As most readers know I’m pretty big on low cost investing – it’s one thing to talk about it – how about some actual suggestions on how to do it!!
- Save on taxes – Investing in a taxable account when you have tax free retirement accounts available is costing you money. Max the rrsp/401(k)/roth accounts first!
- Save on taxes part II – If you have both taxable accounts and non-taxable accounts then make sure you have the less tax efficient investments (ie bonds) in the non-taxable accounts.
- Merge accounts – If you are paying annual account fees then it doesn’t make sense to have multiple accounts with the same account type (ie RRSP). Get organized and streamline. This also applies to bank accounts.
- Buy ETFs and index funds instead of managed funds – They are much cheaper and do the job better. Do this at a discount broker.
- Lower MERs are better – If you have to buy managed mutual funds then keep an eye on the costs and returns – lower costs are better. Monitor the returns – are the high-priced funds outperforming a passive alternative?
- Pay the lowest trading fees possible – There is no benefit to paying higher costs.
- Trade as little as possible – If you can’t conclusively show that your trading increases the return then don’t do it. Each trade costs money so less is better.
- Don’t invest so much – the less investments you have, the less your costs will be – pay off debts instead. It also doesn’t hurt to live a little once in a while.
There you have it – follow some or all of those rules and you’ll be just fine! Do you have any suggestions to lower investment costs?? Can you come up with the 9th way to lower costs?