Wait a few months to invest due to interest rates expected to go up?

[KingstonU]

This is in Canada. I am for the first time in my life in the position where I am ready to invest into the stock market (age 24). Starting to educate myself, and I am looking at putting most of it into stock mutual funds, but I keep being told that I should wait a few more months due to the interest rates expected to keep going up, which will cause stocks to go down. Any thoughts?

Where can I read up on this to get a more educated sense of when is a good time? Where do other canadian members educate themselves on this?

Any and all advice appreciated. Thanks

 

[IceBergSLiM]

I would pick a couple blue chips that always perform. There is still alot of economic uncertainty out there. Then again your young so if you lose your shirt no big deal right?

 

[bignateyk]

There's a stock market in Canada? Who would have guessed...

I would invest heavily in the defense contractor who is awarded the contract to maintain the tank.

 

[Bateluer]

At 24, there's plenty of good mutual funds to invest in that can maintain solid long term growth.

 

[Sahakiel]

If I remember correctly, the "safest" investment aside from CD's, bonds, or similar with guaranteed (literally) returns is an index fund. Over the long term, they seem to keep up with inflation, so you won't "lose" money by stuffing it under your mattress.

 

[alrocky]

The Four Pillars of Investing by William Bernstein
Why Smart People Make Big Mistakes & How to Correct Them by Belsky & Gilovich

You'll be investing for 30-40+ years and the shares prices will fluctuate. It is more important to start than trying to time the market to get the lowest price possible. You can dollar cost average to take the sting out of 'buying high.'

visit bogleheards.org

 

[yllus]

There's basically two asset classes that we laymen investors dabble in: Stocks and bonds. Bonds are directly affected by rising interest rates, and a large jump in interest rates generally leads investors to re-balance their portfolios by moving some of their money from bonds to stocks. This causes a surge in demand that causes stock prices to increase, not decrease (and either way by usually not a significant amount).

That all said - don't try to time the market if you're getting into stocks or bonds. Just play the long game (10 - 25 years) and invest in index funds with as low an MER rate as possible. Actively managed mutual funds are a scam that you should not take part in.

 

[DaveSimmons]

^ right. Buy and hold stock index mutual funds. In the US, vanguard.com is the leader in this, they might also sell to CA.

"Dollar cost averaging" is one of the better approaches. You invest X dollars a month, every month. You don't try to time the market, but you have a good chance of catching any dips since you're buying every month.

 

[alrocky]

http://www.bogleheads.org/forum/viewtopic.php?t=69389&mrr=1298444409

http://www.bogleheads.org/forum/viewtopic.php?t=68969&highlight=

this may help

 

[silverpig]

invest in index funds with as low an MER rate as possible. Actively managed mutual funds are a scam that you should not take part in.

Just quoting the important bit. Especially the second part. Mutual funds in Canada are a total ripoff.

 

[Ghiddy]

Any diff. between ETF's and exchange traded funds?

 

[iGas]

The TSX & TSX Venture are mining weighted stock exchange. I don't know much regarding the Quebec stock exchange.

Don't invest in the TSX Venture till you are more experience because most if not all of their stocks are extremely high risk penny type stocks.

The ME turmoil & interest rate fear is affecting the TSX at the moment, and most of the mining stocks on it is down 10~20% from their 52 weeks high. Oil stocks are up 20~30% more than where they were since November of 2010 due to the turmoil in the ME (over price highest in 52 weeks). Banking stocks are flat or down 5% at the moment. Precious metal also is over price at the moment at 52 week high, however it might go higher if the ME & North Africa continue its political turmoil.

The Asian market is what you want to watch because it affect Canada greatly beside the American market. American market is languishing at the moment, and there are suggestions that it will take another year or 2 before they are in order. However, my hunch is that America market is in for a long haul till they sort out the War in Afghanistan & Iraq, and some how put their finances back in order.

IMHO, it is best to stick with low risks strategy while you are learning. It would greatly help if you start reading on the net/books, and keep track of a dozen stocks for a year or two to see how it function before you jump in with both feet.

Ask your bank regarding stocks/bonds/trusts, and look into pipeline/transportation/banking/telecommunication with high yield dividend to park your money while lean/research the stock market.

Good luck!

 

[rcpratt]

Any diff. between ETF's and exchange traded funds?

One's an acronym and one's not.

 

[iGas]

Any diff. between ETF's and exchange traded funds?

Great Debates: ETFs vs. Index Funds

 

[aldamon]

The premise for this thread is flawed because interest rates are not going up any time soon.

 

[yllus]

The premise for this thread is flawed because interest rates are not going up any time soon.

The Bank of Canada has signalled* that it will slowly but steadily hikes rates in this country beginning this year, as our economic situation is not as dire as the American one.

* Opinion really since when the hell do central bankers ever come out and say what they intend to do.

 

[Imp]

You have to be realistic as to what kinds of interest rates "up" means. If you want to just stick it in GICs, remember that the highest that ING Direct in Canada ever went in the early part of the decade (last decade? 2000-2010) was 5-6%, if I recall correctly.

At Ally, a 5 year GIC was 4% a few months back, is about 3.6% now.

Stocks "should" get you at least 10% a year, except when the shit hits the fan, then you spend a few years recovering. But over the long run, stocks should still do better.

I play both and am about 75% stocks, 25% cash/GICs/savings. I made more in 3 months in stocks than I did in GICs, but I also lost about half that much in the past 2 days... So good luck!

 

[KingstonU]

Thanks for all the advice. I am doing a lot of research and trying to educate myself for a long term plan.

 

[Ionizer86]

Link to cheapest mutual funds in Canada. Of course, ETFs are fine as well.

Portfolio assembly ideas? See here.