Investment Workshop 09: Our First Buy

OK so today’s the day! We’ve opened our investment accounts, figured out our portfolio allocation, chosen our ETFs, and we are ready to do our first buys! Nervous? Excited? A little scared? All normal emotions to be feeling, but trust me, after you get use to it, you’ll be trading like a pro in no time.

Questrade/Passiv (Canada)

We’re going to start with Canada. This wasn’t always the case (especially when we first started this blog), but the trading tools in Canada have gotten much better, to the point where I daresay they’re even better than what the Americans have.

The reason is because Passiv, which is based out in New Brunswick, was really designed from the ground up with passive index investors like us in mind, so the tool is literally tailor made to manage a portfolio like the one we’re building. Plus, their partnership with Questrade means that they get paid by Questrade rather than us, so it’s free for us to use.

The first thing we want to do is to create a “Model” in Passiv that matches our portfolio. To do that, log into Passiv and on the left menu, select “My Models.” Then click “New Model.”

Here, you can enter in the model you’ve designed earlier in the workshop. We’re going to use our benchmark 60%/40% portfolio and enter in all the ETFs as well as their portfolio weightings into the tool, like so. Note that Canadian ETFs have a .TO at the end of their ticker symbol to denote that they’re listed on the Toronto Stock Exchange.

After that, save the model and go back to the previous screen. You should see your brand new model available and ready to use.

Next, you want to apply your model to your investment account.

And once that’s done, it will bring you back to your portfolio dashboard, with a list of trades that the tool has calculated that will implement your model on your investment account!

At this point, you can login to Questrade and perform the buys that Passiv has figured out for you.

One-Click Trading

There’s also a cool, but optional, feature of Passiv you can use called one-click trading. Basically, since Passiv already knows what you should do, you can just go ahead and have Passiv make the trades for you.

To do this, you have to grant Passiv permission to trade on your behalf. While this does make trading your portfolio super easy, not everyone is comfortable with granting another company this level of access, so again, this part is completely optional.

If you want to do this, head on over to the “Settings” link on the left menu and click on the “Connections & Portfolios” tab at the top. You should see your brokerage connection on this screen. Click “Edit” next to it and flip the dropdown from “View only” to “View & Trade.”

You’ll have to re-login to your Questrade account and grant trading access on their side.

After that, when you go back to your portfolio dashboard, under the trades you can click the “Preview trades” button, which will bring up an Order Summary screen showing the trades you’re about to do if the market is open. If not, you’ll have to come back during normal trading hours.

Once you click Confirm, the trades will be entered and you’re done! Sit back, pour yourself a celebratory glass of wine, because you just performed your first trade!

Vanguard & Empower (USA)

Now on to the Americans. Unfortunately, the same free tools don’t exist on the American side, so we’ll have to do a little more legwork yourself.

I created a simple spreadsheet that basically does the same job as Passiv’s tool. Is it pretty? No. But is it free? You betcha!

This spreadsheet is available in two formats: Excel and Google Sheets.

If you’re going to use the Excel version, make sure you have the most up to date version of Excel, or the automatic stock price updates won’t work. If you don’t have the newest version, you can use the Google sheet version, and clicking the link will create a copy of the spreadsheet in your own Google Drive folder. You’ll get a prompt to create a copy, so click Make a Copy.

I’ve pre-loaded it with the American Workshop portfolio, so when you open it up it should look like this.

Start by changing the percentages in the “Target %” column to your portfolio targets if yours are different. The prices update live using Google Finance based on the ETF symbol in the first column, so you shouldn’t need to touch that. We are also assuming you are starting off wth an empty portfolio, so leave the units column at 0 for everything.

The last row “Cash” is locked to a price of $1. In the units cell, enter however much cash is sitting in your account. Then the buy/sell column will update to tell you how much of each asset to buy/sell.

In this default setup, it’s telling you to “sell” 1000 units of cash (meaning use it up) and buy 5 units of BND, 1 unit of VTI, and 5 units of VEU.

The rightmost column tells you what allocations to each asset you can expect after you perform these buys. The difference between this column and the allocation targets you set are caused by a number of factors that happen when you’re first building your portfolio.

ETFs can generally only be purchased in whole units. You can’t own half a share. So when the math tells you that you need to buy 1.95 units of VTI, the spreadsheet doesn’t round that up to 2, because that might cause you to spend more money than you have in the account. Instead, it will always round down, choosing to leave cash undeployed rather than spend too much and cause your cash to go into negative territory, which would cost you fees and interest.

Vanguard’s stock market fund, VTI, has a share price of around $200. If the math tells you to buy, for example, 1.95 units of VTI, but the spreadsheet rounds that down to 1, then your portfolio will be off target by nearly $200. When your portfolio is larger, this isn’t a big deal, but when you’re just starting out and your balance is a relatively low number, like $1000, a $200 rounding difference will look pretty significant.

This rounding issue is not a big deal, and not a sign of a bug in the calculator. As you add more money to your portfolio, the spreadsheet corrects for this effect automatically. To see this for yourself, pretend the cash you’re investing is $100,000 instead of $1000.

Now the projected percentages are much closer to your targets. So no need to freak out if your allocations look way off in the beginning. It’s because we deliberately don’t want your account to go into debt.

So now that you have your buy orders calculated, log into your Vanguard account and input them into their web interface.

Once you’re done, you can log into your Empower dashboard and make sure your portfolio’s holdings have been updated.

You can use their visualization tools to track your portfolio’s performance over time. Play around with the tool and get to know it. It’s fun!

Passiv for Vanguard

A quick note to our American friends. The tool that we used in the Canadian section is actually available to you as well as they recently added support for Vanguard as a broker connection. However, Passiv isn’t free for you guys because the deal they made with Questrade isn’t available to you. If you want to use Passiv to manage your portfolio instead of the spreadsheet I created, that’s up to you, but it will cost $99 a year for a subscription.

If you do decide that it’s worth the cost, please use this link to set up and account. We get a referral fee if you do, so it would help us keep this workshop free for everyone.

Conclusion

OK that’s it for today’s lesson. You have now made your first buys and are on your way to FIRE. Congrats!

Onto the next section!

Go back to the previous section


WORKSHOP TOOLS

How much does it cost to participate in the Investment Workshop? NOTHING. Because that's how we roll. All we ask is that you sign-up using the following affiliate links to keep it free forever:

For Canadians:

1) Questrade

2) Passiv

For Americans:

1) Vanguard

2) Empower



Disclaimer: The views expressed is provided as a general source of information only and should not be considered to be personal investment advice or solicitation to buy or sell securities. Investors considering any investment should consult with their investment advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decisions. The information contained in this blog was obtained from sources believe to be reliable, however, we cannot represent that it is accurate or complete.


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