Best Investment in the world & The Best Way to Invest

I have always enjoyed hearing from readers, whether it’s via comments or emails. Quite often, I learn a few things through these reader interactions and sometimes a blog post comes out as a result. That’s how the $360k dividend income/living off dividend post with Reader B got started – with a simple email exchange…

Anyway, I received a few emails recently that had a similar tone. They went along the lines below:

“Congratulations on getting sizable dividends. If you were to start investing today, would you start with dividend investing? Or would you go with index investing and forget about dividends?” 

“Do you think dividend investing is the best investment in the world? What is the best way to invest?”

Interesting questions eh? 

Let’s see if I can address them one by one.

Dividend investing vs. index investing 

Before our financial epiphany, we were investing primarily in mutual funds and GICs. Although we held some individual stocks, we didn’t really know what we were doing. Learning about dividend growth investing finally gave us a direction. 

I’ll be honest. Neither Mrs. T nor I knew anything about ETFs back in 2011. Having learned how expensive mutual funds were (in the form of high MER’s) and how little real return GICs provided, we honed in on dividend investing as our key investing strategy. 

We also liked receiving regular dividend income regardless of how the market was doing. Having a regular dividend income was a great help psychologically. It helped us stay invested.

If we were to start investing today, would we have done something completely different? 

Absolutely!

Over the years, companies like Vanguard, iShares, Horizon, TD, and BMO have created some really low-cost and amazing index ETFs. I am a big advocate for the all-in-one ETFs and would have absolutely no problem building our investment portfolio with one of these all-in-one ETFs. 

Why do I like them so much?

Simplification. 

It is extremely easy and straightforward to hold just one index ETF and let it do the work for you. In case you’re wondering, I have summarized the best ETFs in Canada to get you started. 

• All-in-one ETF showdown – TD vs. BMO vs. iShares vs. Vanguard.

So, if we were starting today, how would I invest?

Well, I’d put all of our money in either VEQT or XEQT (probably XEQT as that’s the one we picked for our kids’ RESP). Once we have a sizable amount of XEQT, say $200k or so, we would then start considering purchasing dividend stocks. I would pick a handful of dividend stocks, either 10 or 20 and just do an equal weighted distribution. Say we have $200k in XEQT and saved up another $20k to invest, I’d then invest $1k each across the 20 individual dividend stocks that we selected. 

Essentially, it’d be the same approach as what we’re doing today – hybrid investing. But instead of buying individual dividend stocks first and then ETFs, I’d switch it around. Investing in an index ETF like XEQT would provide immediate diversification across all sectors and different regions. This is not something a dividend stock can do, even if you invest in a multinational stock like Procter & Gamble, Costco, or Apple.

Personally, I would not forget about dividend investing because I like receiving regular dividend pay cheques and constant cash flow. 

If one were to go 100% in an all-in-one ETF and forget about dividend investing at all, is that an issue?

Absolutely not. 

The important aspect is that you’re investing money and not hiding your money under the mattress!

Some might argue that GCIs are great to “invest” in but we do not invest in GICs for various reasons. Depends on your situation, it may make sense to invest some money in GICs.

Best Investment in the World & The Best Way to Invest

Now to the second question – what is the best investment in the world? And what is the best way to invest? 

Is index ETF the best way to invest? Or is dividend investing the best way to invest?

Is one better than the other and therefore deemed as the best way to invest? 

It’s actually neither. 

Let me repeat that. 

Dividend investing is not the best investment strategy in the world. Dividend investing is also not the best way to invest.

Index investing is also not the best investment strategy in the world. Index investing is also not the best way to invest.

Confused? 

Allow me to explain.

For me, I think there’s no one-size-fits-all when it comes to investing. That’s why there’s no such thing as the best investment in the world or the best way to invest. 

I strongly believe that the best investment in the world and the best way to invest is a strategy that allows you to stay in the market throughout all the ups and downs. 

As I’ve said many times in the past and will doubtlessly say in the future, It’s not about timing the market, it’s all about time in the market. 

On paper, investing is all about math and how to get the highest return for your money.

But investing is way more than just math. I’d say 90% of investing is about psychology and emotion. Can you stay invested over the long term? Can you prevent yourself from making emotional and knee-jerk decisions that could potentially wreck your investment? 

The key is to find an investment strategy that will allow you to stay invested long term so you can achieve your financial goals. 

Everyone will have different financial goals; that’s why personal finance is personal!

Some might want to have enough money for a downpayment; some might want to have enough money to retire at 65; some might want to have enough money to retire in their early 40s; some might want to have enough money to pass down to future generations; some might want to have enough money to pay for the yearly vacations. 

Knowing your financial goals will allow you to align your investment strategy and stick with it long-term. 

It’s not about returning 250% in one year and walking off into the sunset. If you believe in that kind of magical unicorn stuff, please do yourself a favour and stop now.

$10,000 returning 500% in a year will result in $50,000, which seems fantastic.

But compounding 10% over 30 years will give you far more money than that ($174,494.02).

Take advantage of the power of compounding all you can and let your money work hard for you so you don’t have to. (This means you have to be patient, be non-emotional, and weather the inevitable ups and downs of the market.)

It’s silly to argue what the best investment is and what the best way to invest is. Rather than arguing and putting down people for their investment choices, shouldn’t we cheer and applaud each other for investing our money rather than hiding it under the mattress?

How you invest is not important. What’s more important is that you are actually investing! Make sure your money can grow over time. 

Stop being obsessed about getting the highest return or beating the market. Stop putting down people because they invest differently than you. Stop finger-pointing and typing in capital letters because someone on the internet has a different view than you. Align your investing strategy with your financial goals – that’s the critical point! 

To sum it up, there’s no such thing as one single best way to invest. What works for me may not work for you. 

The important part is to stick with your investment strategy long term and not jump back and forth between strategies. Allow your money to compound over the long term, and understand that no matter what you invest in, there will be ups and downs. 

Remember, your ego is not your amigo when it comes to investing!