Get Rich Keeping it Super Simple
The financial industry has been made itself to appear as a complicated beast; we’re made to believe our only way through this complicated maze is to hire a professional. The actual truth is we can get rich keeping it super simple; in fact I would suggest we can get even richer if we simplify and do it ourselves. It’s not hard and we will show you.
Simple Article with Actionable Ideas
First Action – Create a Surplus
The first thing we do to get rich by keeping it super simple is to create an investible surplus of cash. We won’t dwell on this too much because we want to get into how we can invest it, but suffice it to say we need some free cash that we can buy assets with. We need to cultivate an asset oriented mindset where we create surplus investible cash and instead of buying toys or meals out. If you haven’t read our article on Investing the Bargain go give it a read; especially if you’re a Canadian investor. It has some powerful examples.
Second Action – Invest the Surplus
This is where the action is going to hit the road and I’m going to show you how to get rich by keeping it super simple. Don’t underestimate the power of what is going to be shared here. It takes everything I’ve learned and encapsulates it into a very simplified investment approach. Just because its simple doesn’t mean it won’t perform – in fact I would be willing to bet this will beat any other investment strategy over a 5 year time frame, including the total return of a dividend paying portfolio.
- Low Fees
- Fully Diversified
- Growth Oriented
- Hedged with Gold
- Tax Aware
Last thing before we get started you need to tell me if you’re an American or Canadian investor. If you’re neither then pick American as you likely have access to the NYSE and NASDAQ. Then for each country I’m going to give you a total investment solution. There is no need to read both sections because the theme is the same, just the ETFs are different.
USA Total Investment Solution
The critical tool you need for this solution is called an All-In-One ETF. This efficient tool has your asset allocation already set by carefully selecting an underlying group of ETFs and putting them together so you have the best set of American stocks, international stocks, bonds and emerging markets all wrapped into one low cost solution. The underlying funds are rebalanced regularly to keep the target allocations on the mark. The only thing we are missing is gold which we will add separately to go along side the All-In-One ETF.
I am fond of the iShares family of ETF’s as I have used them extensively over the last 15 years and had great results. They have stood tall during times of market turbulence and they are a market leader. If I wasn’t allowed to pick iShares I would go with Vanguard. In any case use the following table to see which ETF I recommend for your age group.
Easy Over / Under
Keeping it easy and getting you super rich. If you’re under 45 go with the aggressive portfolio AOA, if you’re over 45 then go with the growth portfolio AOR. I don’t want you going more conservative than the growth portfolio because of these risks that are just as bad as market volatility:
- Inflation eroding away at returns, especially the bond return portion
- You’re too conservative and you out live your money
- You have to keep working and saving longer to get the same result
Both carry fees of 0.25% a year so you’re getting a one stop shop for a completely diversified portfolio at a low cost. If your portfolio value is $100,000 then you’ll be paying them $250 a year to manage that portfolio and keep it on your target allocations. Not a bad deal at all.
Add Gold and You’re Done
We just need to add gold. Gold is a terrific diversifier and will help balance returns and lower your volatility. Plus its a terrific hedge against political uncertainty, inflation and it is a safe haven in times of global unrest.
We like GLDM because the fees are just 0.18% and because of this, it will out perform all other gold bullion ETF’s with higher fees.
Put 95% of your money into the All in One Portfolio and the remaining 5% into GLDM.
Just add a commission free brokerage
If you don’t have one already, you’ll need to pick a commission free broker so we save money each time we buy. This is an easy choice – go with Robinhood in the States.
Performance
Canada Total Investment Solution
Compared to the States, Canada just doesn’t have the same selection of investments to pick from. Luckily we still have access to some very powerful All-In-One ETF solutions. This is critical because this lets us get rich by keeping it super simple. The all-in-one ETF portfolio solution gets you your asset allocation by carefully selecting a group of underlying ETFs and putting them together. This way you have the best Canadian, American, and international stocks, bonds and emerging markets all wrapped into one low cost solution. The underlying funds are rebalanced regularly to keep the target allocations on point. The only thing we are missing is gold which we will add separately to go along side the All-In-One ETF.
I am fond of the iShares family of ETF’s as I have used them extensively over the last 15 years and had great results. They have stood tall during times of market turbulence and they are a market leader. If I wasn’t allowed to pick iShares I would go with Vanguard. In any case use the following table to see which ETF I recommend for your age group.
Easy Over / Under
Keeping it easy and getting you super rich. If you’re under 45 go with the growth portfolio XGRO, if you’re over 45 then go with the balanced portfolio XBAL. I don’t want you going more conservative than the balanced portfolio because of these risks that are just as bad as market volatility:
- Inflation eroding away at returns, especially bond returns
- You’re too conservative and you out live your money
- You have to keep working and saving longer to get the same result
Both carry fees of 0.20% a year so you’re getting a completely diversified portfolio for a terrific low cost. Also keep in mind there is a lesser known TER or trading expense ratio of 0.01% so the total cost is more like 0.21% to hold this fund. If your portfolio value is $100,000 then you’ll pay $210 a year for Blackrock to manage that portfolio and keep on your target allocations. Incredible deal considering the alternatives within the Canadian market place for investments. Heck, you have lower fees than the American counter part!
Add Gold and You’re Done
We just need gold. Gold is a terrific diversifier and will help balance returns and lower your volatility. Plus its a terrific hedge against political uncertainty, inflation and it is a safe haven in times of global unrest.
We like GLDM because it has the lowest fees at just 0.18% and out perform all other gold bullion ETF’s that carry higher costs. The downside is you must convert from CAD to USD to buy this fund. The alternative is to buy CGL. It carries a higher fee of 0.55% but as a bonus it hedges out CAD/USD FX fluctuations. This gives you a pure play and exposure to the price of gold.
Put 95% of your money into the All in One Portfolio and the remaining 5% into CGL
Just add a commission free brokerage
All you need now is to save money on commissions. You want to buy and sell without trading fees and get more of your money invested and working for you. This is a bit more difficult in Canada. One option is Questrade which allows commission free buys on ETFs – which is what we’re mostly doing – but it charges at least $4.95 for the sell. They make up for this by having a great trading platform and real-time quotes.
The other option is WealthSimple Trade which offers commission free buy and sell but the platform is available on only iOS and Android phones (no desktop). Worse, the quotes are not real-time with a 15 minute delay. These limiters can easily overlooked but if you had a large order to put through it’s nice having a mature platform with accurate real-time quotes.
Performance
Third Action – Let it Grow
Just because this method is simple does not mean its easy and this last action will test your inner fortitude and conviction. To help you see the importance of holding for the long term and letting the growth compound and compound again consider the following experiment.
Suppose we invest from 1995 to 2020. We will experience the dot com bubble, 911 terrorist attack, housing crash, oil crash, and the COVID-19 pandemic crash. If we just invest for 8 years at a go it will look like we’re merely doubling our money. But if we go for the whole run… the whole 25 years back to back and stay the course we can produce some stunning returns.
1995 to 2003 – 111% Return
2004 to 2012 – 56% Return
2012 to 2020 – 114% Return
1995 to 2020 – 611% Return
Bringing it all Together
Often times we want a complicated system of trading and investing to deliver impressive results and turn our original investment into multiples of its former self. The truth is we can, and should, just keep it simple and focus on the things we can control. Generate a weekly surplus and invest it in a simple yet diversified portfolio of low cost ETFs. Keep at it and let the power of compounding interest work its magic and exert its full effect on your portfolio.
If you would like to learn more, please read our Four Pillars For Investing Success where we dive into some more details and discuss the importance of having cash on the side to leverage those crashes to our advantage.
Get Invested, Stay Wealthy, Get On Board!
Disclaimer:
While we actually follow and execute this advice ourselves we have to advise you to do your homework before doing this yourself. PLEASE contact us on twitter @mywealthmoney or email, smanning@mywealthmoney.com. We would be very happy to help and assist you set this up. And until otherwise notified, we do not charge for this initial setup service. This won’t last forever so please contact us and we will jump on your side and get you going.
