42 Keeping It Simple!

Investing is already a complicated manner for many Canadians.  It’s best to keep your investments and brokerage accounts as straightforward and simple as possible, especially when at the beginning of the financial literacy journey.  Keeping the costs of investing to a minimum is ideal in order to have even more funds to invest further and compound the accumulating wealth.  Strategies to keep investments as simple as possible:

1. Lead with tax-advantaged accounts: These accounts allow Canadian tax residents to grow funds tax-free, reduce current tax liabilities, and defer taxes. It’s difficult to select investments that have the consistent growth to overcome anything earned in tax-free accounts.
2. Keep contributing consistently: Set aside a similar amount each month for investing. Dollar cost averaging of investing will help one not have to time the market.
3. Keep the costs of investing as low as possible, based on your individual comfort and risk level. Review the MER of funds invested in.  There’s probably a lower cost index fund or ETF alternative that’s 99% similar to the managed fund.
4. Diversify investments in order to reduce risk: Having a basket of funds such as mutual funds, index funds, or ETFs provides the investor with a broader range of Companies owned. If a few of those companies out of the entire fund’s portfolio don’t have a good financial year, then the impact won’t be as high as there are other Companies in your investment portfolio already.
5. For taxable accounts, there are significant tax savings through earning income through capital gains and eligible Canadian dividends.  The tax rate is approximately zero percent to fifty percent of some other types of investments