I’m a 23 year old male currently residing in Vancouver.

I’ve just started my first full time job here so looking to be smarter about investing with my money. I’ve read a couple of posts here and I’m thinking about going with the High-Growth Coach Potato Portfolio. Please let me know if you guys think this is a good idea. Here’s my current situation.

My investment goal is Mid term. Obviously I want to save up for retirement (long term) but I say mid term because I feel like once I get a better understanding of how I should invest my money, I may shift from the Coach Potato Portfolio, probably in 5 years.

I have about 30,000 to invest right now and I’m thinking about making monthly contributions of 500 (not sure what the normal contribution level is, ie, what % of your pay cheque?)

Also I have a TSFA account with about 10,000 in there, does it make sense to also apply the couch potato portfolio to this? I’m thinking about investing in more EFTs in this account since I won’t be making regular contributions on a monthly basis here.

So all in all, I’m just looking for some good advise to get me started on my investments, and I’m sure many of you have been down this road so I’d greatly appreciate it if you guys could share some of your thoughts with me.

Having said this, do you guys think a Couch Potato Portfolio even make sense if I might shift things around in 5 years? Or maybe does it even make sense for me to start a portfolio like this?

Any feedback is welcomed. Thanks guys.

bogfish

2010-04-07, 08:40 PM

Welcome.

I’m a new member myself, but happy to give you my two cents (so to speak).

First, well done on already having maxed out or TFSA for the two years of eligibility and already having $30k at 23 and with a new job — you’re already ahead of many Canadians who at age 23 are often $30k in debt! Great job.

Just a point of correction: your growth strategy is still long-term — whether you start with the Couch Potato strategy and switch later, you’re strategy will likely remain the same — given you have many years you have until retirement, you can ride out ups and downs but want to grow your portfolio as best as you can, you’re willing to take on more risks as a result. So it’s still a long-term view.

The Couch Potato strategy is a great one — my wife and I employ it ourselves and we’re nearing 40 (I wish I had started on it at 23). The benefits of it: you’re applying diversification, you’re balancing on a semi-regular basis (taking profits where you’re doing well, buying low where you’re not), if you stick with good ETFs or Mutual Funds, you’ll have low management fees, and as the Coach Potato has demonstrated, it can be just as effective (or even more) than many managed portfolios out there.

And yes, the couch potato is fine — even if you’re only planning to use it for a few years — who knows you may learn to love it like I do, and therefore want to stick with it. (I use it for my RSPs, and my TFSA is for slightly more riskier investments that I hope will grow or earn me good returns, and my investing account is for buying various stocks/dividends).

I’m assuming the $30k is already in an RSP — if it’s not you should consider moving as much as you’re allowed (based on your contribution limit) so that you can start getting that to grow tax sheltered.

As far as monthly contributions — again, I’d say it depends. First, on what your RSP limit is. If it’s, say, $12,000 this year (and you have contributed anything yet), then $500 — if you can comfortably afford it — would be good but getting to max-out your RSP (e.g. $1000 / month) obviously is even better. I’m sure others will tell you what an ideal % of your salary should be — I’m a believer in doing what you feel you can afford NOT to miss. If you like to live a more lavish lifestyle, then tucking away 5-10% of your take-home income might be brutal to consider. If you tend to be very good with your money, then you should and can go higher.

If the amount you can set aside now is greater than what your RSP contribution limit is, that’s still great — put that money into your investment account every month, and as your income levels grow (and therefore the amount you can contribute to each year), you can take some of your investment money and transfer it to your RSP for tax/sheltered growth benefits.

Last comment about monthly contributions — obviously you want to avoid paying trading fees each month if you can — consider low-management fee mutual funds that you can use to rebalance into ETFs (if that’s what you’re planning to buy) but do some research to make sure that there aren’t minimum periods you need to hold a mutual fund before you can sell it.

Your question about doing the Couch Potato in your TFSA — my only concern would be fees — if you’re buying ETFs in there, and you are with a discount brokerage that charges $10 per trade, then 4-5 ETFs per year with your $5k limit will cost you $50 — or 1% (more if you decide to sell some to rebalance for whatever reason, but your contributions should be used to rebalance in most cases). That may or may not seem so bad to you, it’s really up to you. You could consider lessening the # of ETFs you buy in your TFSA, but then you’re not quite getting the diversification that a Couch Potato suggests.

In other words — I don’t think there’s a right or a wrong here, it’s what you’re comfortable with.

shstylo

2010-04-08, 03:25 AM

Wow bogfish, thanks so much for the reply very informative and helpful

Firstly I have to say unfortunately I did not put my 30k into RRSPs this year as I was still a student for half the year and didn’t have a net income of over 40k so I got lazy and thought it was worthless to put any money into RRSPs as I wouldn’t be reaping any benefits off it, however now I know to think longer term and be smarter about things like this.

I just have 2 questions and hopefully you don’t mind shedding some light on me again

2) Thanks for pointing out the commission fee concern with the TFSA account, but is there a good guide on what you should invest in under these different accounts? I know you’ve mentioned that you have different strategies under each account but is there a specific reason to the choices you made? I can see the couch potato would be a good choice for the RRSP account since your RRSPs would be more long term investments as you probably be putting that money away for a house. However is there a good way to take advantage of TFSA with a specific type of investment?

Sorry for the lengthy questions, but I came from an Engineering background and don’t have a good basic knowledge for finances, hopefully I can build that in the years to come