Getting soaked

The only way to describe it is ‘prison’. The mutual fund prison. Salesguys who masquerade as financial advisors love it. Because it works.

This is exactly what DSC – deferred sales charge – mutual funds are intended to do. Lock you up for a seven-year sentence. The clever idea is that instead of shelling out a commission upfront to some friend of your nephew’s BIL who just got a job slagging funds, you get to buy them ‘for free’. Each year you hang in there, the penalty for bailing out dwindles. After 72 months, it’s gone. You’re paroled. Freedom.

Why would a financial asset you’d invested in penalize you for selling it? Because if the prison didn’t exist, you’d probably bail as soon as you discovered you’re paying 2%, 2.5% or even more in recurring charges to own it. Human nature being what it is, the salesguys know investors would rather spend two years paying huge MERs (that stands for Management Expense Ratios – code for ‘fees’) which they don’t see, than shell out a fraction of that to leave.

Yes, the financial business runs on fees. It’s why the banks are money machines, clearing $40 billion a year in profits. Mutual funds are hugely profitable, and together we hold $1.47 trillion in them. That’s ten times the amount of money that’s held in exchange-traded funds, where fees are ten times less. Obviously millions of Canadians have been guided down this path by that temptress known as [email protected]

I thought about this whole fees thing when Rob sent me this note:

Hi Garth, I will make this quick because I know that you are busy. Basically came across an article about what fees are deductible and which are not. Maybe you could do a Blog post on the subject one night. The article makes it sound like most fees are not tax deductible, and to top it off, it seems some rules are changing on January 1 2018

Here are a few things to remember. First, on mutual funds (since most people own them): fees are significant, and buried in the cost of ownership. The person selling you these animals at the bank will tell you s/he doesn’t charge anything to perform that charitable service. In reality, the funds turn out trailer fees so every month you stay invested, somebody gets paid. To Rob’s point, mutual fund fees aren’t tax-deductible. So if you own a fund with a 2.5% MER and you’re in the 40% tax bracket, that’s actually costing 3.5%. Ouch.

The same principle applies to ETFs, all of which have embedded fees which are not deductible. The big difference is the average fee across a portfolio made up of exchange-traded funds might be 0.2% – or one tenth of the cost of owning a mutual.

What about other fees and investment costs?

Management fees, charged by fee-based advisors, are 100% deductible from taxable income on non-registered accounts. With RRSPs, the money taken to pay an advisor is not counted as taxable income. That means you got a tax break for putting that in, but there’s no tax when it exits – so the government is also subsidizing you. Fees on TFSAs, however, are non-deductible. Somebody in the top tax bracket, then, with accounts run by a professional offering tax advice and portfolio management who charges 1% will end up paying closer to 0.6% – while the poor single Mom with a few grand in the bank’s funds will shell out 2.6%. Unfair? You bet. But that’s the law.

So, fees are deductible. Commissions are not. MERs are embedded, invisible and can kill returns. If you remember just those three facts, they’ll serve you well.

Until now it’s also been possible to have fees for TFSAs, for example, deducted from non-registered accounts so they all become write-offs. But that party ends next month. Starting in 2018 investors with different kinds of accounts will see their monthly charges taken from each. Hopefully they will all come from bountiful growth – which is a goal.

How about loans?

These days you can borrow on your secured line of credit for prime plus a half, or 3.7%. That’s fully deductible if you use the loan to invest. So someone in the top bracket will actually borrow at an effective rate of about 1.8%, and this year would earn 9.5% (before tax) on a balanced portfolio. How is that a bad deal? (Of course leverage magnifies risk and can cause marital mayhem. Govern yourself accordingly.)

Some advisors will tell you investment loans are only tax-deductible if the money is used to earn actual income (interest, dividends) as opposed to buying stuff that goes up in value (capital gains). In the real world, that’s hokum. The CRA will never enforce this arcane tax code verbiage for average investors. So, if you have a house with a mortgage on it and an investment portfolio of equal value, sell the financial stuff, pay off the mortgage, take a new mortgage and buy back the assets. Now you have 100% tax-deductible mortgage interest.

A final rule: Do not send Bill Morneau this post.

122 comments ↓

#1 Raver on 11.23.17 at 6:28 pm

Vancouver: More than 1 in 3 Yaletown condo sales appear to be flips : https://thinkpol.ca/2017/11/23/more-than-1-in-3-yaletown-condo-sales-appear-to-be-flips/

Vancouver: 1 in 4 Vancouver Westside home sales appear to be flips : https://thinkpol.ca/2017/11/21/1-in-4-vancouver-westside-home-sales-appear-to-be-flips/

#2 ole Doberman on 11.23.17 at 6:35 pm

So Gartho you can do that with penny stocks, interest is tax deductable on the loan?
My turbotax says otherwise.

#3 MSM-Free Zone on 11.23.17 at 6:41 pm

Excellent, informative post this evening. Definitely a copy-and-paster for future bug repellent, especially for my annual visit to the Canadian Maroon Bank of Commerce next spring.

(The last line almost killed me).

#4 Proud Canuck on 11.23.17 at 6:42 pm

Canadians are most indebted on planet!!!

Go Canada Go!!!

#1 guys!!!

Yay!!

#5 benzengy on 11.23.17 at 6:50 pm

[email protected] told me she cannot make any money on me. I find it amazing people can spend countless hours watching the tube, sitting at Timmies, or stare at their computer screen and have no time to manage their investments.

#6 LOANS are considered TAXABLE INCOME under Ontario welfare! on 11.23.17 at 6:50 pm

But Section 5.9 of the Ontario Works welfare directive orders that Loans are considered taxable income which is to be decked from the recipient’s welfare check for the subsequent month.

No Wonder Morneau can afford to evade taxes while his 18-year-old daughter flies Business Class to Africa to promote the destruction of the family unit via militant gender policy which discriminates against little black boys while teaching girls how to hate their own culture.

#7 jess on 11.23.17 at 7:07 pm

November 24 2017 – 8:42AM

Australia faces housing hangover twice the size of the GFC subprime era
After five years of surging prices, the market value of the nation’s homes has ballooned to $7.3 trillion – or more than four times gross domestic product

BIS -Q1 data – aussie’s second switzerland first
http://www.smh.com.au/business/the-economy/australia-faces-housing-hangover-twice-the-size-of-the-gfc-subprime-era-20171123-gzrwn4.html

========
five year ban
http://www.independent.co.uk/news/world/americas/richard-spencer-ban-european-countries-alt-right-white-supremacist-neo-nazi-eu-a8071971.html

#8 Nonplused on 11.23.17 at 7:09 pm

“A final rule: Do not send Bill Morneau this post.”

Why would I? That would be like talking to a tree or commenting on a blog. Nobody would read it.

Anyway, I’ve been thinking about GDP

https://en.wikipedia.org/wiki/Gross_domestic_product

From the Wiki-article:

“The OECD defines GDP as “an aggregate measure of production equal to the sum of the gross values added of all resident and institutional units engaged in production (plus any taxes, and minus any subsidies, on products not included in the value of their outputs).”

Based on this definition I think GDP is now overstated, due to the rise of a lot of companies that don’t actually produce anything in the internet age. (It’s not my idea but I find the arguments compelling.)

For example, Facebook. They get a lot of money from “directed advertising” but what are they actually producing? All they really have, other than the social forum for people to waste time on, is an algorithm that tries to direct ads to the people most likely to respond to them. I don’t know about you, but I’ve been “online” since Al Gore invented the “internets”. I think I could count the number of times I’ve clicked an ad on my fingers for the whole time. I’m pretty good at ignoring them.

So, the argument would be, the whole value of Facebook is already included in the prices received by producers for their products they sell, and the only value Facebook provides to the economy, if any, is that it connects buyers and sellers where they might not of otherwise connected. But the value of the transaction is still captured in the sales price. All Facebook is doing is skimming some of that value. Thus, even if Facebook connected the buyer and the seller, counting Facebook as part of the GDP is double counting. They didn’t produce anything. Sure, it’s fair they get some money for advertising the product, but it’s really a commission. The entire value-add was provided by the manufacturer and captured in the sales price.

If this idea is to be believed, GDP has to be measured a different way. It should only be calculated on products and services bought and sold. So the hair dresser stays in, so does the plumber and the doctor, but Facebook, Google and the banks are out.

Sure banks deserve their profits because they do facilitate transactions and they have to pay their bills, but do they really produce anything? They can facilitate production by say financing a factory or even a retail store that sells the product, but all of the bank’s fees are already captured in the sales price of the product or service.

To put it another way, if a home builder build a new house and sells it, that should be included in GDP. But if a bank lent money to the home builder to build the house, that should not because the interest is already included in the sales price of the new home.

The original GDP measure was calculated this way. Banking, advertising, and commissions were not included only the final sales prices of products and services. The rest is allocation, not wealth generation.

If we reverted back to this way of calculating GDP, we have been in a great recession for a long time. Unless of course you think Facebook and the like have any value.

#9 Money Coach on 11.23.17 at 7:11 pm

Shocking the number of people getting “free” financial advice where the advice is “you should buy mutual funds with 2.85% MER’s”

#10 Mobile on 11.23.17 at 7:13 pm

Wouldn’t investments using a loan into high growth non-dividend paying firms such as Facebook or Amazon also disqualify an investor from being able to deduct the loan interest?

#11 TheSpangler on 11.23.17 at 7:21 pm

#10 Mobile on 11.23.17 at 7:13 pm

Interest is still deductible as you would pay tax on any capital gains.

#12 Other thoughts on 11.23.17 at 7:22 pm

1) Invest in swap-based ETFs in your taxable accounts. No distributions (therefore no tax); just capital gains when you eventually sell. What would otherwise be dividends to you are added to growth in value of the fund. Its absolute magic. That being said, if CRA ever DOES attack average investors for investing in things that grow in value rather than pay dividends, you may end up in a nasty situation (potentially fully taxable income on sale rather than capital gain).

2) Not only are MERs not tax deductible, they grind down what would otherwise be eligible dividends to you. Your investment account management fees are fully tax deductible, while your dividend income is favourably taxed thanks to the dividend tax credit. Mutual funds SUCK when you are well up into the six figures. For Ultra high net worth people it actually makes sense to pay for someone to buy individual stocks for you because even the cost of ETF MERs (while much lower than mutual fund MERs) exceeds the benefit of tax deductible account management fees + dividend tax credit.

#13 westcdn on 11.23.17 at 7:23 pm

Blockchain technology is coming in a big disruptive way. https://www.hyperledger.org/about

I think it wise to keep my eye on this one as it can automate many service jobs out of existence. Combine this with advances in Artificial Intelligence and we will have a Brave new world about 10 years down the road providing we don’t blow ourselves up in the meanwhile.

Guess who is going to deal with climate change, pension funding, taxes and technology adoption? – yup, the millennials. Hopefully they will be able to tax robots.

No mutual funds for this guy.

#14 f series funds on 11.23.17 at 7:29 pm

Do not pay trailer fees . If you want
Active management this certainly is a fair option. Nada for feee in life .

One online broker does allow them to be bought for DIY investors

#15 On Time on 11.23.17 at 7:34 pm

#381 IHCTD9
Elon Musk delivers a job on time.
He’s some kind of hero?

When is the last time you told your boss you would finish your task on time, and if you did not, he could withhold your salary for that month?
Oh wait… you’re an unemployed full time commenter.

#16 Nonplused on 11.23.17 at 7:35 pm

#10 Mobile on 11.23.17 at 7:13 pm
“Wouldn’t investments using a loan into high growth non-dividend paying firms such as Facebook or Amazon also disqualify an investor from being able to deduct the loan interest?”

Why?

I’m interested to find out what kind of rule you are proposing here that could differentiate between different investments.

Sure some rules can differentiate, for example only the guy with the gloves and specific jersey can use his hands and only in the goalie area, that one works because you can identify it and enforce it, but you need a different jersey to do it.

But I’m wondering how taxes could be different on high growth companies as opposed to low growth companies. When gold goes to $5000, which it might, gold companies will be “high growth”. Facebook might crash when the next trend comes along. It is the Yahoo of the future. Tesla is almost certain to crash at some point they can’t even build the products they are trying to sell and I don’t think there is a market for them and even if there is they don’t have any sort of technological edge whatsoever over the big boys. So who do you tax more and how? GM, BMW, Ford, Toyota, and all the others will certainly have very good electric cars available if and when the market demands them. So should they tax Tesla more now? They don’t have any money.

#17 Garth on 11.23.17 at 7:37 pm

When you say fee based advisor is that 1% from total assets a family has invested ?

As an example , if family xyz has $1,500,000 in taxable and registered accounts do they pay $15,000 for a calendar year?

Thanks

Yes, but expect a lower fee for a portfolio of that size. – Garth

#18 espressobob on 11.23.17 at 7:42 pm

It’s a wonder why anyone would invest in a mutual fund. Besides the high fees and underhanded structure of the dreaded rear loaded version, there are other risks involved.

Transparency is one, not actually knowing what exactly the fund holds? Overlap problems when owning several funds.

Redemption risk. The unit price could be somewhat higher than the NAV of the fund. Won’t that be great if the unitholders are running to the exits creating a bigger loss while the fund manager is trying to create liquidity. Still many other issues. No thanks.

Thank god for ETFs.

#19 Rooster on 11.23.17 at 7:45 pm

“These days you can borrow on your secured line of credit for prime plus a half, or 3.7%. That’s fully deductible if you use the loan to invest. So someone in the top bracket will actually borrow at an effective rate of about 1.8%, and this year would earn 9.5% (before tax) on a balanced portfolio. How is that a bad deal?”

?????????

Do you ever get a chance to read the news down there at GTI? Canadians have already blown their brains out on debt and you want to give them a Luger with a full clip. Put the Bitcoin Bubble Boy back on. He was at least starting to make sense.

Now quote my next sentence. – Garth

#20 Smoking Man on 11.23.17 at 7:57 pm

Garth . Why do you you keep giving away these brilliant bits of advice for free. What is wrong with you. Doping into the booze early today.

I think you need a business advisor.

#21 For those about to flop... on 11.23.17 at 8:01 pm

Recent Sales Report/ Realtor Assistance Needed.

Well, for the best part of a year I’ve been trying to find a realtor with a conscience on here.

Didn’t work out to well.

Anyway I will give them another chance and turn it into a game called…

Did they get their number?

1791 Ralph st,North Vancouver
Paid 1.52
Ask 1.44
Just sold for….

505 Rupert st Vancouver
Paid 1.05
Ask 1.08
Just sold for…

1725 SW Marine Dr,Vancouver
Paid 2.25
Ask 2.49
Just sold for…

976 Leovista Ave, North Vancouver
Paid 2.6
Ask 2.49
Just sold for…

All of the above houses sold in the last 14 days,now I just need the final piece of the puzzle.

I’ll guess,three out of the four lost money after expenses…

M43BC

#22 Rooster on 11.23.17 at 8:02 pm

“(Of course leverage magnifies risk and can cause marital mayhem. Govern yourself accordingly.)”

Please revise to:

When markets turn, which they always do, you may lose your security ( i.e. your humble abode). Govern yourself accordingly.

You only lose when you sell, and every market correction is temporary. Moreover, the loan is secured by the house, not the equities. There is no margin call. HELOCs max at 65% of equity, and no worthy advisor would suggest going to that limit. Extremism does not an argument make. — Garth

#23 Renter's Revenge! on 11.23.17 at 8:09 pm

Maybe the reason you can deduct interest on loans used to buy stocks that don’t pay dividends is that the criteria for deductibility includes investments that have a reasonable expectation of paying dividends in the future ( stocks yes, personal residence no)??

#24 Millennial investor on 11.23.17 at 8:18 pm

Question for Garth or anyone else who cares to chime in. I have a decent portfolio worth roughly $700k, which is largely in ETFs. Just wondering if this is ok, or if I should be buying dividend paying stocks for more favorable tax treatment? I love the ease and diversification of ETFs but wonder if I’m missing out by not buying individual stocks.

ETFs pay dividends, too. Same tax treatment, less risk. — Garth

#25 dakkie on 11.23.17 at 8:27 pm

Whose Private-Sector Debt Will Implode Next: US, Canada, China, Eurozone, Japan?
Canadians, fasten your seat-belt. Here are the charts.
http://investmentwatchblog.com/whose-private-sector-debt-will-implode-next-us-canada-china-eurozone-japan/

#26 oldman on 11.23.17 at 8:34 pm

R: Getting Soaked:
As I understand it, MF Fees are deducted from MF earnings before MF distributions are paid to shareholders. Therefore the MF taxable distributions are already reduced by the cost of the “investment advisory fee”. Obviously it is more advantageous to the investor to pay 1% rather than 2.5%, but let’s not mislead by erroneous math.

Not erroneous at all. The fund MER you pay is not deductible from your employment income. The advisor’s fee is. — Garth

#27 LivinLarge on 11.23.17 at 8:35 pm

Nice post tonight Fearless Leader, these are the precise and concise reality laden posts I actually turn up most nights for.

One small “point of order” type comment, be very very careful when using a HELOC to fund any investment if you are intending to use the resulting interest deduction. As long as the HELOC is purely dedicated to the investment debt then everything goes through like the goose and the shit but pollute the capital balance of the HELOC with even a buck worth of not investment related capital and you have stepped over the line and at least technically voided your right to the interest deduction.

Having sat through this scenario with a friend a few years back in an audit, I know first hand that the CRA can be prissy about any loan for investment purposes being pure as the driven snow. How many folks can resist the ease of using a HELOC and just writing a cheque vs the formal process of taking out an amortized term loan? And even more importantly, how many Canadians can live for years without ever using the HELOC for anything other than the investment loan purpose. So, yes, it certainly works but a little caution is in order when deciding to do it.

My experience inside and outside of CRA is that no auditor ever likes to close a file without creating some kind of addition tax obligation and even if it’s their last resort, they have been known to trot out the polluted loan to create the additional tax debt.

Still, used carefully and at the right time, in the right market for the right assets, leverage “CAN” be a useful tool. Personally, I have at times used leverage to finance the purchase of high yield dividend shares that have been atificially beaten down for a while. If the dividend is paying a yield at the very least 2x the loan interest then it’s hard to argue against it if you know for certain that the underlying share is fundamentally strong and will turn around but there are very few of those to choose from.

#28 Thank you on 11.23.17 at 8:38 pm

@1 Raver

Dear Raver – thank you for finally linking us with some real honest data!!! thank you!

#29 Big Daddy on 11.23.17 at 8:46 pm

Buy stocks through a discount broker like CIBC or TD and pay $6.95 per trade……no matter how small or large your trade….and no fees or brokerage….ever again…..unless your RRSP is under $1000 and then they charge $100 p/a as an admin charge……a ‘nudge’ as it’s called.

I collect cash dividends direct deposited to my acct…..no annual fee’s….from companies each month, quarter, semi-annually and annually….plus occasional ‘special dividends’ without any fee’s whatsoever . Fee’s are for crazy people.

Look at your bills…..who do you pay every month? Fortis, Rogers, Mortgage , Food, Drugs….Auto….Insurance etc. Buy stock in those companies first and the start paying your bills for you through dividends. Most all these companies pay really fat dividends…..instead of giving them money….why not reverse that buy buying shares in these companies as a way to start your portfolio? Is Fortis going broke…..hardly…..will Rogers stop selling programming…..no…..etc etc. Stop paying fees and bills and start collecting cash dividends……thank me later. Merry Christmas.

An all-equity portfolio is a bad idea for most investors. Not advice the average family should follow. – Garth

#30 IHCTD9 on 11.23.17 at 8:57 pm

On Time on 11.23.17 at 7:34 pm
#381 IHCTD9
Elon Musk delivers a job on time.
He’s some kind of hero?

When is the last time you told your boss you would finish your task on time, and if you did not, he could withhold your salary for that month?
Oh wait… you’re an unemployed full time commenter.

————-

Read up on contracts and penalty clauses. Common as dirt. Musk had a contract, probably had a penalty clause in it, those help vendors deliver on time. Happens every day.

#31 Pete from St. Cesaire on 11.23.17 at 8:58 pm

where fees are ten times less.
—————————————————————–
Ten times less than what? That’s not proper wording. It should read “when fees are one-tenth” or “when fees are 1/10th”.

Sounds like you figured it out. — Garth

#32 IHCTD9 on 11.23.17 at 9:17 pm

#16 Nonplused on 11.23.17 at 7:35 pm

So should they tax Tesla more now? They don’t have any money.

————-

That’s true, well none from turning profits anyway. You need to produce product for that to happen. Musk said monthly production for the C series would reach 20,000 vehicles per month by the end of 2017.

Q3 2017 production total was… 260 units.

Yes, 86 vehicles per month.

Musk claims to have taken 455,000 “reservations” (lol) for the car. Hopefully these aspiring new C series customers are very long lived, because it’s going to take 441 years to build all these cars at the rate they’re going.

#33 Smoking Man on 11.23.17 at 9:21 pm

Being a five star writer on amazon, and Lulu I’m sitting in a chair that’s missing a few screws, can tip over at anytime and I will never get to Garth’s submit button.

Taking a risk here.

Two more sleeps before another savage road trip. LA area is the target.

Only obstetrical left is my interview with a USA boarder guard who is thinking I’m taking away an American Job.

Not sure how to tell him, I’m not your enemy, its the globalist you stupid moron. All development work has been off shored, the coders are idiots and cant do shit in VBA which is not taught at universities. They only skim the surface.

I’m bad ass at this shit, I don’t develop anymore because I can’t live on 4k a year in Toronto competing with Mr Gill and his realatives., so now I fix off shore shit creations.

Don’t know how the interview will go, Periscope @smokingman

Real time real life.

#34 espressobob on 11.23.17 at 9:24 pm

The whole idea of a mutual fund is to beat an index. Why else would anyone be willing to pay a premium?

Fund managers engage in speculation. The majority fail miserably to even match the benchmark they intend to outperform.

Doug Rowat touched on this issue Nov 4rth.

With ETFs you can be that benchmark that 91% of professional mutual fund managers can’t match.

What is there to figure out?

#35 The real Kip on 11.23.17 at 9:29 pm

I fell asleep twice reading tonight’s blog. I long ago cashed out the last $80k I had in mutual funds. Used the money to pay down and then pay off the mortgage. So I guess I have no TFSA, no mutuals, no ETF’s, no MER’s or hidden fees…and, no mortgage.

I forgot to mention, no headaches. I’m happy!

You forgot the ‘no money’ part. – Garth

#36 oldman on 11.23.17 at 9:29 pm

Garth: I’m disappointed in you. I would think you very well know that in the case of the investment advisor the “employment income”, to use yr example, is gross income (ie before expenses) while in the case of a mutual fund the “employment income” is net income (ie after expenses). For a mutual fund reported taxable income has already had the investment fees deducted, while with a fee for service financial advisor the reported taxable income is before the fees are deducted on yr tax return. Let’s not be obfuscate.

An investor may deduct 100% of her advisory fee from non-investment employment income. Try that with a mutual fund MER and let me know what CRA says. – Garth

#37 I’m stupid on 11.23.17 at 9:48 pm

Hi Garth

I received a reassessment from revenue Canada. I received a t3 after I did my taxes and owe $530. They charged me $270 in penalties and $22 in interest. I understand the interest part but the penalty of over 50% of what the taxes owing is ridiculous. I recieved a tax refund of over 15k for 2016 and paid over 70k in income tax. Do I have a leg to stand on or should I just pay the penalty and hate Trudeau and tax and spend liberals?

Rhetorical, right? – Garth

#38 TRUMP on 11.23.17 at 9:52 pm

Sorry Garth,

Bill Morneau has the playbook on tax dodging.

Remember……Morneau-Shepell. The tax dodge experts????

#39 Long-Time Lurker on 11.23.17 at 10:22 pm

#106 Liquidgoldzandz on 11.22.17 at 8:22 pm
Ok Blog Dogs

I live in Fort Mac and been renting for 3 years. Real Estate has gone down a lot in these parts. There is a foreclosure in the building I rent in. The building is 3 years old. The foreclosure is 200K (original was close to $400K now its $200) less than what the person paid. I did the calculations and my mortgage, condo fees, property tax, electricity, cable and internet would come up to the same amount as my current rent amount. The unit is a 2 bedroom and I rent a 1 bedroom.

Do I keep renting or do I buy it and treat it as rent? I plan to stay in Fort Mac for a long time.

>If you think Fort Mac has a future then it sounds like a good deal.

#270 Tony on 11.23.17 at 2:13 am
Re: #203 Long-Time Lurker on 11.22.17 at 10:46 pm

I doubt “the powers that be” will ever let the price of oil spike upwards again. The world economy is teetering so the central bankers will forward sell oil contracts to restrict any gains in oil. Keep renting.

>I’m starting to think that Tony is right about continuing to rent. Fort Mac’s economy is totally dependent on how oil does and there are a lot of uncertainties about where the price of oil is going in the future. A lot of the world’s economies are stagnant or vulnerable to recession. Plus, alternative energy technology continues to develop.

Even if the condo is a deal right now if Fort Mac’s economy tanks then you’ll be stuck with a dud investment with no foreseeable bright future ahead. It’s less of a risk to continue to rent and continue to build up a portfolio instead.

If oil’s outlook brightens up in the future you can still get a condo at the beginning of the bull market cheaply. It’s too risky right now to buy it, I think. If you wait another year you can see if Trump’s tax cuts have a positive effect on oil prices.

Thanks, Tony.

#40 For those about to flop... on 11.23.17 at 10:27 pm

Recent Sale Report/ Realtor Assistance Needed.

Well my first post went down like a lead balloon with the realtors, but I’ll keep annoying them and the boss of this blog.

This house sold 9 days ago.

3640 w 2nd Ave,Vancouver

Paid 2.87

Asking 2.88

Just Sold for…

You guys can keep the loaf,just break me off a crumb…

M43BC

https://www.zolo.ca/vancouver-real-estate/3640-w-2nd-avenue

#41 LivinLarge on 11.23.17 at 10:33 pm

“Stupid”…if “rhetorical question” wasn’t clear enough…

You were charged a 50% penalty for filing a complete return late. If the T3 issuer actually delivered it late and will give you a letter stating that then you can likely get the penalty cut in half so it’s up to you just how much work you want to do for $135. There is still the rule thay every tax payer is responsible for getting their docs in order and filing on time so the waiver of half the penalty isn’t guaranteed.

Now, another subject. Now that we know that the federal pot surcharge is going to be $1 per gram plus HST, do we also know where that new revenue is going? General revenue of earmarked for a specific purpose?

BTW, back in the 70’s $1 per gram was pretty much what decent weed was going for on university campus. I don’t know what projected demand is but this is going to generate some serious coin every month.

#42 Loonie Doctor on 11.23.17 at 10:38 pm

Financial advisors are like lingerie. Sexy and more useful as you get older and your assets grow. I also would avoid buying lingerie at the bank.

#43 Front End Load on 11.23.17 at 10:57 pm

True story folks back in the mid 90’s when mutual funds were all the rage I went into Midland Walwyn ( acquired by Merryl Lynch Canada in 1998 )and was told that they charged 9% fee on front end load funds ( everybody wanted you to buy rear end loaded funds and lock you in for 7 years) but since I had a decent amount to invest that they would take me on as a client for 6% and thats plus the outrageous mer’s back then that ran in the neighborhood of 3% on the funds that they were pumping. After checking out a few of the other large brokerages ( their front end load fees were outrageous as well) I found an independant advisor just starting out and he was glad to take me on for 0% (front end loaded funds) because he said he got a 1% trailer fee from the fund companies and he was pleased as punch !

#44 Nonplused on 11.23.17 at 11:04 pm

#32 IHCTD9

Yep, Tesla is a truly amazing lesson in how not to run a company.

It’s not that I have anything against the product or the design. But really, how many billions of dollars do you have to expend before you can produce something about as advanced as a Chevy Volt?

One day there will be a lot of Tesla shareholders wondering where the hell their money went. Buy now they’ve raised enough money to build several Toyota plants, only there are not very many cars coming out.

Or compare Tesla to Harley Davidson. Tesla has a market cap of $52 billion and hardly makes any sales. HD has a market cap of $8 billion and you see their bikes collecting dust in the garage all over the place. And HD can get almost as much for one of their bikes as Tesla is saying they are going to charge for a model 3.

It just doesn’t make any sense.

#45 For those about to flop... on 11.23.17 at 11:08 pm

Recent Sale Report.

This one is so fresh it still has steam coming off of it.

3870 17th ave Vancouver.

Originally asking 2.88 then 2.73 then 2.58

Just sold for 2.6

Another one that will go down in the history books as sold over ask.

The listing suggested it was an excellent starter home.

Delusion knows no boundaries…

M43BC

#46 Dr. Strangelove on 11.23.17 at 11:09 pm

Hey smokey…lost ur periscope what’s the deal? Been missing ur drunken wizdom…
DSL

#47 Dreamer on 11.23.17 at 11:11 pm

#21 For those about to flop

Flop dude you need to go to #1 Raver. It’s chalk full of useful data and mythical creatures.

Vancouver: More than 1 in 3 Yaletown condo sales appear to be flips : https://thinkpol.ca/2017/11/23/more-than-1-in-3-yaletown-condo-sales-appear-to-be-flips/

Vancouver: 1 in 4 Vancouver Westside home sales appear to be flips : https://thinkpol.ca/2017/11/21/1-in-4-vancouver-westside-home-sales-appear-to-be-flips/

So what? – Garth

#48 Question Machine on 11.23.17 at 11:11 pm

Who is [email protected]?

I always see it and never know what it is.

#49 Question Machine on 11.23.17 at 11:12 pm

Ohhhhh, 2 secs after I post it comes to me hahah

The nice lady at the bank

#50 For those about to flop... on 11.23.17 at 11:27 pm

11 pm
#21 For those about to flop

Flop dude you need to go to #1 Raver. It’s chalk full of useful data and mythical creatures.

Vancouver: More than 1 in 3 Yaletown condo sales appear to be flips : https://thinkpol.ca/2017/11/23/more-than-1-in-3-yaletown-condo-sales-appear-to-be-flips/

Vancouver: 1 in 4 Vancouver Westside home sales appear to be flips : https://thinkpol.ca/2017/11/21/1-in-4-vancouver-westside-home-sales-appear-to-be-flips/

So what? – Garth

/////////////////////////

Yeah, some wrote me and brought the article to my attention the other day.

I have presented some of the cases here already.

Different people will interpret it differently but the main thing I got out of it was after the dreamers how many of the houses were back on the market for less than 10% more than purchased for.

The foreign sounding surname thing is just rubbish…

M43BC

#51 Grandstanding Social Justice Warrior on 11.24.17 at 12:46 am

First of all, there are few advisors out there who will take you on for %1. Most charge more unless you are starting out with a hell of a lot of money. Many will not even return your call if you have under 50k to invest. You can also add the MER’s of the etf’s and funds they use to their fee and it will come out to well over one percent.

Mutual funds can be a good way for someone starting out to build a nest egg. There are good funds out there, you just have to look.

I manage a family members account and have moved her registered accounts into one balanced mutual fund. It charges slightly under 1 percent MER, is well diversified, usually maintains around a 60-40 equity/debt ratio, and has a long track record of averaging around 7 percent return annually. I can’t beat it’s performance using etfs unless I take on more risk.

If I drop dead she knows she can make future contributions to that fund and then forget about it. No worries about re balancing or observing market conditions. And no DSC’s.

There are also versions for non-registered accounts that use derivatives to defer taxable gains until you sell.

#52 Mr Happy on 11.24.17 at 1:25 am

Hey, you read about the lost hiker in BC? 3 days lost in cold rainy weather? She survived. How? She had 3 dogs with her, thats how! Frickin’ cats would have bailed but the dogs stayed with her. Kept each other warm… man I love dogs!!

#53 jane24 on 11.24.17 at 1:40 am

Well our situation here in Britain is that hubby and I buy Jupiter Mutual trusts. This is one of many independent investment companies. Jupiter offers choice of maybe 50 different funds for different parts of the world, market segments or growth vs income.

We pay a whooping 5% on purchase but then a very small amount in yearly fees. This is the set-up for all of these unit trusts, That 5% hurts but then over time i have made a lot of money so why should I moan. Funds can be cashed in or moved around for free at any time.

#54 jane24 on 11.24.17 at 1:41 am

If i lived in Canada I would swap Jupiter for Garth in a heat beat though.

#55 Dave on 11.24.17 at 1:50 am

Why is the interest on an rsp loan not tax detuctible? But if borrowes to invest in a cash account it is?

#56 Lolo on 11.24.17 at 2:57 am

Before I came upon your blog, I had an advisor who sold me mutual funds. I took the DSC route (it was a long time ago, but I do believe he gave me a choice of deferred or upfront fees). Of course the choice of this naive investor would be to defer the fees, thinking I would hold until the fees dropped to zero. Besides, he said, i could still switch fees within the same fund family without incurring charge. Well, I switched to a fee-based advisor post-enlightenment. I guess i must still have been naive. I expected that since i had been with my first advisor for about 9 years, all my deferred fees would have dwindled to 0. To my surprise i still incurred a substantive hit in fees when my new advisor sold the funds (with my ok) because the funds had rolled over to a new term (sorry, I am not even sure if I am using the right terminology!). I was not pleased, to say the least.

#57 Dolce Vita on 11.24.17 at 2:58 am

#47 Dreamer

So what? – Garth

As the cheque cashing (and writing) 31st Minister of National Revenue, you ought to appreciate that never in the history of the CRA has an audit list been created for them courtesy of the Public, at no cost, and about:

Line 127 customers.

#58 backwardsevolution on 11.24.17 at 3:58 am

Raver and For those about to flop:

Thank you for your work. Nice to see people trying to get the truth out.

I’d love to do a detailed search of the Land Titles to find out the sales history on every single property.

If the government wanted to set me up with access, I’d do it. I’m sure there are people on here who would help.

Be nice to expose the lies.

Thanks again.

#59 under the radar on 11.24.17 at 5:13 am

#106 Liquidgoldzandz on 11.22.17 at 8:22 pm
Ok Blog Dogs
If you believe in the future of Fort McMurray then do it. People end up renting their whole lives and accumulate no wealth.

#60 earthboundmisfit on 11.24.17 at 5:51 am

Hammergate. Brad Lamb vs. Captain James Tiberius Kirk.
Priceless.

#61 BillyBob on 11.24.17 at 6:03 am

#42 Loonie Doctor on 11.23.17 at 10:38 pm
Financial advisors are like lingerie. Sexy and more useful as you get older and your assets grow. I also would avoid buying lingerie at the bank.

====================================

hahaha! Best post of the day. Week? Month?

*clap clap clap*

#62 Dharma Bum on 11.24.17 at 6:56 am

HAPPY AMERICAN THANKSGIVING!!!

https://www.youtube.com/watch?v=w-FSTYPLzlc

https://www.youtube.com/watch?v=mv1RP1v3lRk

#63 jess on 11.24.17 at 7:31 am

building right

http://www.cbc.ca/radio/thesundayedition/the-sunday-edition-november-19-2017-1.4406916/imaginative-solutions-for-an-overheated-housing-market-1.4406919

Ottawa’s new affordable apartments for the vulnerable cost $27 to heat …
ottawacitizen.com › News › Local News
Nov 26, 2016 – Three weeks ago, Backs was one of the first tenants to move into a new four-storey, 42-unit apartment building on Clementine Boulevard in Heron Park run by Salus Corp., an Ottawa non-profit focused on providing supportive, affordable housing for vulnerable people. Before Salus, Backs had spent seven ..

http://ottawacitizen.com/news/local-news/how-ottawas-newest-affordable-apartments-for-the-vulnerable-only-cost-27-a-year-to-heat

#64 Locker on 11.24.17 at 7:52 am

Sobeys laying off 800 scumbags.

Just anncounced. People with houses and families.

#65 crowdedelevatorfartz on 11.24.17 at 8:04 am

Over 400 comments about Trudeau’s $40 BILLION dollar socialist “experiment” at taxpayer expense.

When one considers the amount of readers that dont post…………….
Thats a lot of angry voters

#66 knew the day would come.. on 11.24.17 at 8:49 am

when etfs mer’s would approach the cost of f series if not exceed. ‘active’ etfs…haha!

Mackenzie is into the game, as is Templeton. Everyone is joining the party

here’s a Mackenzie product;

mivg.to

mer- .85 (keep in mind NO HISTORICAL DATA. No beta/no alpha/no sharpe ratio…..zilch)

LOL!!

Picking the correct ETFs from hundreds available takes research and experience. Be careful. Asset mix, fees and (especially) liquidity must all be considered. — Garth

#67 n1tro on 11.24.17 at 9:14 am

I love mutual funds! Especially the company matched ones. Don’t care what the fees are as long as i put in the exact amount which my company match effectively giving me 100% return each year. :)

Mutual funds are not matched. You are referring to group RRSP contributions. The employee plan would be even better if it were invested in ETFs, not mutuals. — Garth

#68 Tazi Bnu on 11.24.17 at 9:20 am

I believe we have Michael Lee-Chin to thank for DSCs.

#69 TurnerNation on 11.24.17 at 9:30 am

Merry Christmas , Kanadian economy’s great. No wonder Dollarama stock hitting new highs.

http://www.cp24.com/news/sobeys-to-cut-800-office-jobs-as-part-of-reorganization-of-grocery-business-1.3692212

“Sobeys to cut 800 office jobs as part of reorganization of grocery business”

#70 n1tro on 11.24.17 at 9:32 am

Ticker RIOT…the no name profitless company that added “blockchain” to its name has tripled since making the name change.

Bought at $12.81 two days ago, sold this morning at $18.51.

This shit is bananas!

#71 ALFRED E. NEUMAN on 11.24.17 at 9:34 am

#17 Garth on 11.23.17 at 7:37 pm
When you say fee based advisor is that 1% from total assets a family has invested ?
As an example , if family xyz has $1,500,000 in taxable and registered accounts do they pay $15,000 for a calendar year?

Yes, but expect a lower fee for a portfolio of that size. – Garth
_____________________________________

Although, the annual %age fee charged IS paid out on a monthly basis, right Garth?

Typically one-twelfth of the annual fee (which totals 1% or less) is taken from accounts monthly. Hopefully all out of growth. — Garth

#72 Dissident on 11.24.17 at 9:43 am

One of the very same mutual fund hawking sales guys you speak of here bragged to me that he was so smart that he rebuilt his house not using a regular mortgage loan, but a line of credit, because the interest rate was lower. That was the same meeting where he spoke at length for 2 hours about hot air and never got to talking about his ‘fees’. “…and we didn’t get to my fees, but we can talk about that later.” Haha. There was no later.

What did he do before this? He was a kitchen cabinet sales person. “You know why I love baseball? Cause its the only sport where the players can steal points.” Mmm-hmm, you ain’t stealin’ my money. Bye.

#73 Leinnay on 11.24.17 at 9:52 am

Is it legal to make an arrangement with your fee based advisor so that s/he only takes care of your RRSP and non-registered accounts? (Leaving the TFSA out of the advisor’s reach to be dealt with in a DIY way)

Follow up question: assuming the above is legal; is it worthwhile for the advisor to do this kind of arrangements? This scenario assumes there’s enough money in the RRSP and non-registered accounts (above 150k).

Yes, of course it is legal. — Garth

#74 LivinLarge on 11.24.17 at 10:08 am

A question for Fearless Leader (or any math wiz) regarding the efficacy of selling a portfolio to pay off a mortgage and then remortgaging to rebuy the portfolio. Specifically, the net impact of triggering a capital gains event with the portfolio sale.

With the cap gains taxes to be paid on the portfolio sale proceeds, is there still a significant advantage doing this maneuver?

I like the idea of making mortgage interest deductible but it seems to me to be also sacrificing a significant proportion of the portfolio’s value to tax to accomplish it.

Sure, there is a new adjusted cost base but that cap gains event seems to me to offset a lot of mortgage interest deduction advantage.

Do you not invest to make profits which have to be crystallized at some point? Additionally, the cap gains ta rate for most people is a lowly 15%. All situations are unique. – Garth

#75 n1tro on 11.24.17 at 10:11 am

Mutual funds are not matched. You are referring to group RRSP contributions. The employee plan would be even better if it were invested in ETFs, not mutuals. — Garth
——–
You are correct as usual. However, all the companies I’ve been with only allowed mutual funds as a choice in the matched RRSP so with the free money they give, i can only load up on more mutuals. First world problems….

#76 JTL on 11.24.17 at 10:14 am

Garth – I love the blog, but this post is misleading in a couple of respects:
1) Fees paid by a mutual fund are deductible by the fund (i.e. the mutual fund trust or the mutual fund corporation), which reduces the income that the fund needs to distribute to investors. Suppose a fund earned $3 and paid a fee of $1, the fund would then distribute $2, so the investor would only include $2 in income. The fees cannot be deducted by the investor because they are not incurred by the investor. If you compare apples to apples, there is no difference, so you shouldn’t mix up the deductibility issue with the high fees issue.
2) Advisor fees re RRSPs, RRIFs and TFSAs are not currently deductible – see 18(1)(u) of the ITA. What the CRA is proposing to change is whether they can be paid from a non-reg account (which would preserve the value in the reg account), not whether they can be deducted.
3) Commissions do increase ACB, which would reduce the capital gain on disposition.

(1) True, but an advisor’s fee on non-reg accounts is 100% deductible from an investor’s other (employment) income, which is a significant added advantage. (2) Untrue, since fees from RRSPs and RRIFs are paid in pre-tax dollars, which means the government subsidizes them heavily. (3) True, but minimal impact for most investors. — Garth

#77 Dissident on 11.24.17 at 10:21 am

Speaking of cryptocurrencies. A must-watch show: STARTUP on Crackle (or download it). Its frustratingly *GOOD*. Bingewatched season 1 and 2.

https://www.youtube.com/watch?v=yCf_MpXAXK8

#78 Citizen on 11.24.17 at 10:30 am

Great post Garth!

I wish I knew this prior to signing up with a company that had the name “Group” in it’s title.
Took 7 years to shed my funds. HIGH 2+% MERs.

I am not even sure it’s in the fine print.

Does it really matter if the MER is high even though I am making great returns?

#79 LivinLarge on 11.24.17 at 10:35 am

“Do you not invest to make profits which have to be crystallized at some point? Additionally, the cap gains ta rate for most people is a lowly 15%. All situations are unique. – Garth” …of course I/we do. I should have asked whether this was a “pay me now or pay me later” senario?

15%, really? Is that because most folks are at the 30% marginal rate and cap gains are taxed at half your normal msrginal rate?

Correct. — Garth

#80 Blacksheep on 11.24.17 at 10:55 am

Flop # 45,

“Recent Sale Report.

This one is so fresh it still has steam coming off of it.

3870 17th ave Vancouver.

Originally asking 2.88 then 2.73 then 2.58

Just sold for 2.6

Another one that will go down in the history books as sold over ask.”
—————————–
Flop, you really need to find a source to get you the buy price on these sales, cause with out that, all your efforts show nothing.

Come on realtors, man the hell up so we can actually get some honest market direction.

I may be holding RE now, but its just a house, if the market shifts dramatically, im out.

I’ve bailed before, I can do it again.

#81 rainclouds on 11.24.17 at 10:56 am

@ Stupid “Hi Garth,I received a reassessment from revenue Canada. I received a t3 after I did my taxes and owe $530. They charged me $270 in penalties and $22 in interest. I understand the interest part but the penalty of over 50% of what the taxes owing is ridiculous. I recieved a tax refund of over 15k for 2016 and paid over 70k in income tax. Do I have a leg to stand on or should I just pay the penalty and hate Trudeau and tax and spend liberals”
—————————————————————-
Well, you could always call them for clarification. Nobody will answer and you will get incorrect information from a bot, But hey! prolly better than having the life sucked out of you by anonymous spiritless drones in a festering minefield of politically correct government “employment”?

#82 Blacksheep on 11.24.17 at 11:21 am

Non # 44,

“And HD can get almost as much for one of their bikes as Tesla is saying they are going to charge for a model 3.

It just doesn’t make any sense.”
———————————
Had a 2003 Night Train, now a 2008 FLHX, both purchased new, so I get the whole Harley deal.

But…I am also a big Elon fan.

HD is the past, but Musk is the future, whether he can deliver on time, or at a profit or not, he is a revolutionary dude.

If you wanna talk about motorcycle companies, check out KTM. Awesome bikes, cutting edge tech, had many in the last 15 years. They now make Japanese bikes look cheap and dated buy comparison and build quality.

#83 LivinLarge on 11.24.17 at 11:44 am

“Does it really matter if the MER is high even though I am making great returns?”….geeze Louise. Of course it does. That’s the same as asking “Does it matter that my tax rate is high if I’m making a great investment return?”. The MER is nothing more than a surcharge or tax that isn’t going to the government. The lower the MER then the greater your real rate of return is. If you’re paying 2% to anyone then that’s 2% that isn’t compounding in your pocket.

#84 Guy in Calgary on 11.24.17 at 12:27 pm

“The person selling you these animals at the bank will tell you s/he doesn’t charge anything to perform that charitable service.”

Garth, this is incorrect. MFDA and CRM2 require the rep to disclose the management fee as well as the trailer fee. If they don’t, it is their license on the line. They are also required to disclose how they or their firm are compensated (through the trailer). All fees are now disclosed on their annual statements in dollar figures and the compensation gets broken down in detail. I am not pro mutual, but there is definitely a portion of the population where they make sense.

They are not required to verbalize any of that. You know the consequences. CRM2 also does not require the same level of disclosure as for IIROC-regulated account. — Garth

#85 Guy in Calgary on 11.24.17 at 12:28 pm

Also, DSC funds have been phased out for the most part. Very few firms use DSC funds anymore.

Millions of people have billions in outstanding DSC funds. They should all get out. — Garth

#86 Dissident on 11.24.17 at 12:42 pm

Whaaaat is going on with RIOT. It has ballooned up 40% today. It just sounds so sketchy. Former medical tech, whose descriptor sounds like a meme https://en.wikipedia.org/wiki/Surface_plasmon_resonance, is now a blockchain investing company?

#87 Guy in Calgary on 11.24.17 at 12:49 pm

#55 Dave on 11.24.17 at 1:50 am
Why is the interest on an rsp loan not tax detuctible? But if borrowes to invest in a cash account it is?

Because you are already receiving a deduction on the contribution.

#88 Renter's Revenge! on 11.24.17 at 12:49 pm

#56 Lolo on 11.24.17 at 2:57 am
…I expected that since i had been with my first advisor for about 9 years, all my deferred fees would have dwindled to 0. To my surprise i still incurred a substantive hit in fees when my new advisor sold the funds (with my ok) because the funds had rolled over to a new term…

==============

Greasy!

https://www.youtube.com/watch?v=kVvgHDTj-CI

#89 Triplenet on 11.24.17 at 12:50 pm

#80 Blacksheep
For ~$15,000 per year you can subscribe to your local board and access all the information you need.
Unless of course you want everything for free.

#90 TurnerNation on 11.24.17 at 1:09 pm

Here in Ontariowe I’ve seen small shops with signs saying Reduced opening hours coming – due to the hike in Minimum wage.
Everything old is new again under Kanadian Kommuniusm: They pretend to pay us, we pretend to work.

Lineups for bare shelves coming soon? Sorry delivery didn’t arrive today…reduced hours all over you see. Try tomorrow.

Possible solution – I do not recommend!:

Convert balanced portfolio into gold and Bitcoin, take a bus to USA; flush your passport down toilet; return here and claim economic refugee status.
Get government emerg and ongoing housing and food cash, move to Hamilton piloted site of Guaranteed Minimum wage.
Work odd jobs for cash or crypto currency and live like a King.

#91 Guy in Calgary on 11.24.17 at 1:18 pm

Millions of people have billions in outstanding DSC funds. They should all get out. — Garth

No doubt about that and I completely agree. I was more saying if someone were to go to a bank/firm today, it is unlikely a fund with a DSC would come up in conversation. That’s my observation at least.

They are not required to verbalize any of that. You know the consequences. CRM2 also does not require the same level of disclosure as for IIROC-regulated account — Garth

MFDA requires that Members, prior to the acceptance of any order in respect of a transaction in a client account, inform the client of any sales charge, service charge or any other fees or charges to be deducted in respect of the transaction.

I suppose that can be left to interpretation but best practice is full disclosure.

#92 Meeky on 11.24.17 at 1:32 pm

Does anyone else feel really depressed about all of these bubbles? The ignorant and reckless are making huge profits on housing and crypto, yet people who are careful and balanced are suckers. I see so many people bragging about making huge money on crypto on social media and acting like they are pro investors now… it’s exhausting. And people leveraged to the max to buy multiple properties making huge dollars on a giant risk. Am I missing something?

#93 I always have questions on 11.24.17 at 1:34 pm

I haven’t had time to read through all the comments so pleasee forgive if this has already been addressed. Is it possible to hold ETFs in an RRSP and if so can I DIY or do I have to go through [email protected]?

Thanks Dawgs

Yes, yes & no. – Garth

#94 Ace Goodheart on 11.24.17 at 1:46 pm

Looks like Canada’s housing market is about to get trashed. With all the talk about corrections and whatnot, we now have what appears to be all of the spare parts coming together to create the perfect storm.

Next six months should be an interesting mix of anecdotes and horror stories. Then the fun begins…..

#95 tccontrarian on 11.24.17 at 1:48 pm

Since I took over control of my investments, I’ve never owned a Mutual Fund. Why fork over 2-3% for no reason?
Even if I had no clue as to what to buy, all I’d have to do is see what a ‘popular’ fund held in its top-10 holdings and just copy it!

Also, I never buy for ‘income’, per se (ie. lured by the dividend). If I need extra cash I’ll just sell enough of whatever is apporpriate at the time, and there it is – ‘income’!
Buying ‘for income’ is really an admission of ignorance in terms of whether that particular asset is worthwhile buying on a valuation spectrum.
“It doesn’t matter if it goes down 20%, I get paid 4% to wait!”, you often hear.

I was buying Teck Resources late 2015/early 2016 when it dropped below $12 because it had lost 80% of its value from its previous high. Although I was ‘losing’ money from $12 to $5, as it continued to drop, I continued to buy it every $0.50 or so ending up with a $7.50 ACB.
I sold 3/4 position between $20-35 for triple-digit gains.
That was my ‘income’! Never did I ask myself whether Teck paid a dividend (I think it does, but I didn’t/don’t care).
TCC

#96 "new mortgage" on 11.24.17 at 1:58 pm

take a new mortgage and buy back the assets… Garth

——-

Would that “new mortgage” be a HELOC, though, that the bank can require to pay back at any time?

#97 molson cdn on 11.24.17 at 2:03 pm

will my bitcoins ever slow down.
forget about any thing else.
looking into bitcoin data-miner computers.
antminer s9.
going for 1450 cdn at bit bay.
Just like Dire Straits ” Money for nothing and the chicks for free!!”

#98 Stan Brooks on 11.24.17 at 2:10 pm

Bill Moroneau can not tie his shoes alone:

https://ca.finance.yahoo.com/news/canada-posts-larger-september-budget-161156812.html

but is dreaming of stealing other people money, went orgasmic on the 6 billions he plans to steal from passive investments in private corporations (Canadian, not foreign owned by Canadians like the one that manages his own 20 million villa in France)

These incompetents are deadly dangerous.
Can you imagine government/CRA being a tool in the hands of such morons coming after you with their subjective interpretations and assumptions?

—————————————-

#90 TurnerNation on 11.24.17 at 1:09 pm
Here in Ontariowe I’ve seen small shops with signs saying Reduced opening hours coming – due to the hike in Minimum wage.
Everything old is new again under Kanadian Kommuniusm: They pretend to pay us, we pretend to work.

——-
You sir are mistaken.

Communism (and it’s mildest form – socialism) means house and work for everybody, free education.

We have nothing of the above, as we live in authoritarian oligopoly kleptocracy.

You are seen as a chicken in a chicken farm, you have to lay eggs, gain wight and when head happily for the slaughterhouse /i.e. no retirement.

#99 Blacksheep on 11.24.17 at 2:10 pm

Triple # 89,

“#80 Blacksheep
For ~$15,000 per year you can subscribe to your local board and access all the information you need.”

“Unless of course you want everything for free.”
————————————-
We have open source, Block Chain and A.I. but cant find out publicly, what a house was bought / sold for, with out paying extortion rates to a Reeltur?

The RE Industry may currently have a strangle hold on these details, but their (your?) immediate future is bleak, as a reelturs skill set (oxymoron?) is simply not required to transact the purchase of home in 2017.

Let the information flow…..what do you have to hide?

Speaking of Strangle Hold, it’s Friday:

https://www.youtube.com/watch?v=0c3d7QgZr7g

#100 WelcometoSlurrey on 11.24.17 at 2:13 pm

#92 . Meeky . Its a long term game. If the majority of ignorant and reckless are making profits, I would say yes be ignorant and reckless. But are gains (in the case of houses ) , going to continue to churn out double digit gains over the next decade. All historical graphs have shown, as pointed out by Garth and others on this blog, mean reversion, years of decline follow these types of gains. My folks had held onto a property from 1994- 2001, sold because it provided no gains in 7 years, only headaches………. only to miss the big boom. But who can predict such an increase in 2015 and 2016 as seen in YVR. My strategy is keep most of your stuff in safe things ie : balanced diversified portfolio and be reckless with a small amount ie : start a business and take a risk. Majority of reckless/ignorant lose in the end ………….but yeah a few will profit. Real estate can’t continue to produce such annualized returns, I think thats why Garth keep saying reap the profits now…

#101 Canada Action Against Poverty and Corporate Exploitation on 11.24.17 at 2:16 pm

@ #6:
Too much noise about small problem like combating the right-wing version of paranoid and racist stereotypes of welfare fraud but what about the banks bail out and the corporations tax breaks, recently by Morneau Sheppell? THOSE ARE THE MAIN PIECE OF THE PROBLEM.

Our organization will combat the racism, sexism and anti-poverty attitudes of the Ontario Liberals when it comes to social assistance.

It is not fair that corporations like Loblaws and Metro can pocket billions of dollars in overseas tax haven locations when they complain of a $1 increase in minimum wage, while Morneau Sheppel encourages tax evasion for corporations.

It’s also not fair that real estate speculation has drastically increased the price of shelter in urban areas of Canada, but welfare expects recipients to find a room to rent for $300 a month.

It’s not fair that welfare rates have not kept up with the rate of inflation, while our Central Bank tells us that they see no inflation, and that a devalued currency is good for our economy when our food bills keep rising beyond 10% a year ever since our dollar went from 95 cents to the 65 cent to 76 cent range for the past three years.

#102 Canada Action Against Poverty and Corporate Exploitation on 11.24.17 at 2:21 pm

Help stop poverty in Canada by holding our elected officials and corporations accountable. It’s not fair that we pay 13% tax on medical First aid supplies like bandages while Morneau Sheppel encourages corporations to evade taxes.

#103 Canada Action Against Poverty and Corporate Exploitation on 11.24.17 at 2:22 pm

Canada should do better.

#104 isuckless on 11.24.17 at 2:28 pm

[email protected] == The Nice Lady at The Bank (someone selling you overpriced services like mutual funds)

#105 Blacksheep on 11.24.17 at 2:37 pm

Meeky # 92,

“Does anyone else feel really depressed about all of these bubbles?”

No, bubbles create opportunity for profit.
——————————————–
“The ignorant and reckless are making huge profits on housing and crypto, yet people who are careful and balanced are suckers. I see so many people bragging about making huge money on crypto on social media and acting like they are pro investors now… it’s exhausting. And people leveraged to the max to buy multiple properties making huge dollars on a giant risk.”

“Am I missing something?”
——————————————–
Whether starting a business or speculating, taking a RISK is required to get ahead.

Whom ever said: ” Blessed are they who are meek, for they will inherit the earth ” was full of shite. Maybe try a more assertive sounding handle like: Ballsy, maybe that’ll help.

#106 DIY on 11.24.17 at 2:40 pm

#93 I always have questions
do I have to go through [email protected]?

You can open an RSP trading account and buy ETFs or stock in that.

I’m with RBC Direct Investing, which lets you open those accounts in person at a bank or online.
They are a little more expensive with trading, $10 per trade.

But if you intend to buy and hold, you are not trading much anyway, in which case the trade fee may not matter.

#107 d'Edmonton on 11.24.17 at 2:40 pm

#92 Meeky on 11.24.17 at 1:32 pm
Does anyone else feel really depressed about all of these bubbles? The ignorant and reckless are making huge profits on housing and crypto, yet people who are careful and balanced are suckers. I see so many people bragging about making huge money on crypto on social media and acting like they are pro investors now… it’s exhausting. And people leveraged to the max to buy multiple properties making huge dollars on a giant risk. Am I missing something?
——————–

You truly make money by investing in a bubble only if you:

– Buy low
– Sell high (crystallize the money you ‘made’)
– Don’t jump right back in

Most of the people you write about have just done step one. Few time all steps well. They brush aside consideration of risk. Leverage amplifies that risk.

Check back with them after a correction

Balance (together with diversification) wins long term.

#108 Doug in London on 11.24.17 at 3:02 pm

In reading this post, now you know why I got out of mutual funds in the early years of this decade.

@Blacksheep, post #105:
Yes, the meek will inherit the earth, but they probably won’t get the mineral rights!

#109 Doug in London on 11.24.17 at 3:16 pm

@Meeky, post #92:
These asset bubbles are a double edged sword. If you get in early then get out at or near the top you can make some serious money, no doubt about that. The problem is, unless you have the ability to travel in time you’ll never know what will be the next bubble and when the top is going to occur. A lot of people who jump in at on rear the top end up getting burned.

Myself, I’ll stick with that bore you to tears strategy of trying to buy assets that are on sale and selling off some when they recover. It can test your patience, but personally I sleep better when I’m not worrying about a bubble in something I own bursting. In 2013 when REITs were on sale, you could have bought CAR.UN at $20 and change and now it’s trading at about $37. And now the punch line, if you bought CAR.UN back then you not only got capital gains but dividend payments over the last 4 years. Bitcoin or Canopy Growth? Bah, humbug!

#110 mike from mtl on 11.24.17 at 3:37 pm

DSC funds suck, usually there’s a provision to swap to other funds or to max 10% /yr So it would take 10 years to melt down DSC funds without incurring a penalty.

Seg funds are even worse. Most are in the 3% MER range and are terrible performers as well.

Annuities have their place but as far as I know they die with their owner.

Also I just love the fund highlights for those bad at maths. “Fund xyz +15%”!!! wow holy chit! (in small print over 5 years). That’s less than 3% annualised btw.

#111 -=jwk=- on 11.24.17 at 3:37 pm

@ #^ LOANS are considered TAXABLE INCOME under Ontario welfare!

———-

please stop posting this nonsense. Ontario Works is not the welfare system. Loans from OW are income exempt for every scenario that OW gives loans for. .

#112 jess on 11.24.17 at 3:43 pm

The Murphy Scandal

Justice Lionel Murphy was one of the most senior political and legal figures in Australia. He was also at the centre of one of the most extraordinary scandals in our nation’s history.

Now this sensational chapter in Australia’s history has been reopened with the release of documents kept secret for 30 years.

Four Corners takes you into the heart of this story with powerful first hand accounts from many of the key players in this astonishing saga. Some are speaking publicly for the first time in 30 years.
47mins 3secs •
Tue 21 Nov 2017, 2:20pm

DEBBIE WHITMONT: The illegal phone taps captured thousands of conversations about organised crime – involving lawyers, public servants, politicians and corrupt police.

http://www.abc.net.au/4corners/the-murphy-scandal/9175506

#113 Entrepreneur on 11.24.17 at 3:50 pm

#52 Happy…A old saying about horses is that they will always go home. On my many adventures in the bush I usually carry a compass but the odd time out there without one. But had my trusty golden retriever with me and transferred that old horse saying and was led back, wasn’t home but close enough. The trick is to let them lead, make sure when turning around that they are ahead, they go by smell. Also, learn to read the sun, stars, terrain, comes handy, sometimes.

#92 Meeky…many have given up, feeling depressed but go to #94 Ace Goodheart…even the name will cheer you up.

#For those about to flop…about the condos/houses flipping which I find the prices extremely high for the families to be able to jump from one residence to another (nightmare moving a family). And with so many high amounts cannot be middle class as middle class frugal and use their money wisely.

My conclusion: A lot of speculation here and foreign plus money laundering. All in the disguise of low interest rate. Then add in the rentals, (un)disclosed, excess properties. Coming to an end.

#114 earthboundmisfit on 11.24.17 at 3:53 pm

The employee plan would be even better if it were invested in ETFs, not mutuals. — Garth

I tried convincing employer of that. Got told to STFU.

#115 AGuyInVancouver on 11.24.17 at 3:58 pm

#90 TurnerNation on 11.24.17 at 1:09 pm
Here in Ontariowe I’ve seen small shops with signs saying Reduced opening hours coming – due to the hike in Minimum wage.
Everything old is new again under Kanadian Kommuniusm: They pretend to pay us, we pretend to work…
_ _ _
Or they could just charge an extra 25 cents for that muffin, or an extra $1 for that garden gnome and see if consumers notice or care.

#116 LivinLarge on 11.24.17 at 4:32 pm

“please stop posting this nonsense. Ontario Works is not the welfare system. Loans from OW are income exempt for every scenario that OW gives loans for. .”…me thinks you don’t understand the “loans” claim. It’s not referring to loans made “ODSP” / Ontario Works but instead loans that a recipient receives outside of the gov system. If you borrow money while in the OW system, like a remortgage of your home etc then they count the loan proceeds as income and deduct $1 for $1.

#117 Dissident on 11.24.17 at 4:37 pm

If you think RIOT is whack, check out MARA. Yowza.

#118 mike from mtl on 11.24.17 at 4:57 pm

#114 earthboundmisfit on 11.24.17 at 3:53 pm

I tried convincing employer of that. Got told to STFU.

////////////////////////////////////////////////////////////////////////////////

Same. Last two employers, forced into their RRSP group plan. Choice of mix of same six crappy mutuals. Too bad.

Obviously whomever is hocking these funds is making their ‘service charge’.

#119 NoName on 11.24.17 at 5:01 pm

#75 n1tro on 11.24.17 at 10:11 am

You are correct as usual. However, all the companies I’ve been with only allowed mutual funds as a choice in the matched RRSP so with the free money they give, i can only load up on more mutuals. First world problems….

—-

Where i worked rrsp matching funds went thru 3 different “life” companies, only first one (have Canada in name) had all MF only, but it did offered some index funds, way back in 2003. As a company changed provider list of MF got shorter and index and target date funds got increased in numbers.

I personally find those target funds very good did well and fees were low 0.6%, and allocation fund will be adjusted as time goes on.

But keep on mind i am just an electrician, with no red seal. Red seal is so overrated.

#120 RyYYZ on 11.24.17 at 5:56 pm

#105 Blacksheep on 11.24.17 at 2:37 pm
Meeky # 92,

Whom ever said: ” Blessed are they who are meek, for they will inherit the earth ” was full of shite. Maybe try a more assertive sounding handle like: Ballsy, maybe that’ll help.

====================================

I think that was Jesus who said that. Now you can say that Jesus was full of shite if you want, and I might agree, but it’s not something I would say as it’s offensive to Christians.

#121 Mike on 11.25.17 at 12:57 am

The loophole for writing off interest on money used to purchase non-dividend paying stocks is the fact you expect they *might* start paying a dividend.

#122 joe on 11.26.17 at 1:19 pm

Good advice, Garth. I sold my mutual funds many years ago ( even though I had to pay the trailer fee) it was still worth it.

I also borrow money to invest, mostly in high dividend stocks which have fallen but look solid.

The question i have is that in an earlier column you were vehemently against the Smith Maneuver. How does this procedure differ from the Smith Maneuver? and why is it better?
thanks joe