Short Insights
Many of my readers love talking finance and learning new ideas in in-depth articles. However, if you prefer some lighter reading, here are some short articles on “Insights”.
Why won’t Canadians pay for investment advice?
Great article in Globe & Mail by Rob Carrick. The media has been heavily anti-advice for years. The focus has been mainly on low fees, rarely mentioning that the fees pay for advice or attempting to evaluate the cost/benefit of advice. Evidence shows this has been a disaster for Canadians. The comprehensive study by CIRANO shows that people with advisors have on average 4.2 times larger portfolios. ETFs are sometimes called “Extra Tiny Funds” because ETF portfolios are almost always tiny. 🙂 The majority of advisors, unfortunately, do not do proper financial planning. They mainly just sell investments. Another study “Making a…
Read MoreAchieving Peace of Mind
Worried about debts? Do you know when or even if you can retire? Most Canadians do not feel secure financially because they look for security in all the wrong places. The conventional wisdom is to focus on paying off debts & buying “safe” investments, while not knowing if either of these strategies will pay off in the long run. Let’s say you were going on vacation but you hadn’t planned or booked anything. You were just going to get in the car and start driving. How would you feel about your vacation? The key to a successful vacation is having a plan…
Read MoreTax Refund is NOT a Benefit of RRSPs
Getting a tax refund is one of the main motivators for contributing to RRSPs. However, there are two main benefits of RRSPs and the tax refund is not one of them. The benefits of RRSPs are: Tax-free growth (same as the TFSA). Tax gain or loss depending on your post-retirement tax bracket when you withdraw vs. your tax bracket now when you contribute. Tax-free growth? Isn’t it tax-deferred growth? A simple, but dramatic example will clarify this. Let’s say you contribute $10,000 to your RRSP, your investment doubles in one year and then you withdraw it. Assume you are in a 40%…
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Are you “Smart Money” or “Dumb Money”?
Amateur investors often look down on professional fund managers thinking they are not worth their fees. Meanwhile, professional fund managers tend to think of amateur investors as “dumb money”. What is “dumb money”? It is investors that invest when the markets are high and then sell when the markets are low.
Read MoreLosing Money by Chasing Yield
The classic truism by Raymond DeVoe Jr. is particularly appropriate today: “More money has been lost reaching for yield than at the point of a gun.” Searching for investments with higher yields has often led to bubbles and has often lost money for investors. For example: The sub-prime mortgage-backed securities that collapsed in 2008 were marketed as money market funds with a higher yield. The income trust bubble that was popped in2006 by new tax rules was all about a perceived higher yield. Collapse of the “junk bond” market in 1989. The issue with reaching for yield is that investors often think…
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