least 5 positive metrics with zero negatives.

Only 1 company on the list had 9 positive metrics. This was EXCO Technologies.

Exco Technologies Stock Screen Winner

Exco Technologies is a Canadian global designer, developer and manufacturer of dies, moulds, components and assemblies, and consumable equipment for the die-cast, extrusion and automotive industries. (Source: Wikipedia).

Exco boasts a 5 year dividend growth rate of 17.6%, coupled with a payout ratio under 40%.  Exco is also trading at a relatively low P/E of 9.97, and trading at a discount of 27% from the consensus analyst target. The company has a history of buying back shares and currently has a dividend yield of 3.82%.  With any stock, there is always some risk, Exco is coming off a disappointing quarter, and could be hurt if auto sales to the US are impacted due to Trump.  Always do your own research before buying any stock!

Now onto the rest of the results…

Full List, ranked in order.  Number in brackets is how many positive metrics it scored from me.

  1. Exco Technologies (9)
  2. Equitable Group INC  (8)
  3. Canadian Tire Corp   (8)
  4. Richelieu Hardware Ltd (7)
  5. CCL Industries (7)
  6. Andrew Peller Ltd (6)
  7. CAE Inc (6)
  8. Enghouse Systems Limited (6)
  9. Canadian Western Bank (6)
  10. Dollarama (5)
  11. Methanex Corp (5)
  12. Alimentation Couche Tard (5)
  13. TD Bank (5)

There were a few others that were really close, but happened to miss out one one of the metrics above.  These companies were all scored a 4:

  • Metro Inc
  • Saputo Inc
  • Stella Jones
  • Gildan Activewear
  • Transcontinental Inc,
  • Logistec Corporation
  • Loblaw

I am not recommending any specific stock on this list (yet), as this is just phase one for me.  Next step is to do a deep dive into each, to narrow it down to 5-6 that I plan on opening a position in once the cabin sells.  The good news is, there are a few on the list which I already own, and a few others I had on my watch list already.

If you own any of the stocks on the list, or have any comments on any of the stocks listed, please let me know in the comments.

Have a great weekend!

What I learned by interviewing 11 financial bloggers.

Over the last couple of months, I’ve posted interviews I conducted with 11 of my favourite financial bloggers.  Today I am going to give a quick summary of a few of the things I learned along the way.

You can find my interviews with all of them on my blogroll page

First of all, I’d like to thank each one of them one last time for participating, and to encourage everyone to check out their sites if you haven’t already.

Here is the full list:

Tom from Dividends Diversify

Rob from Passive Canadian Income

Cam from Millennial Dividends

Adam & Andrew from Wallet Squirrel

Sabeel from Roadmap2retire

Gen Y Money

Sarah from Smile & Conquer

Nelson from Canadian Dividend Investing

Matt from All About The Dividends

Sir Budget

 

FINANCIAL BLOGGERS COME IN ALL SHAPES & SIZES

Financial Bloggers come in all shapes and sizes

Now, obviously this is going to be skewed, and based on a handpicked sample of bloggers I personally read, but I still found some of it very interesting. I also rounded up/down some of the percentages to make it easier to read.

  • Average age 34 years old
  • Youngest: 27
  • Oldest: 53
  • 50% Canadian, 40% American 10% Overseas
  • 20% female, 80% male (I clearly need to start reading more female blogs)
  • 20% don’t drink, 80% do.  70% like beer!
  • 20% have been arrested

The majority of bloggers I follow are very open about their personal lives, they share their real names, ages, portfolio holdings and even some personal family details.  Personally I prefer blogs that do this, as it makes it easier to connect with, and understand some of the choices they make.  I also completely understand why some others don’t, whether it be for privacy concerns, conflict of interest with other jobs, or personal preference.

 

FINANCIAL BLOGGERS UNDERSTAND THE IMPORTANCE OF STARTING EARLY

  • Average age of first investment: 21
  • Earliest to start investing 10 years old
  • Latest to start investing 31 years old

Even though the majority started investing before their 21st birthday, 50% of these bloggers biggest financial regret  was “Not starting earlier”.  Think about that for a second, these are people who truly understand the power of compound interest, and having money work for them over time. Don’t make the same mistake, get started early & often and your future self  will thank you!  If you need more proof, read my last post about how compound interest can turn anyone into a millionaire over time HERE

FINANCIAL BLOGGERS INVEST IN BOTH STOCKS & FUNDS

  • 60% invest in Stocks & Funds (ETF/Mutual Funds)
  • 40% invest solely in stocks

This makes sense, these are people who are obviously very serious about their finances (they run financial blogs for fucks sake).  Although individual stocks are great for more experienced investors, and can be extremely addicting & fun to own, I think it’s safe to say every single person I interviewed would agree that an investor just starting out can’t go wrong with a low cost ETF that matches their risk tolerance and long term goals.

WE ALL MAKE MISTAKES

Financial bloggers make mistakes

Although the biggest mistake (by far) these bloggers made, was not starting earlier, there were many others along the way.  Here are few:

  • Chasing big yields or big gains on penny stocks
  • Not setting a budget earlier in life
  • Listened to the “experts” instead of doing own research
  • Not being properly diversified

Another thing I continually see in different financial forums, Facebook groups and online, is the amount of people obsessed with chasing a high dividend yield.  People get excited about a high yielding dividend stock, instead of worrying about the total long term gain.  What inevitably happens, is these companies paying high unsustainable yields end up cutting the dividend, the stock price crashes and people get burned.  I cannot stress this enough, always do your research, ensure dividends are covered by cash flow, look for a history of earnings growth, dividend growth, and profitability.

IS INVESTING STUPID?  SHOULD WE SPEND EVERYTHING NOW?

Investing or Saving

I’ve long struggled with finding the right balance between saving for the future, and enjoying my life now.  I think I do a pretty good job, however some days I think I should just say fuck it, not invest anything this year and take the family on a trip…other days I think we should downsize our house and invest the difference for the future.

One thing that really got me thinking about this, was reading everyone’s answers to the question:

If you knew you had 1 year to live, how would you spend it?”

Basically every single person answered this question the EXACT same way. 10 out of the 11 people interviewed said they would travel the world with friends and family.  I thought about it as well, and I think I would answer the same way too.

If almost everyone thinks the most important thing to do before they die is travelling the world, and everyone knows that life is finite, and could literally end at any second, why do we put this off?  What if we get sick in retirement and can’t travel? What if we get into an accident the year before we retire and never get to experience the world?  Even if travelling isn’t your thing, there must be some bucket list items you would want to do before you die.

There are also the extreme frugal bloggers (I don’t really follow any of them, because I can’t get into that lifestyle personally), but it seems to work for them.  Some of them will retire at a much younger age than me, and Kudos to them.

Obviously there is no right or wrong answer, but I still find this struggle very interesting.  The financial side of my brain is telling me keep saving so that you can retire earlier, and have more time to do all these things later in life, with a lot more money and freedom – while the “fuck it” side of my brain is saying, “let’s have a beer and go to New Orleans, let’s check out the Bourbon Trail, lets go NOW!”

I think I’ll keep doing what I’ve been doing, trying to maintain a good balance of enjoying every minute now, while paying myself first (for later).  One of my very first blog posts was called “Saving money feels great – but lets be honest, so does spending it”.  This post was about a bucket list item I was able to check off 4 years ago (Attending a World Cup with my Dad). I know I’d be further ahead financially had I invested that money instead…but I also know If I could go back in time, I wouldn’t change a damn thing.

I was hoping there would be some sort of lesson at the end of all this….unfortunately, I am still trying to figure our what it may be…

Does this internal debate creep into everyone else’s mind, or is it just me?

Have a great weekend.

Better know a Blogger: Featuring Sir Budget.

The financial blogging community is a pretty tight knit group. Although I’m new to the blogging side of things, I’ve been an audience member for over 5 years, reading people’s stories, learning from them, and following their financial journeys.  There are probably 30+ people I have been following for years, who I could tell you their investing styles, what stocks they own, and perhaps even their average dividend income just off the top of my head.  What I couldn’t do however is tell you a little more about the people behind the portfolio’s…which is what inspired me to reach out to a few of my favourites, and try  to get to know them better.

I hope you have been enjoying the previous interviews.  You can view them on my blogroll page HERE

Welcome to the 10th “Better Know A Blogger”!

Today I will be featuring Sir Budget

Sir Budget, is one of the few international bloggers I follow.  He lives in a small town in Germany, and also one of the younger bloggers in this series.

Without further ado…I’d like to introduce you to Sir Budget

Dividend Blog INvesting Canada Stocks finance

Name: Sir Budget

Age: 27

Where do you live:  Small town close to Stuttgart, Germany

Tell me something awesome about your cityWell, it’s not just the city but the region Swabia is known for its frugal people. A good place to live in as a financial blogger 😉 And well, Stuttgart is the home of Mercedes and Porsche. So, we can build good and expensive cars 😉

What do you do for a living:  I’m a freelance iOS and web developer

Are you married:   No

Do you have any Kids? Pets:   We have no kids yet, but we plan to have them later. We have a dog called Lucky

Website: www.budgetlikeasir.com

Twitter:  @BudgetLikeASir

Why do you blog:  I want to share the stuff I’ve learned from several finance books with my readers, so they will have success and build a richer life. Ultimately, they won’t make the mistakes I did and be able to handle money in a reasonable way. For me, that doesn’t mean being super frugal. Money is there to spend it. But you need to have a balance between your short-, mid-, and long-term goals!

In your opinion, what is the best thing you’ve ever published:  My post about perpetual dividend raisers: https://budgetlikeasir.com/2017/12/15/perpetual-dividend-raisers-can-make-rich/

 

Money Investing Stocks Dividends Investing Blog

Why do you invest/What is your ultimate financial goal:  I’m a fan of dreaming big and reaching for the stars. So, my goal is to build an incredibly large passive income, like 5-10k per month (right now I’m at 11€/month).

When did you start investing: During my final year of studies in 2016. I was 25 at that time and bought my first ETF

How long until you will be financially free (wont NEED to work): Well, I just started working full-time in January of this year. So, I have quite a long way to go. But I plan to reach financial independence in the next 8-10 years.

 What will you do in retirement:  Uff, that’s hard as I think I will continue to work even if I don’t have to do so anymore. Therefore, there are some decades until I will really retire. But I guess I will spend a lot of time with my kids and Mrs. Budget, read many books as they are the best thing to grow as a person, buy real estate properties on a semi-annual basis and teach my kids as much as possible. If I still got the drive to build a business, I will develop a software that helps people achieving what I have achieved then.
Do you share your portfolio? If so, what is the current value: Yes, I do this on a monthly basis in my net worth reports. My current value is 3,384.97€. This value is still pretty low, as I’ve just started my career this year, but I add a bunch of stocks (600€+) every single month.
What is your net worth: I also do this in my net worth reports 😉 Right now, it’s 12,415.21€. But it should drop the next months a lot as I’ve purchased my first car and I have to pay my income taxes for the first half of 2018. However, my goal for the end of 2018 is quite high with 30,000.00€. Hopefully, I can manage to achieve that.

What % of your salary do you invest/save each year:   I can’t really answer that right now as I’ve started freelancing just a few months ago. Therefore, my income, as well as my expenses (we also moved out of our parents’ places in March and bought our first car in May), vary dramatically. I would say usually 10-15% for investing and then 10% is saved for months without freelancing projects, another 10% for my emergency fund, and lastly 5-8% into other savings accounts for short- and mid-term goals. But in good months, I put another 10-20% in my savings accounts. I also have to add that I don’t exclude the costs of social security (~10%) from the base value. If you take that away my savings rate should be higher. So, let’s say 40-75% usually.

Do you invest in funds or individual stocks & why:  I started investing in index funds as suggested by Ramit Sethi in his great book ‘I Will Teach You To Be Rich’. However, as soon as I’ve discovered dividend growth investing, I’ve switched my investing style to buy solid perpetual dividend raisers. Therefore, individual stocks. I prefer it that way as I have more influence on what stocks are bought/sold. I also love the monthly income that those stocks produce. However, for the average person, I would still recommend buying funds.

If I gave you $10,000 right now to invest in 1 stock – what would you pick & why:  That’s a good question. Usually, I would split it up into several stocks. As I’ve received dollars from you, I would buy a US company and I really like Realty Income as they have such an amazing dividend growth streak (I think more than 80 consecutive quarterly dividend raises). Their payout ratio is a little bit too high, but I believe that the management is able to handle that after more than 20 consecutive years of quarterly dividend raises.

What was your biggest financial fuck up: Handing over nearly 20k to a Suisse bank to buy mutual funds and don’t know anything about the stock market. I don’t know if their performance was good or not, but it was in 2008 or 2009. Yes, when the financial crisis was happening. After a few months and losing 2.000,00€ I took my money out and it was just gone. So many mistakes were made there. First, you shouldn’t invest without knowing at least a little bit what you are doing. Second, mutual funds are mostly a bad idea and underperform the market often. Lastly, you should never sell when the prices drop. You should better buy low, sell high. Or how Warren Buffett said: ‘Be fearful when others are greedy and greedy when others are fearful’.
.


Investing Dividends Blog Finance Winnipeg Canada

Is there a God:  Yes, I believe there is a god, but I don’t think that you have to go to the church on a weekly basis to do good in his eyes. I just pray a few times a week and try to help others when I can and improve this world somehow.

When you die, what is 1 thing you hope people think of/remember you for:  I want them to be remembered as loyal and faithful. I think that’s a skill that we, as a society, are about to lose. It’s now normal that politicians lie. Deadlines for projects aren’t met most of the time. People tend to be late for appointments. Having debts is just how it is and sometimes are not paid back. In relationships, folks say one thing but do the complete opposite. It’s true for small and big things. Machines get more and more reliable and at the same time, we are losing that. At least, that’s what I’ve noticed.

Do you vote? Who did you last vote for: Yes, I do. I voted for our German chancellor

What do you think the next big technological advance will be:  Hmm, I don’t know if this still counts but I would say self-driving cars will become standard and then the imagination starts. How about reading books and newspapers with a head-up-display (HUD) on your windshield?

What is the single biggest threat to humanity:  The human itself. We keep on doing things that we should know they are not good for us, the planet, and the society. But well, I’m also scared of artificial intelligence.

What are you most proud of & why: Mrs. Budget. I made the most beautiful, lovely, loyal, breathtaking, and astonishing girl on this planet becoming my better half

If you knew you only had 1 year to live – how would you spend it: Spend as much time with my family as possible and guarantee that everyone is taking care of. So that includes that I would continue to work to improve their situation.

What is one thing most people don’t do – but everybody SHOULD do to make the world a better place:  “As one person I cannot change the world, but I can change the world of one person.” – Paul Shane Spear. Starting small is a great thing and every action makes a difference. One small monthly donation or volunteering can mean a lot to others and improve the world. If every single person makes the world a little bit better by their actions, we would have a much better planet to live on.
.

Dividends Investing Finance Blog Canada

Favorite Movie:  The Boss Baby

Favorite TV Show:  Family Guy

Favorite book:  The Richest Man in Babylon

First Job:  Paperyboy

Have you ever been fired:   No

Which website do you spend the most time on:  Amazon

Favorite Cocktail: Vodka Redbull*

*Editors Note* See I told you he was young

Favorite Beer:  Shocker! The German guy doesn’t drink beer at all

Favorite Sports Team: Pittsburgh Steelers

Have you ever been arrested?  No

Dogs or Cats:  Dogs

Does your spouse read your blog: Sure

Best restaurant in your city: Santa Lucia

How often do you check your portfolio (be honest):  Daily

How often do you check your website stats (be honest):  Weekly

**Bonus question submitted by my wife (I asked her what ONE question I should ask):

What do you put on your hotdog: Weenie, roasted onions, ketchup, mayonnaise, pickles

Dividends Diversify Blog Finance Canada Investing Jordan Maas Cocktails

Thanks for reading.  I hope you enjoyed this series as much as I enjoyed putting it together and learning about everyone.  If you’d like to be featured, let me know.

Compound interest can turn anyone with patience and a small amount of disposable income into a millionaire

The Beauty Of Compound Interest

Most people are not good with money.  Some people are downright terrible with it – but if you are reading this – hopefully that means you are at least slightly interested in taking the first steps to a brighter financial future.

If you are looking for stocks with great Price/Earnings Ratios, the best low cost ETF’s or ways to structure your asset allocation during a recession – this post is NOT for you.  If you were confused by that last sentence – THIS IS FOR YOU.

Part 1 – THE POWER OF TIME & COMPOUND INTEREST

The most important thing about investing is getting started.  This may seem obvious, but I cannot tell you how many of my friends and family members have continually put it off.  The only way to guarantee wealth in the future is to start investing today (or marry a rich girl), but let’s be honest…you aren’t good looking enough DARREN!

What is compounding/How does it work?

Compound interest, simply put is when the interest you make off an investment starts earning interest as well.  For example, if you invest $100 dollars and earn 10% interest, you will make $10 dollars. The next year though, you will make $11 dollars (because you now have $110 dollars earning 10%.  Over time – the speed at which the money compounds is unbelievable.  Take the example below from one of my favourite books “The Wealthy Barber“:**

**If you haven’t read this book yet, and have any interest in bettering your financial situation, or understanding do yourself a favour and READ IT!

“Teen 1 saves $2,000 each year from ages 19 to 26 and invests it in an account that earns a return of 10% per year. She then no longer contributes anything, but leaves that money in the account until age 65. The total value of her investment at that time would be $1,035,160.

Teen 2 does not start saving until age 27. He saves $2,000 each year from ages 27 to 65 and invests it in an account that also earns a return of 10% per year. The total value of his investment at age 65 would be $883,185.

Teen 1 will have contributed a total of $16,000 and at age 65 increased the value of her deposits by 64 times.

Teen 2 will have contributed significantly more at $78,000 (39 years x $2,000.00), but will have increased the value of his deposits only by 11 times.”

Another great example of the wonders of compound interest.  Answer the question below:

Would you rather have 1 million dollars right now, or a magical penny that doubles in value every day for 30 days?  

90% of people say they want the $1 million dollars.  That means 9 out of 10 people JUST don’t get it.  That magical penny would be worth over FIVE MILLION dollars after 30 days.  Don’t believe me? Look at the chart below:

Compound Interest Penny

The power of compound interest, can turn anyone with patience and a small amount of disposable income into a millionaire!

By this point, you must be ready to start investing – how could you not be.  However, investing can be scary – I get it.  Here are a few questions I hear quite frequently:

  • What should I invest in?
  • What If I lose all my money
  • The stock market is at an all time high – shouldn’t I wait? Buy low sell high right?

What should I invest in:

First of all, there is no single correct answer to this question. If anyone tells you there is – RUN.  The most important thing is to get started.  Automate payments every time you get paid, and choose something that fits your risk tolerance.  For beginners, I’d recommend a low cost ETF, which is basically the exact same thing your bank will try to sell you – but with lower fees.  That said, if you take comfort in the guy/girl at the bank, and you trust the bank – by all means invest in the mutual fund they recommend – it is still 100% better than NOT investing.  I started investing in mutual funds when I was 18 years old, and only recently sold some of them/transferred them to low cost ETF’s.

What is a Mutual Fund/ETF

A Mutual fund is a group of stocks/bonds that are packaged together and managed by a professional.  They charge you a % each year(usually 1-2%) to mange the account for you.  The benefit of an fund is you get instant diversification on hundreds of stocks and bonds without needing the cash to buy each one.  You own shares/units in the fund, which in part own all the underlying assets of the fund.  There are many different types of mutual funds, some will be focused on equity (stocks), others on fixed income (bonds), some will be balanced (both).  There will be some mutual funds that are Canadian focused, others that are US or Global focused. Some funds will be focused on paying you each month – others will be focused on long term growth.  There really is a fund for everyone.  The goal of the mutual fund’s manager will be to try and “beat the market”.

Study after study has shown that the majority of mutual funds actually underperform the market (due to trading fees, commissions, and in some cases poor fund managers).  An ETF (Exchange Traded Fund) is very similar to a mutual fund, however the goal is to simply replicate the market. Just like a mutual Fund, ETF’s come in all shapes and sizes, but because their goal is to replicate the market, there isn’t much managing of the fund going on – and this usually results in much lower fees for YOU the investor.

Disclosure:  I currently own both Mutual Funds and ETF’s.  You can view them on my portfolio tab.

Choosing the right fund, will come down to your own goals, risk tolerance, time horizon and more.  Do your own due diligence, but remember, choosing a poor performing fund that only returns 4% per year, is still better that not investing!  Feel free to ask any questions in the comments, or send me an email if you have any specific questions.

Investing is Scary…What if I lose all my money:
Investing is scary

This is the beauty of owning an ETF or a Mutual Fund.  It is virtually impossible for you to “lose all your money”.  Most funds will consist of over 100 different stocks (sometimes thousands).  For you to lose all your money, every single stock you own would have to go belly up.  Sure, sometimes your funds will go down, sometimes they will go up, but just remember the average return over the last 100 years is around 7%. As a general rule, you want to be more aggressive when you are younger (higher risk, higher returns), and reduce your risk as you get closer to retirement (switch from a lot of stocks, to a balance of stocks and bonds, or if you’ve built up a big enough portfolio perhaps mostly bonds).
It would be possible to lose everything if you were to own one individual stock, however until you are an experienced investor, and can stomach volatility and major losses – I wouldn’t recommend owning individual stocks.  (And Even if/when you do venture into owning individual stocks, you should still diversify)!

The stock market is at an all time high – shouldn’t I wait? Buy low sell high right?

Once again, study after study has shown that:
TIME IN THE MARKET > TIMING THE MARKET

What this means is that, over any long period of time you will be better off investing for NOW, than you would be trying to time the market/buy when stocks fall.  Even if the results were different, it wouldn’t matter, because NOBODY can time the market perfectly.  If someone tells you they can – RUN.  Need another reason to start today (instead of waiting for a market dip) – go back an re-read the compounding section.

Part 2 Investing Accounts: 

In Canada, there are different types of accounts in which you can hold your investments.  I am going to touch on the two most popular, and explain them in simple terms.

Option 1 – RRSP: Registered Retirement Savings Plan

The RRSP has been the most popular retirement/investing plan around for years (and for good reason).  An RRSP, is an account in which you can hold *most* investments(stocks, bonds, cash, etc).  The RRSP is registered with the government of Canada, and any contributions you make throughout the year can be used as tax deductions when you file your taxes (reducing the amount of taxes you need to pay – which usually results in getting some extra $$$ back at tax time).  All money invested, and all the gains will grow tax free inside your RRSP, until you are ready to start withdrawing funds (usually, in retirement, and when in a lower tax bracket).

There are limits on how much you can contribute to an RRSP each year, and there are penalties for withdrawing from your RRSP early, so make sure to read all the rules before getting started.  That said, in most cases, anyone earning $60,000 or more per year, should be investing via an RRSP (because you will be in a higher tax bracket, and benefit from a large reduction in taxes owing).  If you earn under 50k per year, you may be better off investing via OPTION 2:

Option 2 – TFSA: TAX FREE SAVINGS ACCOUNT

Most people I talk to, even those who have a TFSA, seem to think this is just another every day savings account, when in truth, this is one of the most powerful investment vehicles around.  The Tax Free Savings Account (should have been called the Tax Free Investment Account), can hold *almost* any investment, much like an RRSP, however there are some restrictions. For more information you can check the Government of Canada’s website: HERE

How does a TFSA Work:

The main difference between a TFSA & RRSP is that there are no tax benefits/deductions to invest in a TFSA, and you cannot claim any investment losses, however any money you contribute to your TFSA, along with any investment income earned, capital gains, dividends, etc can be withdrawn TAX FREE at any time.  For example, if you invest $10,000 into your TFSA, and in 10 years, that investment is worth $50,000 you can withdraw the full amount, without paying a penny in taxes.

Like an RRSP, there are contribution limits to a TFSA, and penalties if you go over them. You can however withdraw money at any time without penalty, which makes a TFSA a lot more flexible for people saving up for shorter term things (house down payment, tuition, etc).

Generally speaking, in most cases, higher earners will benefit more from an RRSP, and lower income earners will benefit more from a TFSA (some will use both).  In 100% of cases, investing via either account is better than NOT investing.  Are you sensing a trend yet?

What are you waiting for? Get started today!

This post was meant to give the uninitiated, a VERY BASIC look at how & why they should get started investing.   If I have convinced you – I urge you to go to your financial institution, get set up with a TFSA, or RRSP (or both), and start making automatic contributions every payday.  It doesn’t matter if you can only afford a small amount (I started when I was 18, investing $25 a month).  You’ll barely notice the amount coming off each pay cheque, and eventually you can increase how much you put away.  Although the first few months/even first few years may seem slow, you will soon start to see the magic of compound interest working in your account, and if you invest via an RRSP, you will most likely be pleasantly surprised at tax time when you get a much bigger return.

I said it earlier, but I think it’s worth repeating:

The power of compound interest, can turn anyone with patience and a small amount of disposable income into a millionaire!

 

invest now do it

Best of luck!

To my *very few* regular readers – I know this post is obvious to you, but If I can even help 1 person, I don’t care if I wasted your time 😉

Please note,I am not a licensed financial advisor, all views are my own, and always do your own due diligence.