I read some interesting advice in this Globe and Mail article recently – what to buy if you only have $1,000 to invest.
Some experts said investing in global equities will offer the most diversification. I would agree investing abroad is a wise thing to do since Canada’s market only equates to about 4% of the global market. Here is Jason Heath’s advice:
“You really only have money for a single investment with a thousand dollars, so go for something global where you’re just buying the market and keeping costs low. You definitely don’t want management costs to eat into an already small amount”.
That said, I’d be tempted to buy a U.S. dividend paying stock, a Canadian “international” company like Brookfield or a U.S. listed ETF like Vanguard’s VTI or VXUS for true low-cost diversification. Actually, this is what I’m investing in now – combinations of these assets this year.
I would certainly not agree with this advice from Dave Paterson, a mutual fund and ETF analyst. Dave recommended:
“For the more conservative investor, I would suggest the Ivy Foreign Equity [fund]. It’s a focused portfolio on high quality names, and it tends to be less volatile than a lot of other global equity funds and has historically provided strong downside protection. The MER is 2.52 per cent, so its pricey, but it’s a case where I’m more comfortable paying more for the overall lower volatility.”
Are you kidding me – recommending a fund product that costs 2.52%???
At least Dan Bortolotti’s advice was far more reasonable, suggesting the Tangerine Equity Growth Portfolio.
“I really like this fund for small investors. One thousand dollars is very small, but I recommend this fund even for investors with $20,000 to $30,000.”
My reflections after reading this advice (certainly based on what I know (now) about high fees killing portfolio values and managing my own portfolio) is the following:
- Regardless of the amount you have to invest, or your age, low fees and low transaction costs should be of paramount concern.
- Canadian investors need more fiduciary duty from financial professionals – be wary of any money management professional recommending any high-priced mutual fund product to you (over 2% MER). His or her compensation may depend on it.
- Regardless of the amount of money you can invest, seek out more diversification. This could be buying more / different individual stocks or buying a collection of stocks via a low-cost index fund. This investment selection should always align with your investing time horizon, goals and risk tolerance.
Invest wisely my friends.