From The Laws of Simplicity via Guy:
“ING Direct tells their customers that to determine how much of their money they should put into high-risk investments versus low-risk ones, just take your age up to 100 years old. However old you are, that is the percentage that you should invest in the low-risk stuff; then take the number 100 and subtract your age from it and invest that percentage in the high-risk stuff.”
I am the world’s worst investor (no, really, I am). Everything I have is earning 3.5% at the Credit Union. So, in other words, I’m 100% invested in extremely liquid, extremely low-risk vehicles. Setting aside my pathological aversion the regular instruments of capitalism, any improvement in my behaviour as an investor requires pithy bits of wisdom like this. They don’t even have to be true.
Comments
If you have any sort of savings (anything in the chequeing account over 2 months living expenses) you should put them in an RRSP mutual fund. The money becomes tax exempt (until you take it out, which when you retire will mean a lower tax rate) and even the low risk ones get 8-12% interest. That’s actually higher than the interest rate on a line of credit or standard bank loan, so if you decide you need the money for a big purchase you can get a loan for it and still be making money in the long term.
Most of my savings is already in RRSPs, albeit in the aforementioned 3.5% liquid term deposit.
The phrase “RRSP mutual fund” gives me the shakes: I’m uncomfortable lending my money to a shady agglomeration of unknown companies over which I have no influence or control. It’s simply too blind for me.
There is a risky, but life-style enriching concept that once-in-a-blue-moon, is successful. That is to put extra cash into something durable that you know very very well — for some this is art, for other coins or stamps. There’s a rare (terrified) bird that will put it into musical instruments. As long as the purchase is very well researched and understood, and you don’t get too attached to these things so that you’ll liquidate at the right time — and assuming you have the time/desire quotient just right — it can actually work. I’m way too clumsy for this type of investment but it is done. I’ve met one or two people who do little else with their money.
I have never been so richly rewarded by the 60 dollars I spent in elementary school for hockey cards which I sold in the early nineties for gobs.
Another option are things like Ethical Funds marketed by Credit Union that get a decent return but don’t put money in things like tobacco, weapons. Granted everyone has a different view of what is ethical.
“I’m uncomfortable lending my money to a shady agglomeration of unknown companies over which I have no influence or control. It’s simply too blind for me.”
You know your credit union does with your money? I assume they invest in mutual funds themselves. But I suppose a large share of their investments are local, so you’re subsidizing fewer stock sales by investing in your credit union than by buying into a mutual fund of stocks with the same size savings.