Stop Over-Thinking Your Money by Preet Banerjee

Author:Preet Banerjee
Language: eng
Format: epub
Publisher: Penguin Canada

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1All prices before taxes. Golf school and training academy membership rates quoted by Deer Creek Academy in Ontario at time of writing. Prices may have changed.

PART 2

BEYOND THE FIVE RULES

You’ve been waiting long enough to read about investing, so I’ll start Part 2 with that.

Whether you want to use an advisor or not, the principles of prudent investing are the same. You can save yourself a lot of money over your lifetime if you do it yourself, but if you make a few simple, easily made mistakes, you can end up costing yourself a lot more in lost performance than what you save in fees.

These are heated discussions among investor advocates, DIY investors, and the financial services industry, but they are of little consequence for those just starting out: how much you contribute to your portfolio in the beginning is far more important than pretty much anything else.

Remember the example I offered in the introduction: put $200 per month into a high-interest savings account that pays a measly 1.5% and you’ll have almost $26,000 after 10 years. Invest just $100 per month and to make the same kind of money, an amount just shy of $26,000, you’ll need an annualized return of more than 14% on your portfolio. So even if you use a financial advisor who puts your savings in relatively high-fee funds, you’ll be fine if you just focus on putting money away. Once your portfolio gets to the $50,000 mark, not only will you have more options when it comes to dealing with advisors, you also will have reached the point at which you can start to benefit from more advanced concepts, such as fees. Until then, don’t over-think it. Just put money away and learn the basics of investing to make sure you aren’t dealing with a particularly bad advisor.

After we’ve covered what you need to know about investing, we can tackle the value of financial advisors. The average Canadian will end up using one, and the average, supposedly savvy Canadian has a very polarized opinion about them: they tend to either love financial advisors or hate them. I’m going to show you how to use one effectively, and how to pick them in the first place. But remember, you shouldn’t worry too much about this in the beginning. You’ve got time to figure it out before it really matters. I can almost guarantee that your first financial advisor won’t be your last one anyway.

We’ll also take a more in-depth look at life insurance, including how to figure out how much you need. At the very least, by the end of the book, you’ll be speaking a bit of the same language as your agent, which helps you to make a more informed decision about something so critical.

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