Believe it

It’s Skeptics Week on GreaterFool, the blog that never learned how to be embarrassed. Or apologetic. Or be humble. Which is perfectly okay, because it’s always truthy.

Nonetheless, there are non-believers. In the past they’d be smitten, or thrown into a pit with angry, naked social justice warriors, but this is 2017. We’re all feminists now, and prefer simply to mock those we disagree with. So, let’s begin with Joel, a skeptic who believes financial portfolios can’t actually deliver a decent rate of return without big risk:

Huh? A portfolio which returns 6% is not possible from an advisor- they take 1% off the top and NO one is giving 7% . Unless of course you dramatically increase risk and dip into junk bonds. Certainly there are ways to get that number via other avenues : private equity, covered call selling, etc. But not like this.

Well, Joel, we don’t make this stuff up. We can’t. It’s against the investment industry guidelines. IIROC Rule 8712j says any advisor who fibs about portfolio returns “shall have a quart of fire ants released within his shorts.”

A balanced, globally diversified portfolio with 40% fixed income (the safe stuff) and 60% growth assets returned 8.5% in 2016 and has averaged 6.7% over the past seven years, at least two of which had financial markets that sucked (the 2011 US debt crisis and the 2015 oil price collapse, for example). I will (again) touch on the basic components of this in a minute. It ain’t rocket science. Instead, the secret is establishing reasonable asset weightings and sticking with them, no matter what your gut, your loins, your BIL or the little fuzzies on the back of your neck are telling you.

Rebalancing is important in order to keep the weightings on plan. When something shoots higher (like US equities lately) you must have the discipline to nip off gains and distribute them among the poorer performers. Human emotion tells you otherwise – to buy and hold stuff that’s rising and chuck the losers. That’s exactly why 99% of DIY investors never rebalance, and end up losing.

You must also accept the difference between investing and gambling. Most do not. Gambling’s the act of chasing returns, thinking that loading up your TFSA with a penny mining stock your therapist recommended is smart because it’ll soar. But it won’t. You swung and missed. So stop trying to double your money in a month and be happy to do that in a decade. Get rich slow.

Finally, be careful where you get financial advice. The bank’s in the business of flogging you stuff. Over 90% of the dudes calling themselves “financial advisors” are actually salesguys paid to load up your portfolio with mutual funds giving them forever commissions. Talk about conflict of interest. Some advisors chose to be paid by the number of transactions they complete for you. More conflict. So the best option is probably a fee-based one who (as Joel mentions) should charge a management fee of no more than 1% annually of the money you give (tax deductible), and refuses to take compensation from any other source. No conflict of interest. He works for you.

Of course, the online world is teeming with financial sites and all kinds of advice, from bullion licking to stock picking to potato portfolios and mustache mulling. Be careful. Nobody online, including the new robo advisors, will ever take the time to absorb your personal circumstances, work with you on unique tax minimization, or ask about your aged parents or the potential needs of your kids and siblings. You are paying an advisor not just to deliver a 6% or 7% return, but to help you cut tax, split income, prepare for retirement, finance a house or keep you out of the evil clutches of rapacious insurance guys.

And remember how to structure your portfolio. Husband and wife should always have a joint non-registered account to assist in income-splitting, enjoy the tax advantages of dividends and capital gains, and ensure if disaster strikes the remaining partner owns everything. Fixed-income or interest-producing assets (government and corporate bond ETFs etc.) should go into an RRSP. Fast-growing, more volatile things (US small caps or emerging markets ETFs, for example) with higher growth potential should be in the TFSA.

Don’t make the common mistake of loading up your kid’s RESP with safe bonds or GICs, or opening a plan with one of the baby vultures. If you lose your mind and buy a mutual fund, never agree to one with a DSC – deferred sales charge – which will lock you into a MF prison. Don’t buy individual stocks, unless you have a seven-figure portfolio and enough dough to achieve diversification. And always get the right money in the right geography. These days that means only a third of growth assets should be maple.

Wow. Look at that. The bottom of the post, already. That came fast. So tomorrow we’ll review the building blocks of the portfolio Joel says does not exist. Then we can shame him. Don’t miss it.

111 comments ↓

#1 kid on 03.19.17 at 5:56 pm

A bit simpler than your picks, Garth, and ratios aren’t mentioned, from Gordon Pape and the lefty-loving Toronto Star.

https://www.thestar.com/business/wealth/2017/03/17/when-picking-an-etf-keep-it-simple-pape.html

What is the Toronto Star thinking, publishing this kind of thing? Don’t they ‘getting rich’ off the stock market is against all the rules?

#2 Jacko on 03.19.17 at 5:59 pm

Hi Garth. This was sent to my inbox on behalf of realtors looking for help! I am not a realtor by any means! In fact, I have never had a great experience with any realtor over many transactions of my past home sales and commercial real estate transactions.

Since the OREA fights against transparency of sales, historical data on properties, what is your opinion of them asking us for help?

http://realtortaxfairness.ca/

#3 Charity on 03.19.17 at 6:02 pm

Hey Garth
You say sell and rebalance but I am contributing every month. So how do I figure out what the rebalance should be and when? And do I sell, knowing full well I am continuing to contribute so just keep adding to the other parts without selling?
Cheers
M46AB

#4 Liberty Snifton on 03.19.17 at 6:08 pm

Garth, is there a single ETF you can buy and put everything in there, which is low cost, and you never have to rebalance and it is 60% stocks, 40% Fixed income? The Unicorn ETF of sorts? DRIP all dividends and add money by dollar cost averaging.

#5 Eurovision on 03.19.17 at 6:09 pm

2nd

#6 AK on 03.19.17 at 6:22 pm

“Huh? A portfolio which returns 6% is not possible from an advisor- they take 1% off the top and NO one is giving 7% .”
——————————————————————–
Of course not. That’s why they own 7 houses, indebted up to their eyeballs, thinking it’s the only way to make money.

#7 when will it crash? on 03.19.17 at 6:28 pm

Great advice Garth — especially on leave it alone except to rebalance.

#8 Old Salt on 03.19.17 at 6:33 pm

Joel, this stuff is for real.

I sold most of my crap (ie house) and sailed for 2 years at the ripe age of 32. Put house equity into portfolio and after two relatively slow investment years (compared to the 5 beforehand), came home with 11% more than I left with. Add in the withdrawls and we are at or beyond what Garth quotes.

Always a struggle not smirking when someone asks how it feels to be starting out again in my mid 30’s.

Seriously, we live in the information age. Take a break from Facebook and you too can find the right path to live the good life.

#9 Ex-Vancouver on 03.19.17 at 6:41 pm

I recommend Bogleheads’ lazy portfolios. For Canadians, global diversification with as few as 3 ETFs. https://www.bogleheads.org/wiki/Lazy_portfolios#Canadian_versions_of_lazy_portfolios

#10 Retired in Kelowna on 03.19.17 at 6:41 pm

My Balanced Portfolio average returns as per Garth’s recommendation since 2006: 6.7% after management fees. This is a Discretionary Managed Account with a cost of 1%.
This includes a downfall of 18% in 2008 followed by a recovery of 17% in 2009.
The last five years average return: 11%
It works. This is not a BS story.

#11 Shawn on 03.19.17 at 6:43 pm

Hello Garth,

With bond yields being so low and the advent of tax efficient bond ETFS (i.e. HBB, ZDB) do you still think holding bonds in an RRSP is best practice?

For example if I held ZDB (a discount bond ETF) in a non-registered account it would free up more room in my RRSP for growth assets (US and International Equity).

I understand every situation is different but would like to hear your thoughts on the matter.

#12 crap to sell on 03.19.17 at 6:44 pm

#8 Old Salt

I sold most of my crap (ie house) and sailed for 2 years at the ripe age of 32.

When was that?

How many 32 years old Canadian have crap (ie house) to sell?

#13 Hana on 03.19.17 at 6:58 pm

My dilemma is same as #3 Charity.
I also add monthly and always buy those etfs that are down at the moment. Do I still need to sell anything in my portfolio?

#14 Jan Truman on 03.19.17 at 7:07 pm

Nice sunny day here in Vancouver. Met the new people buying the house next door. Congratulated them. Not from Canada. Its OK as the price they paid for this house puts mine at now worth 2Million and I like ham anyways….. I asked them about the foreign purchaser tax, they told me that “they purchased the house thru a corporation” and avoided paying this pesky tax. Thats the new way around it apparently . Set up a Canadian business and have the business buy the house. Their realtor had it all set up for them… the sales numbers will be rising in Vancouver again as they have regrouped and figured a way around this. On a scarier note… they let me know they had mortgaged this house with a limited amount down as its hard to get cash out of China. I asked what they thought about the banks warning that prices may drop, significantly. This family feels that that is not such a big risk and even if it did happen they can just go back home. Funny what people will brag about. I just acted impressed.

#15 technical analysis? on 03.19.17 at 7:12 pm

if you think about what’s going on in the world today, you can easily make double what you are suggesting (or more) for the next decade consistently. no trading, no stress. no difficult strategies. seek out the big trends. the ones that are going to drive the market for a long time.

your strategy of selling what’s gone up to re-balance limits your returns all you’re doing is cutting short your profits to add to weaker positions. a horrible strategy. your strategy is for mediocre returns. .

Most people are happy with something close to 7% returns. Greedy people who embrace risk are not the norm. — Garth

#16 ToonTown14 on 03.19.17 at 7:17 pm

Garth, you mention “potato portfolios”. I currently have over $190k in a LIRA, RRSP, and TFSA sitting in mutual funds at one of the big banks. I’m in the process of opening a qtrade account and moving to an ETF investment portfolio. I’ve been reading a lot about these potato portfolios and it seems like simply owning 3 ETFs (All Country World tracking, Canadian All Cap and Corporate/Government Bonds) gives you balance and returns comparable with anything else available. It will certainly cut my fees to a fraction of what they are now and the 20 year average of a 40/60 ETF portfolio described above is just over 6.5%. Why pay an advisor? Couldn’t be much more staight forward.

Did you read the post? Returns are one aspect only of what an advisor does for you. How could you miss that? — Garth

#17 Bytor the Snow Dog on 03.19.17 at 7:20 pm

OMERS returned 10.3% last year. Or at least that’s what it says in my Member’s Report.

#18 Not 1st on 03.19.17 at 7:27 pm

Garth they guy is obviously talking about yield. Where is 7% yield. Return doesn’t matter if I have to sell some of it every year to keep the lights on.

Covered calls are totally fine. Have held them for 5+ years and haven’t had a Problem yet. Not putting my money in any market that gives a yield the same as inflation. That’s dumb.

Most people use ‘yield’ or ‘return’ interchangeably. Seems reasonable. — Garth

#19 Post #15 on 03.19.17 at 7:31 pm

Spot on.

Rebalancing increases fees . That’s about it . Unless someone has evidence to prove otherwise

Scare tactic for potential DIY. Lol

Good advisors charge nothing for rebalancing. — Garth

#20 Disagree Garth on 03.19.17 at 7:37 pm

BANNED

#21 Vampire studies GMST on 03.19.17 at 7:43 pm

3 charity/13 Hana – if you stick with a basic fixed amount for contributing into these funds (dollar-cost averaging)
then it helps reduce the need to re-balance as the small flucuations are taken care of. Keep a little cash available if one of the funds or asset classes drops past a pre-set
limit, you can add to it then with an extra contribution, or check the portfolio say once a year and top up then.

#22 CJBob on 03.19.17 at 7:50 pm

Excellent advice but a little incomplete. Don’t re-balance too frequently, every 6 months is plenty. If you are still contributing then you simple add to the areas that are underweight so it doesn’t cost an additional penny.

This is a good site but there are others in “Canada” where you can sit on your “couch” like a “potato” and learn (hopefully that is specific enough to help and cryptic enough to make it past our benevolent host).

Couch potato weightings are far from ideal. Be careful. If you are a DIY investor because (a) you are cheap or (b) you have trust issues, you need way better advice that the spud people provide. — Garth

#23 Leebow on 03.19.17 at 7:54 pm

#18 not 1st

Covered calls are a very bad idea, especially these days. If you did that for 9+ years, you’d know.

Have some quality time with your money before it says goodbye.

#24 Old Salt on 03.19.17 at 7:54 pm

@ #12 crap to sell.

I sold in spring of 2014. Never had cable nor a smart phone, that didn’t matter to me.

I worked like a dog in high school to put myself through university. In the end scholarships and parents helped for undergrad, so I came out with cash and had started learning about investing. Put myself through MASc on my own. Wife much the same.

We each had 1 or 2 good earnings years, mostly from overtime or the ability to get something done that someone else couldn’t. Otherwise completely average incomes for our respective fields.

We just didn’t buy all the crap the media says we needed to be happy. Focused simply on the stuff that actually made our lives better. Now we have options.

#25 Habbit on 03.19.17 at 8:31 pm

Hi Garth. You mention RESP’S. Are the foundations worth the cost or is opening an account with banks better. Thanks again eh

Banks are better. Advisors better still (bank branches don’t sell ETFs). — Garth

#26 technical analysis? on 03.19.17 at 8:33 pm

Most people are happy with something close to 7% returns. Greedy people who embrace risk are not the norm. — Garth
_____________________________________

it has nothing to do with greed and risk, or being happy with returns or not.

fundamentally, your strategy limits what you make, by selling winning positions to buy losing positions. that’s a fact.

Rebalancing is done for a reason, which is to lessen volatility and create a more predictable return. This is what most folks want, unlike you. Just accept it and move on. — Garth

#27 crap to sell on 03.19.17 at 8:34 pm

#24 Old Salt

Good for you.

#28 Rexx Rock on 03.19.17 at 9:05 pm

If 2008/2009 comes again,will the central bank have negative interests rates like the EU and Japan or some other shceme to prop up the final collapse?I guess you can hire a finacial advisor who is smart enough to short the market.Making money when the market finally corrects is always nice!!Canada’s central bank will never raise interest rates,there making way to much money on high debt mortgages and they also hate savers and pensioners.

#29 Tudor on 03.19.17 at 9:05 pm

Joel is likely right over the near term. While 60/40 had a good run historically, returns are likely to be more muted going forward. And it’s not just ransoms on the Internet who say so — Vanguard has some pretty great research:
https://personal.vanguard.com/pdf/ISGVEMO.pdf

So yeah — you’ll probably need to save more.

#30 Tony on 03.19.17 at 9:06 pm

As strange as it might sound most quote investors aren’t gamblers. I always look for bias when investing or gambling. For me the two are identical no difference. That’s why penny stocks on the Vancouver stock exchange trading at one cent or one half a cent were an overlay way back when. For the simple reason most were investors not gamblers. Fact is nothing produced a greater return than penny stocks trading in Canada at either one cent or one half a cent on the Vancouver Stock exchange. The same bias didn’t exist on the OTC market at the time. Look for bias first and trade accordingly. Always look for bias when investing or gambling.

#31 IHCTD9 on 03.19.17 at 9:13 pm

#24 Old Salt on 03.19.17 at 7:54 pm
—-

We’re carbon copies. No cable ever, no cell/smart phone ever. No new cars ever. No new house ever. No new anything of consequence ever. Two decent but entirely regular incomes located where houses are still affordable. We’ve saved since our 20’s, I’ve always been a hands on guy, so the big bills were largely thwarted via sweat equity.

Glad we did, we have options now too, like you. Looks like we may need them.

#32 not 1st on 03.19.17 at 9:16 pm

#23 Leebow on 03.19.17 at 7:54 pm

Have some quality time with your money before it says goodbye.

—-

I assume you are referring to return of capital sometimes used in these funds to keep the yeild up. Thats no problem. So it limits the stock price. Who cares, I buy for income, not for capital appreciation. I’ve got real estate for that.

A GIC technically returns your capital with a profit as well and millions of people own them. If you give me a dollar and I agree to give you your dollar back plus 7 cents, you wouldnt take that deal?

#33 Alex on 03.19.17 at 9:17 pm

If you can bring a lot of new cash to your portfolio (you should be) every quarter, there’s no need to sell the winners all the time. Just add to the relative losers in order to follow your original assets allocation.
Whenever I have 50K in liquid cash I will buy something and always choose the least performing of my ETFs/stocks (this will happen every 10-12 weeks).
I am not sure that the 60/40 split should apply to everyone. I see it as a start point and everybody should do their homework and decide for themselves, using or not the help of an advisor. I am at 70/30 myself.

#34 Russ on 03.19.17 at 9:17 pm

crap to sell on 03.19.17 at 8:34 pm

#24 Old Salt

Good for you.
=================

Thanks Crap…
if you didn’t post I would have missed the OS boring post completed.
Instead after I read your’s, had to reread her’s and discovered why I missed it the first time… no value.

Cheers, R

#35 Millenial on 03.19.17 at 9:19 pm

Garth,
I’ve been catching up on my economic collapse fear porn tonight. Search September 23rd, 2017 on YouTube. Watch some videos, and report back to me. You’ll probably want to mark that day in your calendar.

#36 45north on 03.19.17 at 9:20 pm

Shared Services: Shared Services’ real mission is to modernize the government’s technology networks by 2020 and at the same time help 42 federal departments to shift thousands of software programs and a mountain of data from older (legacy) data centres to new ones.

http://ottawacitizen.com/news/politics/bagnall-the-cloud-looms-on-shared-services-horizon

no it’s not

Shared Services real mission is to centralize Information Technology (IT). The 42 government departments didn’t ask for Shared Services they were told they had to use it. Senior civil servants have a duty of loyalty: They can criticize direction from above but it’s very stressful. Wayne R Smith, Chief Statistician resigned over exactly that issue:

http://ottawacitizen.com/news/local-news/shared-services-canada-was-a-battle-chief-statistician-couldnt-win

Shared Services was supposed to save money. It hasn’t and never will. The extra $400 million allocation is on top of the $1.4 billion. A year.

The failure of Shared Services is the failure of the federal senior civil service. I mean they expected there would be problems but not on such a scale.

#37 wallflower on 03.19.17 at 9:30 pm

why are we not all putting our houses in corporations, like the HAM couple mentioned… what are we missing out on?

#38 Sitting on the toilet thinking on 03.19.17 at 9:45 pm

Why use a finacial adviser to invest when you can go to the real estate wealth expo and get advice from tony Robbins and pitbull. It’s a sure fire way to get rich. Pitbull said so it has to be true lmfao. I think we have reached official bubble territory

#39 Leo Trollstoy on 03.19.17 at 9:48 pm

I’ve observed that people who have no money quote their annual % returns and rich people quote net worth

#40 crossbordershopper on 03.19.17 at 9:49 pm

a corporation situated on a native reserve, there are 611 in canada if anyone checks. with a board of status natives. all earings from the corporation are tax free. all the income earned by the natives are tax free as well, no reporting required to anyone, including the corporation.
the corp is registered with the federal incorporation, bypass the provincial.
all income earned by the corporation is tax free, all assets are tax exempt because they belong to natives.
now i assume all you are not natives, but i can lend you a 1000 names and numbers of natives who will gladly participate.
or you can just have trudeau steal your money and give it to the them anyway.
end result is the same.

#41 Vancouverite on 03.19.17 at 9:52 pm

#38……..if corporation, then when they sell, they would not qualify for principal home capital gains exemption?

#42 leebow on 03.19.17 at 9:58 pm

#33 not 1st

That’s the least of your concerns. You are exposed to all the downside and very limited upside. Time will likely demonstrate that the compensation you get is inadequate.

And to top it off you have real estate for “capital appreciation”.

Look, it’s completely your business – your money and your life. If anything, I’d like to thank you for doing what you are doing. Consider getting a second opinion about your investment approach.

You are sitting on two of the most crowded and scariest bets – shorting volatility and GTA real estate. I have no clue how it’s gonna play out for you, but you may be in for a big surprise sooner or later.

#43 Brian Gordon on 03.19.17 at 9:59 pm

@#17

You’re correct, OMERS did return 10.3% in 2016. MY DB plan and some RRSPs are with them.

#44 Chaddywack on 03.19.17 at 10:01 pm

@14 Jan Truman

I’m not sure if setting up a foreign corporation actually shielded him. The foreign buyer tax also applies to “foreign corporations,” which are defined in the legislation as:

“foreign corporation” means a corporation that is one of the following:

(a) a corporation that is not incorporated in Canada;
(b) unless the shares of the corporation are listed on a Canadian stock exchange, a corporation that is incorporated in Canada and is controlled by ONE or more of the following:
(i) a foreign national;
(ii) a corporation that is not incorporated in Canada;
(iii) a corporation that would, if each share of the corporation’s capital stock that is owned by a foreign national or by a corporation described in paragraph (a) of this definition were owned by a particular person, be controlled by the particular person;

To me this means….a) he’s BSing you and paid the tax but just wants to “save face” and not admit it or b) the corporation is actually controlled by someone other than him if he is a foreign national (his realtor perhaps) in which case if something went sour there goes his investment.

I also don’t know if by owning real estate through a corporation you can claim a principle residence exemption or if he’s just made his house liable for potential capital gains unnecessarily (because we all know that real estate only goes up in Vancouver).

#45 Yyz2yvr on 03.19.17 at 10:10 pm

Here is a story that floored me today. New home builder had 75 units up for sale a few weeks ago somewhere in the GTA. People lined up for 2 days to buy. All units sold out. Obviously nothing new yet. Father and son who were in line and garanteed to have a place, sold there tickets for 15K each to someone else who wasnt so lucky to get there early. Accepted certified cheques only.

#46 not 1st on 03.19.17 at 10:21 pm

#43 leebow on 03.19.17 at 9:58 pm

You are sitting on two of the most crowded and scariest bets – shorting volatility and GTA real estate.

I have no GTA real eastate. Wouldnt touch that for anything. Not all RE is houses. I have 1200 ac prime farmland. Returns double digits, pays down 3.5% and appreciates by more than inflation every year. Makes stocks look like chump change.

#47 Zoe on 03.19.17 at 10:33 pm

With zero experience I purchased a few ETFs after reading up and making sure I was comfortable with their mixes. Had to dump one as it wasn’t returning much, but after two years I ended up with 11% annual returns.

Almost bought a house… decided that the carrying costs and interest were a sucker’s game when my landlords pay all that for me, I just have to cope with having lower ceilings. That’s ok if that’s what it takes for me to be a millionaire when I retire.

#48 leebow on 03.19.17 at 10:43 pm

#47 not 1st
Ok, my bad – I assumed something that isn’t. 1200 acres is cool.

#49 millenial82 on 03.19.17 at 10:58 pm

Could you perhaps once again cover a blog post on recommended RESP holdings? I always thought your standard 60/40 advice applied for these too. A few weeks back one of the weekend warriors suggested holding a more growth oriented portfolio (at least in the early stages) since it would be money invested for nearly 2 decades.

#50 yulyyz on 03.19.17 at 10:59 pm

I wish I could see 7% return, maybe one day. Advisor at 1.5% fee, 3 years now-maybe 4% return net of fee.
I shopped around at the time for advisors, spoke with several and explained amounts to invest, the mix, what other services were available to me,etc- only 1 of 4 called back to follow-up and see if I needed more info. After a few more meetings that’s who I chose.
But the fee is an issue, so just did the rounds again to try to get a 1% fee. Explained my situation to a few new advisors, got some info but again no follow-up from them and some didn’t even take down my contact info – It’s very frustrating… Am I supposed to be chasing them?

#51 collapse fear porn on 03.19.17 at 11:02 pm

#36 Millenial on 03.19.17 at 9:19 pm

Garth,
I’ve been catching up on my economic collapse fear porn tonight. Search September 23rd, 2017 on YouTube. Watch some videos, and report back to me. You’ll probably want to mark that day in your calendar.

===

Edgar Cayce predicts for 2017:
WWIII
US & Moscow becomes military allies
Japan going into the sea, major earth quake

What is absolutely certain though – yet almost entirely missing from MSM – is Fukushima.

Radiation continues to flood into the Pacific ocean – far beyond what happened in Chernobyl.

There is a fourth reactor waiting to happen. Even without other earth quake.

In the current radiation level workers accumulate a yearly dose in 10-15 minutes! Robots and electronics disintegrates before any effective work.

The cores of unit 1, 2, 3 are melt down, somewhere in the ground.

The biggest problem now is unit 4, where the core, with 1300+ rods, that weights 400 tons, is placed 100 feet in the air and the earth quake significantly damaged that building. It needs to be cooled by water all the time to prevent major disaster.

https://www.youtube.com/watch?v=TdhI2DLJcZQ

Dr. Michio Kaku says the management of the reactor should be removed from Tepco and the Japanese government, and hand over the rescue effort to international experts, with the authorization to use the Japanese military. It is a ticking time bomb.

https://www.youtube.com/watch?v=KV-WQXL1YnU

If unit 4 goes, not only Tokyo, one of the most populated cities on Earth (in less than 200 km away) will suffer catastrophic consequences, but the entire Pacific ocean.

#52 mike from mtl on 03.19.17 at 11:16 pm

Don’t get the issue with rebalancing. It’s primary 4 math to do so. In most cases doing some trades costs like max 60$, the fixed incomes provide that number easily within one month. Not comfortable selling the ‘winners’ means you’re probably not equally comfortable with buying ‘losers’.

If you’re not working with at least ideally six low figures don’t bother working with ETFs as the spreads and commissions eat into real MER. Stick with corpo class mutuals.

#53 The Wet Coast on 03.19.17 at 11:25 pm

@14 Jan Truman

Really not sure about your neighbors story. If there is a big conventional mortgage what conventional lender is going to secure it against a corporation unless the corporation has sufficient assets to go after if they default. The corporation game likely works when there isn’t a mortgage, and so long as you trust the principle of the corporation. Sounds like a pretty big risk to me.

#54 Realtors are not professionals on 03.19.17 at 11:29 pm

#2 Jacko

I will emailed my mp. Realtors is not even a real profession . They have no schooling. Most are high school drop outs.

Worthless generalization. — Garth

#55 Ret on 03.19.17 at 11:46 pm

#44 OMERS pension

So they earned 10.3% last year and they gave you… a 1.3 percent increase if you were retired? So tell me what did you buy last year that went up 1.3%?

Unless you made big bucks as a cop, firefighter, paramedic, or manager, you’ll still be working when you retire, at least part time, or you’ll be watching a whole lot of tv.

#56 not 1st on 03.19.17 at 11:56 pm

#49 leebow on 03.19.17 at 10:43 pm

No harm. Its easy to assume everyone is caught up in the house porn madness.

#57 Economystical on 03.19.17 at 11:58 pm

Garth, my poor friend. The B-J plan is to eventually raise taxes to 150% of income. Your 6-7% doesn’t matter, get in line for the welfare while you can still get to the front of the line.

Even Wayne Gretzky had to take the jersey off eventually. Those who don’t follow economystics are past there time. Socialism is the only way forward. We will all enjoy prosperity at the expense of someone else. No need to invest or hire a financial planner, that is so old school. Instead sit back and enjoy the redistribution. Other people’s money is now your money, and through economystics that means there is plenty of other peoples money to go around.

#58 Tony - Question on 03.20.17 at 12:00 am

What was the rate of return for this period:

Jan 1, 2007 to Dec 31, 2016 (a decade)

Essentially the same as the last seven years. In 2008-9 a balanced portfolio lost 20% (Toronto stocks fell 55%) regained it all in a year, then advanced 17% the following year. It took the TEX seven years to recover. — Garth

#59 YVRTechGuy on 03.20.17 at 12:47 am

I gave up looking at open houses in YVR a year ago when I found I couldn’t even park within 3 blocks of any homes for sale. Today, out of curiosity I ventured out to a few opens in Burnaby. WOW – what a difference a year makes – all the opens were complete ghost towns, didn’t see a single person at any of them, one place didn’t seem to have a realtor either … just a home with all the lights on and the door open, reminded me of the alligator scene in ‘The Big Short’.

One realtor was surprisingly candid, with 40 years in the industry he told me there’s no buyers out there anymore, and he’s expecting a 40%+ decline in prices. Still can’t believe I was hearing that from a YVR sellers agent.

With all these open houses devoid of any punters, my family are going to have to go back to getting new shoes the old-fashioned way … in shoe shops.

#60 MJTADTA on 03.20.17 at 12:48 am

Seen on a red ball cap…..
Make Justin Trudeau
A Drama Teacher Again

I love it!

#61 Fortune500 on 03.20.17 at 12:54 am

Old Salt, we should talk. This is our family’s plan in a few more years. Hopefully on a Lagoon …

#62 Parksville Prankster on 03.20.17 at 1:01 am

John Bogle, the originator of Vanguard on Diversification, “Don’t look for the needle in the haystack. Just buy the haystack.”

Index Funds (or broad-based low cost ETFs) … ” these eliminate the risks of individual stocks, market sectors and manager selection, leaving only stock market risk.”

#63 Fortune500 on 03.20.17 at 1:04 am

I have a lot of time and respect for Carl Richards (NY Times sketch guy/BehaviorGap radio fame). He is a well known and respected independent financial adviser who also employs a financial adviser for himself and his wife.

Richards makes a strong case for even the most knowledgeable investors having someone to ‘catch them’ or act as a sounding board due to our inherent blind spots and various other behavior ticks. Anyways, I’m mainly for do-it-yourself low-cost strategies, but there is a large subset of the population who would self implode any number of times before reaching retirement age and who could truly benefit from a neutral guiding hand.

There is rarely a one-size-fits-all solution to any of life’s challenges.

#64 Boots on the Ground in Ptown on 03.20.17 at 1:23 am

#10 Retired in Kelowna on 03.19.17 at 6:41 pm

My Balanced Portfolio average returns as per Garth’s recommendation since 2006: 6.7% after management fees. This is a Discretionary Managed Account with a cost of 1%.This includes a downfall of 18% in 2008 followed by a recovery of 17% in 2009.The last five years average return: 11%It works. This is not a BS story.
———————————————————————–

Currently looking for a skookum advisor, would you mind posting back contact info for what firm you’re using, we’re in the same area (penticton) even tho my handle belies that.

#65 James Kook on 03.20.17 at 2:45 am

“…a management fee of no more than 1% annually”

Yes, there is no conflict of interests.
But here is no further incentives either.

I do not see any reason why an adviser would fight for better return for clientele.

What about sharing returns, both, gains and loses?

It will make the adviser work much harder.

Why would you incentivize someone to take greater risks with your money? — Garth

#66 A Reply to #48 Zoe on 03.20.17 at 7:34 am

Did you know that you’d have more purchasing power with 50 grand in 1914 than with a million today? A millionaire back then had a certain cachet. Not now.

Money illusion is messing with you.

#67 pBrasseur on 03.20.17 at 7:38 am

I’m 100% stocks, performance since 2004 (the year I started counting) is exactly 10% a year or 246% (after fees). Those are just the gains, doesn’t count the capital I’ve added since then. No re balancing of any kind, just making sure the quality remains.

Of course there were a few bad years but many more good ones and good companies resist well during rough times, they even use such period as opportunities (think Wells Fargo buying Wachovia…).

Two words: Quality and patience.

#68 maxx on 03.20.17 at 8:04 am

#8 Old Salt on 03.19.17 at 6:33 pm

“Joel, this stuff is for real.

I sold most of my crap (ie house) and sailed for 2 years at the ripe age of 32. Put house equity into portfolio and after two relatively slow investment years (compared to the 5 beforehand), came home with 11% more than I left with. Add in the withdrawls and we are at or beyond what Garth quotes.

Always a struggle not smirking when someone asks how it feels to be starting out again in my mid 30’s.

Seriously, we live in the information age. Take a break from Facebook and you too can find the right path to live the good life.”

So many don’t believe it’s actually possible. My motivation was to get to a place where I’d never again have to work for someone else and make them rich. Ever.
We now run our own business which is so much fun…and get paid for it. Some days, I almost feel guilty…not!

The good life can be achieved- if you don’t enslave yourself by dumping all of your assets into re.

#69 A Reply to #63 Parksville Prankster on 03.20.17 at 8:16 am

All beta, and no alpha. It works if you don’t meddle, and your holding period is forever.

#70 crowdedelevatorfartz on 03.20.17 at 8:24 am

@#3 Free Charity, @#13 Holy Hannah
“So how do I figure out what the rebalance should be and when?”
+++++++++++++++++++++++++++++++++++

The blog is free.
Advice isnt.
Time to open that purse “Free the moths” and hire a financial advisor at 1%

#71 windjammer on 03.20.17 at 8:28 am

Great post, great information. I have followed your advice and see the logic in investing this way.
Unfortunately I fall into the category of not trusting that I will find an acceptable adviser so I am doing it myself. How do I mitigate the risk of finding a bozo to take care of my needs? (fee based yes but?)
Also now that I have profits to deal with there is a lot of paper work at tax time.
I have downloaded turbo tax and am taking on taxes as well. Does the government send one to jail for being incompetent? LOL Thanks for your good intentions and good advice. I look forward to your next post.

#72 crowdedelevatorfartz on 03.20.17 at 8:40 am

@#58 Economistycal
“Socialism is the only way forward. We will all enjoy prosperity at the expense of someone else. …. Instead sit back and enjoy the redistribution. Other people’s money is now your money….”
*******************************************
Frightening if that mindset wasnt so true in Politically Correct Ottaweird these days.
$100 Billion more onto the obscene govt debt and climbing…
“Transgendered Toilets for everyone!
I know it will be time to leave when our leaders start giving out free purple kool-aid

#73 Welly Lindholm on 03.20.17 at 8:46 am

If everyone switched to Robo Advisors to save fees, instant 0.5% savings per year, compounded for life. Great savings and automatic everything. How can the 1%ers compete?

For people with little to invest, a robo probably works fine. But do not expect tax advice, retirement strategies, financial planning, wealth forecasts, estate planning, or help with everything from buying/leasing a car to yes/no insurance decisions. Having an advisor means getting advice and help. As with the rest of your life you get what ya pay for. — Garth

#74 crowdedelevatorfartz on 03.20.17 at 8:47 am

@#66 Capt james T Kook
“I do not see any reason why an adviser would fight for better return for clientele….”
*******************************************

Hmmmm.
Lets try shall we?
1% of 250k is a $2500 per annum fee.
after it grows at 7% it becomes aprox 500k in 10 years generating a fee of $5000k for the advisor.
Aprox 10 years after that…..
1 million generates $10,000 per annum for the advisor.
We wont even bother calculating all the other years of fees rising (hopefully) at 7%
Incentive enough to build a balanced and diversified portfolio?

#75 Ace Goodheart on 03.20.17 at 8:48 am

Totally agree with this. Question to all on here: What are your best picks for ETFs to track the old great grand daddy of indexes, the Dow Jones Industrial (DJIA)?

#76 raj on 03.20.17 at 9:19 am

Is there a way to gift stocks(ETF) to your kids (minor) and they get dividend for life but they cant sell it forever.

No. — Garth

#77 Mick on 03.20.17 at 9:23 am

I have never made less than 20% a year in the last 5 year. I don’t own any stocks. Options are the greatest protection against human collective stupidity.
Remember, stock market does not represent “value”. Represents only an “opinion” about value.
Once one SELLS, that opinion transforms itself into “value” of sorts.
One makes the mistake to think AMZN (for example) is worth anything. It doesn’t: except for a certain amount of time. One can tap on the VARIATION of the “perceived” value. In 10 years AMZN could be double or could be bankrupt. Who knows… and who gives a damn anyway ?

#78 Mick on 03.20.17 at 9:25 am

..and yes… TFSA was the best invention ever. Harper was bright enough to understand that the tsunami of debt will wipe out any long term valuations.
Too bad the guy was an a…hole.

#79 traderJim on 03.20.17 at 9:31 am

As a former financial advisor and manager/trainer of financial advisors I can tell you objectively that a person SHOULD be able to just buy a balanced portfolio of ETFs and forget about it.

But reality is, 99% of people do not have the mindset to sit through tough times, or to invest when things are bad.

Quite the opposite in fact, as many studies have shown and as anyone in the business knows.

So paying 1% for ‘advice’ is really paying someone to talk the average Joe who wants to sell at the bottom and buy at the top from doing what he so desperately wants to do.

It’s not easy, and well worth the 1% if the advisor can manage to keep you from doing yourself harm.

All the rebalancing stuff is a little icing on the cake and has far less of an affect on your results than keeping you emotionally stable does.

#80 Mick on 03.20.17 at 9:32 am

#76 Ace

DIA, DDM (have options too)

DOD, (no options)

#81 A Reply to #71 crowded on 03.20.17 at 9:40 am

I used to read the comments for the issues, advice and opinions; now I just come for the jokes.

#82 Bytor the Snow Dog on 03.20.17 at 9:42 am

@#24 Old Salt-

Lemme get this straight.

No smart phone!?

BARBARIC! I suppose you don’t have skinny jeans, granite, and stainless steel either. And no lattes!

What’s this world coming to!?

#83 A Reply to #76 Ace Goodheart on 03.20.17 at 9:54 am

DIA seems to have a good correlation (beta = 0.94) with the DJIA.

#84 TurnerNation on 03.20.17 at 12:04 pm

Great post NS. You’ve nailed the mind control agenda as they rob us:

http://www.greaterfool.ca/2017/03/18/the-dollar/#comment-506279

#85 Ace Goodheart on 03.20.17 at 12:11 pm

Re Mick and #83: Thank you!

#86 Ronaldo on 03.20.17 at 12:12 pm

#67 A Reply to #48 Zoe on 03.20.17 at 7:34 am

Did you know that you’d have more purchasing power with 50 grand in 1914 than with a million today? A millionaire back then had a certain cachet. Not now.

Money illusion is messing with you.
—————————————————————-
You don’t have to go back that far. 50 grand in 1970 bought you a nice home in British Properties, West Vancouver. Today it would take 100 times that amount to buy the same place.

100 grand back then could have enabled you to retire with an income of 10 grand per year.(a good wage back then).

Today, you need to have around 2.5 million to earn the equivalent wage assuming a 3% interest rate.

A million today is like 40 grand back then. A million is no longer a lot of money and that is why people looking to save enough to retire today face a huge challenge. Most will not succeed.

#87 Victor V on 03.20.17 at 12:44 pm

http://business.financialpost.com/news/economy/bill-morneau-says-ottawa-will-go-light-on-the-red-ink-in-wednesdays-budget

Canada’s economy has improved of late, posting its best growth since 2013 in the second half of last year. Challenges remain for Morneau: exports have been disappointing and business investment remains muted on concern the U.S. will impose border taxes, making trade more costly. Low borrowing costs have continued to fuel cheap mortgages, increasing the risks of a housing bubble in some cities.

Morneau said the March 22 budget will avoid further moves aimed at cooling the country’s hottest real estate markets.

======

“avoid further moves” – enough said.

#88 money and stuff on 03.20.17 at 12:48 pm

#14 Jan T.

Your overseas neighbors bought the 2mio shack next door with leverage through a BC corp.
Who financed the deal? How much skin do they have in the game?

There’s no pot of gold at the end of the Vancouver rainbow, sorry. Better stick to selling us how beautiful the weather is in Van.
*******************
#35 Millenial
Thanks for the hint to 09/23/17
Good day to make some hay in trading!

*******************
#40 Crossborder…

That is worth looking into. Good advise for sure. None of my buddies ever mentioned this. They’re old school and keeping money offshore. If it was so easy to earn income free in Canada, it would be done and it would be known. But I will look into it and check myself. Are there limits?

*******************
#78 Mike

TFSAs and RRSPs are a backdoor deposit plan for banks to shore up and secure liquidity. Banks will in turn loan out the money in form of mortgages for example.

Maybe there’s a correlation between the introduction of TFSA and increased mortgage availability and debt of course.

But good for us who can squirrel a few nuts away and grow the money tax free. That’s a nice side effect but it wasn’t the motivation behind the account.

#89 cramar on 03.20.17 at 1:03 pm

One-third of Americans say they’d have trouble coming up with an emergency $2,000.

http://www.marketwatch.com/story/one-third-of-americans-say-theyd-have-trouble-coming-up-with-an-emergency-2000-2017-03-20

#90 Victor V on 03.20.17 at 1:30 pm

http://www.bnn.ca/unprecedented-divergence-with-u-s-will-heap-more-budget-pressure-on-ottawa-macquarie-1.701081

Macquarie Capital Canadian Market Strategist David Doyle thinks the debt load Canadians are carrying will crimp consumer spending and in turn weigh on domestic economic growth. In an interview on BNN, Doyle said house-poor Canadians will cause an unprecedented divergence in economic growth between the Canada and the United States.

“I would describe this as something that’s unprecedented: we’ve never seen Canada and the U.S. [become] so desynchronized,” he said. “[Canadians are] that much more stretched on a consumer basis, on a housing basis, relative to the U.S.: we think that puts our economies on very different tracks going forward.”

#91 Joe Schmoe on 03.20.17 at 1:38 pm

I find it interesting that people struggle with trusting fee based advisers but use banks/RE agents etc.

Incentive: if the portfolio grows the adviser gets more moola. If the portfolio grows, the adviser gets more clients (word of mouth)….gets paid more money to set up the same strategies.

We should let the fee based advisers slide and be more critical of our politicians/national media outlets:

http://www.cbc.ca/news/business/stock-option-deduction-tax-rate-1.4030442

Aren’t they just spinning Cap Gains tax rate as the root of all evil?

CEOs take advantage of it! It’s evil!

Yet people will sacrifice their futures like sheep to the slaughter…

#92 OttawaMike on 03.20.17 at 2:03 pm

#55 Ret on 03.19.17 at 11:46 pm
Said:
Unless you made big bucks as a cop, firefighter, paramedic, or manager, you’ll still be working when you retire, at least part time, or you’ll be watching a whole lot of tv.
————–

Walking away with 70% of my working pay at age 56. No more deductions for union dues, ei, CPP or pension leaves me with the same take home pay.
I’ll take it.

But back to your point, yes there are many in lower paying Municipal jobs that will receive a commensurate pension.

When I spoke to an actuary and 2 financial advisers about divesting before 55, they all said nobody can beat the Omers returns and I’d be taking on risk trying to recover the huge Taxes I would lose in a lump sum.

#93 Billy on 03.20.17 at 4:22 pm

I was offered these rates to switch and renew at BMO

2.25% 5 year variable
2.49% smart 5 year fixed ( some restrictions)
2.64% fixed 5 year rate mortgage

I have shopped around ( here in Saskatchewan) these rates are better or match the rest. Still waiting to hear back from one other mortgage broker

First mortgage 13 years ago was 5.19%. Last mortgage was 3.14% Cant believe mortgage rates are even lower this time around

Leaning towards the 5 year variable. Our mortgage is not that big, so the difference between the 3 mortgages per month is not much.

Just wondering what are some thoughts on the variable rate decreasing/increasing in the next while.

Thanks

VRM rates will likely increase in 2018. Why stress over a lousy quarter point? Worry about things that matter. — Garth

#94 Jorge on 03.20.17 at 4:32 pm

So what are the 40% fixed assets?
What are the Canadian ETF to buy?

#95 jess on 03.20.17 at 4:48 pm

“the Global Laundromat”.
British banks handled vast sums of laundered Russian money

Exclusive: Billions of dollars were moved out of Russia in ‘Global Laundromat’ operation, with anonymously owned UK companies playing major role
Documents seen by the Guardian show that at least $20bn appears to have been moved out of Russia during a four-year period between 2010 and 2014. The true figure could be $80bn, detectives believe…’

“The Global Laundromat banking records were obtained by the Organized Crime and Corruption Reporting Project (OCCRP) and Novaya Gazeta from sources who wish to remain anonymous. OCCRP shared the data with the Guardian and media partners in 32 countries.

The documents include details of about 70,000 banking transactions, including 1,920 that went through UK banks and 373 via US banks.
https://www.theguardian.com/world/2017/mar/20/british-banks-handled-vast-sums-of-laundered-russian-money

#96 common sense on 03.20.17 at 4:52 pm

I just read the TORONTO REAL ESTATE WEALTH EXPO SHOW held over the weekend was quite the pathetic piece of garbage shrill for Toronto real estate as expected…

Anyone else hear anything about this as well?

#97 jess on 03.20.17 at 5:01 pm

criminogenic!

https://www.occrp.org/en/laundromat/

#98 Question on 03.20.17 at 5:02 pm

For those among us who have several m$ to invest, what do you think of a using a professional wealth management firm, such as the ones affiliated with RBC, BDO, TD, etc? As compared to using a fee-based investor only and managing a large sum like that yourself accordingly in self-directed investment accounts?

If you mean ‘millions’ then only a fool would self-invest. The bank-owned brokerages are okay, but it is the advisor that matters. Never sign up just because of a logo on the door. — Garth

#99 Victor V on 03.20.17 at 5:06 pm

#93 Euro Observer on 03.20.17 at 2:26 pm

The Feds may not act but perhaps Premier Wynne will.

#100 Question on 03.20.17 at 5:06 pm

BMO, that is…

#101 Home to Roost on 03.20.17 at 5:15 pm

Its so funny reading about GTAers complain about the massive spike in prices and why the feds will not do more.

When Vancouver underwent massive price increases, everyone just laughed it off as the crazy west.

Now that the ‘centre of Canada’ is gripped by an affordability crisis, measures must be taken!

Hate to tell you GTA, you have many more years of these price increases until you get to the massive income stratification in Vancouver and its surrounding communities which, gosh darn it, nobody can account for since prices have been disconnected from fundamentals for a decade.

Enjoy the run up in prices and those on the sidelines renting better buckle up for at least 10 more years of renting.

#102 BREAKING NEWS on 03.20.17 at 5:22 pm

No increase in Capital gains Tax!

#103 jess on 03.20.17 at 5:58 pm

Swedish Television’s investigative program Uppdrag Granskning and News Agency TT and shared with the Organized Crime and Corruption Reporting Project (OCCRP) and the Canadian Broadcasting Corporation,
On March 22, OCCRP, along with SVT, TT and CBC, will publish a full investigation with additional details of the alleged Bombardier corruption scheme in Azerbaijan.

Multiserv Overseas

https://www.occrp.org/en/investigations/6188-bombardier-sweden-investigated-for-alleged-bribery-in-azerbaijan

#104 dumpster fire on 03.20.17 at 6:13 pm

https://onbeyondinvesting.com/blogs/blog/i-attended-the-top-of-the-canadian-housing-market-so-you-didnt-have-to

I passed by the wealth expo convention this weekend, and the crowd size was staggering. Over ten thousand wannabe speculators dancing to “Don’t stop the party”… You can’t make this stuff up.

~ breathe deep

#105 James on 03.20.17 at 6:17 pm

I have an RRSP with my company that gives me 20% of the 18% max per year. I also have an old RRSP sitting precariously in a single fund with manulife. I opened a self directed RRSP with Questrade and was about to move the one at manulife over, but i’m not sure how to handle my work one. It doesn’t give me many options to choose from, and certainly no ETF’s . Any advice? Do i move my founds out of my work RRSP yearly into my Questrade account? I dont want to miss out on the free money from work, but i feel like i’m spreading things out too much to keep track of. should i even bother with the questrade account?

Also all of my money is currently in the RRSPs (and of course i now can’t pull it out) should i start the TFSA and contribute but only hold the equity funds and make my RRSP all bonds? This would skew my portfolio dramatically…

Any advice helps

Thanks Garth!

#106 Tony on 03.20.17 at 6:20 pm

Re: #97 common sense on 03.20.17 at 4:52 pm

The expo made zerohedge.

http://www.zerohedge.com/news/2017-03-20/i-attended-top-canadian-housing-market-so-you-dont-have

#107 Wrk.dover on 03.20.17 at 6:21 pm

http://thechronicleherald.ca/business/1451477-solar-for-farms-on-the-horizon

Can’t understand the premise of this one, other than being an offer of something for nothing

#108 Alice on 03.20.17 at 6:50 pm

@ #105 dumpster fire on 03.20.17 at 6:13 pm

This is going to be one of the moments that makes documentaries about the epic real estate crash that happened in Canada.

#109 Alice on 03.20.17 at 6:51 pm

@ #89 cramar on 03.20.17 at 1:03 pm

Truly disturbing, but half of Canadians aren’t doing much better.

http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/more-than-half-of-canadians-have-less-than-10000-set-aside-for-emergencies-bmo/article26172527/