The investment world can be a nerve-wracking place for anyone, let alone millennials. It can be hard to fathom the idea of dedicating some of your resources to the possibility of future returns when you’re focused on getting by day-to-day.  Investing can seem downright daunting — it’s hard to know what to invest in, when, and how much.

BNN spoke with the Dave Nugent, the chief investment officer at Wealthsimple, a robo-advisor startup based in Toronto. Here’s what he had to say about first steps for investing, debt repayment, real estate, and more. 

INVESTING TRENDS AMONG MILLENNIALS

• “There’s a huge movement to low cost. It’s widely been publicized the effects of fees on your returns. Certainly a move to lower cost [means a movement] into ETFs, whether that be a DIY strategy that you implement yourself or whether you use a service like Wealthsimple.”

• “There’s certainly a transparency thing where millennials just demand more out of the services that they use and understanding exactly what they’re paying for.”

• “Everything is moving digital and I think investment management is just another piece of the pie. But we still believe in the idea of human advice, we just don’t believe that you necessarily need to have full-time advice.”

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FIRST STEPS TO INVESTING AND FINANCIAL LITERACY

• “The first thing that [young people] need to think of is, why are they going to invest? Whether that be because they want to save for a big purchase like a house or pay for a wedding, or if they’re going to think longer term, like for retirement. And secondarily to that is, in how long are they hoping to achieve that goal? Having those two things is the first starting point to figure out what potential investments they could make that would be suitable for the time that they plan to invest.”

​• “There are a lot of great resources available online. There’s a ton of great personal finance blogs out there. Specifically around ETFs, canadiancouchpotato.com is a wonderful website. And then there’s personal finance blogs that are all very Canadian-focused that are out there where people can get educated about the basics.”

YOU DON’T NEED A LOT OF MONEY TO START INVESTING

• “I think one of the misconceptions is that you need a lot of money in order to invest. I think that’s an excuse. There’s plenty of ways to invest nowadays, whether it be through ETFs, whether it be through a mutual fund, whether you’re going to go buy your own individual stocks. You can get started with very, very little money.”

TIME IS YOUR FRIEND

• “Certainly for younger people, it’s [important to] just get started. Get used to seeing the market go up and down and following the headlines and what’s happening in the world because inevitably, we’re in a world now where very few people have guaranteed pension plans, and so you have to create your own in order to stop working one day … The earlier you can start the better, from an education standpoint, but it’s also — time is a big, big ally for anyone investing. The longer the time you’re in the market, the higher likelihood of positive outcome.”

PITFALLS

• “I think one of the pitfalls a lot of millennials will get themselves into is they’ll try investing in the stock they heard at a party or what the headline is on Twitter or on TV. I think making sure that you’re not putting all your eggs into one basket is certainly a very, very good lesson. Sometimes, you have to learn it the hard way. Making sure you have a diversified portfolio is important.”

‘EMBRACE RISK’

• “It comes back to time horizon. If you’re a millennial who wants to buy a house in three years, then you should probably be conservative. But assuming you’re investing for the long term, millennials need to embrace risk and the stock market. Where interest rates are today, if you take out inflation and taxes, you are essentially losing money in a guaranteed way. If I told someone, ‘You are guaranteed to lose $10 on your $100 over the next five years,’ no one would do that. But the idea of seeing your $100 fluctuate both up and down is a very scary thing for many people. And that’s the importance of getting started early and dipping your toe in and getting the feel for what it’s like to see your hard-earned savings go down.

"We’ve gone from 2009 to now, and for the most part, the markets have gone pretty much up with a few corrections along the way. But no one really knows what they’re made of until you’ve actually gone through a meaningful downturn. You need to get a few wounds on you, so to speak, in order to really zone in on what your true risk is as an individual.”

PAYING OFF (STUDENT) DEBT VERSUS INVESTING

• “If your interest rate [on your debt] is five per cent or more, [you’re] probably better off to just pay down debt. The other rule of thumb would be, if the potential return of the investment is relatively close after tax to what you’re paying on your debt, [it would] probably best to just pay down your debt. Paying down your debt is a guaranteed return. Nothing in the investment world is guaranteed. And so depending on your risk tolerance, we typically would recommend people just pay down their debt and allocate a very small amount to investing just so they can get a feel … but you can never go wrong with just paying down your debt, especially given the fact that interest rates are so low right now. Sometimes that can be an opposite reason, but at some point rates will go higher and you don’t want to get caught in a situation you’re now paying even more on your debt.”

THE ETERNAL QUESTION: TO BUY OR NOT TO BUY?

• “It is a little bit unnerving that many millennials that you speak to today, their reason for wanting to buy real estate is they feel as if they don’t do it now, they’re not going to be able to get in… Nothing ever goes up forever. The stock market doesn’t, the real estate market doesn’t. You hear a lot of times that the goal is to buy a condo, and that condo happens to be five or six hundred square feet and they’re single, they’re out of university. Well, in five years, let’s say you get married or you have a kid, you’re not going to want to live in that five or six hundred square foot place and therefore, are you going to sell it — which obviously costs a lot of money — or are you going to hold it in and rent it out?

“I think we’ve sensationalized real estate investing where everyone thinks they’re the next real estate maven. I think people need to ask themselves why they are investing in the stock market or real estate, and are they doing it for the right reasons with the right time horizon. If you want to own a home for the next 20 years, great, go do it. But don’t do it because everyone else is telling you to do it because it’s life or death and you’re never going to be able to afford it if you don’t do it this second.”

• “If you need to spend every last dollar you have to buy a home, the whole idea of preaching for diversification is out the window… No market is immune to economic shock, so it’s all about moderation and making sure you don’t have all your eggs in one basket.”

GIC: THE LEAST USEFUL INVESTMENT PRODUCT FOR MILLENNIALS

• “If you’re trying to buy a house in a year or two, [a] GIC [Guaranteed Investment Certificate] is probably the best way to go because it’s guaranteed. But, whenever you have a guaranteed investment, it typically is going to come with a very low return. In fact, if you get a guarantee that has a high-return promise, you probably should run for the hills. There is no free lunch out there in the investment world, other than I guess diversification. The challenge with GICs is they just pay you so little. And so for a millennial that has a long time horizon, it’s just not a product that is going to be very useful to them and help them down the road.”