Diving In

I tend to over-think things and second-guess most decisions I make, especially when they’re money related. Most of the money-decisions my wife and I have made to-date about our plan to retire early were automatic – spend a lot less than we make and put all of the spare money we have against the outstanding mortgage.

Now, I actually have to do stuff – making lots and lots of investing decisions over the next (hopefully) 60 years. This month will mark the beginning of having funds available to start investing – which will be quite a change in my money-spending lifestyle.

I read a lot of stuff – a good chunk of it is money-related. Like most things on the Internet, a lot of the information available is contradictory. Some sources say that the market is at a peak right now and it would be ridiculous to buy anything. Other sources say that there’s never been a better time to invest in “Stock X”, or “REIT Y”. As an almost total rookie investor, and someone who is a constant second-guesser, this is the point where I get intimidated.

My whole investing plan centers around buying income-producing assets, which slowly (but hopefully surely) replace my wife’s and my salary, until we have enough money to be able to not work anymore. At a 5% return, every $1,000 we invest is going to increase our annual income by $50. I really try to keep these kind of numbers in mind when I go to spend money on something that is unreasonably dumb, because all of those decisions are doing nothing but adding to the time it will take us to achieve our goal.

In order to achieve my goal, I will probably start investing sooner rather than later, increasing our current annual income now. I will hopefully pick assets that will not result in me flushing money down the drain. I guess the good thing about having what could be called a somewhat stable job, is that if 100% of my decisions are wrong, I’ll still be able to eat. In some way of thinking, I think I’ll treat my retirement investing career the same way I’ve treated sports betting. With gambling, I assume that everything I put in is probably going to be gone. For someone who will hesitate to buy some random $5 item, explaining to my wife that this is within the realm of possibilities does give me a bit of a cushion when making these kind of decisions.

While I would prefer to not shovel money out the door, this pessimistic level of thinking does allow me to overcome my decision-making paralysis and continue down my path to financial independence.

How did you decide when to start investing? Do you try to time the market, or just find investments that fit your set criteria?

10 thoughts on “Diving In”

  1. Derek Foster’s “The Lazy Investor” kick-started my investing plans. I buy stocks of dividend producing companies that have a solid track record of increasing dividends over time. While I invest in these stocks in my RRSP and TFSA, the dividends are only synthetically dripped. By keeping some stock directly with the Transfer Agent the dividends are able to fully drip. Also, dollar cost averaging is the best way to buy stocks. I have pre-authorized payments set up to buy stock through the transfer agents automatically. Set it up and forget about it.

  2. I think the mentality of “I could lose it all” contradicts your earlier statement of “not investing things that are unreasonably” dumb a bit. However, I tend to be of the same mentality. Just admitting to yourself that you could lose it all and in some sense you will still be okay allows you to make some of those hard decisions instead of analysing things forever!

  3. “The best time to invest in the stock market was 20 years ago. The second best time is right now.”

    Remind yourself that you’re in this for the long haul. timing the market is silly, not just because it’s a fools game, but because you don’t care about the market value of your stocks tomorrow or even next year. Buy early, buy often, never sell.

    I find the Canadian Couch Potato to be a good source of investing advice.

  4. I’ve just started reading about investing in dividend producing companies over the last year. I figure I’ll invest small amounts now while paying off my mortgage and once I have more money available I will be able to look back and see whether my plan is working appropriately or not rather than going all in once the mortgage is done and hoping for the best. So to start this process I sold $5k of index funds in my RRSP and sat and waited for a good buying opportunity. After 6 months of the cash just sitting there I decided timing is not going to work for me. So I picked 4 stocks that the folks on Seeking Alpha said were reasonably valued right now and jumped in. Time will tell whether it was a good decision or not.

  5. I started reading a bunch investment books and they got me started with investing. I’m doing dividend growth investment because I like seeing money coming into my accounts. It’s never too late to start investing. Don’t try to time the market, you’ll never get it right.

  6. I started investing in earnest during the summer of 2009. I had a 100k GIC maturing at that time, and while I didn’t catch the market at the bottom I was close by a couple of months. I invested that 100k in some TD E-series funds – needless to say, market gains since have helped me retire at 42.

    I’d be a bit nervous about starting my investing journey right now – things feel a bit “toppy”. I’d be less jittery if you chose the dividend investing route – there is something comforting about regular payments coming in even if the stock price is plummeting.

  7. Not counting the 401k I began investing in back in 1986 (a year after Ib egan working, when I became eligible to join the plan), I did not begin investing in non-retirement investments until 1990. That was after I had paid off my student loans, bought my first car with cash, and replenished my savings after buying my co-op apartment.

    My mom got me started with investing and she had a prospectus for a tax-free bond fund sent to me from Fidelity Investments. I liked it and being able to earn money without paying taxes on it. As the booming 1990s went on, I branched out into mixed asset funds and stock funds. I was able to ride the wave of the booming 1990s which helped me pay off my mortgage in 1998 (after only 9 years) and eventually retire in 2008.

  8. “With gambling, I assume that everything I put in is probably going to be gone.”

    This is not a good mindset to have with investing. I’m not sure why people do this. I did it once myself because I was sure no company was stupid enough to make the kind of accounting error/manipulation that this particular company had. It hurts to lose months of savings – as it should or else you never learn not to do it again. I guess holding onto a loser means you don’t have to admit that you were wrong.

    I would just pick a style of investing that appeals to you – value, deep value, couch potato, indexing, dividend growth, medium risk+high yield… Learn everything about that style and make a business plan before you put a penny into the market.

    Here’s an example of a good one:
    And another:

    If you can’t find anything that meets the criteria in your plan, then you don’t invest and accumulate and wait for the right opportunity.

  9. I don’t think there’s any point trying to wait and time the market – it really is just impossible to know what will happen. The market might look expensive, but it could keep just growing slowly for the next 10 years. Or it could crash tomorrow. You just can’t predict it.

    The best thing to do is get started. Even if you make mistakes, you’ll learn something from it (just try to keep your mistakes relatively small to start with!). It’s pretty hard to figure out what works best for you if you don’t get started, but there are also plenty of great resources out there to help.

    Perhaps ‘dip you toe in’ rather than dive in?

  10. Too risky to time the market and no one really knows. Dividend investing and diversification. I’m still learning too, since my investment strategy in the past has been ignore. 🙁

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