Investment & Portfolio Advice

[yycgeek]

I am 44 and would like to start investing. I know it's a bit late, but I managed to pay off my mortgage this year.
I have got no RRSP and have $200k to invest.
I have been reading a lot lately, but all I can say is this: I used to be indecisive, now I am not sure.
I am looking for an average 6% annual return and I will be contributing $15k into the investment annually for 10 years compounding.
$200k @ 6% in 10yrs + $15k/yr = $568k

Is there a vehicle out there that can get me to my goal?
Is this too unrealistic in this market?

Your suggestions are welcome.
Thanks.

[Shakespeare]

I have got no RRSP and have $200k to invest.

If you have no TFSA, get one immediately and invest the maximum ($15K). Get an RRSP and invest enough to take you down to the top of the bottom Alberta tax bracket ($41544). There is no point investing more this year; wait until next. You can use the calculators at http://www.walterharder.com to estimate your tax savings.

I am looking for an average 6% annual return

That may be high in this environment.

Read viewtopic.php?f=29&t=101652 and http://www.finiki.org/index.php?title=P ... nstruction . You may also want to read my primer. If you don't feel like reading (or managing your own investments), consider putting the money in a low-cost balanced fund like the one from, for example, Mawer.

[Snapp]

Read Shakespeare

[newguy]

You don't give enough info.

The TFSA idea is always a good one.

I'm guessing you make decent money so an RRSP sounds like a good idea, but do you have a pension plan?

You can put money into your RRSP up to the amount of room you have + $2000. You don't have to deduct it all in one year so you don't waste the deduction, it will carry forward indefinitely. That way you can at least shelter the gains from taxes in the meantime.

Do you have kids and are RESP's something you're interested in? Extra RRSP room can help if you have one and the kids don't go to post-secondary something.

As for your goals you should think in real terms. That 6% sounds like before inflation. CPPIB thinks they can get 4% after inflation.

44 and no debt +200k plus a paid of house is waaaay ahead of the average, so no it's not late to start investing. I think the pay debts first attitude is smart.

newguy

[Rickson9]

44 and no debt +200k plus a paid of house is waaaay ahead of the average, so no it's not late to start investing. I think the pay debts first attitude is smart.

I agree. You're in good shape. Take your time and keep reading. There is no rush.

[yycgeek]

So far I am getting a lot of good information and suggestions (way better than a financial advisor asking me to buy $200k RRSP shares of a MIC company!!)

Shakespeare, Thanks so much for your suggestion. I will for sure need to educate myself more in DIY investing.
But when you say

Get an RRSP and invest enough...

, that's what I am struggling with. I am not sure to invest in what.
I have checked the Couch Potato Portfolio (http://canadiancouchpotato.com/model-portfolios/), and still have not been able to decide what and how.

Thanks for all your input.
Cheers.

[Shakespeare]

I am not sure to invest in what.

Read the finiki portfolio design section I linked.

[bowtie]

Where are you keeping the $200k right now? After the immediate action items (max out TFSA, contribute RRSP to an efficient), you could take some time to figure things out. When you're doing that I think it's ok to put the money in a high interest savings account, perhaps with an online bank. Take a look around for what's out there right now. If you have any other debt it could be a good time to retire that as well.

[yycgeek]

Where are you keeping the $200k right now?

One level higher than under the mattress. In a regular savings account.
I like the idea of immediate action on TSFA and RRSP. I could also look into increasing the RESP for my daughter.
Thanks again for your feedback.

[BRIAN5000]

I like the idea of immediate action on TSFA and RRSP.

This puts the money inside let’s say an "envelope" but you still need to decide what to invest in once it's inside the TFSA or RRSP. That can be from a savings account/GIC's to the latest fad "dividend stocks".

[Sensei]

Hi,

YYC, welcome to the forum if you haven't been welcomed already.

As others have noted, I think you are in a good position financially and with enough years left to really make something of your current assets. I don't think you'll find a lot of specific recommendations on what you should do here.

Rather than the sort of specific advice that you probably seek, I think it is also worth noting before doing anything that a good investment strategy is based on facts and statistics interpreted with common sense. An investor needs to determine accurately what her financial needs are or will be, have realistic goals, and carefully consider how to manage the risk / reward factors of any particular investment at any particular time of her life. You need a strategy that is long term and consistent that does not rely on short term events as its core rationale. If you are looking for stock tips or get rich quick schemes, you won't find much on FWR, although if you read the right the posters, you'll get rich slowly!

I assume you haven't tried anything above the retail banking level with your cash. If so, I think it is also worth noting the less obvious point that a good investment strategy needs to fit one’s psychological and emotional profile. If you venture into bonds and stocks, there WILL be another market crash. You need to be prepared for loss and to know what you will do in such a situation. Choose investments that let you sleep at night!

That said, two investment strategies that have worked well for me have been:
1. dollar cost averaging into diversified portfolios of mutual funds
2. dividend investing

Up thread comments :
Take your time.
Read Shakespeare's Primer
Read a lot otherwise
Dividend investing is a fad.
Brian, I think you've got it backwards. Companies that don't pay dividends are the fad.

LORILLARD - started paying dividends in 1760 - Consumer Goods

BANK OF NY ? started paying dividends in 1784 - Bank



CIGNA - started paying dividends in 1792 - Insurance



WASHINGTON TRUST - started paying dividends in 1800 - Community Bank



DUPONT - started paying dividends in 1802 - Industrial Diversified
 Chemicals

COLGATE-PALMOLIVE - started paying dividends in 1806 - Consumer Goods



JOHN WILEY & SONS - started paying dividends in 1807 - Publishing



HARTFORD GROUP - started paying dividends in 1810 - Insurance



CITIGROUP - started paying dividends in 1812 - Bank



YORK WATER - started paying dividends in 1816 - Utility





My advice
Practice self-criticism and learn from your mistakes
Make your plan and stick with it.
Think long term.

[Spidey]

You've received good advice so far. I'll just add my 2 cents.

Given that you have your entire $200,000 in a savings account, I would make the assumption that you are a very conservative investor and would not be comfortable with excessive risk. However, you do need a better return than a savings account to achieve your goal of 6%.

Perhaps you may want to consider placing as much as 70% in fixed income. You could do this with ETFs, but I find that investment firm Phillips Hager North offers competitive returns with more flexibility for contributions and withdrawals. (You pay a slightly higher MER but that is often offset because you don't pay fees to buy and sell.)

Perhaps you may want to consider something like this for your fixed income allocation:
1/3 PHN Short Term Bond and Mortgage
1/3 PHN Inflation Linked Bond
1/3 PHN Bond

If you prefer you could do something similar with Bond ETFs rather than PHN, or you could set up a GIC ladder, or you could do some combination of those choices.

Of the remaining 30% you may want to consider index ETFs. Perhaps something like this:
10% Canadian Index eg. XIU (Could also consider XDV if you want more weight toward dividend payers.)
10% US Index eg. XSP
5% REIT Index eg. XRE or ZRE
5% Emerging Markets Index eg. ZEM (This is the most volatile one, but a good bet if you believe that Emerging markets will outperform over the next 20 or so years.)

Just my suggestion based on a guess regarding your risk profile. May not suit you at all.