The MIllennial Portfolio

millennials modified

It’s Millennial day here at Greater Fool! Free Vespas, face stubble, tats and Urban Outfitter gift cards for everyone. After all, you’re special.

You’re also in better financial shape than your wrinkly parents, or so says a new BeeMo report. Economist Sal Guatieri (who’s at least 45) claims Millennials make about 2% more than their parents did at the same age, with young families doing even better – earning about double what the last generation did in 1984.

The bad news? When it comes to real estate, the M-people are seriously pooched. More than 85% carry mortgage debt (compared with 79% for their parents at that age), with the average house now costing about 12 times the median family income. That multiple was just 5 in Michael Jackson times.

So, Millennials who choose to invest their money instead of trying to turn into their parents are probably geniuses. After all, housing is destined to correct, mortgages suck (no matter how cheap the rate), real estate hurts mobility, and the last thing any hipster needs is a condo you can’t dump.

But as I detailed yesterday, most Millennials are wusses. They’re insanely fearful of risk and loss, tend to exaggerate financial swings (inexperience is a powerful thing), extrapolate recent events into long-term truths (thank you, Google), are functionally innumerate and therefore easy prey for [email protected] So, it’s turned into the savings account-and-GIC crowd who have no idea that there is anything in the world between houses (safe) and stocks (zombie apocalypse).

The kids seem to agonize that another 2008 will occur, even though few suffered any losses. They’re duped by media coverage of financial news which focuses on short-term swings and always portrays investing as gambling (in terms of ‘winning’ or ‘losing’ assets and strategies). They lust after houses sitting at all-time price levels, but run screaming from equity markets at the same point. Like most people, Millennials have no long-term focus and end up buying high and selling low.

So here are some tenets of the Millennium Portfolio.

First, understand that balance defeats volatility and saves your butt. For example, a balanced portfolio of 40% safe stuff and 60% growth assets has averaged 7.3% over the last 10 years, despite the 2008-9 correction. When the Dow shed 55% in 2008, the balanced portfolio lost 20% – then regained it all in 2009. It took the stock market seven years to recover. Over the last four years, this portfolio has returned more than 10% annually.

Second, no individual stocks and no mutual funds. Stocks are too volatile and funds too expensive. The best choice are ETFs – exchange-traded funds – which are cheap, liquid and mirror indices, giving you tons of diversification with less risk. Third, if you have a substantial amount of money (over $150,000) then hire somebody to manage it. A fee-based advisor should cost no more than 1% of what you hand over to manage (paid in dribs, monthly), and it’s tax-deductible. That’s far less than owning an equity mutual fund at the bank, plus you get a personalized portfolio, free hand-holding and a guy to yell at.

Fourth, wait a little. We’re at a time when most financial assets are too expensive. Normally stock and bond prices move in the opposite direction (called ‘non-correlation’) but these days everything has been goosed (just like houses). Strikes me a good buying point for equity-based investments (ETFs holding all the companies in the TSX 60 or the S&P 500, for example) would be 10-15% below current levels.

Of course, that will take guts. I can assure you when the market sheds 15% this blog will be brimming with dour dinks telling you 2008 is just around the corner and stocks are on their way to zero. But it won’t happen. There’s no crash rerun coming, no financial crisis, no bank failures, no bond default, no reason to hide in cash. If you believe otherwise, I don’t expect you to buy a house or have children.

Finally, what should a Millennial invest in for a period of four or five years while waiting for the housing gasbag to erupt and prices to moderate, so you have a fatter down payment and some diversification?

Here are the asset types, and the weightings. Don’t ask me to spell out individual ETFs, as it would be improper to do so. I am not in the business of promoting, or selling, any individual securities.

Canadian bond index ETF
20%
Preferred share index ETF
20%
Canadian equity index (large cap) ETF
15%
US equity index (large cap) ETF
20%
International equity index (large cap) ETF
20%
REIT index (Canadian) ETF
5%

Of course, once you set this portfolio up, careful to buy assets at attractive prices, you must routinely rebalance it. That means selling off the excess amounts of those assets which increase in value and spreading it among the poorer performers.

Yeah, I know it’s counter-intuitive and contrarian. It’s not what Mom would do. And that’s the point.

155 comments ↓

#1 View on 05.15.14 at 7:05 pm

Garth, what is your advice on defined contribution benefits? Can that be rolled into an RRSP or TFSA? How exactly does it work and how can I benefit from this best?

#2 Peter on 05.15.14 at 7:10 pm

Great post! My former co-worker told me to read your blog posts over a year ago and I’ve been hooked ever since. You have changed my financial goals going forward. Keep up the great work!

#3 AG on 05.15.14 at 7:11 pm

Great article as always. Similar to the Canadian Couch Potato ETF model. I would definitely suggest the readers have a look at that.

http://canadiancouchpotato.com/model-portfolios/

#4 gladiator on 05.15.14 at 7:16 pm

Why compare average house prices with median family incomes? A median-median or average-average comparison would be a better gauge of the situation.

#5 Smartalox on 05.15.14 at 7:16 pm

Does anyone know a good website to query stock data into a spreadsheet? It’d be relatively easy to set up a spreadsheet to track a portfolio, and calculate how much of each should be sold.

The only problem that I’ve had, trying this has been the unwieldy formatting that comes along when you use MS query, or Yahoo!

Any suggestions? Smokey, you’re the guru, what do you use?

#6 Derek R on 05.15.14 at 7:17 pm

Garth lays it on the line. Yay!

#7 gladiator on 05.15.14 at 7:20 pm

And by the way, the 10y German bund yield fell of the cliff today, generating negative real return. Europe is running to safety. Why worry about it? Look at the correlations between markets and also among assets – they’re high. And when TSHTF they will be so close to 1, it won’t even be funny. Nowadays, what happens in Europe or Japan affects us much more than it used to.
Pardon my rant.

#8 wallflower on 05.15.14 at 7:21 pm

Nice pina colada, Sal Guatieri.

Second year university, part-time work at brewery, I earned $16,000 that year.
1980.
Thinking the newly graduated are struggling to earn that, full-time, today!

#9 1980 Baby on 05.15.14 at 7:23 pm

My mutual funds kicked the crap out of ETF’s last year.

#10 Jackofall on 05.15.14 at 7:24 pm

Garth, serious questions: Why such a low exposure on REITs? Surely equities backed by hard assets (especially ETFs holding US-based real estate assets) should be a larger part of a balanced portfolio? And why such a high exposure to Canadian assets? Surely when housing implodes, it will take a good chunk of the Economy with it which is never a good thing for any sort of financial asset(equities, bonds, REITs, or otherwise).

#11 visorman30 on 05.15.14 at 7:26 pm

I’ve been eagerly waiting for this post. Although, just a question on classification would the REITs be considered safe stuff (fixed income)?

I ask only because I thought it was a 40-60 split.

#12 Fleabitten Monkey on 05.15.14 at 7:27 pm

Is the REIT weight at 5% not a tad bit light? Or is this simply cautionary given a rising rate environment on the horizon? Would like your take sir.

#13 Happy Renting on 05.15.14 at 7:27 pm

My picks, for blog dogs to comment/critique:

Cdn bond: ZAG, XRB
Prefs: CPD, ZPR, XDV (yes, some indecision here)
Cdn equity: ZCN
US equity: VUN, XUS
International equity: XEF, VEE
REIT: ZRE

Interested to hear what others have picked, and why.

#14 Victoria Real Estate Update on 05.15.14 at 7:35 pm

House prices in Victoria fell more than 1% from March to April 2014 (index). Single family home sales in 2014 continue at a pace that is well below Victoria’s long-term average. SFH sales totals have been extremely low since 2010.

Many first-time buyers (who bought from 2007 to 2013 in Victoria) have underwater mortgages and cannot sell their properties without either claiming bankruptcy or cutting the bank a huge cheque. These underwater mortgage holders have, effectively, been eliminated as move-up buyers, which is part of the reason sales have been slow in Victoria since 2010. This was the case in many US cities as house prices there peaked and started to decline after 2006. It contributed to lower prices in the US and it has contributed to lower prices in Victoria as well. This trend will continue for Victoria. The number of underwater mortgages will continue to increase as prices fall and this will lead to further price declines. Normally, once a housing market is in this situation, prices continue to fall until they reach a level where incomes and rents can provide price support. For Victoria, that support level is far below current prices.

House prices in the US are close to where they should be based on incomes and rents, after having fallen from the lofty highs reached in 2006. Canada’s housing bubble will deflate as well. House prices in Ottawa, Montreal, Quebec, Halifax and (of course) Victoria are lower now than they were a year ago.

Let’s take a look at house prices in Atlanta, Georgia, where house prices are supported by incomes and rents. Prices in Atlanta were in bubble territory in 2006, but reverted to the mean after that.

House criteria:
* min. 3 bed, 2 bath
* min. 1800 sq. ft. of above ground primary (main) living space
* 2004 or newer
* attached double garage

In Victoria, a house like this would probably cost $700 K or more.

In Atlanta, the combined value of these 5 houses (that fit the above criteria) is about 679 K.

$ 77 K ( 4 beds, 3 baths, 1,840 sq. ft.)
$ 121 K ( 4 beds, 3 baths, 2,181 sq. ft.)
$ 141 K ( 3 beds, 4 baths, 3,144 sq. ft.)
$ 170 K ( 4 beds, 2.5 baths, 2,195 sq. ft.)
$ 170 K ( 5 beds, 3 baths, 3,084 sq. ft.)

Girls and guys, house prices in Victoria are deep in bubble territory and will fall a lot more before reaching bottom. Renting while prices continue to fall is an easy way to secure a better financial future for you and your family. Buying now (near the peak of a major housing bubble) would lead to serious financial hardship. Millions of American families deeply regret buying at or near the peak of the 2006 US housing bubble as they continue to face serious financial problems as a result of their actions. Buying a house with 5% down is risky at best. Buying a house with 5% down near the peak of a major housing bubble is outright stupid. Do the intelligent thing and wait for prices to fall a lot more before buying.

Until next time – Cheers!

#15 Mishuko on 05.15.14 at 7:37 pm

If I were to buy a Canadian listed ETF that was an s&p 500 or international ETF and placed it in my TSFA, would the gains / distributions still be tax free?

Or would it be wiser to place said investments into an RRSP / Cash account?

Thanks in advance all!

#16 sheane wallace on 05.15.14 at 7:42 pm

“The last duty of a central banker is to tell the public the truth” – Alan Binder Federal Reserve Board Vice Chairman, Nightly Business Report 1994

#17 Old Man on 05.15.14 at 7:42 pm

#8 wallflower – Si, estoy tomando clases de espanol.

#18 Oh Lawd Help Us on 05.15.14 at 7:49 pm

I’m 26, $70K invested. TFSA is maxed, some RRSP, and some non-reg. Global Couch Potato portfolio. Very similar to what Garth recommends.

Today my company had meetings to introduce transitioning to a new retirement plan offering, another group RRSP comprised of mutual funds. I spoke with the HR princess who did the meeting. She literally said “I don’t know anything about money, I just spend it.”

This is why Gen Y is screwed.

#19 Detalumis on 05.15.14 at 7:50 pm

I think you have a typo, the BMO report didn’t say that young families today earned double what they did in 1984, it said the median net worth was almost double.

#20 sheane wallace on 05.15.14 at 7:52 pm

Garth, you are heavyweight North America. Although your portfolio will behave very well I would probably dedicate no more than 25 % to North America, mostly US internationals, after all here is where the least growth is and we are only 25 % of the world economy.

Europe and Asia/Pacific and BRICS are great alternative as well as some energy and high yield dividends, these will perform exceptionally well.

The correction in the stock market would be most likely around 15-20 % for a balanced portfolio, 30-35 % overall from the top as the tree would need to be shaken before the next cycle and the great inflation can be started, just hang-in (which is easy to say but difficult to follow)

#21 raf on 05.15.14 at 7:52 pm

Garth,

the spectrum of opinions on CDN residential real estate is confusingly varied. There are esteemed economists like David Rosenberg who pull out metrics that suggest valuations are not out of whack. You suggest buying now could be foolish, laying out a compelling case. But does your position not rest largely on a substantial increase in lending rates?

Though an uptick in rates may occur, looking at the semi-soft economic growth forecasts and the heavily indebted governments whose budgets would be crushed by even a modest increase in borrowing rates, is there not now an overall tendency in the financial system/marketplace to avoid ushering in much higher rates for fear of a complete collapse? In this scenario, low cost borrowing could continue for some time here (like in Japan) and leave renters behind owners.

Thanks for your thoughts and great blog.

#22 espressobob on 05.15.14 at 7:53 pm

#9 1980 Baby

My mutual funds kicked the crap out of ETF’s last year.

Sure they did?????? Good luck with that!

#23 G Dawg on 05.15.14 at 7:53 pm

Probably good info….but where am I going wrong buying sweet double baggers like BCE…for ex……up 98% in 5 years ( 19% p/a) while paying a 5% divvie along the way? I get the ETF theory….but stock picking has outperformed the ETF by a wide margin….another good example is TD Bank……CGI ….Tim Hortons…Saputo…CP Rail…….rockets I say… rockets .

#24 Millenial on 05.15.14 at 7:53 pm

“Fourth, wait a little. We’re at a time when most financial assets are too expensive.”

Garth, I nearly fell out of my chair when I read this. I’m not a wuss, everything IS overpriced right now.

#25 ILoveCharts on 05.15.14 at 7:59 pm

So I’ve been recently holding my TFSA and RRSP in cash because the market seems irrational. Garth hounds on that fact in every post so last night I bought a bunch of ETFs. Now I come here and he is advising to keep it in cash!

I advised this four years ago. — Garth

#26 Vangrrl on 05.15.14 at 7:59 pm

#5:
My friend uses one from Squackfox, I believe it is.

#27 Vangrrl on 05.15.14 at 8:04 pm

#5:
Whoops, spelt it wrong!
http://www.squawkfox.com/2012/02/07/rebalance-portfolio/

#28 Inglorious Investor on 05.15.14 at 8:14 pm

$150,000 minimum? Inflation?

For most M-people, this is serious money. — Garth

#29 ILoveCharts on 05.15.14 at 8:27 pm

Responding to Garth:
Four years ago I think I was still paying off my student debt.

The timing is funny – that’s all. Your advice is sound. I can live with $100 in losses from trading fees and one off-day.

On the plus side, my money is still liquid and at less risk than if I had bought that place to live last summer.

I assume that I should never actually have cash but should instead hold all money in a special ETF that is basically just money?

#30 espressobob on 05.15.14 at 8:30 pm

#23 G Dawg

Hindsight is 20/20! Any predictions moving forward? When it comes to indivual stocks, good luck!

#31 takla on 05.15.14 at 8:34 pm

http://vancouver.en.craigslist.ca/van/reo/4465495846.html
And so the realestate infighting begins,this was posted today ,makes one wonder if some of these”out of country” buyers of grossly inflated Van area homes are starting to lose it as they watch their property prices deflate.
check out ‘Vancouver pricedrop.com’ for some more current mega price drops on Vancouver area properties

#32 Len on 05.15.14 at 8:41 pm

Tough sell for the younger crowd not because they are conservative (as you claim) but because many are aware of the financial rigging going on. I teach at a University and talk to young people regularly and surprisingly large numbers are not interested in propping up the status quo. In fact, they believe it is unsustainable and they are simply making different plans. One common theme is localized community, investing in useful skills and knowledge, sustainable practices for living and the list goes on.

I would imagine you don’t come across these smart millennials because they are not likely to contact an insider of the system for advice. Totally different paradigm. Though I do remember you encouraging a young couple who had dreams for sustainable living – so good on you for that one.

One thing that I hear a lot and may be surprising to some is the idea of inert money. Binding paper money to tangible (and intangible like knowledge) assets to make them inaccessible to rentiers and speculators.

There is a sea change out there not visible to believers in the system we find ourselves in. When the shift happens, as it will in our declining system, those inside the system will wonder what the hell happened.

Hard to bamboozle sharp minds with motivation and superior access to information.

#33 Smoking Man on 05.15.14 at 8:43 pm

DELETED

#34 Jamie Czerwinski on 05.15.14 at 8:45 pm

I feel like your Canadian weighting is a bit high. But I like your Canadian REIT inclusion. Seems a bit of an admission that rates could go down if inflation and employment stay low, dontcha think?

#35 theprivatemind on 05.15.14 at 8:48 pm

Good advice. I would suggest adding an emerging market component to the portfolio given the attractive valuations of these securities versus developed markets. The volatility will be higher but they offer the best long term returns amongst the current opportunity set.

#36 Buy Low Sell High on 05.15.14 at 8:49 pm

Pic- Her boyfirend is freaked out becasue she has some kind of snake poking around in the side of her nightgown. He’s thinking “Wait a minute shouldn’t I have that problem!”

#37 Tej on 05.15.14 at 8:50 pm

I only have 1 mutual fund, made me ~23% this past year, not too bad for a MF.

#38 Inglorious Investor on 05.15.14 at 8:59 pm

#32 Len on 05.15.14 at 8:41 pm

Good post. I see it too. The younger generation will chart their own course, and it won’t be the one their parents navigated. The Ms feel let down (or worse, screwed) by the current system. And they are right. They are not timid or conservative. In fact, I find them to be a most confident, adventurous and cocky cohort.

For decades we’ve been talking about how we keep passing the ‘bill’ onto future generations via our ever growing debt. Well, the Ms are likely it––the generation where the buck stops because we ran out of real bucks and left them with nothing but debt.

Those who foresee the end of this current system may well be correct. And those who prepare for what’s really ahead will be best positioned for prosperity in the future. It will be a very different world, and the smart Millennials are well-positioned by history and by dint of their own convictions to take the lead.

The challenges may be great, but the potential may be greater still.

#39 BG on 05.15.14 at 9:00 pm

“Fourth, wait a little. We’re at a time when most financial assets are too expensive.”

Why wait? This sounds like trying to time the market. We don’t know when the correction will happen and you said 2008 took only one year to recover for the diversified/balanced.

So why wait now?

#40 Notta Sheeple on 05.15.14 at 9:00 pm

“………Don’t ask me to spell out individual ETFs, as it would be improper to do so. I am not in the business of promoting, or selling, any individual securities……..”
===================================

A financial guy with morals, integrity, and transparency? Who knew?

No wonder you were a complete and utter failure at fitting in with the Harpocrite clan band of treasonous, sheep-shagging shysters.

#41 Mike S on 05.15.14 at 9:00 pm

Is it smart to try time the Market?

I mean how much time should I wait?
And what if the markets won’t go significantly down anytime soon?

Already tired from waiting for 10%-15% correction in housing. Just accepted I won’t be buying in this country

Not selling my investments now. They are properly balanced and I prefer to collect income/dividends in the mean time over sitting on cash

#42 Mike and Susanne on 05.15.14 at 9:01 pm

Sometimes a person needs to read what they’re told. Thanks for this. A significant burden has been lifted.

#43 Kreditanstalt on 05.15.14 at 9:09 pm

Diversify with ETFs? Bonds? Preferred shares?

Everyone to the other side of the boat! All together now!

Logic should tell us that there simply has to be some punishment for the increasing numbers who are now so cravenly avoiding risk out there. That’s what always happens when you follow the herd.

#44 Smoking Man on 05.15.14 at 9:11 pm

Deleted, you jealous bastard

#45 Bob Loblaw on 05.15.14 at 9:13 pm

Currently managing seven figures for self and spouse between 2 RRSPs, 2 LIRAs, 2 TFSAs and 2 Group RRSPs, very close to the manner you prescribe. Fail to see why I would need to pay someone in excess of 10K / yr. to do it for me?

All registered money, and you don’t think you need help? — Garth

#46 Larry on 05.15.14 at 9:27 pm

Saw this on cbc:

“house price rises 7.6% to $409,708”

http://www.cbc.ca/news/business/average-house-price-rises-7-6-to-409-708-in-canada-1.2643843

#47 NS in Calgary on 05.15.14 at 9:29 pm

#32 Len on 05.15.14 at 8:41 pm

What are you talking about? Is owning small parts of successful companies a bad thing? Binding paper money to intangibles?

I am trying to understand what you are saying and thus suggesting.

#48 Evan on 05.15.14 at 9:32 pm

I agree, ETFs are great for people who have little to no financial knowledge but if you understand a balance sheet (or care to learn) than stocks can be a safe and highly profitable investment vehicle over the long run. Having a long term horizon and selecting safe investments with substantial upside potential is the ideal strategy. How can someone do that? Simple. Adopt the philosophy and strategies of Benjamin Graham

#49 Blacksheep on 05.15.14 at 9:36 pm

# 158 Shawn on 05.15.14 at 6:30 pm

“Banks (together with their customers) create money, called deposits and deposits earn interest.”
—————————————-
100 % agree.

# 159 Mike T. on 05.15.14 at 6:31 pm

“They do not collect the full 2-3% though, most of that will be paid to the debt purchaser.
—————————————–
Agreed. If the debt gets collateralized, some one putting up $ and deserves the returns.

#50 Larry from ON on 05.15.14 at 9:36 pm

#5 Smartalox on 05.15.14 at 7:16 pm

Does anyone know a good website to query stock data into a spreadsheet? It’d be relatively easy to set up a spreadsheet to track a portfolio, and calculate how much of each should be sold.

The only problem that I’ve had, trying this has been the unwieldy formatting that comes along when you use MS query, or Yahoo!

Any suggestions? Smokey, you’re the guru, what do you use?
___________________________________________

I use Google Drive, where I upload a spreadsheet and set up Google Finance formulas to automatically keep the stock quotes up to date. Once a week it’s a quick copy and paste into a file I save locally and I have my linking set up so that the weightings etc. are calculated. Takes some time to set up initially but maintenance is a breeze.

#51 Michele on 05.15.14 at 9:39 pm

Mishuko @15

This should be useful to you:

http://canadiancouchpotato.com/2012/09/17/foreign-withholding-tax-explained/

#52 Ben on 05.15.14 at 9:44 pm

Doing better than the boomers? Sick joke. Both parents working, unlike years ago. No pensions. Massive intergenerational wealth transfer through housing. Come on garth!

Can anyone save 400k now easily without a top 2% job? No, but thousands of boomers got this by buying a house and breathing for 20 years.

#53 not 1st on 05.15.14 at 9:46 pm

ETFs are already managed. Why hire a manager to manage the managers?

Most are not. Just mirror indices. — Garth

#54 Canned Goods and Buckshot on 05.15.14 at 9:48 pm

#32 Len

You likely have come across Chris Martensen and http://www.peakprosperity.com

If not, his perspective is worthy for consideration.

#55 KommyKim on 05.15.14 at 9:54 pm

RE: #5 Smartalox on 05.15.14 at 7:16 pm
Does anyone know a good website to query stock data into a spreadsheet? It’d be relatively easy to set up a spreadsheet to track a portfolio, and calculate how much of each should be sold.

Check with your discount broker. My account with TD allows me to download my RRSP, TFSA, etc account details in a CSV file.

#56 Juan Refrito on 05.15.14 at 10:00 pm

Thanks again, Garth, for all your wisdom and advice. Pathetic or otherwise, it’s really made a world of difference in my own financial and investment planning. Just curious, though, why preferred shares figure so prominently in your asset allocation? I never see them identified as a significant asset class by other authors who also recommended indexing with ETFs (the couch potato portfolios, for example).

#57 Typical Millennial on 05.15.14 at 10:04 pm

Thanks so much for the advice. I’m just curious how you would split out this mix between registered and non-registered accounts? Understanding the tax structure is what makes my brain hurt!

#58 Smoking Man on 05.15.14 at 10:05 pm

I have a confession, garth

Why does this little shit keep protecting me from me..

Why man, am I two steps behind here.

31,years married here.
Anniversary, The secret.

Losing it when you got it figured out..

#59 Larry1 on 05.15.14 at 10:09 pm

This portfolio is better than GICs I suppose.

My old man at 74 years (retired at 55) takes more risk than that.

I disagree about stocks, provided one knows how to evaluate a business, which most don’t I guess.

#60 Pope Sexsixpackkitten Snugglebums the 658yv (aka Nosty) on 05.15.14 at 10:09 pm

#28 Inglorious Investor on 05.15.14 at 8:14 pm — “For most M-people, this is serious money. — Garth”

Great post. When I received my half of Mom’s inheritance, I invested it in a balanced portfolio, which is increasing +/- $2,600 / month, so stuff those GIC’s right up where the sun don’t shine.

My brother (in China, shortly moving to Poland) asked me what he should do with his, I emailed one of Garth’s posts (no PMs or individual stocks), and he seems to be quite happy.

#159 Mike T. on 05.15.14 at 6:31 pm — ” — “Privately owned central banks on the other hand….South Sudan had their chance and blew it.”
— and —
#7 gladiator on 05.15.14 at 7:20 pm — “Nowadays, what happens in Europe or Japan affects us much more than it used to.”

Speaking of South Sudan, I posted a link a few nights ago, in which Webster Tarpley laid out what was happening in the world.

He said to watch Pakistan and Sudan. Well, South Sudan now appears to be in the neocons’ blood-thirsty eyes.

Also, Japan, with an aging population appears to be floundering (no idea what to do with Fukushima), so a war with China (about the islands) would not be in their best interests.

#61 Visitor Number 9 on 05.15.14 at 10:10 pm

#5 Smartalox

to pull stock data into an excel spreadsheet, use:
‘MSN MoneyCentral Investor Stock Quotes’
It is built into Excel

here are the step-by-step instructions:

http://www.stockkevin.com/2013/03/how-to-pull-stock-quotes-into-excel.html

#62 Doug in London on 05.15.14 at 10:12 pm

@Ben, post #52:
I managed to save more than 400 grand without a house or a top 2% job. I saved what I would have put into mortgage payments if I owned a house, didn’t spend all my money on status symbols or other junk I didn’t need, and took it upon myself to buy equity funds when they were on sale during corrections over the last 24 years. I did get an extra boost from living in Northern Ontario (where it’s cheap to live) for many years but working at a place where I made the same wages as someone in the pricey GTA.

#63 Old Man on 05.15.14 at 10:13 pm

#44 Smoking Man – need an answer because tengo una mujer bella que quiere encountrarle.

#64 Smoking Man on 05.15.14 at 10:15 pm

DELETED

#65 Lala on 05.15.14 at 10:15 pm

|^^^^^^^^^^^^^^| ||
|…Garth Turner………..| ||’|”;, ___.
|_…_…_______===|=||_|__|…, ] –
“(@)'(@)”””””**|(@)(@)*****”(@)

#66 Ben on 05.15.14 at 10:15 pm

#32 the recession has made the young realise they don’t need to consume to be happy. This is a disaster for the establishment. To late, Pandora’s box is open. Hooray.

#67 Retired Boomer - WI on 05.15.14 at 10:16 pm

Thank You, THANK YOU – Garth the Magnificent!!!

A truth teller to the young, scared, and almost virginal! O could not have said it better, but then I am a grizzled, old debt-free Boomer – what the hell do I know?

Listen to Garth not [email protected] for future security & profit!!

The Retired Boomer

#68 Smartalox on 05.15.14 at 10:26 pm

Thanks for the tips Vangrrl, Larry and Kommy Kim,

I’m an engineer, so programming the spreadsheet part is not a problem for me. The part that I was looking for was help with where to get the stock data from the Internet, in a bare bones (comma separated value) format.

Thanks

#69 robert turpin on 05.15.14 at 10:30 pm

thank you garth for helping guide canadians to financial literacy and stability.look foward to your blog every day.for #15 mishuko..all gains/distributions are free of tax in tfsa regardless the investment vehicule.for#45 bob loblow..that 10000$ per year is a lot to pay ,but would be money well spent if it got you to build wealth outside tax deferred accounts,where you could defer capital gains until death.with rrsps you have to start drawing down at 71,bumping your gross income each year.

#70 TheCatFoodLady on 05.15.14 at 10:33 pm

#32 – Len: Your post left me both intrigued & puzzled & with a number of questions.

First & I’m not trying to come across as the ‘jaded, snotty elder’, here… I’ve never met a generation going through higher education that didn’t have ideas for changing the status quo, in many cases in quite a revolutionary fashion. That’s a good thing – it generates the change we need to maintain dynamic societies & systems. I’m wondering about proposed alternativs to the status quo.

Localized community takes a lot of work & a good mesh of knowledge, skill sets & good abilities in the field of conflict resolution. It also requires, if the elderly & infirm are to be sustained, a balanced population pyramid. If the financial system we all know, (to greater or lesser degree), doesn’t work for these kids – at least in their minds – how do they propose putting tangible assets aside to support them in their non-productive years?

I confess I don’t understand the concept of inert money; especially keeping it ‘inert’ with the stated aim of keeping it out of the hand of ‘rentiers’ & speculators. How then instead, would they ‘bind’ their money so as to increase it for their own future use; the years where they themselves are rentiers or pensioners?

I’m not so sure we’ll see a sea change in our current financial systems – there’s far too much to lose for both the large & the small stakeholders & that would be… most of us, as well as our systems.

***Hard to bamboozle sharp minds with motivation and superior access to information.***

I don’t question their motivation; it’s their access to information & whether or not their sharp minds are tempered with life experience & pragmatism.

#71 Josh In Calgary on 05.15.14 at 10:34 pm

Good to see you’ve finally come around to waiting on a drop in stocks. They are over valued for sure. I’ll be putting some in if they go down 10-15%, but I’m keeping some powder dry just in case they do drop more, then I’m all in. When everyone else is cryin’ you should be buyin’. When everyone else is yellin’ you should be sellin’.

#72 KommyKim on 05.15.14 at 10:40 pm

RE #23 G Dawg on 05.15.14 at 7:53 pm
Probably good info….but where am I going wrong buying sweet double baggers like BCE…for ex……up 98% in 5 years ( 19% p/a) while paying a 5% divvie along the way? I get the ETF theory….but stock picking has outperformed the ETF by a wide margin.

The ETF VTI is up 118% in 5 years…. What a broad based ETF such as VTI has over your single stock pick like BCE, is diversity. If BCE goes backrupt, your BCE stock goes to zero but VTI only drops in proportion to the amount of BCE it holds, which is very little.

#73 Cici on 05.15.14 at 10:45 pm

Great post Garth, it’s nice that someone is giving the millenials the straight truth and the tools for a brighter future.

Hope you leg is doing well and that the dog walks are joyous ;-)

#74 Doug in London on 05.15.14 at 10:46 pm

Wow, it seems all equities and REITs are up this year. I’m sure glad I didn’t pay any attention to the dour dinks and instead scooped up REITs, preferred share ETFs, and utility stocks while they were on sale last year.

#75 OttawaMike on 05.15.14 at 10:50 pm

That photo is from that most excellent haunted house in Niagara Falls. They built it in an old coffin factory and take photos of the horrified patrons to sell back to them later.

Does anybody have an answer why the VIX is so complacent, even on days like today?
Normally it jumps big time when we have 1% down days but it seems like everybody is relaxed and not hedging the market.

Probably another indicator to watch out for a correction this summer but it is anybody’s guess.

#76 Retired Boomer - WI on 05.15.14 at 10:56 pm

#32 LEN

Somehow, I think I’ve seen this pictures before, in color, but in 2 channel stereo not “surround.” Circa 1969 when I, the 17 year old high school graduate had all the answers!

Decided I knew more than the college, and the cost / benefit ratio too high, embarked on my own journey.

Today with a slightly over 7 figure next worth i think i did “OK.”

Back then, a 1968 Buick Skylark, a bag of weed, and the $3.99 case of PBR was your ticket to the world!

Do NOT assume you will re-make the world in your own image. We have new problems today: climate change, entrenched interests that might lie to you, work and pay, price deformation (work that does NOT pay, goods vastly overpriced like real estate). Climate change will not work our on its own, the others will. Is your generation up to this challenge??

#77 Oh Yeah on 05.15.14 at 11:00 pm

So you’re saying that Government Pension Plans in the USA, Mexico, Ireland, France, Germany, England, etc etc should STOP following their individual models and invest this way huh. Follow the Canadian Pension Plan MODEL Eh?

Key word here is MODEL. THIS asset allocation is just another MODEL and every asset manager has their OWN based on 100’s of key metrics, indicators, philosophies, government “allies”, access to markets, and brain power etc.

WHAT MAKES THIS ONE SO SPECIAL?

What do you think would happen if you told the guys in charge of the Yale or Harvard Endowment funds to stick 15% of their assets in Canada? They’d probably laugh in your face!

Here’s an interesting list of what each country had to say when you told them to invest 15% of their money in Canada!

China- 終於盼靠你加拿大
Japan- 性交がカナダハハハ
Russia – На прошлой неделе в прошлом месяце Канада
Ukraine- Хрен тобі hahaha Канади
France- HAHAHA Va te faire foutre Canada
Saudi Arabia- الشمس وكريستاس أنقذتني بكريم الصبار هاهاهاها انتهاك في كندا
Italy- Hahaha Cazzo si Canada
Venezuela – Hahaha vai à merda o canadá
USA- We already OWN Canada
England- No, WE already own Canada. The Queen is on the money!

#78 OttawaMike on 05.15.14 at 11:02 pm

Don’t forget Gangsta Hats, millennials wear the over sized hats, usually on an angle.

Invest in the Gangsta Hat futures market and profit big time.

#79 Tony on 05.15.14 at 11:03 pm

Re: #14 Victoria Real Estate Update on 05.15.14 at 7:35 pm

You’ll witness the great American real estate collapse part 2 very soon. Right now the imbeciles who paid cash for empty houses have no renters as all of them are either broke or renting small apartments. With no one else to trade their houses with the end result will be another price collapse. This is the end result of chasing yield (or so they thought) but not thinking first before the fact.

#80 Confused Millenial on 05.15.14 at 11:03 pm

I”m confused. So first wait until market drops 10-15%, then buy the mix of FTEs? Keep my money in savings account until this happens?

Here I was getting ready to dive into FTEs.

#81 Oh Yeah on 05.15.14 at 11:05 pm

Point being…..

Just like each religion, they all have their own point of view.

Just like each priest inside each church, they all have their own point of view.

Believe in something you can live with if you’re proven to be wrong.

#82 WhiteKat on 05.15.14 at 11:05 pm

@1980 Baby, #9

LOL. Mine did pretty good too. Only trouble is that IRS considers them to be ‘passive foreign income corporations’ meaning that the cost to report them and the tax on the gains, far exceeds what I earned on them. Of course, I won’t actually tell IRS about them, so its all good.

#83 WhiteKat on 05.15.14 at 11:12 pm

@1980 Baby #9, People who invest in mutual funds, are obviously not smart enough to invest properly, so obviously can’t figure out how to report PFICS to the IRS. I mean really, how does IRS expect us to figure this crap out when we can’t even figure out how to invest, and blindly trust [email protected](did I get that right?) to pick our mutual funds for us. The banks don’t give us the info we need to report PFICS unless we pay them money to do extra reporting for us, and accountants cringe when we tell them we have mutual funds, and every buy and sell triggers a pile of forms.

Sigh….I wish I was a first class Canadian citizen, for that is what I truly want to beeeeee.

#84 Led on 05.15.14 at 11:14 pm

worse advice eva…wow. sell off your winners and give them to your losers. let me know how that works out

I did. — Garth

#85 omg on 05.15.14 at 11:16 pm

#14 Victoria Real Estate Update

AND TAXES IN VICTORIA HAVE BEEN GOING UP 5% TO 7% ANNUALLY

Thanks VREU, Good update.

Victoria housing prices were in a bubble even before 2006.

And let’s also remember that the costs of taxes in Victoria (including fees like garbage and sewer) have been skyrocketing in the last decade. Taxes and fees have averaged an increase of 5% to 7% annually.

Add the new bridge and sewage treatment plant and we are on track for $6,000 to $7,000 annual taxes/fees for a modest home in Victoria.

#86 omg on 05.15.14 at 11:23 pm

WAITING FOR A 10-15% CORRECTION

Do not do it – just start buying your ETFs now. Trying
to time the market does not work unless you are brilliant and lucky.

30 to 40 years from now that 10-15% drop will mean nothing.

And if it does drop 10-15% you’ll be too afraid to invest because all the wackos will be sayings its the end of the world and CNBC will be marching out all the dimmers and gloomers.

And if you do not get in and it goes up 10-15% you delay longer waiting for a correction to happen so you can buy in.

So just start buying – average in over a few months if you want. And then keep adding to it.

#87 Young & Foolish on 05.15.14 at 11:29 pm

Great post ….. straight to the goods! But what to do about all that built up house lust?

#88 Larry1 on 05.15.14 at 11:37 pm

@#48 Evan

Agree, RE: Ben Graham. I’d say one should learn more than just a balance sheet though

Buffet doesn’t beat the market by diversifying. To bet big on stocks can make good sense. Buffet’s widow, though, is to invest 10% in short term US bonds, 90% in a low fee S&P 500 ETF.

Agree w/ ya Garth on bond ETFs and mutual funds. Maybe factor in room for strategic sector ETFs (like say financial, energy sectors and specific foreign markets), especially for us Echo generation with time to hold through the noise.

@#5 Smartalox

Can you write code? Automate the mundane, data grabbing, portfolio aggregation/stats, custom fundamental screens, retirement projections and plans.

If code is not an option, look into Excel openable CSV files from the likes of Yahoo/Google Finance, or your discount brokerage. Even copy paste into Excel from tables on a web page

#89 [email protected] on 05.15.14 at 11:51 pm

So 40% US and international equities. Great, now if you pay extra 1% to your bank it saves you the hustle of picking the individual ETF, finding the advisor, etc….

#90 BCD on 05.15.14 at 11:54 pm

“Fourth, wait a little. We’re at a time when most financial assets are too expensive. Normally stock and bond prices move in the opposite direction (called ‘non-correlation’) but these days everything has been goosed (just like houses). Strikes me a good buying point for equity-based investments (ETFs holding all the companies in the TSX 60 or the S&P 500, for example) would be 10-15% below current levels.”

Was this spoken with an adjustment of the collar or balls in the throat?

10-15% below current levels is pretty optimistic. . .almost makes you sound a bit like a real estate pumper.

#91 BCD on 05.16.14 at 12:00 am

Will tomorrow be an epic day for the DOW? I am calling for another correction. Check the posts. I was a week off calling the 1% correction that happened today.

Long weekend on the way. . .hot summer, driving vacations. . .sensing commodities will begin the surge soon while other things adjust.

#92 Freedom First on 05.16.14 at 12:11 am

Right on Garth!

And to those arguing that investing in individual stocks is better than investing in ETF’s, Garth has already covered that. Garth says to not invest in any individual stocks until your net worth passes 7 figures. In my humble opinion, by the time you have that size+net worth, you will know that buying an individual stock is not worth the risk. Think Nortel,and there is so many other examples in the last 20-30 years of Nortel like failures, that were pushed as sure things, there is not enough space here to list them all. Garth is right, individual stock pickers are wrong. Play safe.

#93 Dean Mason on 05.16.14 at 12:32 am

India’s Sensex Index passed 25,000 right now at 25,173 up 1,267 points which is up 5.30%.

This is a decent jump for one day but is less impressive since the high in 2007 which was at 20,000.

This is about 7 years ago and a total increase of 25.86% or 3.695% per year.

Now if there are dividends on top of this then a 6% or higher annual return is possible and is more impressive than just the Sensex’s 7 year increase.

#94 cmj on 05.16.14 at 12:37 am

Excellent post, Garth. many of us appreciate your educating us on housing and how to diversify our portfolios. Yes, there are the reputable stocks like BCE that can give great returns. The problem is to choose a portfolio of stocks that not only are broad based in all sectors but purchase stocks outside of Canada as well. Canada only represents 4% of the world market. It is impossible to have a strong portfolio just through individual stocks for the average investor. People with individual stocks will always tell you about the fabulous gains on their winners but not about the duds. ETFs are the answer.

When I learned about ETFs on your site, I then read many books including yours and also still follow the Canadian Couch Potato blog. When the student is ready, the teacher appears. Just can’t thank you enough, Garth

#95 Snowboid on 05.16.14 at 12:42 am

In the meantime, in a land far away, shielded by a great lake monster, a wonderful and enthusiastic update from our dynamic duo – it’s taken seven years but real estate has finally recovered…

https://www.youtube.com/watch?v=JhhBKpQ8T6M

Or has it? Let’s compare the numbers from June 2008 to see how much better it really is in the Central Okanagan:

Residential SFH…

Prices (not including inflation):
June 2008 Av – $512,867
Apr 2014 Av – $468,257

June 2008 listings – 594
Apr 2014 listings – 1302

June 2008 sales – 165
Apr 2014 sales – 262

Condo…

Prices (not including inflation):
June 2008 Av – $332,994
Apr 2014 Av – $243,157

June 2008 listings – 308
Apr 2014 listings – 683

June 2008 sales – 72
Apr 2014 sales – 92

Townhouse…

Prices (not including inflation):
June 2008 Av – $384,743
Apr 2014 Av – $379,984

June 2008 listings – 160
Apr 2014 listings – 478

June 2008 sales – 47
Apr 2014 sales – 78

Now I must admit I’m not that good at math, but
something sucks when even I can see that April 2014 is still far worse than the peak in June of 2008. But the ever-jovial pumpers still can come up with a great performance!

We’ve been doing a bit of ‘low-balling’ with our ever-
patient RE agent, a couple of bites we are patiently
waiting to set the hook and reel them in!

And these are properties that are already down much
more than the stats from OMREB would suggest!

Stay tuned…

#96 Christopher Lackey on 05.16.14 at 12:55 am

@32 Len. As a “millenial” or gen y or whatever one of these demographics I belong to, I agree that my generation may see certain things differently but to say we are revolutionary is to ignore history. Elvis’ s hips, greenwich village in the early sixties, haight ashbury in the late sixties, the british invasion, seattle in the early nineties. Young people grow up, without exception, and conform to their present society. Noone is “changing the world” especially in this age of hyperfragmented culture and zero attention spans.

While other people talk about doom and gloom and rigged and robo markets dividends continue to pour in and opportunties abound for those willing to educate themselves about risk. Politicians and banks and fortune 500 function the same way they always have. The sooner people get it the sooner they are on the road to real freedom, economic freedom. Lots of people get it just look at this blog

#97 MEANWHILE IN FRANCE on 05.16.14 at 12:55 am

No guts, no glory.
Save up and live a little.

#98 statsfreak on 05.16.14 at 1:07 am

” They lust after houses sitting at all-time price levels, but run screaming from equity markets at the same point.”

……this is a very, very important observation! How many people are paying attention to this?

#99 tony bologny on 05.16.14 at 1:12 am

I don’t understand how retail sales are dropping while the unemployment is dropping ,apparently with more people working people buy less I guess .Whats up with this recovery ,yields drop from 3.00 to 2.49 and all I here is the recovery is full speed ahead oh and Belgium is now the biggest us treasury buyer LOL that’s because they apparently think that investing in the most indebted nation in the world is a awsome deal .They dont even produce the iconic HARLEY DAVIDSON in America now made in india for the marlboro man to ride free all across America on a great American bike mad in India what a joke lol lol http://www.cnn.com/2010/WORLD/asiapcf/11/04/india.bikes/

#100 AACI Home-Dog on 05.16.14 at 1:28 am

Does anyone know a good website to query stock data into a spreadsheet? It’d be relatively easy to set up a spreadsheet to track a portfolio, and calculate how much of each should be sold.

Smartalox…you said…”The only problem that I’ve had, trying this has been the unwieldy formatting that comes along when you use MS query, or Yahoo!

Any suggestions? Smokey, you’re the guru, what do you use?”
I recommend a good financial advisor…like Garth, or someone at Odlum Brown.

#101 len on 05.16.14 at 2:17 am

#70 TheCatFoodLady and others

Very interesting thoughts and the answers are more emergent than real. I am getting older and wondering along the same lines as CatFoodLady. “Increasing money for their own future use” as you asked – perhaps the currency won’t be measured in money but usefulness? I don’t know and it is unsettling not to know but then I look around most of the rest of the world and understand that the old have a very different role to play and we “vibrant seniors” :) here will have to adapt?

Jared Dimond has a chapter in his book “The world until yesterday” entitled, “The treatment of old people: Cherish, Abandon, or Kill?” This is an interesting cross cultural perspective on ageing and practices around the world and across time. Kind of scary actually.

On the question of alternatives, they are reluctantly leaking into the legacy media as well. For example, there is an article published on the site Marketwatch of all places just today.

“The Collaborative Commons is the first new economic paradigm to take root since the advent of capitalism — and its antagonist socialism. The Collaborative Commons is already transforming the way we organize economic life, with profound implications for the future of the capitalist market”

http://www.marketwatch.com/story/say-goodbye-to-capitalism-as-we-know-it-2014-05-15

Raj Patel wrote interestingly on a similar topic in his book “The value of nothing”.

It’s just that we need to start having a debate outside of the making money on money/compound interest model on our finite planet.

And finally, you question: “whether or not their sharp minds are tempered with life experience & pragmatism” – likely not but yours is and that will become increasingly important. I think the kids seem to really understand that.

#102 Buy? Curious? on 05.16.14 at 4:16 am

Garth, during the 2006-2010 financial crash, we’ve seen countries’ housing markets suffer setbacks. Countries such as Ireland, Spain, ‘Merica and even the UK, all saw property prices decline. So why hasn’t it happened in the land of Beavers, Canaduh? You’ve shown us chart after chart, made some excellent points as to why it’s risky to buy real estate, yet going back to 2008, house prices have only risen. Can I make an observation? Allow me to explain. *ahem* Canadians are polite to the point of stupid. They’ll do what they’re told. I could show some of the charts I’ve exstrapolated from StatsCan to prove my point but it would be a waste of time. Everyone wants to buy a house. Demand is never going away, no matter what. Millenial, Immigrant, Boomer, Loser, who cares? They all want a house and no financial arguement is going to change that.

If I was a millenial and some dude wants to give me money to buy a house, would I say no? Of course not. Why would I waste my free time trying to navigate the financial jungle when I can get a house, where I can raise family and just get on with Life? You claim this magical 7% return on a balanced portfolio but you’re a master of money. Me? I’ve proven time and again, I’m a moron yet my house aprreciated about 11% in 2 years. I’ll take the real estate route to wealth creation any day over the balance portfolio one.

Have a great weekend rebalancing your portfolios, Mofos. I’ve got bake some Banana bread and get my haircut.

https://www.youtube.com/watch?v=9Wl_uQOABxg

#103 MarcFromOttawa on 05.16.14 at 5:40 am

Isn’t 40% fixed income a little high for someone with a 25+ year time horizon?

5 years. — Garth

#104 OttawaMike on 05.16.14 at 5:41 am

It seems like all the stress and work of creating 2 house bubbles on two continents can make a man go prematurely grey.

Carney is starting to look old:
http://www.bloomberg.com/news/2014-05-15/carney-s-hottest-topic-sets-boe-thinking-on-housing-curbs.html

#105 Jimers on 05.16.14 at 7:02 am

Home prices at all time highs, stock market rigging, the only remaining logical choice is to put my life savings into a well diversified portfolio of crypto-currencies including Bitcoin.

#106 Trevor on 05.16.14 at 7:39 am

Garth,

I appreciate your post but why did you not break those categories down into small cap/emerging markers on the growth side and inflationary bonds/high yield bonds on the fixed income side? Your break down is a very simplistic approach unless you this is what you suggest when investing less then 150k? Thanks for any clarification.

Over-diversification in small portfolios is as dumb as none. — Garth

#107 Inglorious Investor on 05.16.14 at 8:00 am

#102 Buy? Curious? on 05.16.14 at 4:16 am

“Allow me to explain. *ahem* Canadians are polite to the point of stupid.”

I don’t mean to be harsh or insulting, really, but basically what you are saying is you plan to keep doing what a nation of stupid people are doing? Do you think that’s prudent?
—————————

“I’ve proven time and again, I’m a moron yet my house aprreciated about 11% in 2 years. I’ll take the real estate route to wealth creation any day over the balance portfolio one.”

Unless you actually
a) sell your house, rent (and lower your cost of living) and invest the proceeds, or
b) borrow against the equity in your home to invest, such that the debt will be self-liquidating (i.e. don’t buy a boat), rising home prices don’t make you richer, they make you poorer.

#108 Inglorious Investor on 05.16.14 at 8:21 am

http://www.marketwatch.com/story/say-goodbye-to-capitalism-as-we-know-it-2014-05-15

Thanks to len for the link. I read the article. Certainly lots of potential in current technological trends. Actually, based on current trends in finance, economics and energy (which are all inextricably linked), we will need to utilize technology to squeeze everything we can out of our resources at a much higher rate of efficiency just to maintain a standard of living most of us are accustomed to.

This is what I’ve been saying about the need to massively increase productivity and efficiencies if we want to work our way out of the current debt crisis and actually grow the economy in real terms.

Technology does and will change how we live. And it can and will completely transform our economy. But…

… I also think there are large doses of snake oil in the article too. Riftkin makes it seem like living could be nearly cost-free. Dream on, Jeremy.

#109 Inglorious Investor on 05.16.14 at 8:30 am

#99 tony bologny on 05.16.14 at 1:12 am

Labour participation rates are falling. Those who don’t look for work are not counted as unemployed. This makes the unemployment rate seem lower than it truly is.

As Jim Rickards once pointed out, if only ONE person in the country worked, and everyone else gave up looking for work, technically we would have full employment.

#110 Tim on 05.16.14 at 8:38 am

Just wondering, if you recommend waiting to buy assets now. Does it follow that it might be prudent to trim some of the better performing ETFs and hold a certain amount of cash, until we see a correction?

#111 learningfromyou on 05.16.14 at 8:45 am

Thank Garth for this post.
In one side you provide guidelines about how to diversify and create a portfolio.

In another side you mention that the market is overvalued and that a correction will take place.

Then what should we do in the meantime with the available funds to invest?

Thank you in advance for any guidance

#112 Inglorious Investor on 05.16.14 at 8:49 am

#86 omg on 05.15.14 at 11:23 pm

It’s not about timing the market; it’s about managing risk. The two are very different.

The former is extremely difficult, if not impossible. The latter requires lots of financial and economic knowledge, and discipline. You also need to know how to manage a portfolio. That’s why so many people hire advisors.

If you simply make purchases on a schedule (e.g. contribute a fixed amount every month/quarter/etc.) also known as ‘dollar cost averaging’, then you are really relying on luck. Markets can go up, down, or sideways for years. If you happen to get caught in a real bull market (e.g. ’82 to 2000) great! But if life happens to put your best investment years in a secular bear market (e.g. ’66 to ’82, or the one that some believe we are still in today) you will likely lose real wealth, not gain it.

The fault is also in our stars, not just in ourselves.

#113 Shawn on 05.16.14 at 9:19 am

Oxymoron?

BCD says: I was a week off calling the 1% correction that happened today.

*****************************************

1% correction? … is as Jumbo Shrimp

1% is mere noise…

#114 Ralph Cramdown on 05.16.14 at 9:20 am

#92 Freedom First — “In my humble opinion, by the time you have that size+net worth, you will know that buying an individual stock is not worth the risk. Think Nortel,and there is so many other examples in the last 20-30 years of Nortel like failures, that were pushed as sure things, there is not enough space here to list them all.”

At its peak, Nortel was something like 35% of the index, so any not-too-conservative portfolio made up of index funds would have had an effective 5%+ position in Nortel alone, which is about the maximum percentage that most investors in individual stocks have in any one position. Index investing wouldn’t have saved you from that one.

It grates on me sometimes that my US broad market ETF has positions in Tesla, Twitter, Groupon and other foolish picks.

When I buy individual stocks, I don’t buy “sure things,” because they’re already priced for greatness. I don’t buy crazy P/Es, I don’t buy miners that don’t yet have a mine and I have a number of other rules of thumb that keep me out of trouble.

Index investing effectively harvests the collective (average, consensus) wisdom of stock pickers, which means you get their smart picks AND their stupid ones. Investors in individual stocks and in sector targeted ETFs are the only ones driving individual stock prices up and down. Broad index investors are just along for the ride.

Some index funds are just a waste of money except for investors with very small portfolios. If you own a fund whose top five or six holdings make up 70%+ of the value, you’re just paying somebody a relatively fat fee to do very little work.

#115 highonyourownfarts on 05.16.14 at 9:22 am

#101 len on 05.16.14 at 2:17 am
“I don’t know and it is unsettling not to know but then I look around most of the rest of the world and understand that the old have a very different role to play and we “vibrant seniors” :) here will have to adapt?”

Oh please; I think you’ve been inhaling too much on campus. Every academic I know lives in a hilarious alternate reality, and you’re no different.

The children you’re “teaching” have zero perspective and zero experience and their idealism will have zero effect. All of it slowly tortured to death by pragmatism as resume after resume go unanswered.

We’re living in an era of colossal change, faster than ever before. But whatever you think “Binding paper money to tangible (and intangible like knowledge) assets to make them inaccessible to rentiers and speculators.” means, I will sleep soundly tonight; assured that the global financial structure is not threatened.

Kids are kids. New ideas are fantastic. 20 year olds can accomplish great thing things. No one you’ve ever met will change the paradigm.

‘You can be anything, do anything’ – The biggest lie perpetuated on the youth. Learning what the rules are, which ones you can bend or ignore and which ones must be obeyed, that’s truly valuable knowledge; stuff you can’t learn in SOC306 or CALC207

Tl;dr – Academics are products of a life in academia and reality handicapped.

Oh please. I think youve been inhaling too much on campus. Every academic I know lives in a hilarious alternate reality, and you’re no different.

The children youre “teaching” have zero perspective and zero expirence and their idealism will have zero effect, all of it slowly tortured to death by pragmatism

#116 RunningBackToSaskatoon on 05.16.14 at 9:29 am

Garth,

You helped clarify a question I had asked a couple weeks ago about where to start.. but _when_ should someone start. I have $10,000 in cash and growing bi-weekly due to job.. no debt.. and renting..

At what amount of dollars should I begin investing.

Obviously your post was about people with less than 150k.. but what is the minimum. Thanks?

#117 Just the facts Ma'am on 05.16.14 at 9:50 am

We all are aware of Garth’s Rule of 90.

Now let me present the Italian Rule of 90.

90% of everything you have should be tied into real estate. Houses, land, whatever you can.
And don’t forget to leverage.

#118 Daisy Mae on 05.16.14 at 9:54 am

#84 Led: “…worse advice eva…wow. sell off your winners and give them to your losers. let me know how that works out…”

***************

Isn’t Garth, in effect, saying he’s ‘buying low’?

#119 Vincent C on 05.16.14 at 10:10 am

Globe and Mail story: Canada’s realtors told Prime Minister Stephen Harper that the country’s housing market is essentially balanced, as they kicked off a lobbying effort in Ottawa that saw them make appointments with more than 160 MPs.

http://www.theglobeandmail.com/report-on-business/economy/housing/realtors-tell-harper-housing-market-still-quite-balanced/article18655503/

Hmm… we need to email our MPs and ask them to to beef up the quality of housing data and tighten rules to improve accountability and ethics in the industry.

#120 Dwilly on 05.16.14 at 10:13 am

Hey Garth, on one hand you advocate that cash is useless, but on the other, that deflation is a big potential risk today. In a deflationary scenario, wouldn’t a stronger cash position be advisable? Also, you recommend that today’s equity/bond prices are inflated and I think what you are saying is to “time your entry” – however there is basically zero evidence that even seasoned professionals can time markets correctly, let alone a new investor with no experience?

Deflation will hardly be permanent, and cash will not perform over the course of years. As far as seasoned professionals go, they don’t get that way by failing. — Garth

#121 Rob Ford In Rehab on 05.16.14 at 10:14 am

Thanks to all my supporters on this blog. You are the real people of Toronto!

Rehab is amazing. It reminds me of football camp. Kind of like the Washington Redskins camp I went to as a kid.

(Yeah, I said Redskins. None of that stupid taxpayer-funded PC crap about renaming the team over some stupid hurt feelings. Get over yourselves)

Anyhooo…..I have an announcement to make:

I am coming baaaa…aaaaccccckkkk!!!

100%! Guaranteed!!!

Can’t believe they’re gonna hoist a frickin rainbow flag at City Hall today :( :( :(

And people are actually talking about voting for a lesbian premier next month!! (: (: WTF????

NOT IN FORD NATION THEY WON”T!

I have to get back to stop this!!

If I can just find where they put my clothes……..

#122 YYX on 05.16.14 at 10:23 am

Garth,

Your fourth advise says that I should wait until price goes down.

Meantime, Where should I put my money ? Not in the couch I hope.

Some assets are reasonably valued now, others are not. — Garth

#123 WiseGuy on 05.16.14 at 10:29 am

This is a post below from a ‘friend’ on Facebook, but I think it pretty much summarizes what you’ve been saying when people are too stretched financially:

“I am so upset right now I can’t see straight. I am writing this post partially to avoid repeating my story too many times, but also to ask for help.

As some people know, Michael and I are building a second story addition to the back of our house. I tried to hire a contractor, but Michael decided to go ahead and do the project himself, with the help of some friends. The roof and the back wall have been opened up, and covered with tarps. HOWEVER, the wind and the rain have in some places blown the tarp back, and in other places caused large pools to gather in between the open rafters on the roof.

Last night it started raining inside the house.

Today I have been watching the dripping ceilings bulge and the woodwork swell up.

While I was out today, Michael decided to climb on the roof, in the rain, by himself, and try to get to water out of the pools and fix the tarp. The ladder slipped and he fell and injured his foot.

When I got home, the water was coming into the house even worse, so I had to go up on the roof, in the rain (with Simon holding the ladder!) and crawl on my hands and knees, soaking wet and terrified as I pulled up the tarp and desperately heaved gallons of water off my roof.

Now we are the hospital, Michael cannot walk on his foot, I am cold and exhausted, and despite my best efforts water is still coming in to house. So now I have a house that has been ripped open, and no one capable of putting it back together. I am furious at Michael, and terrified my house is falling apart.

I have been trying to call a contractor that I was in touch with before, but all I get is voicemail. I seriously don’t know what to do or if anyone can help. If anyone has any words of advice or any leads on someone who can help me rebuild my house ASAP, please let me know. I’m going to go have a good cry now.”.

#124 2or3orsometimes7 on 05.16.14 at 10:45 am

#102 Buy? Curious? on 05.16.14 at 4:16 am
‘….Can I make an observation? Allow me to explain. *ahem* Canadians are polite to the point of stupid. They’ll do what they’re told…’

I totally agree! Our politeness and agreeableness is partly to blame for the housing bubble.

‘What the real estate agent thinks I should submit an offer of x? Okay, I’ll just do that’. Or, ‘what the real estate agent thinks this is too low and will offend the seller? Def don’t want to do that, I’ll offer more’.

People! It’s YOUR money. Offer what YOU want.

#125 2or3orsometimes7 on 05.16.14 at 11:01 am

In middle class European countries, most older retired people live with their families, in modest if not meager situations.

They don’t have ‘spending money’, they don’t go on vacations. They don’t have their own cars. They have a room, share 3 meals a day and give and receive the emotional benefits of being surrounded with family.

I doubt most North American consumer-boomers would like this set up. But it works and does not require much money.

#126 luc on 05.16.14 at 11:36 am

Where did Canadians move 7.9 billion in foreign equities during March 2014?
Read here http://www.ctvnews.ca/business/canadians-bought-7-9b-in-foreign-securities-in-march-statscan-1.1824655

#127 learningfromyou on 05.16.14 at 11:49 am

>Some assets are reasonably valued now, others are >not. — Garth

Could you provide some guidelines about evaluating an asset to determine if there are valued properly or not?

I think it was Buffet who said, anything it’s worthless unless you know the real value of it.

In the pass you mentioned that people could buy independent stocks if they know what they are doing.

I personally do not have enough knowledge to do it, I try to minimize the risk buying ETF, but they seem expensive at this time.

Garth, unexperienced people can behave like the experienced ones if they are properly TRAINED.

Could provide an step by step procedure to analyze an asset to have a decent idea if it’s overvalued or not?

I hope you find in my question a good subject to write a post.

Courage Garth, do it !!!!!
;)

#128 World Traveller on 05.16.14 at 12:14 pm

#125 2or3orsometimes7 on 05.16.14 at 11:01 am
In middle class European countries, most older retired people live with their families, in modest if not meager situations.

***
I believe this is called “waiting to die”, no Thanks!

#129 Rob Ford In Rehab on 05.16.14 at 12:37 pm

Geez Louise!!

I was emailing a constituent to make sure they have no crack. In their sidewalk. Then they sent me this:

http://ward27news.ca/invitation-to-celebrate-international-day-against-homophobia-and-transphobia-idahot

WTF? IDAHOT? Why do I care if IDA is HOT? I have plenty to eat at home!

“Transphobia”? This one I think I get. Most of the dudes I knew who drove Trans Ams to high school were Dagos and minorities, never liked any of them. Cheap car, better to get a Vette or wait for your family get you an Escalade. (Just like real estate, patience pays off)

I totally gotta get back into the office to stop this LGBTTQQI2SWTF!! takeover of Tronna. Taxpayers demand respect!

Seriously, though, I gotta find my clothes first…I don’t get this rehab place, all day long we’re buck naked with our beer bellies hanging out and there are no chicks here, just young guys who all have moustaches and want to rub my back..

Doug!? Where the hell did you send me????

#130 pinstripe on 05.16.14 at 12:43 pm

The Mil-Group today are well educated and informed how the public and private systems work, both good and bad. The role models in society do not walk their talk. Social media gets the message out asap.

Loyalty does not exist anymore in the work environment.

Morals and ethics are designed to reward non-performance and punish performance. Being in debt satisfy the criteria. The perception of having money is a primary metric.

#131 pinstripe on 05.16.14 at 12:50 pm

#127 — unexperienced people can behave like the experienced ones if they are properly TRAINED.

——————————————————

What happens to the equation when the TRAINED person becomes EDUCATED about the SYSTEM?

Why do so many Insurance corps have Salespeople and access to a bigger bank of lawyers in their system?

#132 devore on 05.16.14 at 1:02 pm

#34 Jamie Czerwinski

I feel like your Canadian weighting is a bit high. But I like your Canadian REIT inclusion. Seems a bit of an admission that rates could go down if inflation and employment stay low, dontcha think?

Seems like an admission of balance and that the future is unknowable and uncertain.

#133 devore on 05.16.14 at 1:09 pm

#37 Tej

I only have 1 mutual fund, made me ~23% this past year, not too bad for a MF.

Talk about all eggs in one basket.

A friend’s wife (Korean fwiw) was discussing some investing with him, he said this one thing he bought recently looked promising, and she immediately jumped on him: if you think it’ll do so well, we should mortgage the house and buy more!

#134 G Dawg on 05.16.14 at 1:16 pm

“The ETF VTI is up 118% in 5 years…. What a broad based ETF such as VTI has over your single stock pick like BCE, is diversity. If BCE goes backrupt, your BCE stock goes to zero but VTI only drops in proportion to the amount of BCE it holds, which is very little. – See more at: http://www.greaterfool.ca/2014/05/15/the-millennial-portfolio/#comments

Actually…if you include divs…then BCE is up 123% OVER 5 YEARS….BUT WHY NIGGLE. BTW it has no MER. The tax treatment on ETF’s is more onerous…..Your example is a capital gain…while I get a dividend tax credit adding further to my gains holding individual equities….adding up to a lot of extra profits without tax triggering crystillizations.

I also prefer the individual stock to ETF because of the perpetual income generation that adds the opportunity to diversify without having to trigger a capital gain by selling stock. It’s like a perpetual motion machine that generates cash through low taxed dividends…that buys more stock…that rests tax free…while generating more cash to buy more stock…that generates more cash…to buy more stock…to generate more cash.

I get the same rub about individual bankruptcy from the ETF crowd all the time. My answer is this…..if a company like BCE goes bankrupt……then you can be sure that every issue on the index has plummeted as well and we’re headed for the bunkers. The smalls of the exchange will fall far faster in a downturn than a blue chip.

I don’t know of a single example in an ETF that can replicate the performance of say…TD Bank….up 1700% for me…while DRIPPING extra stock and twice splitting…..so that I get paid and paid and paid and paid……whereas having to churn a non dividend ( or negligible) paying ETF doesn’t do that in such a trouble free and wondrous way.

#135 devore on 05.16.14 at 1:18 pm

#5 Smartalox

Easiest way probably is to start a spreadsheet on Google docs, and use the GoogleFinance function to populate prices. Will take a while to set up properly, but there’s basically no maintenance afterwards.

http://wsjourney.blogspot.ca/2014/01/google-spreadsheets-google-finance.html

#136 CaesarMarcus on 05.16.14 at 1:43 pm

…a guy to yell at…

meant to be humorous, nonetheless, oh so true…lol

#137 TurnerNation on 05.16.14 at 1:44 pm

Dip the buys.

#138 pr machine full speed on 05.16.14 at 1:57 pm

Housing Bubble overblown

http://www.bnn.ca/Video/player.aspx?vid=312510

#139 chet sanders on 05.16.14 at 2:16 pm

If the stock market didn’t recover until 7 years after 2008, then what you’re saying is buy stocks in 2015.

The balanced portfolio recovered in one year. — Garth

#140 chapter 9 on 05.16.14 at 3:16 pm

#123 Wiseguy
Lucky it is a foot injury my friend just got out of the hospital after falling off a ladder breaking her neck and back. The breaks were millimeters from her spending the rest of her life in a wheel chair and will be off work for more than a year. Tradesmen were running late and she couldn’t wait to get started.
Health is more important it’s only a house!!

#141 learningfromyou on 05.16.14 at 3:23 pm

#131 pinstripe on 05.16.14 at 12:50 pm
>What happens to the equation when the TRAINED person >becomes EDUCATED about the SYSTEM?

It’s up to each one to define the words training and education.

Your critical way of thinking will give you the answers if it’s right or wrong what you accept or deny in your life.

It’s true that some educations could be translated to brainwash, it’s happen (for example) when you watch too much TV and finish accepting as true what you see.

We are rounded by SYSTEMS, on every place we stand they interact with your body and brain.
You better do not get drunk, keep focus and regardless of the SYSTEMS goals yours will prevail.

“Your interface defines your behaviour”

That’s way I come to this blog on the daily basis and I write my goal before going to bed.

Garth, could you provide us the requested ALGORITHM? please.

#142 Cici on 05.16.14 at 3:40 pm

#80 Confused Millenial

Stop right where you are and call Garth or another advisor.

First, we’re talking ETFs here, not FTEs.

Get that straight before you make your next move…

#143 G Dawg on 05.16.14 at 3:51 pm

” espressobob on 05.15.14 at 8:30 pm

#23 G Dawg

Hindsight is 20/20! Any predictions moving forward? When it comes to indivual stocks, good luck!”

It’s not luck Bob……I sometimes spend years reviewing individual balance sheets and corp reports before making a purchase…..do the whole macro thing and spend hours every day at my boring craft following/holding some holdings for decades.

Even at the best of times I am wrong approx 23% of the time due to unforeseen circumstances…Fukushima and government interference. The trick of running money is to be right more often than you’re wrong. Even when wrong the macro always proves a patient man right…….interferences come and go…politics change….black swans die a slow death and stop stinking while the world reorders itself…

But…that’s why returns are double the sector indexes. My wife had some good advice for me years ago ……”Why not just buy the stocks that go up?” Thats the essence of stock investing….Hard knowledge and fear of failing the ones I love.

ETF’s are the lazy mans stock market…… I never met an ETF millionaire. Writing about making a million and making a million from writing about making money….and actually making money as an investor….are two completely different things……as The Wealthy Barber, The Millionaire Next Door…. etc will show. Stock picking is not an art , luck or a science…..it’s accountancy.

#144 Old Man on 05.16.14 at 3:58 pm

Breaking News on CP24 – Rob Ford has been spotted in Bracebridge and Gravenhurst today.

#145 kommykim on 05.16.14 at 4:07 pm

RE:#134 G Dawg on 05.16.14 at 1:16 pm
My answer is this…..if a company like BCE goes bankrupt……then you can be sure that every issue on the index has plummeted as well and we’re headed for the bunkers.

GM used to be a blue chip stock. Never say never.

RE:I don’t know of a single example in an ETF that can replicate the performance of say…TD Bank….up 1700% for me…

You’ve obviously been investing for a very long time and must have a seven figure portfolio. The majority of us do not and can not achive the needed diversity without using a vehicle such as an ETF.

#146 espressobob on 05.16.14 at 4:26 pm

#15 Mishuko

Owning the S&P 500 & International etf’s in ones TFSA aint a bad way to go. The only negative would be the witholding tax on US dividend or getting raped by your discount broker on foreign exchange. However, no biggy. Otherwise the gains are yours ‘tax free’, and thanks Garth!

Non-reg accounts may require some study on your part for taxation issues. Best of luck.

#147 bigtown on 05.16.14 at 4:49 pm

The best opportunity with the high Cdn. dollar is GET OUT OF TOWN and go to South or Central America polish your sales and Spanish language skills. It is perfectly legal to sell REAL ESTATE in Mexico without a license…..take that MLS Canada. You have to love a country that grows tequila. OLAY. Far better you have some backbone in the new DARWIN AGE OF FINANCE….what with the financial repression and the NSA and Montreal Habs in the Stanley..

#148 aaron on 05.16.14 at 4:59 pm

https://ca.news.yahoo.com/big-ticket-dinners-blunt-bernanke-sounds-theme-low-200233589–sector.html

Shocking. Some big shots predicts rates won’t rise more than 4% in Bernanke’s lifetime.

#149 G Dawg on 05.16.14 at 5:10 pm

#145 KK…

“You’ve obviously been investing for a very long time and must have a seven figure portfolio. The majority of us do not and can not achive the needed diversity without using a vehicle such as an ETF.”

I have and I do……however….the returns on generalized investing are so marginal that you can never make serious money. I don’t want my wife to choose between regular and premium cat food. An ETF will never get you there…..it might grow…but you’ll never make ‘Boat Money’….thats the ‘risk/reward’ ratio in a nutshell. As I said…ETF is spelled ‘complacency’…..the way to get ahead is to educate oneself and take the plunge……otherwise it’s a long road of mediocrity.

#150 happity on 05.16.14 at 5:22 pm

This portfolio is handing all you have over to the banksters.

It’s like saying buy a house but diversify it into bedrooms, kitchen, front room, den, etc.

The portfolio assumes the world is blissfully floating along with unicorns walking by and trees that grow lollipops.

It ignores money creation cycles, kondratief cycles, banksters greed and corruption, unprecedented debt and global military tension all combined the likes of which N America hasn’t seen since the 1920’s. Nothing was fixed since 2008, there are enough well known proven names shouting this all over the Internet.

The greater fools will soon be exposed in the coming months and years.

#151 learningfromme on 05.16.14 at 5:23 pm

#101 len on 05.16.14 at 2:17 am
“I don’t know and it is unsettling not to know but then I look around most of the rest of the world and understand that the old have a very different role to play and we “vibrant seniors” :) here will have to adapt?”

Oh please; I think you’ve been inhaling too much on campus. Every academic I know lives in a hilarious alternate reality, and you’re no different.

The children you’re “teaching” have zero perspective and zero experience and their idealism will have zero effect. All of it slowly tortured to death by pragmatism as resume after resume go unanswered.

We’re living in an era of colossal change, faster than ever before. But whatever you think “Binding paper money to tangible (and intangible like knowledge) assets to make them inaccessible to rentiers and speculators.” means, I will sleep soundly tonight; assured that the global financial structure is not threatened.

Kids are kids. New ideas are fantastic. 20 year olds can accomplish great thing things. No one you’ve ever met will change the paradigm.

As Garth Turner is well aware, truck rest areas are homosexual hangouts. They are the bath houses of the nineties for many many gay men.

‘You can be anything, do anything’ – The biggest lie perpetuated on the youth. Learning what the rules are, which ones you can bend or ignore and which ones must be obeyed, that’s truly valuable knowledge; stuff you can’t learn in SOC306 or CALC207

Tl;dr – Academics are products of a life in academia and reality handicapped.

Oh please. I think youve been inhaling too much on campus. Every academic I know lives in a hilarious alternate reality, and you’re no different.

The children youre “teaching” have zero perspective and zero expirence and their idealism will have zero effect, all of it slowly tortured to death by pragmatism

#152 espressobob on 05.16.14 at 8:28 pm

#149 G Dawg

Professional fund managers for the most part underperform their benchmark! Us retail investors are kidding ourselves with individual stocks. If you have some gift cherrypicking equities you might consider a career change.

Index investing may seem boring, compounding never is! Think about it.

#153 G Dawg on 05.16.14 at 10:46 pm

Sorry B…but that’s mutual fund sales propaganda. Its true that some fund managers do less than stellar jobs…..and some hedge fund managers make stupid bets …but pro’s for the most part outperform the market…think about it…why would pension funds hire a consistent under-performer?

I sold information to individual investors for decades….none would have paid me if I didn’t make money on a consistent basis. Don’t listen to the cube farm conductors. The idea that an index investment will compound to a million over the course of 40 years is a hypothetical formula under only the best/impossible conditions….and you’ll never meet anyone who achieved that. That’s why ‘Freedom 55 ‘ failed…..cancelled.

There’s real easy money to be made in stock picking. I manage my own account poolside these days…the idea of working doesn’t cross my mind.

The only sure way to gain a multi-million dollar equivalent pension is to work as a civil servant where it takes 3 ++ million tax payer dollars to fund a single civic servants pension. Other wise….you’re better off watching paint dry.

#154 Sunday Morning Dump: Feminism, Jim Rogers, Reddit - Financial Uproar on 05.18.14 at 8:00 am

[…] Fool, Garth Turner takes a break from talking about Canada’s real estate bubble to give a nice, simple portfolio for millennials to follow. It’s simple enough that even the dimmest of you can follow […]

#155 espressobob on 05.18.14 at 5:33 pm

#153 G Dawg

Individual stocks are laughable! Its surprising how a handfull who comment here never disclose their positions in advance. I wonder why?