We’re talking about your pension of course.
Without investing those pension contributions, the savings bucket that OTPP and OMERS has wouldn’t go very far come retirement (as that money would decline in value over the years, thanks to inflation).
While investing your pension contributions is a job that’s left to professional fund managers (employed by OTPP/OMERS), the act of ‘investing’ is something all education members could and should be doing to save for all financial goals big and small.
Contrary to popular belief, investing doesn’t require a ‘top of the pay grid’ kind of income level. In fact, it’s something you can do very early on in your career—starting with as little as $2 a day.
Not convinced? Keep reading.
For example, many Canadians buy two cups of coffee a day at $2 each ($4 a day in total). While you may spend more than that, for the sake of this example, we’ll assume this is your absolute ‘bare bones’ cup of java.
Now, take half that spend— and put the $2 in daily savings into an investment account.
Considering the average annual rate of return of the stock market over the last 10 years has been around 6% (after inflation), you will have saved/earned approximately:
All of that to say—don’t let money (or a seeming lack thereof) detract you from investing. Because where there is a will (to cut back on your daily coffee spend), there is a way.
Above numbers calculated using a compound interest calculator (with interest compounded monthly); assuming regular contributions of $14 a week ($2 x 7) and that the stock market maintains an average annual rate of return of 6% per year after inflation, compounded after the end of each month.
Thanks to your pension contributions, the bulk of your retirement income is covered. Now what about all other life events and goals between now and then?
Of course, you can never predict how your life will play out from one school year to the next (let alone 5 to 10 years down the road). However, setting a few goals to begin with will at least reaffirm your own specific reasons for investing in the first place.
Life as an education member is busy enough without having to add ‘remember to contribute to my investment account’ to your to-do list. That’s where pre-authorized contributions (PACs) enable you to take a ‘set it and forget it’ approach to investing (as contributions will automatically come out of your bank account).
With a PAC you can:
Plus automating your investments will ensure that your contributions remain consistent—which is key for achieving your financial goals within your set timeline.
What this basically means is, don’t put all of your investment eggs in one basket.
Although it doesn’t guarantee against loss, diversifying minimizes overall risk by investing in different areas that would each react differently to the same market event (see ‘diverse sectors’ below for an example).
Here are a few things to consider when it comes to the diversification of your portfolio:
When it comes to investing, a good rule of thumb is to resist taking the ‘beginner’s luck’ approach (i.e. crossing your fingers and hoping for the best). Instead, reach out to one of our financial specialists—and one that happens to have a unique understanding of your world.