Retired at 32. How he did it and the lessons learned – Part 1 of 2
For years I’ve considered investing a “get wealthy eventually” strategy. Sure, you can get lucky on a hot stock but it’s just that – luck. Successful investing typically goes far beyond luck. It includes making good financial decisions; getting the big decisions in life right (like houses and cars), having a modest and sustained savings rate, and getting a solid rate of return.
Few people in Canada as young as Kornel Szrejber have built wealth so effectively.
Kornel is the host of the Build Wealth Canada Show, a top personal finance and investing podcast created specifically for Canadians. After becoming mortgage-free at age 29 (yes, 29) and becoming one of Canada’s youngest retirees at the age of 32, Kornel now helps other Canadians do the same through one-on-one financial coaching, and by interviewing other top financial experts on his show.
On his show, he also shares his journey, the lessons learned, and how he did it so that other Canadians can consider a similar path if they choose.
I had a chance to talk to Kornel recently about his investing journey, his gig at running Build Wealth Canada, and other personal finance and investing ‘stuff’.
Kornel, thanks for this.
It’s great to be here. I’m excited to share some things that will hopefully help other Canadians retire early too (if they want to).
Kornel, talk to me about your investing journey; the ‘early years’ if you will. What mistakes did you make? What did you learn about personal finance and investing back then?
When the 2008 crash happened, I was fresh out of school, knew little about investing and how the markets worked. Instead of learning about how to invest during this time so that I could ride the recovery, I instead saw the people that I highly respected at my new job lose tens of thousands in the market. That scared me off from investing in the markets for years. Instead of educating myself on investing, I let fear drive the decision-making process.
I kept thinking about how I could “lose it all” if I invest in the stock market which isn’t necessarily true depending on the type of investing that you do. I wrongfully defined “risk” as the chance of me losing all my money, instead of defining it as volatility.
On top of this, I hated seeing the $1,300 mortgage payment leave my account every month so out of fear and ignorance, I mistakenly decided to go with the guaranteed rate of return that paying off our mortgage provided. My wife and I agreed to only live from one salary, and use the 2nd salary to pay off the mortgage quicker. We ended up paying off the mortgage in under six years. I was 29 at the time.
After this, I was forced to learn how to invest. After all, the mortgage was paid off but now we were behind on our retirement savings. I read everything that I could get my hands on, and started an investing and personal finance podcast so that I could interview the sharpest investing minds in Canada on how to invest properly.
Taking the lessons I learned, we kept investing over 50% of our income, plus the mortgage payments that we no longer had to make. After less than four years, we were considered financially independent. My wife became fully retired at 31, and I semi-retired at 32 where I now only work on projects/hobbies that I actually enjoy. One of those includes working at 5iResearch (partnership).
Fast forward to the present. Let’s talk about Exchange Traded Funds (ETFs). What makes them a great potential product for investors?
Apart from rental real estate, my entire investment portfolio consists of ETFs. There are 3 things that I especially love about them:
1.Low fees. To give you a real-life example, I’m currently doing financial planning for a client who is paying almost 3% in fees on her mutual funds. I’m helping her switch to an ETF portfolio, where she will be paying around 0.147% in fees. That’s over 20 times less in fees.
What does that mean in dollars? It means she’s paying around $9,000 a year in fees on a $300,000 portfolio. After we switch her over, she’ll be paying $441 per year. That’s a savings of $8,559 per year. Enough said.
2.I buy the same four (4) ETFs which is just as easy as buying four stocks every month. The difference though is that if I buy the same four stocks, I’m nowhere nearly as diversified as I should be if that’s all that I have in my portfolio. With the ETFs that I buy though, I’m owning thousands of companies across the entire world, and am nicely diversified among countries and industries (i.e., the opposite of putting all my eggs in one basket).
Editor’s note: Kornel holds: XIC: Canadian Index; VUN/VFV: US Index; XEF: International Developed Index; and XEC: International Emerging Markets Index.
This leads me to my last point…
3.They help me sleep at night. If I was investing in just a few companies I would be constantly stressed. What if their management team messes things up? What if their industry starts declining? What if there is fraud or a scandal that sends the company plummeting? Instead, by owning thousands of companies, I don’t have to care about what happens to any one company.
Any downsides to investing with ETFs?
Make sure you buy ETFs for free. There are discount brokerages that let you do this instead of charging you $7-$10 per trade. If you’re buying four ETFs every month after your monthly payday, that’s a $40 a month expense. You don’t need to be paying that, so switch to a discount brokerage that offers this.
You are allowed to have multiple RRSP and TFSA accounts amongst different institutions, so it’s not like you have to move everything over to your new discount brokerage just to do this.
One potential downside is that if you are buying ETFs then you’re likely a do-it-yourself investor which can sometime imply that you don’t have somebody in your corner to help you and give you unbiased advice when you need it. You may be missing out on tax optimization, for example.
When we do get another crash, eventually, it’s also good to have someone who can help be the voice of reason and help you get through those tough moments to prevent things like panic selling when the market is at its lowest.
Lastly remember not all ETFs are passive index investment vehicles with low fees. If a passive index investing strategy is what you subscribe to (like myself), it’s critical to actually pick the right ETFs so that you are actually paying the low fees, and those ETFs are properly diversified among countries, industries and asset classes.
Impressive stuff from an impressive saver and investor. Make sure you come back for Part 2 of 2 with Kornel Szrejber – to find out what advice he has for 20-somethings, 30-somethings and other age groups by the decade.
What comments or feedback do you have for Kornel? Any questions for me?