I. AM. NOT. AN. INVESTMENT. PROFESSIONAL.
I just needed to get that out of the way first.
One of the hardest things about discussing finances is the fear of being judged. It’s a fear I think most bloggers have when they start off announcing their debts to the world via the internet. Admitting you’ve made mistakes is tough. Opening yourself up to criticism is tough. Putting all of your money fumbles out there for the world to see is tough.
While the backgrounds are diverse, the personal finance community tends to separate itself into two distinct categories: debt bloggers and investment bloggers. Debt bloggers have variable debt balances ranging between a couple hundred dollars and a couple hundred thousand dollars. Investment bloggers, with similarly variable account balances (in the positive territory), are more often than not already established and are discussing investments at a higher level than your average beginner readily understands.
Is talking about making mistakes as a beginner investor more shameful or socially taboo than talking about debt and spending mistakes? I think it might be, because no one ever seems to talk about it.
Well enough of that crap. If I could put all of my debt mistakes out there on a platter for the world to see, I can do the same for my investment mistakes. There will be mistakes. There will probably be lots of them. Isn’t this how people are supposed to learn? By making mistakes and learning from them? Well alright then.
You want to know what the hardest part about investing has been for me in the last few months?
I tried to open an online brokerage account last year. I knew that I needed a $1000 balance in order to trade, but I didn’t have the money available at that point in time. I asked the customer service guy assigned to my application if I could open the account and make $100 deposits every month, and then start trading when the balance reached $1000? He didn’t understand my question. I tried rewording it to clarify. Still no dice. After several attempts he never did answer my question. I ended up giving up and abandoning my application. Then my car broke down, I had to purchase a replacement, and I started back at square one again.
Late this past spring I started my savings effort again. Rather than bang my head against a wall talking to someone in customer service, I saved my money the old fashioned way – in a savings account. Once my savings hit $1000, plus a small buffer, I went back to my application form again.
I didn’t want to be getting dinged with taxes while learning how to invest and making stupid mistakes. Learning the ins and outs of investing is enough work without learning the ins and outs of investment income taxes as well, so instead of opening a regular brokerage account I opened a tax free savings account (TFSA) to avoid some of the headaches. It really should be called a tax free investing account, but I think that would probably scare a lot of people out of opening one if they called it that. I know it doesn’t block paying all taxes, since I believe if you’re buying investments on exchanges in other countries you have to pay their taxes, or whatever our countries have agreed upon, but it should simplify things for me on the Canadian front.
One would think that if you’re filling out a form to open a TFSA online it should be as fast as opening a regular savings account online, right? Fill it out *boom* new account ready to be used. Except it doesn’t work like that. I filled out their multi-page application (easier than it sounds), e-mailed them a copy of my drivers license for identification purposes, and then waited for approval.
That’s the painful part. Waiting.
Then at work a couple days later I see a missed call and message on my cellphone from the brokerage. One of their advisors wanted to talk to me.
First thought? “I don’t want to have to listen to a sales pitch before you’ll even open my account.”
I’m a cynic.
I called him back when I got home and reached his voicemail. Damn time change. I explained that I do shift work and that it would be difficult to discuss my account over the phone give the time zone difference, so could we have the discussion through e-mail?
I never heard back from him, but my account was active the next morning.
Not all accounts require you to start with a $1000 account balance. By the looks of it, the majority of the major banks allow you to open an investment account with no minimum balance (BMO Investorline requires $5000 minimum). This is great if you’re just starting out with the exception of one
small big problem: their fees will obliterate your balance. Annual fees, trading commissions and inactivity fees are three big problems with many of the no minimum balance accounts.
When you take annual fees of ~$100 and commissions of ~$30 per trade into account, it makes more sense to save your money in a savings account and open an account with a lower fee option once you save the minimum balance. If you’re starting out as a new investor, saving $50 or $100 a month, fees of that magnitude will have your balance spinning on a hamster wheel, steadily greasing the pockets of the bank rather than your own. I should know, I did it with my first investment account.
So, be patient. Find an account that fits your needs. If there’s a minimum balance, save up for it in a savings account. It might be tough, but it’ll be worth it.
Recommended Reading: Are Young Women More Independent Than Men?