Interactive Guide To DIY Invest Using Qtrade

Use this interactive guide to start your DIY investing journey or come back to it along the way. Below are the steps to take, broken down into bite-sized pieces. Click the blue buttons of each step to open a detailed page with step-by-step instructions, educational material, or tools relevant to that part of the DIY investing process. You can print out a paper copy of the basic process maps if you haven’t already.

In the wrong place?

When you are starting out, you must keep it simple.

Even as you gain experience or build a large portfolio, still keep it simple enough that you can execute your plan. There are two optional complicated steps in the process: meshing DIY with other assets and asset location. Consider them if you have a large multi-asset portfolio (meshing) or a major tax burden (asset location tax optimization). However, do not let them paralyze you. They are complex and the benefit for the time investment and execution risk taken on is dubious for most people. It is usually better to spend more time in the market and then adjust as you gain experience than to miss those returns trying to make the “perfect” plan. There is no such thing.

Steps To Execute Your DIY Investing Plan

Step 1: Choose what account type(s) to use.

Accounts are like the pots that you will plant your investments in. They are simply containers, but each has their own size and characteristics. Different accounts are optimal for different purposes. Select the ones that suit your situation to start, and then add more as you build your garden.

Use your tax-sheltered accounts first and tax deferral if you are in a higher tax bracket now than you will be in the future.

Usual sequence: FHSA -> TFSA -> RRSP -> Corp and/or Cash Accounts. If saving for kids: RESP -> Informal Trust

Step 2: Open Your Account(s)

Opening your first account will take the most time. Usually under an hour. Subsequent accounts go very quickly because your login, profile information, and identification verification are already done.

Corporate accounts and Informal Trusts require a paper application. Don’t worry, I have done some leg work to make that easier!

Step 3: Funding & Linking Account(s)

You may have done this as part of the account opening process above. If not, or if you want to add a funding method or bank account link, this section goes over the options and processes in detail.

Use Electronic Fund Transfer (EFT) to link a bank account.

Use Transfer Accounts to transfer from another brokerage. Transfers in kind, US-listed holdings, cash transfers, and partial transfers are all discussed. This is where people often get stuck. So, there are pictures.

Step 4: Determine Risk Capacity

When you plant your garden, you don’t want to be forced to harvest before the plants are ready.

Risk capacity is your financial ability to take on investment risk. The more investment risk you take, the higher the potential return. However, higher risk also means a greater potential for loss and usually more fluctuations along the way.

How much investment risk can you reasonably take while being able to reasonably expect that you will have the money that you need when you need it? Translate that into how much you can invest and an appropriate stock:bond asset allocation for your risk capacity.

Step 5: Assess Risk Tolerance

Risk tolerance is your ability to stick to the plan when your investments fluctuate up & down in price (volatility). It is about emotion and predicting how you will respond to future events. So, it is hard to quantify or be precise. Fortunately, you do not need to be perfectly precise, and can gently adjust course with experience. Use multiple approaches to get off to the best start that you can. Quick and simple is also ok. 

Use the tools and exercises in this section to choose a stock:bond allocation that takes enough risk to maximize potential returns with enough stability for you to stick to the plan.

Step 6: Choose Asset Allocation For Capacity & Tolerance

You assessed your risk capacity to find how much you can invest & what asset allocation will ensure invested money is there when you need it. You also did your best to consider what asset allocation would suit your emotional risk tolerance from multiple angles.

In this step, you combine those asset allocations to determine what you should start with. Use the more conservative of the two possibilities. Further, if risk capacity due to a 3-to-10-year timeframe is your limiter, learn how you can adjust in the future as it improves.

Optional: Mesh DIY Investments With Other Assets

Skip this if you are just starting investing, have few other assets, or it will paralyze you from action. Also, if you aren’t soothed by your other assets when your DIY investments drop, then skip this.

If you are comfortable and have multiple assets like a pension, managed investments, a marketable business, whole life insurance, or real estate. Consider how they mesh with your DIY investing & use the Portfolio Blender tool to help.

If meshing with other assets: Your DIY investments may have a higher or lower stock:bond ratio to blend with your other assets. The portfolio of your total assets (DIY & otherwise) should have the stock:bond ratio from the Choose Asset Allocation Step #6.

Optional: Consider Tax Optimized Asset Location

Skip this if you are just starting investing, only use tax-shelters, or don’t have a high income. It is clearly Not worth the execution risk in those cases. Read below to understand why.

If still considering tax optimization, learn more about the complexities and considerations.

If you face a high tax burden, understand it, and can do it easily. Consider an approach that you can reliably execute.

Step 7: Choose Suitable ETF(s) To Use

If using a more complex approach, research and choose the ETFs, stocks, or bonds that suit you.

Step 8: Buying ETF(s) Using Qtrade

This is as simple as using online banking with the Qtrade platform. However, it is often still scary for people the first few times that they do it. They don’t want to make a mistake when money is involved. Understandable, but fortunately surmountable with some help, reassurance, and experience.

In this section, I will show step-by-step, with screenshots how to buy an ETF to help give you confidence. After you have done it a few times, it is a simple 5-minute process.

Step 9: Rebalancing (If not using an All-In-One ETF)

All-In-One Asset Allocation ETFs: If using an All-In-One ETF, just buy more when you have the money. They automatically rebalance for you.

If using separate ETFs: We rebalance occasionally to keep our portfolio from getting too concentrated in one area. That is to maintain diversification and control risk. The good news is that you don’t need to do it very often nor be super-precise. Rebalance when you have money to put in or 1-2 times per year. That will often simply mean buying more of what has been lagging. When your portfolio becomes really large, then you may need to trim (sell) small bits of what has done really well.

Step 10: Tax Season Preparation & Record Keeping

Tax Preparation: Your tax forms become available on the Qtrade site at the end of February or March on this schedule. There will be RRSP contribution receipts, T5008, T3, T5 etc as appropriate. I simply print these out and give them to my account for when they file my tax returns. That would be in April for personal accounts and at the close of the fiscal year for corporate accounts.

Don’t worry about the tax forms and your corporate year-ends aligning. They won’t align perfectly unless your corporate fiscal year end is Dec 31st. Your accountant will deal with it. No biggie.

Transactions & Adjusted Cost Basis: When you do eventually sell holdings, you will realize a capital gain or loss. That is calculated from the difference between what you sold for and the adjusted cost basis (what you paid). The cost basis is the average cost and changes each time you buy or sell units. You can simply print off your transaction history and give it to your accountant to track. That is what most people do. If you want an extra safety net for accuracy, you can keep track on your own as well.

Still stuck or nervous after using this page?

If you have set up your account or plan to set up your account using The Loonie Doctor Qtrade link, then I will do my best to help you out. I am not a financial advisor and am not qualified to give specific financial advice. You must make your own decisions and push the buttons to manage your own accounts. However, I can tell you what I think. I know that taking control of your investing can be intimidating and the second opinion or presence of a colleague can be reassuring. If that is what it takes to get you rolling, then I will try to help. Contact me.