Building wealth should be and can be one of the most rewarding experiences in life. It can be a very simple process as well. We can buy and own the stock markets of the world with the press of one button. That investment would offer fees in the area of 0.20% to 0.25%. You can press two or three buttons to create a portfolio and bring your fees down even more. With very low fees almost all of your investment dollars stay in your portfolio pocket, contributing to the compounding and growth. Recently, I produced a video highlighting how to build wealth and create the super-simple portfolio. In this post, I will offer the support blog posts that add to the educational experience.
Here’s the video. Please start here …
The simple process to building wealth
Here’s the framework outlined in the video.
- Get your financial house in order.
While this is simplified, laying the groundwork necessary for wealth creation is a big dose of common sense.
- Clear bad debt
- Track your income and spending
- Spend much less that you make
- You now have money to invest on a regular basis
More considerations: Please have a read of my personal finance book. It’s so easy, it’s a 1000 word blog post (instead of a book).
When you invest, keep your fees as low as possible
2. Cut your investment fees
Here’s a post on why low-fee investments matter.
The unfortunate truth is that high-fee actively managed mutual funds greatly underperform passive index funds. The fees in mutual funds can be 10 times that of passive exchange traded funds (ETFs).
You pay a mutual fund manager to beat the market, in turn they deliver greatly inferior results. As per the video, you could build twice the wealth (or more) over the decades by keeping those fee super-low.
Here’s more context on what we mean by active vs passive investing.
What is index investing?
What is an exchange traded fund?
Why pay an investment fund manager and advisor high fees for inferior investments?
Here’s a great quote from that why low fees page.
Every dollar you spend on investment advice is a dollar you cannot invest.
Fee-for-service advisor Ross Berlin
Get a managed portfolio
3. Invest on a regular schedule.
Fortunately, there are game-changing investment portfolios that are called asset allocation ETFs. These are well-diversified global ETF portfolios that you can purchase with the click of a button. The asset allocation ETFs, at times called one ticket ETFs will allow you to cut your fees by some 90% or more, compared to Canadian mutual funds.
Create your own ETF portfolio
Here’s the link to the ETF Model Portfolio page on Cut The Crap Investing.
Keep in mind the models are not advice, but ideas for consideration, on how to build the simple ETF portfolio.
How to make that purchase
ETFs are funds that trade like stocks. You would open up a discount brokerage account at your bank. It is a simple process. That said, we want to pay attention to any transcation costs.
At Questrade, you can buy ETFs for free. Here’s a partnership link to open up a Questrade account. You will ge an additional break on fees.
You might also consider Q-Trade or Weathsimple (a very slick trading app).
I have brokerage accounts at TD, Questrade and I use the Wealthsimple trading app. They are easy to use, and it is easy to open an account.
Want lower fees and some hand holding?
You might consider one of the Canadian Robo Advisors.
The Robo Advisors offer advice, financial planning at a few of the shops, and use those ETF portfolios. They are a wonderful training ground if you want to make a first step towards taking control of your wealth creation.
You might move on (one day) to buy an asset allocation ETF or create your own ETF portfolio. You might decide to stick around, Robo’s are a wonderful option for many Canadians.
I am a big fan of Justwealth, Canada’s best-performing Robo Advisor.
Other popular options are Wealthsimple and Questwealth at Questrade.
Plan to succeed
There is value in advice and financial planning. If you need more help, the self-directed investor can use an advice-only planner, we do need that roadmap.
You can gain advice without recurring fees, so you keep all the wealth you build.
Fee-for-service advisor Ross Berlin
That said, you might not need a financial planner.
Ensure that you know what you are doing, and invest within your risk tolerance level.
More simple inspiration
Here is a wonderful video featuring Larry Bates, author of Beat The Bank, interviewed by Robin Powell.
There is some wonderful framing in there from Larry.
Answering reader questions on wealth creation
With the help of Cut The Crap Investing reader Brent S., I co-hosted a Zoom call where I went over the portfolio building video. Readers were invited to ask questions on the simple but effective ETF portfolio. That Zoom call was recorded, you can hit that link.
While the accumulation stage can be simple, things get much more complicated when it comes to creating or shaping the portfolio for retirment funding. I will be back soon with a retirement ETF portfolio video, and we’ll have another Zoom call, on Wednesday May 11.
I will also follow up with all-weather portfolio and building the simple stock portfolio.
Stay tuned. Thanks for reading.
Feel free to fire away in the comment section in this blog post, or on YouTube.
Dale
