Sponsored by BMO Global Asset Management
Does building a stock portfolio sound hard as hell? That’s because it is.
Contrary to popular belief, trying to pick the next big thing is one of the worst ways to invest especially if you’re new. So how can you break into the market without a Ph.D. in Finance? Nathan Kennedy is here to teach us how to build an investment portfolio the stress-free way – with Exchange Traded Funds (ETFs).
Nathan is something of a social media extraordinaire, tackling our collective financial literacy crisis one relatable video at a time. His personal finance content has exploded in popularity, landing him over 9M likes and over 500K subscribers on TikTok alone. If you’re going to learn how to invest, you might as well have fun.
Swap complicated stock picking for the path of least resistance. Nathan explains how to take your financial power back and build an ETF portfolio the easy way.
- When financial literacy isn’t enough
- Taking control takes guts
- The craziest thing about investing
- This is the hardest part
- I want to buy an ETF, now what?
- Ready, set, buy!
- Nathan, what is the best financial advice you ever received?
- How is Nathan investing in himself?
- What’s the best strategy for a young person new to investing?
When financial literacy isn’t enough
You’ve heard it before, “They don’t teach us this stuff in school!” is the financial pain point of a generation. But what if you grew up with money-talk around the dinner table and still messed up? That’s exactly what happened to Nathan.
“From a very young age, my mom and dad were very open with me about money. It was top of mind and I always felt like I understood the value of a dollar.”
Until university schooled him with a rude awakening. He opened his credit card statement and instantly felt nauseous. “I maxed out my student credit card. I was gobsmacked by how much I spent. Where did all this money go?”
Taking control takes guts
The road to financial wellness is paved with personal responsibility. Instead of letting anxiety get the best of him, Nathan got to work. He went through his transaction history with a fine-toothed comb, and unwittingly sparked a passion for personal finance.
In just a few months, he paid off that $4,000 credit card. No small feat for a university kid making $10 an hour. “It was just so empowering. I've never felt like that in my life about money.”
Nathan says the moment he became debt-free is still his biggest win to date. It changed his entire outlook on money and set his life on a new trajectory. “I was blown away by what you can do once you figure out your money. Now I just want to share that passion.”
The craziest thing about investing
His passion grew into a bonafide career path. A few years in and half a million subscribers later, I asked him, “Nathan, what’s the craziest thing you learned about investing?”
“Compound interest!” he exclaimed emphatically. “I realized that if I just invested consistently over a period of time, I could be a millionaire someday.”
And with that easy-to-follow recipe, almost anyone can become a millionaire. Or, at the very least, achieve financial independence. “It just takes patience and consistency, ” he explained. So what’s the hang-up?
This is the hardest part
Stress-free investing is a skill issue. Before you do anything, make sure you arm yourself with information. To build an ETF portfolio the easy way, you need to understand what an ETF is and how it works. Take it away, Nate:
“A stock is a single piece of one company. But an Exchange Traded Fund (ETF) can have a bunch of stocks from lots of different companies bundled together in one. You can buy and sell an ETF on a stock exchange just like a regular stock. And the price fluctuates up and down just like stock prices do.”
Why take your chances buying stock in one company when you can own a little bit of everything? Nate again:
“It's so much easier to invest in an ETF than to speculate on a bunch of different companies. ETFs are diversified, meaning your risk is lower and returns are much more consistent.”
More than that, different ETFs can hold different types of securities, not just stocks. A broad-based ETF will hold all the securities traded on a certain exchange like the TSX, S&P 500, or the NYSE, for example. Something like an all-in-one ETF can hold different proportions of stocks, bonds, commodities and other assets weighted to your risk preference – which makes building an ETF portfolio a total breeze for beginners.
BMO ETFs offer a range of all-in-one Asset Allocation ETFs that can be used as a core investment portfolio, based on risk tolerance and time horizon. These ETFs are a one-ticket solution where the asset allocation is determined by professional managers, and where the asset allocation is automatically rebalanced. They are low cost, and there is no double dipping on the fees (all in MER of 0.20%* includes the cost of the underlying ETFs). Examples include our BMO Balanced ETF (ZBAL), or BMO Growth ETF (ZGRO) and BMO All-Equity ETF (ZEQT). To learn more about BMO asset allocation ETFs, click here.
I want to buy an ETF, now what?
If an ETF is a bunch of different securities bundled together, how do you buy one? And which ones do you choose? First: know thyself.
Different ETFs are built with different levels of risk. And the level of risk you choose depends on your tolerance and how far in the future your goals are set. Nathan explains, “figure out what products you want to invest in, where can you invest in them, and what account you'd like to open.”
Determine your risk tolerance
For a younger person with a longer time horizon, they might want something with more risk, like an all-equity ETF. For someone much older, they may want less risk with a balanced or conservative ETF that holds a higher proportion of lower risk assets, like bonds for example.
Choose a brokerage
There are many low costs, online-only brokerages that are easy to access. Do some research about fees, ease of use, and customer reviews. Opening an account online is as easy as following the prompts and answering some questions. Canada’s Big Banks also offer self-directed investing platforms. They tend to charge higher fees but can also offer a wider range of tools that might make more sense for you, depending on your needs.
Choose an account
Finally, decide on the type of account you want to use for investing. For most Canadians, this is usually an RRSP or TFSA depending on your income level and stage of life. According to Nathan, “I think a TFSA is the tried and true beginner path to start investing.” Nothing is set in stone, you can always switch to another type of account if you need to.
Ready, set, buy!
Now that you’re set-up, it’s time to buy. Just like an individual stock listed on an exchange, every ETF has its own ticker symbol. Log in to your brokerage account and search for your ETF’s ticker, select it from the results and press Buy. That’s it!
Nathan, what is the best financial advice you ever received?
Without skipping a beat he replied, “to invest in myself.” Nathan says a real estate investor told him the best strategy to build wealth was to invest in things like his skills and education, career, or business: “Just double down on what you need to do while you're young and you can make more money than you ever will in the market.”
How is Nathan investing in himself?
“My short-term goal is to really maximize my income through my business and try to grow as much as I can,” says Nathan. “Then, medium term is to launch additional businesses off my brand. And long term is trying to achieve financial independence for myself and for my family.”
How will you adjust your investing strategy as you achieve those goals? With confusion in his voice, he answered, “I don't see myself ever getting out of the stock market or trying to do something else. I’ll continue to invest through thick and thin. I’m in it for the long term.”
What’s the best strategy for a young person new to investing?
Don’t be a hero. “We’re all exposed to the same uncertainty. Just consistently buy in – don’t speculate.” Nathan explains the number one thing that will trip you up is trying to predict the future.
Consistency is king, he explains. “I think generally, the best approach that's pretty universal is to continually buy ETFs for the long term, and just continue to max out your registered accounts. You don't have to do anything else to be successful if you just do that.”
“Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any investment funds managed by BMO Global Asset Management. Any reference to a particular company is for illustrative purposes only and should not be considered as investment advice or a recommendation to buy or sell nor should it be considered as an indication of how the portfolio of any investment fund managed by BMO Global Asset Management is or will be invested. This social media network is an independent organization and is not affiliated with BMO Global Asset Management.”