Take advantage of the many ways you can invest

Like many young people entering the work force at the time, my first exposure to investing was through my employer’s group RRSP program. If it weren’t for the brief presentation that was part of my new employee orientation, I am not sure if I would have started investing at that time. Looking back now, I am very thankful that I did start then because it got me started on an investing journey that continues to this today. Though I recognize that some of that was pure luck. One of the reasons I wasn’t so eager to save and invest then is because I didn’t have a goal in mind. That changed a few years later.

It was when my partner and I wanted to buy a home that I realized I had to create a real savings plan. Unfortunately, we didn’t have enough funds to meet the minimum threshold of a financial advisor at the time, so we had to do it ourselves. I started reading books to understand important investing principles like risk tolerance, time horizon and goals-based investing. Then I started to learn more about the different investment vehicles available to me. I knew the conservative mutual fund I had chosen through my group RRSP wasn’t going to get me to my goal of buying a house.

Like many Canadians, I owe a real debt to the author David Chilton, as the simple and practical rules he set out in his book The Wealthy Barber really stuck with me. Simple things like “pay yourself first” taught me to be more disciplined with my savings. I set up a pre-authorized payment so a little bit from every paycheck went into savings, which meant I wasn’t playing catch-up at the end of the year. Forcing myself to be disciplined about savings really paid off over time.

Becoming a DIY investor

The basics that the Wealthy Barber gave me were a great starting place for savings, but I realized I needed to dig a little deeper if I was going to manage my own investments. Famous investor Peter Lynch’s idea about “Invest in what you know” also resonated with me. I was more comfortable investing in companies whose products or services I used, so that was a great place to start.

However I knew I couldn’t just invest in a company because I liked their products, I had to start doing research and some level of analysis. That’s when I started learning more about how to research as an investor. For the companies that I liked, I looked up their Price/Earnings ratio, whether they paid a dividend, and how their stock had performed recently. As a DIY investor I was focused on buying stocks that I could hold for the long term rather than trading on a short-term basis.   

Managing your own investments can be a lot of responsibility, especially if you are self-taught. Some part of me enjoyed learning because it was information that I could put to use, and it was rewarding to see my investments grow. However back then information was much more limited, and you really had to seek out the information. Doing my own research and due diligence was time consuming.

Working with an advisor

I didn’t start investing with an advisor until much later in life. Saving and investing for a home worked well, so I continued to learn more about investing after buying a home and continued doing that for many years. Plus as my career progressed within financial services, I got more exposure and more familiar with investing, which helped boost my confidence. The next obvious goal was to save for retirement and my daughter’s education. While we felt comfortable making our own investing decisions, the downside was that it did start to become time consuming to keep educating myself and weighing my investment decisions. As our liabilities decreased and our assets were growing, there was suddenly a lot more to plan for. I started to feel like things were maybe a little more complicated and I didn’t have enough time to do things properly.

Finding a financial advisor helped take the burden off my husband and I. Working with our advisor wasn’t just about getting investment advice, it was about big picture thinking about our lives. The advisor helped us with things beyond retirement planning, but also tax advice, estate planning and wills. Even though my husband and I felt like educated investors, I recommend working with a financial advisor once your financial life gets a little more complicated.

Embracing the full spectrum of options

I don’t see different ways of investing as replacing or competing, I think they are much more complementary. I started my investing journey with that group RRSP and have continued to contribute to whatever group retirement plan has been available through work. One principal I have followed is never turn down free money, so any chance to receive company matching and automatic contributions was great. I still work with a financial advisor for more holistic wealth planning while allocating some of my assets to DIY investing too.

From our own data at Aviso, we see that combining different methods of investing is quite common. A study from the Ontario Securities Commission also found that over 25% of Canadians who work with a financial advisor also have a self-directed brokerage account[i]. A similar U.S study found that nearly 70% of affluent investors with advisors also have DIY accounts[ii]. Many investors enjoy buying and selling stocks outside of their advisor managed retirement accounts.

An OSC survey found 44% of investors choose self-directed investing because they enjoy it.

Ontario Securities Commission, Self-directed investors: insights and experiences, April 2021

Advice for the next generation of investors

The investing landscape has evolved so much from when I first started. There are so many more options available to the next generation of investors and so many opportunities to invest in a way that works best for your needs. Thanks to new technology, to the greater accessibility plus all the ways to learn about personal finance and investing, the average retail investor has never been in a better place to achieve their investing goals. Many of the hurdles that made investing seem inaccessible have been removed and there is more education and research at your finger-tips like never before. A few big things stand-out in my mind:

  • For those seeking out financial advice, it’s much easier with lower minimum investment thresholds, plus there are many advisors who have embraced a fee-based compensation model
  • For those more independent Do-It-Yourself investors, the ETF revolution has brought so many new types of funds that make it easier than ever to build low-cost diversified investment portfolios.
  • And for those who are somewhere in-between, robo-advisors have introduced a whole new way of investing that gives investors access to professionally managed portfolios who want a more low-touch experience.
  • And perhaps the biggest shift is just how popular personal finance and investing has become as a normal topic of conversation. From reddit communities to YouTube videos and podcasts, it’s amazing to see investing put to the forefront of so many people’s lives.

My advice to the younger generation is to explore your options and try different ways to discover what works best for you.

Christine Zalzal.
Head of Online Brokerage and Digital Wealth
Aviso Wealth

[i] Ontario Securities Commission, Self-directed investors: insights and experiences, April 2021 (source)

[ii] Cerulli Associates, Affluent Investors Report an Increase in Both Advisor Use and Self-Managed Accounts (source)