Where do you start?

Not Investment Advice

.... other than do your research when looking to invest

It wasn't long ago that @ecohive wrote a post about purchasing a mutual fund in his home country of Nigeria. If you are interested you can read the article here. The general idea of the article is that a small investment ($5 / N7,000) can start you towards earning real money. Being Canadian I typically shy away from mutual funds, not because they don't have a place but because they typically have high fees.

After doing a little bit of digging I've come to the conclusion that different countries have different rules. However, even with the different rules I really like the idea of diversifying between real world and virtual (blockchain) investments.

Now @ecohive liked the mutual fund idea because it had a small initial investment with a high interest rate of over 18%. In Canada there is nothing with an interest rate even close to 18%. Even stocks so risky that you can smell them a mile away still don't come with that kind of payout. He didn't like the idea of ETF's because they are less common and generally looked down upon.

That was surprising to me because in Canada they are kind of my "Go To" for starting investments.

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After some looking

He mentioned a few so I looked up one of them.

Stanbic IBTC 30

Now he mentioned a minimum buy in of $500 vs mutual funds of only $5. That seemed just outrageous to me. Still... I looked into it.

This ETF needs a minimum buy in of 500 shares and each share was valued at N100 when it was issued. N50,000 just to buy a single ETF. What a rip off.

Then I looked further. You have to pay a percentage to get into the fund. Then you have to pay a percentage to sell the fund. Then there is a fee the fund pays itself to manage the fund. Now it is about 1.5% to get in and another 1.5% to get out.

No wonder the fund isn't popular!

But maybe if the fund does well. I took at look at that and in one place it says the ETF is worth N300 per share. In another place it says N500 per share. That's a red flag. What is the actual value of the ETF? Then to make things worse.....the ETF is lightly traded so maybe the sell is at N500 and the buy at N300...and minimum lots of 500. Seriously? Buy at N250,000 but only get N150,000 if you want to liquidate.

Don't walk away from that. RUN!

With numbers like that I wouldn't be looking at ETF's either! Kind of like credit cards. In Canada they are a great way to get a discount on everything. In Nigeria they are the worst scam I've ever seen. Different countries, different rules.

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Why Canadian ETF's are a little more humane

Today I purchased an ETF using the WealthSimple trading platform.

The difference between the systems is night and day:

Canada	Nigeria
No fee to buy	1.5% Fee to buy
No minimum number to buy	500 share lot minimum
Fractional shares available	Fixed lots only
No fee to sell	1.5% Fee to sell

In short: If I wanted to buy $5 worth of the HUTL ETF in Canada? No problem. I would only get about 0.25 shares but I'd still get my fractional share.

But what if I looked at Mutual Funds?

Canada	Nigeria
$500 minimum to start	$5 minimum to start
$25 monthly investment	No ongoing investment
No fee to purchase	No fee to purchase

Now I will not claim that is entirely correct. I do know in Canada initial fees are anywhere from $100 to $1000 depending on the bank. Making additional regular investments anywhere from $25-$100 depending on the bank. Also you can purchase once and hold. It seems that things are a lot more lenient in Nigeria ... buy I have no practical experience there.

But funds have fees (at least in Canada)

The other big difference in Canada is the:

MER

Management expense ratio.

Now mutual funds are offered by banks. These banks have to pay their employees who market the funds. They have to pay the people who are buying and selling within the fund and of course the bank wants to make a profit. As a result Mutual Funds sold from the bank tend to have an expense ratio. People don't pay the bank directly but...

Assume that the bank gets $1000 put in a mutual fund. The Mutual Fund invests that money and lets say it gets $70 (7%) in a year. The first thing it does is take off its 3.5% ($35) and then reports to the holder -- you made $35 (3.5%) for the year. They hide the MER in the fine print.

If you purchase an ETF? Well, the ETF can be actively managed (higher MER) or passively invested (much lower MER) but either way the expense is much lower. I believe the HUTL I purchased is on the higher side (2.5% or so--didn't look very hard) while many are as low as 0.5%. The less they pay in fees the more a person holding the investment stands to gain.

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But what are Mutual Funds and ETF's?

Of course I may have gone off without explaining what the difference is between Mutual Funds and ETF's.

Here is a very brief primer.

There are a lot of investments out there. There are stocks, bonds, REITS, GIC's, Time Deposits, and many many more. The average person doesn't know one stock from another. They don't know how to evaluate shares, price graphs, yield curves and all the other financial data that goes along with it.

If the average person just wildly guesses and hope it pays off. Much like if I was to give you 4 different currencies on HIVE:

EDSI, SURGE, PAKX, and GLD. Which is better?

Answer: They are all awesome in very VERY different ways.

Both ETF's and Mutual Funds have professionals who decide what to invest in. Also they invest in a bunch of different investments to limit risk. For example:

HUTL invests in these as their primary investments --

That is the top 10 holdings but its only 1/3 of what they actually have. As an individual investor researching 30 or more different stocks and doing the paperwork on all of them? Not realistic.

Mutual Funds and ETF's let you get a bunch of different investments in one single purchase. Mutual Funds are typically offered by banks with bank fees. ETF's are listed on the stock market with stock purchase fees (varying depending on the brokerage--WealthSimple is nice because it doesn't have fees).

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Fees without having fees

Now I should point out that while wealthsimple doesn't have fees it does work on an order book. That means there is a "BUY" rate and a "SELL" rate. The difference is the spread. You always pay more to buy and get less when you sell. It's not an actual fee but rather how the market works. Exactly the same thing you would find on the Hive-Engine. I'd show an image but the Hive-engine seems to be down right now :( Very unfortunate.

My usual advice for new investors?

1. Start off with mutual funds

If you are only investing $1,000 to start then the difference between 3.5% Fees (mutual fund) and 2.5% Fees (ETFs) is about $10 per year. At that amount of money it is worth it to pay the bank to do some hand holding and give you some advice to get the investment process going.

2. Learn from your mutual funds

Once you are in the habit of investing read your reports and figure out what you actually own, why it makes money, and why you like to hold it (or don't). Once you are more knowledgeable then think about switching to ETF's.

That 1% difference on $1000 is small.... But at $10,000 or $50,000 it adds up quickly!

3. When your portfolio grows larger?

I personally would like to recommend individual stocks. You buy and you sell and you get exactly what you want. No additional ongoing fees so you can maximize your growth potential.

IF YOU ARE DISCIPLINED AND RESEARCH WISELY!!!

I did this early in my investment cycle but later on? I found that family responsibilities just didn't leave me with enough time to do my own research. At that point I decided it was better to let experts do the work and pay the management fees for their expertise.

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I love the bridge between virtual and real

How did the Stanbic ETF do? Well, it went from N100 in 2019 to either N300 or N500. That means that you either tripled your money or you quintupled your money. Unfortunately the Naira dropped by 50% End result: You made money but not nearly as much as it looks like at first glance.

Diversification is important. With HIVE you get access to HIVE which goes up or down with the fortunes of the blockchain With HBD, another Hive coin, you get a US Dollar Proxy that more or less just sits there as a major currency option.

If you mix all three? Less risk than any one by itself.

If you move Naira to HIVE? You get an international currency in case the Naira takes a dive. If you move your HIVE to HBD? You get a stablecoin in case HIVE takes a dive. If you move your HIVE to Naira? You take out value so you can purchase things in the real world.

But for me? I like using my real world investments to give real value to HIVE, then have them balance over time.

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Balance between real and virtual world

Assume I have $10,000 in Hive and $10,000 in a Canadian ETF. If I put my interest from the ETF into Hive I'm buying $750/year of hive spread out each month. Result: I'm supporting the chain AND if the chain takes off like I think it can then I make major cash in the end. On the other hand my $10,000 in HIVE (properly curated and juggled) will pay out about $1,300 annually. Money which I can take out and invest so I get real world value.

Over time the two will balance. When the real world does well it subsidizes the Crypto. When Crypto does well it balances out the real world.

Just my thought and way of doing things but it makes me happy :)

Is this investment advice?

Absolutey NOT Regulators say I can't give advice and I believe everyone should do their own research!

Do I think investment is important? Absolutely and I hope to support @ecohive to grow his mutual fund stash and hope in return he will put money back into Hive (and maybe even this community) to keep both sides strong.

Thanks for reading..

..... And better posts to come once I have the community actually up and running :)