Posted by Robert on November 5, 2012
This is a guest post by Robert, who lives in Calgary and worked as a financial adviser before retiring at age 35. He is married, has three kids and has returned to school with the goal of eventually living and working overseas.
My initial thoughts are that your expectations may not be realistic. The stock market can make money for you, but it can also lose your money. It’s dangerous, unless you can invest your money for at least five years. Even then, it will only earn 5% to 10% per year. That means that if you start with $100, after five years you might earn $50 if you’re lucky. Also, stock commissions are expensive. It costs at least $25 (or more) to buy stock, whether you buy $100 or $100,000.
Step one: save money. Everyone is different, so it’s hard for me to tell you how to save money. Can you save $3 per day by not buy coffee? Can you save $50 per month by not subscribing to cable TV? Or are you already spending the minimum possible to still be healthy?
Step two: open an investment account. You can start at your bank. Tell them you want to invest in mutual funds. That way, there should be no $25 fee (no commission) to invest. You probably want a TFSA account or “open” or “taxable” account.
Step three: invest each month. Choose a Canadian Dividend Fund. Each month, deposit only the money that you’ve saved and that you won’t need to take out soon.
The idea is that once you invest the money, you’ll never take it out. Instead, you’ll just take out the dividends that you’ve earned. It’s a very slow, long-term plan. But it does work.