How I Became a DIY Investor

Thanks to Mr. CBB’s email question recently today’s post will retrace my investing journey, how I became a do-it-yourself (DIY) investor.  The purpose of today’s post is to shed some light on my investment journey to date and build upon this article for future blogposts including how I’m managing my retirement portfolio today.

In the beginning…

I became interested in personal finance, probably in my early 20s.  Reading The Wealthy Barber cover to cover a few times over was definitely the trigger for me.  Dave Chilton’s tale was extremely well-written and inspiring.  I figured if Roy the Barber could amass that much wealth then maybe I could too.

Early focus on investing products

In my early 20s, I invested solely in mutual funds at one of Canada’s big-5 banks and did so for many years thereafter.   With my meagre RRSP contributions set up every month as a young 20-something living in Toronto, I contributed to each mutual fund held for many years and did little to question the composition of these funds, their performance or their management fees.  Like some of you I suspect, I got my RRSP statements in the mail and immediately filed them under “G” after I noticed the numbers seemed to climbing every month.  Everything was fine and good.  It certainly was good times for many investors in the late-90s.

Boom, bust and now fed up

With the tech boom, my returns were rather stellar but on the other side of the curve when Nortel and other companies came crashing down, so did part of my portfolio.  I incurred some hefty losses.  I wondered how this could be avoided?  What had I done wrong?  Maybe most importantly, why the hell did someone at the bank not call me and help me?  Money is an emotional subject and to put it bluntly after the tech-bust, I got fed up with the performance of my investments and needed some answers.  In retrospect, I’m glad my emotions took over…

I read and read and read some more

Annoyed and frustrated with my investment portfolio and the bank’s products, I bought books and started to read.  And then I read some more, and some more.  What I found out was not really that surprising but enough facts that gave me a kick-in-the ass to change my ways:

  • Active money management fees will steal from your portfolio returns – for every $25,000 invested in a mutual fund that charges around 2% in fees, you’re kissing $500 per year goodbye.   That might not sound like much, but keep paying that 2% every year for another 9 years.  That fund will cost you $6,400 to buy and hold.
  • If your money is being managed by someone else are you really going to follow it closely enough?  Some might but I’m not one of those people.  I’ve learned nobody cares about my financial future more than me.
  • Contrary to what some financial institutions may advertise I am not richer than I think and I need think for myself in order to become wealthy.  This means taking ownership over my financial plan and clearly understanding the products or securities I am investing in and the risks associated with them.  This also means setting some goals and working towards them.  They include simple things like having some financial discipline to delay gratification, consistently pay down mortgage debt and avoid making big purchases unless I have the money to do so.  In short, there is only so much money to go around I can’t do everything I want with it as much as I’d like to.

The game plan

I’m far from a great investor and I don’t rub my pennies together.  I am however becoming more picky where and when I spend my money and definitely more disciplined regarding how I invest it.  I am much more competent on many financial matters and probably most importantly, I’m on a financial journey that I’m committed to.  You can read more about that journey here and here although many more blogposts in the future will cover that.  DIY investing does take some work but like most things in life, the more you learn the more you know and the more you know the better your chances to succeed will become.

I hope today’s post inspired you to take a firm grasp of your financial future and make a pact with yourself to learn a bit more every day so you can enjoy some of the financial freedoms this tool called money may provide.  Thanks to Mr. CBB for your email question.  Stay tuned to my blog for more posts about my investment journey and strategy.  In the meantime, if you have any questions all you need to do is ask.

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30 Responses to "How I Became a DIY Investor"

  1. Yup, sounds a bit familiar.
    In the 90’s, I had my own small biz that was quite successful. While I could rum my business, I entrusted the investments to a “wealth manager ” at a major chattered bank. He enrolled me in a bunch of back end load funds. I trusted he know what he was doing because I didn’t have time to learn that business and my own. He didn’t even make money in the 90’s for heaven sake.
    I sold my business in ’01 and now I could concentrate on and learn the investing stuff. He made more money on trailers fees etc. than I made in cap gains in 7 years. What a disaster. We didn’t stay together long after I figured out what was happening. Fact was he really didn’t care what happened return wise, just so long as I stayed invested with him. Nobody really cares about your money except you.

    Reply
  2. You didn’t say it, so I will:

    You ARE a great investor. The main reason is that you’ve taken control of your emotions. This is where most investors fail, despite their potentially strong training and IQ.

    Cheers!

    Andrew

    Reply
  3. Ask any DIY investor the reason they decided to learn about investing and I’d say 99% of them would say mutual funds…gah…just saying those words make me cringe!

    Reply
  4. It’s the money management fees that get me – I didn’t pay enough attention when I bought my mutual fund investments – and now I have to pay fees if I get our early..sigh. But I’m learning. 🙂

    Reply
    1. Thanks Kanwal. I hope I will have the discipline to see this plan through for many years. Sometimes, it’s not easy to just watch things unfold but I’m doing my best to stay the course in all market conditions.

      Reply
  5. Good Read !!!

    Best line ever in a financial blog:

    “Contrary to what some financial institutions may advertise I am not richer than I think and I need think for myself in order to become wealthy”

    Reply
  6. Thanks Mark for taking the time to answer one of my questions. It’s always great to read about how someone starts something from the beginning. Not everyone understands the in’s and outs of investing so when it’s broken down for newbies to understand it helps to motivate us to want to learn more. Cheers mate

    Reply
  7. @My Own Advisor
    Not that i know of BUT i am assuming that 100% of the portfolio isnt in XIU

    From what i have researched you get a decent diversified ETF portfolio for about 0.35% MER. but than i also see you can get basically the same portfolio at about 0.44% with mutual funds

    I guess it depends who your broker is but mine still charges me commission to buy ETFs, small as it may be. Kinda tough for the investor with a small portfolio to contribute monthly and have to pay commissions on the ETFs

    I agree whole hardily NOT to pay HIGH mutual funds MERS (a good friends of mine is paying over 2.5%) but just recently switched everything to buy 4 mutual funds that average under 0.5% MER.

    I just find to tough to swallow that EVERY mutual fund is always BAD and every ETF is always GOOD 🙂

    Reply
  8. I was surprised at how low the company I work for negotiated index mutual funds for the company RRSP and DPSP accounts, the Canadian index was 0.12%, I had to ask them if that was right since the previous plan had a 1.35% fee for its Canadian index product.

    Reply
  9. You know, “kissing $500 a year goodbye” sounds like the “cost of doing business, until you work the numbers from the perspective of a long-term horizon and compounding. I ran across an article recently, quoting Jack Bogle; he did the math and an investment earning 8% over 30 years with a 2.5% MER resulted in almost 80% of your investment going to the Financial Industrial Complex.

    I’d say, more accurately, active fund management “will steal your portfolio”.

    Great post; sharing and education is everything!

    Reply
    1. Exactly Beric, a few hundred per year doesn’t sound so bad until the compounding effect takes place!

      Learn, save, invest and prosper! Rinse and repeat the cycle as often as you can.

      Thanks for reading and sharing.

      Reply
  10. Great post. This is pretty much the same way I came to be a DIYer. As a client of MMI Financial (Me, Myself & I), things have been going pretty well the last 15 yrs.

    And a big LIKE about reading, reading and reading some more…I researched a ton and devoured about 20 finance books over a 2 year period!

    Reply
  11. Great post, taking on the responsibility to care for ones own financial future is definitely a wise decision. To empower your investment strategies even further you may want to use https://swanest.com to better control your investment risk and to maximise returns through a smart asset allocation.

    Reply
    1. Thanks for the link Silvan. I will accept this link but in future comments, I wish to avoid any excess product promotion.

      Thanks for understanding.
      Mark

      Reply

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