How to protect your savings. Start investing now!

Due to inflation, the value of your money is decreasing every year. To determine inflation we use the Consumer Price Index (CPI). For example, if some goods and services cost $100 in 2007, they would now cost about $117.

The average rate of inflation in Canada for the past ten years is about 1.64% per year. This means that if your money isn’t invested or earning interest, it’s losing value. To counteract this, you can put your money into a high-interest savings account. Still, the return on one of these accounts does no more than negate inflation. Investing can give you an average return of about 6.3%. To put that into perspective, if you invested $100 today, in about 11 years it will have doubled to $200.

How to invest your money

There are countless ways to invest your money, you could even invest in stamps if you wanted to. But, there are a few you should consider as a new investor.

Index investing

You may have heard of the TSX, S&P 500, or Nasdaq. These are all different types of stock market indexes. An index measures changes in a sampling of stocks, meant to represent the market. For example, Nasdaq is an index for U.S. technology stocks. Even the billionaire investor Warren Buffett recommends investing in indexes.

To invest in an index, you can buy an index fund. That’s all you need to do, you can leave it alone and check it when you feel like it. Not only is it easy, it outperforms 80–90% of active investors. If we look at the S&P 500, the annualized return for the past 50 years is 9.74%. While this is great, past performance is not a guarantee for future success. In the past 10 years, the annualized return was 7.7%.

Index investing provides steady growth with little effort. Given its simplicity and great returns, it’s no surprise it has been growing in popularity.

Dividend investing

Dividends are a payout that companies will periodically give to their shareholders. These companies pay dividends to make investing in their company more appealing. So dividend investing is the practice of investing in companies that pay a dividend. Because of the guaranteed income, it’s a pretty safe investment. Not only that, but if the company is doing well the stock can increase in value too. So you get some growth from the dividend payments, and some from the stock price. Like index investing, you shouldn’t need to be checking these stocks very often.

The problem is, how do you pick stocks to buy? There are lots of recommendations you can find online, but the safest bet is to buy blue chip stocks. These are safe companies that have been and will continue to be, around for a long time. Consider a company like Bell. They’ve been growing and paying increasing dividends every year for over 30 years. Currently, their annual dividend yield is 4.66% and their stock price increased about 8% last year. There’s no guarantee that they will have growth like that every year, but the dividend is a pretty safe bet.


If you don’t want to manage your own investments, consider using a robo-advisor. It’s a service offered by several companies, where a computer program manages your money.

They will ask you some questions to determine your risk profile, and then create a portfolio for you. It will be a diverse portfolio made up of different industries and types of investments. Most of their investments are in a variety of funds, they don’t buy individual stocks. Since it’s all done by software, it will automatically adjust your investments as needed.

The returns you get will depend on which robo-advisor you use. If we look at Wealthsimple, one of the robo-advisors, their highest growth portfolio has an annualized return of 5.4%. But, this is only based on 2 years of data, it’s difficult to say how they will perform going forward. Plus, as they say, it’s impossible to predict what returns you will get.

Financial planner

If you want someone else to manage your money and help you come up with a plan, consider hiring a financial planner. Finding someone you can trust to manage your money and get you a good return can be difficult. It’s best if you know someone who can recommend you a good planner with a proven history.

If not, you can always go to your bank and they will be happy to arrange a meeting with one of their financial planners. You can also search for registered financial planners in Canada or in the U.S. You should meet with several financial planners before making a decision. Find someone that you can trust to manage your investments for many years to come.

Invest your money!

You have many options available to you, if you find them overwhelming then go to your bank and meet with an advisor. It won’t cost you anything, and you don’t have to commit to investing your money with them. They can help you make a plan to achieve your investing goals.

The type of investing you should do will depend on what level of risk you are comfortable with. The higher the risk the longer you’ll need to leave the money invested. While an index like the S&P 500 has great returns over long periods of time, there are years like 2008 where it dropped 37%. If you needed that money immediately you’d be taking a big loss. But if you were able to leave your money invested, the S&P 500 did more than recover in the following years.

Time is your most valuable asset, don’t waste it. Start investing today.

Originally published at on January 14, 2017.