Updates planned:
This article will be updated with graphics and charts to make the information easier to read and pick out.

I am not a qualified financial advisor; I will always encourage you to double-check/verify strategies with your preferred experts/financial advisors, and as well to double-check/verify the information provided in charts/lists with established websites/apps.

But now, let’s get to the fun part. To begin, please allow me to introduce you to the world of investing with a short Youtube video from The Swedish Investor (10 minutes at 1x speed):

Here are two images that sum up the four main “approaches” to generating income for yourself, which could also be seen as different ways of providing value for others:

Simplied version of the graphic on the left

Now that you know a little more about the mindset of the investor, here are a few reasons why you may want to invest:

– you want to “retire” eventually from one of the three other quadrants one day (Employee/Specialist/Business Owner) and still have a comfortable and reliable income source;

– you want your “extra” money to “work” for you;

– you want an additional source of income to supplement your lifestyle, or to allow you more flexibility/freedom;

– you want to participate in the financial system you are part of.

You probably already know of multiple ways of entering the world of investing; these paths can be seen as different modes of play with varying difficulty levels. Keep in mind you can invest in multiple modes and difficulty levels at the same time. 

For example, you could have:

  • an employer pension plan (Very Easy Mode), 
  • your own retirement account (aka 401k in the USA / RRSP in Canada), and/or other investment accounts like a tax free savings account (aka Roth IRA in the USA) / TFSA in Canada), and/or or a regular brokerage/investment account (for example, if you already maxed out your retirement and tax free accounts) and you invest in either a Mutual Fund investment or a Robo-Advisor ETF portfolio investment (Easy Mode), and,
  • another account(s) where you yourself are in charge of buying and selling securities (Hard Mode).

Here is a breakdown of some of the most common paths that lead to the investing world:

1. Very Easy Mode: 

  • Lower Risk
  • Steady low to average reward (depends on your company/organization!)
  • Hands-off investing
  • No control over performance

The employee pension plan.

Your employer offers a comprehensive pension plan. If this is the case, take advantage of it while you work there, and make sure to look into the details. (How many work years are required to get something out of it; what % to expect at different ages/worked years; what happens when you leave your employer).

2. Easy Mode:

  • Lower Risk (depending on what portfolio profile you choose)
  • Steady low to average reward (depending on what portfolio profile you choose,  usually between 3 and 8% annualized return)
  • Mostly Hands-off investing
  • Little to no control over performance

Here are two common paths for Easy Mode investing (both can be pursued concurrently):

a) Your employer offers to contribute to a 401k (USA) or RRSP (Canada) account up to “x” % of your salary.

This means the employer deals with a financial institution where they usually have a predefined mutual fund/portfolio into which they will invest for you. The employer will match your own contribution up to “x” % of your salary. Again, check the details. (What % of salary can you contribute; what % will the employer match; can you choose from different portfolios/investments to match your preferred risk level and expected returns; are you automatically signed up for it, or do you have to register through HR; what happens when you leave your employer).

b) You have your own retirement (401k / RRSP) or tax free savings account (Roth IRA / TFSA) and invest into a managed Mutual Fund through a bank/financial institution, or into an automated ETF portfolio (aka Robo-Advisor). What is an index (like S&P 500) tracking ETF

Some common examples of Robo-Advisors are Betterment and Wealthfront in the USA, NestWealth and Wealthsimple in Canada. The advantage of Robo-Advisors is that you get to keep more of your investment because the management fees (MER) are very low. If you choose the Robo-Advisor route, after a few years on the road and some experience gained, the question that could arise is: “why not skip the Robo-Advisor, and just buy the underlying ETFs myself?”.

The main advantage of Mutual Funds and Robo-Advisors is that you can set your accounts to automatically contribute an “x” amount of dollars from your checking account(s) and the system will purchase the investments for you according to the chosen portfolio. And this, regardless of the “x” amount contributed, because the system can obtain “fractional shares” for you.
You can purchase fractional shares with brokers like Robinhood and M1 Finance (only available in the USA), but know that this is something you cannot purchase yourself with most brokerage accounts (at least, not in Canada).

You can find reviews and comparisons of the most popular Robo-Advisors in the following links:

@NerdWallet (USA)
@MoneySense (CAN)

The following article gives a brief overview of Mutual Funds vs Robo-Advisors, and explains why savvy investors often end up dropping/skipping both the Mutual Funds AND the Robo-Advisors:
Low Cost Mutual Funds vs Robo-Advisors

Of note, these days, you will also find Index Mutual Funds, which offer the advantages of both Mutual Funds (automatic fractional investing) and Robo-Advisors (low cost index tracking). These are not widespread and are only offered with select banks. You will find more details here.

3. Regular Mode:

  • Lower Risk (depending on what portfolio profile you choose)
  • Steady low to average reward (depending on what portfolio profile you choose,  usually between 3 and 8% annualized return)
  • Mostly Hands-off investing (When using special Robo-Advisors like M1 Finance and Robinhood)

You have a retirement (401k / RRSP) and/or tax free savings account (Roth IRA / TFSA) and/or a regular (no tax advantage) brokerage/investment account, either through your financial institution or with a broker, and you handle the buying and selling of index-tracking ETFs yourself.

In Regular mode, you decide to bypass the Fund Managers and Robo-Advisors that offer only predefined portfolios, and you do your own index ETF purchasing and selling. You have two options for this mode:

a) You can create an ETF portfolio using a special Robo-Advisor broker that also invests for you automatically (like M1 Finance)

b) You can create an ETF portfolio manually (Google Sheets/Excel/PDF) and then use a regular broker to manually purchase the securities, according to a model you create or borrow.

If you create your own portfolio manually from scratch, you will find many ressources online (like Couch Potato) that give you example ETF portfolios with varying risk tolerances + expected returns for you to model yours after.

Here is one of Couch Potato’s portfolios, to give you an idea. The way to use these models is very simple:

Let’s say you have 100 dollars to invest every month and you start with the “Balanced” portfolio (when you are new to investing i.e. have very little invested already, it is recommended to start with a higher risk/return to kickstart your investment, because of the power of Compound Interest). As you get closer to the age when you want to start selling (cashing-out), you may want to rebalance your portfolio for lower risk.

Using the “Balanced” ETF portfolio in the Couch Potato .pdf as a model, we would buy:

24.00$ of Vanguard Canadian Aggregate Bond Index ETF ( VAB:TSX )
7.00$ of Vanguard U.S. Aggregate Bond Index ETF ( VBU:TSX )
9.00$ of Vanguard Global ex-U.S. Aggregate Bond Index ETF ( VBG:TSX )
18.00$ of Vanguard FTSE Canada All Cap Index ETF ( VCN:TSX )
24.00$ of Vanguard U.S. Total Market Index ETF ( VUN:TSX )
14.00$ of Vanguard FTSE Developed All Cap ex North Am. Index ETF ( VIU:TSX )
4.00$ of Vanguard FTSE Emerging Markets All Cap Index ETF ( VEE:TSX )

(For a total of 100.00$ invested). 

In the USA, it is possible to buy fractions of ETFs through various brokers (say, to buy 24% of an ETF “unit”), however this is not yet possible in Canada with most banks/brokers. This means that you wouldn’t be able to actually buy 24$ of an ETF if one whole unit is worth more. This complicates your investment task initially, as you can only buy whole shares, you have initial planning to do (simple math and percentages, but work nonetheless).

4. Hard Mode:

  • Risk is higher
  • Can be very Hands-on if you choose it to be (depends on strategy and tools)
  • Rewards can range from negative to extremely high, depending on your strategy, diligence, and luck
  • More control over performance (since you are the one buying / selling your securities directly)

You have a retirement (401k / RRSP) and/or tax free savings account (Roth IRA / TFSA) and/or a regular (no tax advantage) brokerage/investment account, either through your financial institution or with a broker, and you handle the buying and selling of securities OTHER than index-tracking ETFs yourself. 

This is where we get into stock picking (the “hard” part). You will find a plethora of stock data websites (Guru Focus, Morningstar, Bloomberg, Simply Wall St., to name a few) that provide full up-to-date information on thousands of stock tickers (not exclusively dividend stock), Index ETFs, Dividend ETFs, etc.  

Dividend.com, like this website and many others (link to top 100), focuses on dividend income stock. Why dividend stock specifically, you might ask? See here!

Depending on your strategy and goals, there are tools you can use to make it almost completely “hands-off”, especially in the USA, with brokers like Robinhood and M1 Finance (yes, this one again) that have auto-investing and fractional share capabilities.

5. Very Hard Mode:

Private equity stakes, venture capital funds. These are part of another ball game. You need to already have big cheddar to play in those fields; no dividend investing is relevant here.

Last Words:

Remember, you can be playing the investing game in all modes and difficulty levels.
That said, the goal here is not to become entirely dependent on / enslaved to Wall Street (unless you really want you to!).

Learning and effectively using a skill and / or developing a business system that provides value to others will always be more satisfying than watching a stock portfolio grow.

Example of an optimized investment portfolio:

From Wealthy Education