The cheapest way I’m aware of (and the way I do it) is to get a “self-directed investing account” at TD Canada Trust, with Web Broker enabled. This can be a bitch to set up in person at a branch, but once it’s done it’s done and you can enjoy a lifetime of investing without paying some banker thousands of dollars to click a mouse for you. Because that’s what’s happening if you don’t do this yourself. A banker will charge 1-2% annually whether you make money or not. Bankers get away with this because it doesn’t sound like much and what they’re doing seems mystical.
It’s not magic. And it’s not difficult.
And when your balance is only earning 2% in interest annually, that means you’re losing all of your interest in fees if you have someone manage your account. FUCK that. YOU manage your account and keep those thousands so they can compound.
Once you have the Web Broker enabled TFSA account open, you add your TFSA as a bill payment from whatever other bank you normally bank with, and that’s how you get cash into the account.
Once cash is in there, you can buy whatever you want but I’d argue violently for choosing indexed mutual funds with the lowest Management Expense Ratio (MER) possible. As linked to above, my trio of death include TDB900, TDB905, and TDB902. This covers the entire Canadian, US, and International markets. It’s as diversified as you can get (aka lowest risk), with the lowest management fees, and gets you that juicy 7% average annual return over the long term.
There is no transaction fee when buying or selling mutual funds (as there are with stocks, which is about $10 each time you buy or sell). MER is what you pay the person who manages the entire mutual fund (this is not your local branch banker, this is some superstar way high up the TD foodchain).
As far as I can tell, this MER fee is unavoidable, so the best we can do is to minimize its damage as much as possible. AND THE DAMAGE CAN BE SIGNIFICANT. If you currently own mutual funds, find out what the MER is on the funds. It should be easy to look up online. Lia and I are paying between 0.33% and 0.51% MER rates on the TDB900, TDB905, and TDB902 mutual funds we own.
So if you’re paying 2% or 3% MER, that’s between 5 and 10 times more than you could be paying with TD’s E-Series funds. From what I’ve been able to find online, these are the least expensive indexed mutual funds available.
This year’s investing efforts got off to a depressing start. I had set a goal of investing $30,000 this year, which breaks down to $2,500 per month. To keep myself (painfully) aware of my (lack of) progress, I had a running tally on the whiteboard in my office.
After the first 3 months of 2018, Lia and I had only managed to invest $600 and so we were $6,900 below where we’d hoped to be at that point in the year (as seen in the image below, photographed in April):
You will also notice that I delayed publishing the last Retirement progress report because I was embarrassed at how little we’d invested. I also started reporting market value to avoid having to talk about the actual dollar amount contributed this year. I was working flat out, and I just couldn’t make enough to invest after monthly living expenses took their toll.
Lake also arrived in March, so there’s that.
Then, a few months ago, I stopped tracking the deficit and simply kept track of the positive number. I was just tired of feeling shitty about myself, and obviously looking at that red number grow negatively wasn’t having the desired effect on my behaviour. I erased the red and just tracked the green. I buckled down and worked a bit harder too.
Since then, things have improved.
I’m not entirely sure what happened, but keep in mind there’s a significant chunk of HST in that figure which we will have to make up for in the beginning of 2019. So that’s probably why our investing pattern is so end-of-year heavy: I spend the beginning of the year trying to build up money again to pay taxes owed for the prior year – because we’d already invested that HST / income tax (instead of setting it aside and having it earn nothing all year).
My TFSA has dropped 14% in the last quarter and now sits at $55,542.05. It’s down $6,094.70 in 3 months. This is actually a good thing because this is the lowest I’ve seen these indexed mutual funds in like 3 years, and we just bought a heap of them at this lower rate.
Lia’s TFSA is on the radar now, clocking in at $28.645.18 market value (it’s dropped 2.5% since we bought our first chunk of mutual funds like 2 weeks ago, indexes are plummeting).
It does not feel good at seeing our TFSAs drop like this. But on a conceptual level I understand that this is a great time to buy mutual funds. So in the long run we should do better because we bought during this slump, and have sold nothing. But still – nobody likes looking at their accounts when they’re low.
Our mortgage is sitting at $158,666.20 (down $1,301.95 since my last report).
Up to this point, my math has been a bit wonky in predicting future values for these retirement reports. I was calculating the total value of our investments compounding at 7% annually but really they compound at about 2.17% and are supposed to appreciate at 7% on average over the long term. I think the two are different but I struggle to know why.
I also don’t quite know how to create projections of future value based on these conditions of separate appreciation and compounding percentages. But I’ll try walking through it slowly and try to get close.
Say we contribute $30,000 per year, we can look at it like this:
We have an $84,187 balance going into year 3, 2019.
We hope to add another $30,000 in year 3, which will bring the balance to $114,187. The value of these mutual funds should grow by 7% annually, so by the end of year 3 we can expect it to have appreciated in value to $122,180.
Our mutual funds pay annual distributions (basically, this is an interest payment) at some point in mid-December. The distribution yield percentage for each fund is a little different, and I’m not sure if it’s fixed or if it changes year to year. At present, distribution yield is 3.04% for the International Index (TDB905), 2.3% for the Canadian Index (TDB900), and 1.16% for the US Index (TDB902). So at the moment, these distribution yields average to 2.17%.
I’ve selected the “re-invest dividends” option, so that dividend/annual distribution buys more shares of the same mutual funds already sitting in the TFSAs. As far as I can tell, this is what is meant by “compound interest”.
In the chart below of my TFSA’s performance, I’ve restricted the time period to the past 3 months, and you can see that things are tanking hard except the “Interests and Dividends” which have increased by $1,284.96. That’s the annual distribution which was just paid out on Dec 17th.
Wow that rabbit hole got deep. I totally forgot what I was doing there for a good hour while I looked all of that up. So we’ll take our future value $122,180 amount in December of 2019 and collect 2.17% in distributions, which comes to $2,651. Add that to the pile and we’re going into year 4 with $124,831.
Keeping with this pattern, here is my best shot at illustrating future years:
If someone who knows math or money or both wants to vet this that would be awesome. At this point it’s feeling a lot like a shot in the dark.
Based on the most recent MMM article, Lia and I will likely be aiming for between $1 and $1.4 million to consider ourselves financially independent / retired. This is way higher than my first guess that we’d be able to retire on $800,000. So at this rate it looks more like we’ll become financially independent at some time in our early 50s.
But the good news is that once we reach the latter years of our investing career, we’ll be covering ground exponentially faster than we had been in the beginning.
Investing seems to be like a train; it takes forever to even begin to get rolling, but once it does the sheer momentum becomes a force unto itself.
If you’d like to get your own war chest going, I’ve written a much shorter post called Simple Investing 101 so check that out.
Finally, if you want to stay up to date with these blog articles, please subscribe using the email opt in box somewhere on this page…
We’ve let the loaves “cold proof” in the fridge overnight to develop more of those signature sour flavours, and allowing for a bit more rise. You will get a feel for when to shape and put your loaves in the fridge to allow for that last bit of rise, as opposed to putting them in a little too late and over-proofing. When you put the shaped loaves in the fridge to cold-proof, fermentation slows way down but doesn’t stop entirely, so we want there to be a bit of room for them to rise, so we shape just before our bulk fermentation has reached its peak rise.
For me, timing this accurately involves more intuition and trial and error, and it’s no big deal if your timing is a little off. The results will still be pretty good. And eventually, with enough repetition and exposure to a variety of different bakes, you’ll begin to develop a keen sense of timing for your own bulk and cold-proofing stages.
All of this culminates in the bake, and contributes to explosive “oven-spring” (the bread rising nice and high) when done well.
For baking, I’d suggest actually baking in a dutch oven as you will get more complete heat that way and really increase your odds of baking great bread. If you’re using a dutch oven, make sure to preheat the oven with the dutch oven inside so everything is insanely hot when you put the bread in there. I’ve found that you can use the parchment paper as a hammock and lower the dough into the dutch oven.
My best results have come from baking for 30 minutes with the lid on, then removing the lid for another 20 minutes or so of browning. I also put a ceramic plate in the bottom of the dutch oven to prevent the bottom of the bread from burning, though this isn’t necessary if you don’t mind a little charring on the bottom of your loaves.
In the video I don’t use a dutch oven, opting instead for baking on a couple ceramic plates while adding steam with a water pan. Sourdough needs to bake in a moist environment in order to get the best results, and normally a dutch oven would seal in all the moisture, so we need to compensate when not using a dutch oven by adding a bit of steam.
One of the biggest mistakes I had been making early on in my sourdough journey was cutting into the loaves too soon after removing them from the oven. I didn’t realize that they needed about 45 minutes to continue to cook and, most importantly, for the crust to thin out! I was getting crazy-hard crust until I started letting the bread cool before cutting into it.
Cutting into the bread prematurely is a great way to ruin a loaf. The crust will be tougher, and the inside doughier (not as thoroughly baked) as had we been patient and let the bread finish baking outside the oven.
As mentioned in the previous bulk fermentation post – once fermentation is complete we’ve reached a point where we can do whatever we want with the fermented sourdough (make bagels, pizza, bread loaves, etc).
Here we’ll be making bread with it.
Shaping Sourdough Bread Loaves
At this point we want to avoid squeezing the air out of the dough as much as possible, as the more we do so the denser the end result. Generally, it’s better to aim for an airier, less dense “crumb” which is the bread interior itself.
I’m working with enough dough to make two loaves, but if you’re working with a smaller batch, feel free to skip the dividing part and only shape one loaf. I tend to like baking larger loaves, but it’s up to you.
I missed last quarter’s report so here it is up to today, and I’ll post another one for year’s end.
It’s up $24,807.38 since April… but it’s not actually that great. This is pretty blown out of proportion because we’re holding HST in there until it’s due, so that number is way higher than it should be. Another factor that makes that leap seem huge is I’m now just reporting the current market value of the TFSA because it’s gotten too confusing for me to figure out what I was doing before (which was something like tracking the book value of only the money contributed, ignoring changes in market value, which was useful to see how many net dollars were making their way into the account, but it also painted an unrealistic picture of the real-world value of the holdings and accounts for that past number being lower than it should have been).
SO from now on, market value is what you get!
I’m also happy to announce that my TFSA is now maxed out, and we’re stuffing Lia’s next. Why not have started with Lia’s, you’re wondering? It’s because we’re also rebuilding her SDRRSP from having demolished it to buy our house, so it seemed right to have some assets under my name. Not that it matters. We’re each other’s beneficiaries anyway.
I spoke to someone at TD to figure out where that TFSA limit was, and it’s actually on your most recent CRA Notice of Assessment (I think it says how much you’re still allowed to contribute to your TFSA). Because mine has also earned distributions (paid out in Dec) and appreciated in value, that explains why the value of my TFSA exceeds the 2018 contribution limit (of $57,500 if you were to start today).
The best thing to do with a TFSA is max it out, then leave it full so it can:
Appreciate in market value at an average rate of 7% over the long haul.
Earn roughly 2% in annual distributions in December, tax free. So at some point in late December, something like $1,200 in mutual funds will automatically be added to my holdings. Compound interest baby!
So at some point in 2019 I’ll put $6,000 into my TFSA.
Debt / Mortgage: $159,968.15
Down $3607.19 since last report. I love seeing the 5 in there where the 6 was now that it’s below $160,000. The iceberg is melting.
Once the levain has risen and is showing lots of bubbles on top, we can see if we’re ready to move onto the next step (bulk fermentation) by taking a spoonful of the levain dough and dropping it into a full cup of water. If it floats, that means we’re good to proceed (because the dough is full of air, which is a sign of excellent yeast activity).
If the spoonful of dough sinks, wait a little longer. You may have tested too early, and there may be more time for the dough to rise. If you can’t get it to float, don’t advance to the next steps – it will just end in sadness with nothing works out from here on in. Instead, go back to working with your starter (at room temperature the whole time) discarding half, feeding (which is just adding flour and water), waiting for it to rise fully, discarding half, feeding.. on repeat until it’s obvious that your starter is very “active” – meaning it’s rising as quickly as possible after every feed. An active starter leads to an active levain which leads to a successful bulk fermentation which leads to a successful bake.
But your levain passed the float test! So you’re ready to move onto the next step toward actually baking BREAD (or making pizza, or bagels, etc… regardless of what we’re making this bulk fermentation stage is the same).
Here’s the process for bulk fermentation:
Once bulk fermentation is complete, you can do anything you want with it. I will be showing you how to bake bread, turn it into pizza, make bagels with it, or roll it into one big dirty log of cinnamon raisin brown sugary debauchery.
Once the starter has strengthened to the point where it is consistently rising to double or triple its size within one day (or ideally, faster) and you’ve been discarding half (or more) at the top of the rise to mix in fresh flour and water, you may be ready to bake with it.
You can test this by feeding your starter and letting it rise to double or triple in size. Take a spoonful of it and drop that spoonful of starter into a full glass of water. If it floats, you’re ready to move onto the next step (because it’s full of air bubbles, which is a sign of good yeast activity).
All we’re doing in this next step is scaling up the amount of dough we’re fermenting. There isn’t enough active yeast in the starter to cause a large amount of dough to ferment in a reasonable amount of time, so we work up to it gradually with this middle step: the levain. Here’s we’re essentially just making a larger starter. I’m preparing to bake 2 loaves, so I’m mixing a pretty large starter. Even if you’re only baking one loaf, having a larger starter is a good idea as having more active yeast going into the bulk fermentation (the step after the levain) will help with a faster fermentation time.
To mix the levain, I combine most of my starter (you need to keep some of it for future bakes, so be sure not to use ALL of your starter!) with 5 heaping tablespoons of flour and enough water to achieve that thick doughey consistency – like thick peanut butter. I aim for a thick texture because a soupy consistency is more difficult to monitor for changes. A “stiff” dough will rise more obviously because it has more structural strength and does a better job of trapping all the gasses released during fermentation. A really runny dough will bubble at the surface, but it might not rise as much (because the gasses can get out through the top).
Once mixed, wrap the levain in a clear bag so you can keep in the moisture and watch it rise. The rise will take only a few hours if your environment is, and it could take closer to 24 hours if you’re baking in a cold environment. It’s fall right now, so ours will probably rise in about 12 hours.
Once the levain has risen fully, we’re ready to move on to the next step, which is mixing a big ball of dough to ferment and then bake – called bulk fermentation.
I lost the $100 bet last Tuesday (that I’d be able to dunk a basketball after 5 months of training), and I wasn’t even all that close. But I learned recently that growth happens when your ego is in a position to be embarrassed, so I feel like I’m on the right path.
Then today I mashed a few low rim dunks and filmed it, and was able to compare it to dunk attempts on another low rim (same height, 9′ 5″). In comparing the footage, it looks like I’m jumping higher (or maybe I’ve just gotten better with filming in slow motion to make it look more epic!).
Filming dunk attempts has helped big-time. I can tell that I get way higher when my approach is full speed, and I don’t get nearly as high with a slower approach. My best jumps today occurred after I mentally primed myself by telling myself to approach the jump as fast as possible. Otherwise I just do a medium-speed approach and get only a medium-high jump.
All the gains come from max effort, so I need to keep on top of keeping my approach speed maxed out.
I’ve lost the $100, but I’ve gained a few inches and lots of technique. Beyond that, I’m more hopeful than ever that I’ll pull this off on a 10 foot rim in the near future.
Lia and I ran into problems after having put the starter in the fridge overnight, then feeding and discarding too aggressively – potentially to the point where we lost most of our active yeast.
The starter is not rising very quickly at all. It almost seems to be slowing down. And because it’s so hot these past few days and the starter has been living on the kitchen counter – I know our rise is not being stymied by the weather. We’ve done something wrong. I think the yeast really didn’t like being put in the fridge overnight. My previous starter (which I dearly miss now, I had it for over 2 years and it was like a pet), handled all sorts of temperature changes without breaking stride – it was consistently hungry and produced a reliable rise every time.
This new, young starter is seemingly more finicky.
So the plan now is to guard against extinction by letting it over-proof and look for signs that the starter has fully risen and fallen before feeding it again. And when we feed it, we’ll be more careful about not discarding too much. With my previous starter, I could dump the entire jar out and the remaining residue was powerful enough to cause explosive rise. With this new one, we’ll have to build its strength slowly before we start abusing it with cold exposure and aggressive discards during feeds.
Essentially, we can’t advance until we sort this out and get that quick rise where the starter triples or quadruples in size over a few hours (in hot temps, and closer to half a day in cold temps). It doesn’t matter whether we’re getting a good rise if it’s taking 24 hours to do it in hot weather. That just won’t ferment a larger amount of dough fast enough when it comes time to bake anything substantial.
The mission here is to get the starter to a point where it’s rising as rapidly as possible because that’s going to result in bread that rises beautifully during fermentation and then again during baking.
To do this, we need the yeast to become HANGRY. And the more we feed them, the hangrier they get. They’re greedy – they’ll increase their rate of consumption to account for a surplus of available food (fresh flour and water).
As you’ll see in the video, we want to avoid excessive “over-proofing” – which is simply leaving the starter too long without feeding it. Over-proofing happens when the yeast consumes all the fresh dough (causing a nice rise) but then they run out of fresh dough to consume so they stop producing those fart bubbles. Without those gasses being produced by the yeast, the dough deflates and drops back down again.
The yeast also react to the lack of food by becoming less aggressive in the rate at which they consume fresh dough. So subsequent rises will be slower until the yeast adjust to surplus feedings again.
It’s not a big deal at all if the starter over-proofs. Over the long term, mine lives in a perpetual state of near-starvation in the fridge (with me only feeding it every week or two). Starters can survive like this indefinitely, the yeast is very resilient.
But when it comes time to bake something, that fast rise is crucial. So we need to feed the start a few times (discarding most of the starter each time we feed it) to get the yeast all voracious again.
NOTE: DO NOT PUT THE STARTER IN THE FRIDGE! I did this in the video and it was a mistake! It ruined it. The starter was too “young” and not yet fully established enough to tolerate the cold temperature yet. It seems that you should feed your starter at room temperature for a couple weeks before risking putting it in the fridge.
Once the starter is good and active/hangry/fast-rising – we can move onto the next step toward baking something, which is to build a levain.