Investing $50 every day for 365 days (challenge)

Ben holding up a $50 bill and pointing at it with text saying CHALLENGE: DROP $18,250

Introduction

Over the last few weeks, I’ve been trying something different: investing $50 every day. And I’m going to continue this until I reach 365 days! Let’s take a look at this year-long experiment in which my bank account is the guinea pig! In this post, I’ll be going over all the details of this self-imposed challenge. It’s gonna be a fun and I’m doing this so that YOU can learn from the risks I’m taking!

The gist of it is that I’ll be investing $50 a day into the stock market, using ETFs with insanely low trading fees! Before jumping into this, I want to acknowledge that everyone is at a different place in their financial journeys. For some, investing $50 a day is an absolutely puny amount. To that, I say congratulations – this experiment can be scaled indefinitely! But for many, this is something they’re not able to do at this time in their lives. But you can set yourself up for future success!

No matter where you’re at in your financial journey, everyone will learn something from this experiment. That, or at least you’ll be entertained by the mistakes I make throughout the process! 

Don’t forget to watch the associated YouTube video. And smash that like button for the YouTube algorithm!

Without further ado, let’s get to it!

Extreme Dollar Cost Averaging

The first thing you’ll need to be familiar with for this “investing every day” challenge is the concept of Dollar Cost Averaging. The simplest explanation of this is from Investopedia

What is Dollar-Cost Averaging (DCA)?

Dollar-cost averaging (DCA) is an investment strategy in which an investor divides up the total amount to be invested across periodic purchases of a target asset in an effort to reduce the impact of volatility on the overall purchase. The purchases occur regardless of the asset’s price and at regular intervals; in effect, this strategy removes much of the detailed work of attempting to time the market in order to make purchases of equities at the best prices. Dollar-cost averaging is also known as the constant dollar plan.

Source

DCA’ing in simple Ben-terms

In the simplest of Ben-terms, Dollar Cost Averaging is regularly purchasing equities at set time intervals, regardless of their price. Doing so theoretically entirely removes the emotional component of the trade completely. This is beneficial because our lizard brains are still there to mess up logical, premeditated decision-making. 

Now that you’re familiar with what it means to DCA, my strategy is to take Dollar Cost Averaging to the absolute EXTREME. Typically, “regular internals” are weekly, monthly, or quarterly. Not daily 😂. 

If we were dealing with regular stocks and NOT ETFs, this challenge would cost me way too much. There would be so little profit (if any at all) because trading fees for regular stocks are a minimum of CAD $4.95 with Questrade. On the other hand, because Questrade has incredibly low ETF trading fees, this strategy will only cost me about 1 or 2 cents per day in trading fees! That’s somewhere between $2.53 to $5.06 for a whole year! More on that math coming up!

💹 Get $25~$250 cashback when you start trading with Questrade using my QPass offer code: 626124608437845

What are ETFs?

An exchange traded fund (ETF) is a type of security that involves a collection of securities—such as stocks—that often tracks an underlying index, although they can invest in any number of industry sectors or use various strategies. ETFs are in many ways similar to mutual funds; however, they are listed on exchanges and ETF shares trade throughout the day just like ordinary stock.

Investopedia: ETFs

ETFs in simple Ben-terms

In our case, ETFs are pools of stocks with low management fees (i.e. 0.6% annually) in predetermined industries. As a long-term couch potato investor with an investment horizon of 30-years, ETFs offer great low-risk diversification.

Breakdown of my personal finances

Next up is running my own numbers. I needed to know this to decide how much I can comfortably invest throughout the year. So, this is how I’ll be able to afford to invest every single trading day of the year:

  1. On average, I clear $‭3,508‬ per month from my salary. That’s $‭42,096‬ per year (after taxes, benefits, RRSP contributions, etc.) as a Digital Content Specialist in North York, Ontario (just north of Toronto’s Core). I’m excluding “bonus cash” from tax returns and write offs in this.
  2. My rent is $900 flat per month. Everything included.
  3. My cost for food averages $155 per month.
  4. My phone plan costs me exactly $56.50 per month. I’ve been with Koodo for years and love them. 📱 Switch to Koodo and you’ll get $50 off your bill!
  5. That leaves me with approximately ‭$2,400 after all my recurring monthly expenses.
  6. Rounding to about 30 days per month, $50 per day times 30 days is $1,500 per month that I’ll be investing for this challenge.
  7. That leaves me with $900 left for saving or discretionary spending. I’ll need that because I’ll also be rounding up during this experiment! More on that in a bit.
  8. Finally, I always keep $15,000 in a Tangerine HISA as an emergency fund… which is literally over a year’s worth of expenses for me! 💲 Get $50 for FREE! Open a Tangerine account with my Orange Key 55116795S1

Compressing 365 days into 253 trading days

For those of you who were seeing through the cracks of this plan, this is where I answer your burning question! “How can he be investing $50 every day of the year when the market isn’t open for 365 days? Well, it just means I need to fit 365 days of trading into 253 days.

You see, the NYSE, NASDAQ, and most importantly for me, the TSX are only open for 253 days a year. So, I’ll do some adjustments to my “$50/day for 365 days straight” math. Here’s how it’ll work. I’ll still be aiming to spend $50 per day for 365 days but will have to compress the spending into those 253 days! 

Some quick math shows… 
365 days * $50 = $18,250 is what I will be investing over the course of an entire year.
$18,250 / 253 days = $72.13 is what I will actually be investing on each trading day of the year.
That means my actual minimum daily investment per trading day is $72.13 per trading day. 

So, that’s what I’ve been doing since May 12th, 2020 will continue doing until May 12th, 2021! Now how can YOU do this?

Investing $50 every day: how you can do it too

There are three types of people reading this. Those who:

  1. Have massive wealth at this moment,
  2. Are living paycheque-to-paycheque, and
  3. Are somewhere in the middle.

No matter your Financial Skill Level, it’s easier with these three things in mind if you want to make this work:

  1. Have a stable income
    A stable source of income is key to starting out – something like a core day-job. This provides structure and stability. You can still do this with a variable income but you just might need to be a little more disciplined and a bit more savings.
  2. Save first, invest second
    You’ve gotta prioritize having an emergency fund first. If you don’t have that, don’t invest. Only invest money that you won’t need other the course of at least the next 10-15 years (average bull/bear market cycle).
  3. Surround yourself with the right people
    You’ve probably heard the “you’re the average of the FIVE people you surround with” saying. Well, think again. It’s bigger than that. You’re actually the average of all the people who surround you.

My shameless plug? If you want support and encouragement, let me know in the comments below as well as subscribing to my YouTube channel! I’ll be posting more finance-related videos moving forward.

Final tidbits

As for investing $50 every day, I’ll be posting updates here and on YouTube. Along with updates, coming up should be some videos about how I’m saving so much and what expenses I cut to make this happen. 

And finally, a tidbit of knowledge before I sign off:
Financial habits, just like regular habits, are like cables. You weave them a strand at a time until it they’re so strong that you can’t break them. I’m here to say “you’re cable-able of this!” (I couldn’t resist ending with a pun). 😜

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Ben Durham

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