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7 Simple Steps to Investing with Vanguard All-in-One Funds

Photo by Elijah O'Donnell on Unsplash
You've been thinking about investing for a while but you've been held back by several excuses. Some of these are legitimate (everybody says to do this or that... but is that right?) and some of them are pathetic (I'm not sure right now is a good time to buy.... just look at the news!). I have some very simple advice for you:


Fuck the news and fuck the piles of noise everybody is "adding" to the "conversation." 

It's simple, you already know you need to invest and you probably have the cash sitting somewhere else collecting a garbage interest rate. The more complex you make it, the more easily these websites, robo advisors, banks and mutual fund companies can profit from you. I have nothing to gain from you - so I have this really easy step process because I haven't been bought to make it more complex or sell you additional garbage. No must-use language from advertisers, no paywall and no book. It's almost like I want to do this. You'll see below I have a referral code for Wealthsimple Trade that'll net each of us an extra $5 if you choose them - but go with however you want (although my instructions are specifically for Wealthsimple Trade but others are very similar). If this is the first time you've heard of Wealthsimple Trade, here's my review.

If you're just starting to invest for the first time, you can use my steps to take your first dip into the investor's world. After you've completed these steps you'll probably come back to the top and reread all the convincing I just had to do to get you to do the thing you knew you needed to do. We'll have a good ol' laugh about it, don't worry. Let's begin.

Step #1 Why you are investing

You're investing in the stock market because it is the best performing asset class in the world. Not your savings account, not your Canadian bonds or GIC's and not your home. It's stocks. They are the long-term winner and when we invest, we do it for the long term. Think 10+ years minimum. Read "The Simple Path to Wealth" by JL Collins and then "Beat the Bank" by Larry Bates for more information about why you invest in the stock market.

Step #2 When to invest

You're going to begin investing once you read step #6, so in a matter of minutes. Aren't you excited!? 

Don't try to time the market, you'll suck at it. People much smarter than you and I suck at it - and they're were paid to be good at it! So unless you've always had good luck, go ahead and make the right decision and begin investing right away regardless of the noise. There is a VERY good chance you'll be ahead 10+ years down the road and since that's what we're aiming for, we need to begin now and regularly after that with every payday.

Step #3 Assessing your risk tolerance

Unfortunately, I cannot assume you are an enigma or an emotionless void of which you'll be immune to doomsayers. When you see your money fluctuate, it sends a special signal down your spine that says "GOD DAMMIT - I FUCKING KNEW IT." The level of dammit is dependent on you and you only, I can't tell you what it will be. Hopefully it's zero but you're just not the emotionless robot I aspire you to be. So do yourself a favour and head to Vanguard's website for a risk tolerance questionnaire

Be honest and don't fake it. You need to check your emotions and investing time horizon. It's important. Once you have your results, keep the page open and head to Step #4.

Step #4 Picking your All-in-One Fund (AOF)
Note that these are also sometimes called Asset Allocation Funds. 

We want to invest in a simple manner, yes? Great, literally nobody has ever said anything bad about AOF's because they are essentially a mutual fund that costs 0.25% MER, instead of the industry shakedown of 2%. AOF's are wonderful, the cherry on top if you will or the warm breeze through the meadow while birds land on your shoulder and sing to you and the nearby deer cozy up to you because you are an enchanted being.

If you want to stay in the serene environment, do yourself a favour and go with an AOF. You'll be investing in stocks and bonds from across the globe (yes, there is a reason for bonds and no, you don't need to worry why). Every time you walk outside, you can say "I own a piece of this planet and I'm okay with that. I'm gonna be rich because of it... and then I'll be better able to help the planet right back."

Compare my list below with your results from Step #3 and remember the four letter acronym. These are the four most important letters of your life from now on.

VEQT - 100% Stocks, 0% Bonds
VGRO - 80% Stocks, 20% Bonds
VBAL - 60% Stocks, 40% Bonds
VCNS - 40% Stocks, 60% Bonds
VCIP -  20% Stocks, 80% Bonds

The lower you go on that list, the less of a long term investor you are. If you need the money you're investing soon (within 3 years), you'll naturally appear lower on this list. Pick the one you got. You can always change your mind later by re-taking the assessment test because life happens and your investments should reflect your retirement needs.

Step #5 Time to buy

Since you're a newbie to investing I'm going to correctly assume you haven't touched your TFSA contribution room, or you have but you don't know the last time you contributed. You can find out this information by heading to the CRA log in page, it'll use your bank login credentials and then you can find the "TFSA and RRSP tabs." It's pretty easy, see what you got going on in there.

Next, head to Wealthsimple Trade. Sign up with your email for $5 free once you begin trading in the app on your phone. Note - you can choose whichever trading platform you'd like - they're all good except Wealthsimple is the easiest to sign up for, use and does not charge a commission or electronic fee for trades. 

Do not choose Wealthsimple or Wealthsimple Invest, this is their robo advisors and it's an unnecessary expense for simple trading. It needs to say "Wealthsimple Trade." This app will let you set up a TFSA in your name without any physical paperwork. It'll also ask you if you want to re-invest dividends - an obvious yes! Throw in all your information.

Next, you'll need to set up your bank account. Using your login credentials you'll select your bank account to withdraw funds from and deposit into Wealthsimple Trade. This process takes up to 3 business days to complete. I find it takes about 2 days for me to move money from RBC to Wealthsimple Trade. Go ahead and transfer the dough and then come back and see me. I'll wait here.

---------------------

Welcome back, you're all set up and you can now move your money from your bank account to your Wealthsimple Trade app. Easy as 1, 2, 3, right? You've got your $500 bucks or whatever it is and you're ready to invest for the first time. Don't get all sweaty on me, you'll be fine.
  1. Head to the search icon at the top (the magnify glass)
  2. Ignore the stuff on the screen and tap onto the top search field and type in your four new favourite letters (the AOF, remember!)
  3. The price will be there front and center. Don't get spooked! Hit buy at the bottom of the screen
  4. Select your account
  5. At the top of the screen it'll say "Market Buy". Switch this over to "Limit Buy". If you're trading nearly all your cash (which chances are you will be) Wealthsimple Trade will force you to do this anyways.*
  6. The app will give you your AOF's price and then you'll input how much you're going to pay. Put in the price + 1 cent.**
  7. Now it'll warn you that your Limit Buy is going to go through almost immediately. That's perfect for us. The reason it warns this is because some people try to be fancy and time the market with Limit Buys. Don't worry about those people are this warning, it serves our purpose to buy immediately.
  8. Now with our new price, we select however many shares we can buy. Make sure your "Estimated Cost" is below the "Available to Trade".
  9. Follow through and you're done like dinner. Woohoo!!!
Congrats you are now an investor. The story doesn't end here though, still two more steps. Please keep reading.

Step #6 Your expectations

As much hype as you hear about the stock market and from Step #2, you'll be painfully aware of how long it takes to make money. You might think your $500 will double in a year! Not a fucking chance. In fact, you'll gain a finer appreciation for how overhyped the market is on any given day. What a load of crap.

Here's the reality - Your wealth will be determined by how long you leave that $500 in there and how often you add additional lumps of money, say $500 every two weeks. Then you will be first row to the magic show that is the stock market but it takes a lot of time and a lot of ups and downs over extended periods of time. This magic show doesn't take an hour or two, usually about 10-20 years and occasionally the magician ignites the stage on fire and somebody spills their beer on you. The magic will happen but from time to time you'll be uncomfortable. Give it time.

Step #7 Stay the Course

You cannot keep changing things. You SHOULD NOT pull your money because the numbers go up and down. You are just starting, this is most vulnerable part of the process to fuck up by thinking you're helping your future self by tinkering and waffling. You won't help. It's already known that the best investors are estate accounts. Invest like you're a dead person besides regular contributions. Even if you have to skip a payday or contribute much less than you usually do, please continue! Don't break the habit of contributing to your investments.

Here's an analogy we can all appreciate. We know that cats can only tolerate humans for so long before they get pissed and start swatting. Your investments are the same thing. You've given them a good home, just pet them every now and then and be sure to feed them regularly.


Thanks for reading! I like WealthSimple Trade because it's the easiest discount brokerage to get started and enjoy using. I use them myself and if you use my link to sign up with your email, you'll get us each $5 for free and further support my blog and my mission. Thanks for any patronage if that's you! 

Ryan Myricks

You can email me here: canadianfire1@gmail.com (I respond to everybody)


* The point of doing this is to know exactly what you're buying for at what price. A Limit Buy is a firm deal - a Market Buy is contingent on whatever the market prices your AOF at. Think of it like this: a box of Cheerios is worth $5 at Loblaws right now. Let's say the price goes up and down every second by a few cents but sometimes even as much as a whole dollar. With that type of unpredictability, a Limit Buy will simply make sure you don't accidentally buy something you can't afford because you have stated a firm limit to the price you're willing to buy for.

** So you'll put in a Limit Buy of $5.01 using my method. That way if the price goes way up when you thought you were buying for less, you won't go into overdraft, which Wealthsimple Trade doesn't allow.

Comments

  1. Glad to see you are still at it��. I love how compact and decisive you have made it.
    One question though. Why wealthsimple trade? Over questrade or others?

    ReplyDelete
    Replies
    1. Thanks Mr/Mrs Anon! I chose Wealthsimple Trade because it's incredibly straightforward and directly through an app. It felt like the simplest choice because of that. I don't take any issues with Questrade yet Wealthsimple seems like a more simplified experience.

      Delete

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