In a previous post I suggested getting and perusing a copy of our credit report to check for accuracy. Enquiries were made as to how to obtain the actual credit score.
Although by law everyone is allowed a free copy of their credit report once a year from Equifax.ca or TransUnion.ca, unfortunately these companies charge extra to get the credit score. For about $24 you can get a copy of your credit report and credit score combined.
Related: What Does Your Credit Score Really Mean?
Beware of some websites that claim to offer free credit scores. They may sell your contact information to online marketers of credit monitoring services. Also, read the agreement carefully to make sure you will not be automatically charged a monthly membership fee.
Read the fine print of any site that says “FREE.”
Credit Score
Your credit score is a complicated series of calculations based on your credit history. The final number will be somewhere between 300 and 850. The average credit score is about 650.
A score of 720 or higher is considered good, and most lenders will give you their best deals. One under 600 will leave little or no negotiating room, so it pays to do whatever you can to increase the credit score – paying on time, not going over the limit, not opening a lot of new accounts, keeping balances below the credit limit, etc.
Related: Best Balance Transfer Credit Cards
I previously mentioned closing any accounts that are not being used. To clarify, don’t close all your accounts. Keep at least one or two revolving credit accounts open (especially ones that have been open for a long time), and use them periodically.
Warning flags will be raised if someone over, say, thirty years of age has no credit record at all. One example is someone closing all their credit cards and then using the secondary card of a spouse for all purchases. This may make life easier, but the credit history will only be displayed on the spouse’s record.
On a personal note, my husband’s credit score was always higher than mine even though I take care of the family finances and pay the bills, and I’m clearly a better credit risk than he is. I was determined to find out why.
It turns out that when we applied for our first credit card, he became the primary cardholder and the secondary card had the same account number and his name on it also.
I subsequently received a card in my name with a different number, but this made his credit history longer than mine. I imagine it should have evened up by now. Perhaps, out of curiosity, when I get copies of our credit report next time I’ll pay the extra money to get the credit score as well.
This is part three of a four part series on how to invest your money. The main focus of this series of articles is to discuss the psychology of investing, how to get started, finding your strategy, and building your portfolio. I hope this can be a resource for many people who are looking for information on how to invest their money.
Finding Your Strategy
Now that you have identified your investment goals it’s time to determine how to invest your money. There are many different investing strategies to choose from. Experts in each discipline will claim to have the best method for you to invest your money, but ultimately you need to find the right strategy for your situation.
The two most common methods of investing would be a passive investing approach and an active investing approach.
Passive Investing
Passive investing is a strategy involving very limited ongoing purchasing and selling actions. Passive investors purchase an indexed ETF or mutual fund and hold it for the long term based on a pre-determined asset allocation. When the asset allocation becomes out of balance due to over/under performance of certain sectors or when new money is added, the portfolio should be re-balanced.
Unlike active investors, passive investors buy a security and typically don’t actively attempt to profit from short-term price fluctuations. Passive investors instead rely on their belief that in the long term the investment will be profitable.
One of the most common passive indexing strategies is the Global Couch Potato. This portfolio includes a Canadian Equity index fund, a U.S. and International equity index, and a Canadian Bond index. The benefits of a portfolio like the Global Couch Potato is the diversification and relatively lower risk (with the fixed income component), as well as the minimal fees required to maintain the portfolio.
A common misconception is that you can’t be a passive investor if you hold individual stocks. This is simply not true, as the famous buy-and-hold investor Warren Buffet said, “Our favorite holding period is forever”.
The idea behind dividend growth investing is to purchase worthwhile amounts of blue chip stocks that have a history of raising their dividends and holding them for the growing income.
This method takes patience and discipline to hold the dividend stocks for decades through the ups and downs of the market, but does not require any more active management than an index investor re-balancing their portfolio.
Active Investing
An active investment strategy involves ongoing buying and selling actions by the investor. Active investing is highly involved.
Unlike passive investors, who invest in a stock when they believe in its potential for long-term appreciation, active investors will typically look at the price movements of their stocks many times a day. Typically, active investors are seeking short-term profits. Some active investing methods would include:
- Swing Trading – A style of trading that attempts to capture gains in a stock within one to four days. Swing traders look for stocks with short-term price momentum. These traders aren’t interested in the fundamental or intrinsic value of stocks, but rather in their price trends and patterns.
- Momentum Investing – Also known as “Fair Weather Investing”, is a system of buying stocks or other securities that have had high returns over the past three to twelve months, and selling those that have had poor returns over the same period.
- Dogs of the Dow/TSX – A method where an investor buys the 10 highest yielding stocks in the Dow Jones Industrial Average or the TSX 60 and holds them for a period of one year, at which time the investor would sell the portfolio and purchase the new “dogs”.
What’s Right For You?
In order to figure out how to invest your money you need to understand what type of investor you want to be. You can choose to be an active investor who takes on greater risks in trying to beat the market, but enjoys analyzing stocks and the excitement of short term buying and selling.
Or you can choose to be a passive investor who wants to limit risk, accept what the overall market returns, pay less fees, and trust in the long term benefits of staying invested in the market.
In the final part of this four part series on how to invest your money I will talk about building your investment portfolio in order to achieve your financial goals.
My parents are in their late 80’s and currently live in their own home, which has benefited them so far. Sadly, most of their friends have now passed away, or have moved to other assisted living facilities and I worry about them being on their own, especially as their health has been slowly, but surely deteriorating.
Related: Settling In To A Retirement Community
As a result, I am now in the process of researching and trying to find them a more suitable place to live. As my brother and I both live in different provinces it hasn’t been easy to co-ordinate. I’ve found that there are several different types of senior care facilities depending on what is required.
Senior Care Facilities
Some types of senior care facilities that we have considered are as follows:
- A Plus-50 or Seniors’ condo complex where they can purchase an apartment in the $250,000-$300,000 range with monthly condo fees. This allows for a private residence with a communal area with various activities. The attraction is that they would be independent without the responsibility of shoveling snow or mowing lawns, etc and have close neighbours for companionship. This seems to be the only option for purchasing.
- A similar option is a Supportive Living residence. Residents here would be more in their age range. This accommodation mainly provides companionship and activities to seniors who can care for themselves but who have previously lived alone and there’s a fear of them being too isolated. In both of these situations, however, there is a degree of concern should an accident occur with no one around to help.
- “Aging in place” residences offer independent living, assisted living and continuing care in a single setting. Residents can move from one care option to the next, as health needs change. It benefits couples whose care needs are different, as they can remain together in the same complex.
- Assisted living complexes have self-contained suites with central dining room and common areas for socializing, recreational opportunities and regularly planned activities as well as an emergency response system and housekeeping and laundry services as required.They are for people who don’t need full time care. These residences can be publicly funded (less expensive, but huge waiting lists), or private. Private pay options are expensive ($1800 to $4500+ a month depending on size of suite and amenities included) but there is a better chance of obtaining a suite as these complexes are being built in many cities at quite a fast rate. (Could be a good investment opportunity in a REIT specializing in such residences.)
- Finally, there is long-term care also known as nursing homes. These offer private or semi-private rooms for seniors who have long-term nursing needs. Subsidies are available for low-income earners and costs may be covered by provincial health care. Waiting lists areextremely long and these senior care facilities suffer from a bad reputation with regard to the care given (warranted or not).
The choice I’m leaning towards for senior care is the assisted living facility. I know my dad will balk at the high rent and would prefer an apartment condo they could purchase instead.
However, his legs are getting wobbly and he has recently fallen several times while getting up at night. My mother is not able to pick him up when this happens.
Luckily, they would be able to afford the monthly rent, and they will have a financial cushion after they sell their house, and I will feel better knowing they will be looked after if and when help is needed.
The challenge is finding a suitable place soon in the area we desire. Waiting lists are so long in some senior care facilities that I’m tempted to put my own name on a list now so there will be a spot for my husband and me should we require such accommodation in our later years.
Meanwhile, the house has to be sold, the contents sorted and trashed (mostly), or sold (maybe), or kept in the family (as little as possible).
My next few months are going to be busy.