You’re not investing? There are NO more Excuses.

Posted on by Dividend Daddy

If I had a dollar for every time a friend told me investing was too complicated, too expensive, and too time consuming, I’d be rich.

When I started investing some 20-25 years ago, there may have been excuses then for not investing. There were definitely excuses in the decades prior to my start in the stock market. Mailing in or faxing forms, phone calls to your broker, expensive trading costs, etc. Those were all realities of investing 20+ years ago. The friction between you and getting your first dollar invested were not insurmountable, but they were there.

Fast forward to today, and there are no more excuses. I won’t listen to your pity party about how you don’t understand investing, you don’t have the time, you don’t have the extra money to invest, etc. I’ve heard all of your excuses. None of them are valid. Absolutely none.

The old adage is “you can bring a horse to water, but you can’t force it to drink”. Well, I’m going to bring you to the proverbial water and show you just how easy it is to drink it.

Why invest?

Investing in the stock market can offer several benefits including:

  1. Long-term growth: Historically, the stock market has provided higher returns compared to other types of investments over the long term.
  2. Diversification: Investing in a variety of stocks can help spread risk, reducing the impact of poor performance from any single stock.
  3. Dividends: Some stocks pay dividends, providing an additional source of income.
  4. Hedge against inflation: Stocks have the potential to outperform inflation, preserving the purchasing power of your money.
  5. Ownership in companies: When you invest in stocks, you own a portion of the company and can benefit from its success.

It’s important to note that investing in the stock market also comes with risks, including the potential for loss of capital, though at least historically over the long-run, you were fine.

However, think of every dollar you invest as a dollar that is a little soldier in your growing investing army that is working for you day and night, compounding year over year, as the stock market returns a positive average return historically over time. Spend that same dollar today and it’s gone forever and not working for you tomorrow and into the future.

In my stock portfolio, from May 2001 to May 2004, my dividend income increased 83.223% as I’ve added new money each year and the existing income my initial investments made in the form of dividends, compounded year over year. It’s like a snow ball that is rolling down hill and gathering more and more snow.

Here is Warren Buffett, possibly the greatest investor of all time, on Dividend investing, particularly for retirement. For more on dividend investing, see the Ultimate Guide to Dividend Investing.

But to enjoy long-term stock portfolio growth and dividend growth, you need to get started! Your future self will thank you.

Sign up to a Robo-Advisor

You don’t need to read hundreds of investing books or study for a 4-year university degree to be a smart and successful investor.

The recipe is actually quite simple:

  1. earn money
  2. save money, and
  3. invest money.

Done. There’s nothing else to it. Once you’ve mastered these 3 easy steps, I’d suggest finding ways to increase your income through raises, bonuses, stock options, or side hustles and invest most, if not all of the extra cash.

The next step is to pic a broker. Robo-Advisors have revolutionized the investing game for novice investors or even just lazy ones. I use WealthSimple in Canada. If you’re in the United States, take a look at Betterment, Wealthfront, or Robinhood, etc.

I recommend new investors sign up for a managed account by a robo-advisor. The same is true I believe for investors that simply want to hit the reset button after wondering aimless in the investing world, perhaps trying to be a day trader (hint you will surely lose money) or after trying your hand in penny stocks (hint you will also surely lose money).

A managed account requires about 5 to 10 minutes of your time to set it up via a smartphone app or on your laptop. Then all you have to do is deposit money on your own cadence and the robo-advisor takes care of everything else. Nothing more for you to do.

In fact, you could set it up so that a certain amount of cash is withdrawn from your bank account on whatever cadence you choose (daily, weekly, monthly, etc.) and never ever log back into your account (except perhaps at tax time to check for tax slips). That’s really it. Check back in 30+ years basically. If you have a few dollars now, you can get started. There really are no more excuses.

This is the epitome of set it and forget it. After all, studies have shown the best stock market investors are dead investors. Why? Because they never check their investing account(s) and as a result are not inclined or tempted to tinker with their equity holdings by selling a stock for example.

Using a robo-advisor, your money will be invested in a wide range of asset classes (low cost index and Exchange-Traded Funds (ETFs)) across the global stock market in order to maximize returns while minimizing risk. Whatever you choose to deposit with your robo-advisor from a few dollars to hundreds on a regular cadence, will be put to work buying whole or fractional shares . Yes, you’ll pay a little bit more in fees than doing it yourself, but you’ll pay a fraction compared to what you’d pay if you went to a stock broker at your local bank branch to do this for you.

If you enjoy being poorer, than go into your bank and they’ll gladly take your investing money from you in higher fees (and likely poorer returns).

Index it

If you want to save even more money on fees and fancy yourself a mini Warren Buffett, my advice is to skip the robo-advisor and buy an index fund / Exhange Trade Fund (ETF), and (still) set it and forget it.

Some investors simply buy $VTI and chill. $VTI is the Vanguard Total Stock Market Index Fund ETF that tracks the entire U.S. stock market in USD (U.S. dollar currency). For some investors, this is the only fund they hold in their entire stock market portfolio. My largest holding is $VTI. (FYI: Many Canadians hold $VTI in their RRSP (Registered Retirement Savings Plan) to avoid the withholding tax).

Others will want to add a fund that provides for some international diversification outside the United States (although arguably given the global nature of a lot of large U.S. businesses, the $VTI fund is somewhat already globally diversified – Amazon paid affiliate link).

As a Canadian, I also buy $XAW (trades in CAD – Canadian dollar currency): iShares Core MSCI All Country World ex Canada Index ETF. It’s “ex-Canada” which means that it doesn’t invest in the Canadian stock market (as Canadians we are historically over-exposed to the Canadian stock market and economy through our “home bias”) and instead invests globally, including a sizeable portion in the U.S. economy.

If you want to avoid having to convert Canadian currency into U.S. currency and avoid the cost of those transactions or the reduction in purchasing power given the value of the Canadian dollar relative to the U.S. dollar, you may wish to take a look at $XAW for U.S. and global diversification away from Canada but in Canadian dollars.

Some of my other index fund / ETFs for international exposure include:

But Dividend Daddy, why do you purchase individual stocks?

Am I guilty of not following my own advice above? Maybe. Depends on your perspective.

If you want to set it and forget it, but don’t want to go the Robo-Advisor route and want to save a bit of money in fees doing so, you could buy $QCN: Mackenzie Canadian Equity Index ETF as one among many examples of Index funds that track the Canadian stock market.

However, I think for more experienced investors, Canada is an exception given the rather oligopolistic and concentrated nature of the Canadian stock market across a few sectors: Financial, Insurance, Energy, Transportation, and Telecommunications. In Canada, there a handful of large companies in each sector.

In other words, these industries represent “moats” that make a compelling case for investing in them. Why? Think of a castle with the moat around it in the form of water with the draw-bridge up so getting to the actual castle to stage an invasion, is more challenging.

Canada’s “Moaty” Stock Market

Many industries in Canada are quite “moaty”:

  • Want to build a pipeline to carry oil, good luck.
  • Want to start a telecommunications company and need to obtain spectrum to do so? Good luck!
  • Want to bank charter to compete against the Big 5 Banks in Canada? Again, good luck.
  • Want to build a railway to compete with the two largest players CN Rail and CPKC (formerly CP Rail)…I’ll say it again….good luck!

So want to pick individual stocks in Canada, pick one or two big players from the above noted industries with a sizeable moat, for example:

  • Financial: You could pick $RBC or $BMO
  • Insurance: You could pick $SLF or $MFC
  • Energy: You could pick $ENB or $CNQ
  • Transportation: You could pick $CNR or $CP
  • Telecommunications: You could pick $BCE or $T

Given the heavy concentration of the Canadian stock market, by selecting a few key stocks across the main industries in Canada, you are essentially (but not exactly) duplicating the “TSX” or Canadian stock market (or the $QCN ETF essentially) but at a lower cost (avoiding the albeit low fees associated with index funds that track the Canadian stock market like $QCN or the slightly higher fees a robo-advisor would charge to manage this all for you).

Using a discount stock broker like WealthSimple or Questrade (My Questrade referral code: 815820681448330) that doesn’t charge any commissions/fees for buying stock or ETFs like WealthSimple (Questrade doesn’t charge a commission for index/ETF purchases but charges a small fee for individual stock purchases), means you can eliminate the fees (albeit VERY low fees) charged by funds like $VTI or $XAW.

Pick from the Top 10 or 20 of the Major ETF Tracking the Index

Another (similar) way to pick stocks to buy in Canada, is to look at the Top 10 or 20 holdings of a fund that tracks the TSX and simply buy some of those stocks individually using a no-commission discount online broker like WealthSimple. It doesn’t have to be rocket science or more complicated than that.

The Top 20 holdings for $QCN; Mackenzie Canadian Equity Index ETF are:

Outside of Canada in the U.S. for example, if you’re going to pick stocks, I’d recommend buying $VTI or a similar fund that tracks the U.S. stock market as your main investment vehicle before tinkering with some individual U.S. stocks like Coca-Cola ($KO), which I own for example.

Stuff I love

Below is a list of stuff I love. The list does contain paid referral links.

WealthSimple Trade: Trade stocks at no cost / zero commission. Great if you want to buy a small amount of shares in companies on a regular basis.

Questrade: A solid platform for investors looking to purchase individual stocks and ETFs. Fees are low to purchase stock compared to higher fees traditionally found to purchase shares through traditional big bank platforms and ETF purchases are free. My referral code: 815820681448330

Addy: This platform enables investors who don’t want the hassle of being a landlord and/or who can’t afford pricey residential real estate, to gain access to real estate investing for as little as a $25 annual membership (something Addy recently added to their platform in terms of an upfront membership fee – note there are properties you can access without paying the membership fee but you’ll have access to fewer properties to invest in). Click my referral link.

Wealthica: A secure way to track all your investments and progress in one place, including net worth, dividend, distribution (from Real Estate Investment Trusts (REITS) for example), and interest income, etc. They also produce handy visuals so you track your financial independence goals in a visual way. (I use Wealthica everyday and I highly recommend it for my Canadian friends/readers. Use my promo code: WDDividendDaddy10 and get 10% off the yearly premium subscription).

Simplii Financial: Tired of paying monthly fees for chequing accounts and paper cheques but still want easy access to bank machines at no cost? Simplii Financial allows unlimited bank machine transactions at CIBC bank machines and no cost banking.