Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Presented by Michael A. Goldberg, B.Comm., B.Ed., Richmond Hill Public Library, 2014 Investing for Future Millionaires

Michael A. Goldberg, B.Comm., B.Ed., OCT 1.Investing Basics 2.Risk & Asset Mix 3.Indexing Investing ETFs & Mutual Funds 4.How to get your Million Dollar Portfolio Started! 5.Try it Out! 6.Questions/Sources Agenda

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Investing Bingo!

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT 1. Investing Basics What’s Investing? It’s spending money on an item of value that you purchase in order to get income, or to grow in value.

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Personal Financial Management for Teens M.A. Goldberg, November 2012

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Saving To Invest, you need to SAVE!!! What is saving, and how do you do it?

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Saving – The 10% Solution How much should I save? –According to David Chilton, author of The Wealthy Barber, you should save 10-percent of all the money you receive (income)

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT With saving, the most important step is to get started.

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Saving Tips – Cut Spending! The Latte Factor! Avoid getting into the habit of buying expensive little things like coffees/drinks EVERYDAY!!! (This could save you $1000s/year!) Bag your lunch instead of buying it Think of the yearly (annual) expense

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Five Basic Steps of Investing 1.Set Goals 2.Determine what kind of investor you are (how much risk can you handle) 3.Pick a mix of investments (asset mix) 4.Choose investments 5.Keep track of your investments

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT 2. Risk & Asset Mix Risk When making an investment you should be totally comfortable with it. You should be able to sleep well at night! If you are worrying about your investment all the time, it’s probably too risky for you. GetSmarterAboutMoney.ca Risk Profile Quiz! Image source: Novemeber 2, 2014

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT 2. Risk & Asset Mix Asset Mix –Basically the mix/percentage of Equity (eg. Stocks) Fixed Income (eg. Bonds) Cash Other investment types –Commodities –Real Estate –Collectibles …you have in your investment portfolio (list of all of your investments).

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Types of Investments –Equity Stocks Mutual Funds ETFs –Fixed Income GICs (Guaranteed Investment Certificates) Savings Bonds (and other bonds) Mutual Funds ETFs –Cash –Commodities (gold, silver, copper, pork bellies, etc.) –Real Estate –Others?

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Asset Mix Choosing your own Asset Mix depends on: 1.Time Horizon 2.Risk Tolerance Level 3.Financial Goals

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Asset Mix Advantages Advantages of determining your own an Asset Mix Limits risk through diversification –Don’t put all of your eggs in one basket! Can be adjusted as your risk tolerance level changes Allows you to be risky with your investments, yet still have some “insurance” if the market goes bad.

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Asset Mix Rule of Thumb Fixed Income (%) = 100 – Age Example: If you’re 20… –Fixed Income = 20% of your portfolio –Equity = 80% of your portfolio Note: you should always have some cash in your portfolio too

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Asset Mix Examples AgeEquity (%)Fixed Income(%) < s s50 60s2080 >70595 These are rough estimates Note that this doesn’t include cash Your asset mix should be re-balanced annually The fixed income age rule, isn’t really followed here

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT 3. Indexing What’s an Index? –A benchmark or yardstick that lets you measure the performance of a stock market, part of a stock market or a single investment. –Examples: S&P/TSX Composite, S&P/TSX Canadian Bond Index. From the Investor Education Fund’s glossary Source: July 10, 2014

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT 3. Indexing Note that index numbers based on the number or , a starting or “benchmark” number Charles Dow created the first index, the Dow Jones Industrial Average in 1896, which tracks the New York Stock Exchange Today there are thousands of indices! Source: _U8DtGsSNqQGCnYC4AQ, July 10, 2014

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Mutual Funds It’s a type of investment fund. Collection of investments –Stocks –Bonds –Other funds or Exchange Traded Funds (ETFs) –Commodities (gold, silver, pork bellies, etc.) Management Funds are controlled by a Fund Manager, an expert investor or a team of investors who make decisions on when to buy and sell investments within the fund.

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Diversification There are many ways to Diversify through mutual fund investing. 1. Type of Investment (Equity vs. Fixed Income) 2. Geography (focus on certain countries or regions of the world) 3. Investment Style (eg. Income, Growth, Balanced, Index) 4. Company Size (eg. Large Cap. vs. Small Cap.)

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT MER MER = Management Expense Ratio –MERs are costs represented as a percentage of your assets in the fund that are paid annually. –Most MERs for mutual funds in Canada cost 2-4% per year for equity-based and “actively managed” funds

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Dollar Cost Averaging Definition – Making regular payments (for instance $ per month), regardless of the price of the investment. –When the price of the mutual fund is higher, you get less units. –When the price of the mutual fund is lower, you get more units Over time, the average price per unit becomes smaller and smaller, which lessons the risk of price fluctuations over time. This can easily be done with mutual funds

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT ETFs Exchange Traded Fund definition: –A fund that chooses investments based on a market index or sector. ETFs trade on a stock exchange. They are not actively managed, so costs tend to be lower than regular mutual funds. From the Investor Education Fund’s glossary ETFs often follow one particular index. Example: The iShares “LargeCap 60 Index Fund” follows the S&P/TSX 60 index (basically the 60 top companies, by market capitalization on the TSX) trading on the TSX with the stock symbol XIU

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Diversification/Asset Mix Like Mutual Funds, ETFs can cover many different industries, types of investments, countries, etc. All of this diversification can be purchased using Canadian products in Canada!

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT 4. How to get Your Million Dollar Portfolio Started You need an account with a mutual fund company, broker (eg. iTrade, Questtrade, etc.) or bank –Brokers usually need $ as an initial investment You need to be 18 You need to have a minimum investment, often $ or $ You need to read the fine print! Once you start, track your results Rebalance your portfolio every year

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Developed and promoted by MoneySense magazine Pick a few ETFs and target asset mix Diversify according to your asset mix, and personal tastes. Couch Potato Examples –“Classic” 33.3% Canadian Equity 33.3% American Equity 33.3% Canadian Bond –“Global” 20% Canadian Equity 20% American Equity 20% European/Asian Equity 40% Canadian Bond Important: Rebalance your portfolio once per year!!! See MoneySense’s Buyer’s Guide to ETFs for more examples Couch Potato – A Simple ETF Strategy

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Investing & Taxes To Save Money use Tax Shelters TFSA (Tax-Free Savings Account) RRSP (Registered Retirement Savings Plan) RESP (Registered Educational Savings Plan) RDSP (Registered Disability Savings Plan) Usually used more as a savings account

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT 5. Try it Out! 10 Investment Choices See the Results!

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT ETF Providers in Canada (TSX) –iShares ishares.caishares.ca –BMO etfs.bmo.cometfs.bmo.com –Horizons horizonsetfs.comhorizonsetfs.com –Powershares powershares.capowershares.ca –Vanguard vanguardcanada.cavanguardcanada.ca –FirstAsset firstasset.comfirstasset.com –RBC funds.rbcgam.com/etfsfunds.rbcgam.com/etfs –Purpose Investments purposeinvest.compurposeinvest.com –First Trust Full TSX ETF List: –

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Additional Mutual Fund Information Morningstar is a great website for mutual fund information –

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Investing Bingo Revisited & Feedback!

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Questions?

Investing for Future Millionaires Michael A. Goldberg, B.Comm., B.Ed., OCT Bortolotti, Dan, “The Complete Couch Potato Roadmap”, MoneySense (November 2009), February 16, 2010 Gerlsbeck, Rob, “Buyer’s guide to ETFs”, MoneySense (November 2009), dex.aspx, February 2, change-traded-fund-etf.aspx, February 16, February 16, basics/Pages/default.aspx#.VEvI6MmEwvk, October 25, profile-quiz.aspx#.VFZFWMmEwvk (Risk Quiz) basics/Pages/Choose-your-asset-mix.aspx#.VFZVmsmEwvk (Choose Your Asset Mix) re_etfs.html (“What is an ETF,” TSX, November 6, 2014) I created the artwork with “Wordle,” an application on wordle.net. (February 16, 2010) Works Cited