Investing 101

invest

Most people suck at investing. The banks know this. Mutual fund salesguys depend on it. Insurance hawkers, too. Plus the cowboys who flog gold and silver. The vast majority of us make two one of two mistakes. We get greedy and end up taking huge risks. Or we get scared and bury money in dead-end GICs. Either way, we lose.

Of course, most of the people you know gave up trying to figure any of this out long ago. So they just buy real estate. They put almost all their wealth in one asset on one street, over which they have no control. Like the trapped 70-year-old couple in a semi in Toronto’s Beach area. Ordinarily the property would be worth a million bucks, but it was valueless since nobody would buy half a house with the other side occupied by a cat hoarder, and the lawn a sea of flies and feline surprises.

But we yak about real estate too much here. Let’s focus on making money grow. I’ll return to this theme more often in the future. Right now here are ten little rules to get us started.

Invest, don’t gamble. Mostly this means don’t buy individual stocks unless you have a mess of money, like seven figures. Stock markets are volatile, scary places. Companies lie to investors, even though rules are in place to ensure they don’t. Prices can fluctuate enough in one day to erase a year’s worth of dividends. Junior, speculative issues – especially in the energy sector – are investor death traps. And there’s no way the little guy can compete with professional traders or high-frequency computer transactions. If you want to gamble, spend two bucks on the lottery, or drive on the 401.

Diversify, always. So it’s okay to have exposure to stock markets, but get it through baskets of equities. ETFs are the best – exchange-traded funds. They’re like mutual funds, but since there’s no fund manager who likes Porsches, there’s no big management fee. They also trade on the markets, so they are more liquid, but still pass through dividends. You can buy all the large-cap companies in Canada or the US, for example, through a single ETF.

Don’t be patriotic. Diversifying to avoid risk and earn more consistent returns also means not owning too many maple assets. Canada accounts for about 4% of the world’s financial markets, and yet 70% of investors here have nothing but Canadian assets. Very dumb. The Toronto market is up 5% so far this year while the S&P 500 has gained 20%, Europe is ahead 14% and Japanese stocks have added 44%. So Canadian stuff, at best, should be only a third of the growth part of your portfolio.

Be balanced. This is my favourite word. The true key to investing success is to own a lot of asset classes all the time, and to do so with the correct weighting and balance. One size does not fit all, but a balance of 40% fixed income (safe stuff) and 60% growth has proven itself, in good markets and disasters. This portfolio has returned about an average of 7% over the last decade, even with the 2008-9 melt. The safe stuff includes a blend of corporate, government, high-yield and real-return bonds, plus preferred shares, while on the growth side are REITs and ETFs in Canadian, US and international assets as well as alternative assets such as a completion ETF or tactical fund.

Don’t just balance, but rebalance. This is what almost all amateur investors never do. Because all assets are changing values all the time, the careful weightings in a balanced portfolio (like 6% REITS, 18% preferreds, 5% emerging markets, 17% US equity etc.) get out of whack. This year American stocks have done well, for example, so what was designed to be 17% of the portfolio might have blossomed to 21%. So, rebalance. Take profits, bring the weighting back to its optimal point and distribute the gains among the under-performing assets. Yup, it runs counter to your intuition, which is exactly why it makes sense.

Don’t chase prices. Because we’re human, and care more about Lindsay Lohan than Dow Jones, we crave what everyone else does. That’s why we buy houses when the market is booming and prices soaring, or lust for gold bars and Apple shares when they’re at historic highs. So when one part of your portfolio does well, the temptation is to punt the losers and buy more of it. Bad idea. Next year conditions could be entirely different, and you’d own a mess of the wrong thing.

Don’t sell low. That sounds so obvious you’d wonder why I bother listing it. But the temptation to turn paper losses into real ones, propelled by irrational fear, is overwhelming for most people. For example, Eve and Jack bought a bunch of preferred bank shares with a fixed 5.2% dividend last Spring for long-term income, and then freaked this past summer when rate jitters sent prices down 15%. They bailed, afraid the preferreds would continue to lose value. So, they turned an illusory loss into a real one. And now preferreds have started to recover (of course). Meanwhile they could have been collecting 5.2% and the dividend tax credit. The mama of all bad times to sell? That was March of 2009 – when the selling turned into an avalanche. Time to buy.

Stay liquid. Don’t stick all your net worth into real estate. Don’t buy a five-year, non-redeemable GIC. Don’t fall for some bank-created, structured product that locks you in for years. Don’t get sucked into a mutual with a deferred sales charge, and end up in a fund prison.

Start with a TFSA. This is a gift from that peckerette, F, who for once in his life listened to me. You’re allowed up to $25,500 in there now ($51,000 with your spouse, and add another twenty-five grand for each kid over 18), and all growth is untaxed. That means it is a crime against nature to put TFSA money in a savings account, a GIC or a bond. This is where the higher-growth, more volatile parts of your portfolio go. The bonds should migrate to an RRSP, while stuff that churns out dividends belongs in a non-registered account.

Watch the fees. They can kill you. The worst are toxic MERs on mutual funds, especially equity funds. So, avoid them by using ETFs. If you have an advisor (good move for anyone investing $100,000 or more), don’t get a guy who collects commissions and tells you his service is free. It ain’t. It all comes right out of your after-tax returns. Better to find a fee-based advisor charging 1% or less, which is deductible from taxes.

And above all, for the love of God, take no advice from a blog.

202 comments ↓

#1 TurnerNation on 09.27.13 at 7:23 pm

Stop supporting billionaires?

In our little free firedom you are most likely supporting – with your weekly grocery shop – these following billionaire families: Westons, Sobeys, Pattison (Jim).

At Loblaws, Safeway-Sobeys, Shoppers Drug, Save-On/Overwaitea et al.

(Just scion on the bottom line.)

I’ve gone from giving them 100% of my grocery spend down to maybe 35%.

All meat from here: http://www.thehealthybutcher.com/
And a small family owned bakery for that and deli, cheese, home-made stuff, etc.

Worth switching supermarkets for (RIP D.N.?)

#2 Randy on 09.27.13 at 7:26 pm

Stay away from processed foods….Save money and be healthier….Dr Atkins was right !!!

#3 Donald Trump on 09.27.13 at 7:35 pm

Miss Toronto contest?

#4 Obvious Truth on 09.27.13 at 7:43 pm

Exact conversation I had with my friendly insurance salesman.

At the end he said I had to give up some growth for his safety products.

I said arbitrarily raising the bond stock ratio over time in a vehicle that is not liquid is stupid not safety. Who cares if I’m guaranteed my principle will always be paid back.

He said people love the product.

I’m sure the sales guys love it too. U

#5 Chicken Little on 09.27.13 at 7:44 pm

Transparency in the world of real estate:

Act 1: Realtor tries to understand what the statistics he receives really mean, why there is so much discrepancy between CREA and REBGV, and why he wouldn’t simply receive raw data…

http://youtu.be/u03UN4_nnvE

Act 2: He gets fired and share what he feels…

http://youtu.be/2zMTHIkv-n8

Act 3: Garth mentions him in his next post?

#6 BG on 09.27.13 at 7:49 pm

I have only enough money to max up the TFSA for now.
Should I create a balanced portfolio inside the TFSA or max it with growth stuff only?

I can save around 16K a year.

#7 Smoking Man on 09.27.13 at 7:52 pm

#131 zeeman1 on 09.27.13 at 5:25 pm
“#124 Frenchy on 09.27.13 at 4:02 pm
You just told one big fib, how do I know,
I invented lying.”
Good call SM.
But the question is why did Frenchy bother?

……………………………………………..
I WILL BREAK IT DOWN FOR YOU ZEEMAN1,
WHY THIS KID IS A LOUSY LIAR.-SM

“Hi Garth!” – THE “!” EXCLAMATION AFTER HI GARTH, SUGGESTS KISSING ASS, DOCTORS ARE ARROGANT.-SM

“I’ve been a regular reader of your blog and really appreciate it! I think it really sums up how deep in troubles we are here in Canada.”

“appreciate it!” ! MORE SUCKUPARY-SM
“sums up how deep in troubles” SERIOUSLY A PHD WRITES LIKE THAT-SM

“I plan to be a renter for years to come…god I make like 200000$ a year working in health care as a primary care physician and I think houses and condominiums are overvalued and inaccessible”

DR’S NEVER DISCLOSE THEIR INCOME IN PUBLIC PLUS, “INACCESSIBLE” ISN’T A WORD-SM

“for people. Who are crazy enough to buy 800000$ condos in dowtown Montreal?? ”
DR’S ARE TRAINED TO NEVER USE THE WORD CRAZY-SM

“Or worse half a million dollar house in Laval, stuck in traffic everyday. I actually think it’s gonna end bad here in Quebec. Really bad. “

“gonna and Really bad” HA……………… SURE DOC.-SM

Obviously this gent is a patient,

I could go on and on.

He’s a kid attempting to give himself credibility, he feels slighted and less than by his owner peers, He’s lashing out. He thinks his post can influence everyone, look I’m a doctor and a renter. Stop buying people, be like me.

Armature is all I can say. By my book and I will make you a damn good liar.

Also (I invented Lying) is that not a classic is all I’m saying, think about it.

#8 Fighting idiots over RE statistics on 09.27.13 at 7:54 pm

A while ago I was fighting an idiot who calls himself Gomyoneover the idea of calculating the average and the median price by using a running sum for the last 30 days.
The idea was to know at every moment where the market is and not to wait for CREA and TREB for their lies

Here is what he had to say
http://forums.redflagdeals.com/statistical-mirages-applicable-re-prices-stock-market-1363692/3/#post17168198
You’re using a 30 “day” moving average for housing???? :facepalm:
You know that houses don’t trade continuously on a daily basis on a public exchange, right?

I suspect the guy works for BMO, he is probably afraid not to lose his job.

In this video
http://www.youtube.com/watch?v=u03UN4_nnvE
we learn that CREA themselves use this algorithm for smoothing the inventory numbers. The guy who posted the video lost his job for speaking the truth about CREA hiding the inventory numbers.

Another retard on the same forum, her name nickname is licenced implied that my stats were half baked and she pointed that my stats were off big time

I wonder if she is willing to eat her own shit now that she admitted that the stats published by TREB and CREA are faked
Here with in her own terms she admits that she was an idiot a while ago

http://forums.redflagdeals.com/canadian-real-estate-boom-defying-naysayers-1351104/96/#post17477425

Ross Kay revealed why my stats were always off and Patrick (see the video above) showed us how far up on the food chain the corruption and the lies can go.

I wonder what the heck more CBC needs to jump on this story!???

#9 Smoking Man on 09.27.13 at 7:57 pm

Gartho, Gartho, Gartho…….

Weekends should be bank bashing, Realtor Lynch mobs.
Everyone has a few drinks and unloads.

Logic, and good advice for a Friday night.

What is wrong with you.

#10 T.O. Bubble Boy on 09.27.13 at 8:01 pm

Some good common sense advice.

2 interesting references to net worth thresholds:

1) “…don’t buy individual stocks unless you have a mess of money, like seven figures…

2) “…If you have an advisor (good move for anyone investing $100,000 or more)…”

So, get an advisor at $100k, and let the advisor start looking outside of ETFs at $1M.

That advisor better work some magic at $1M, because that 1% fee = $10,000 per year.

Garth – I’m curious why someone would start to move away from diversified ETFs and into some individual stocks just because they have $1M+ invested?

Not what I suggested. The point is that with smaller amounts investors will never achieve divsification if they opt for individual equities. — Garth

#11 Skook on 09.27.13 at 8:03 pm

#5 Chicken Little

Suggest you visit the “Real Estate Talks” BC forum

http://www.realestatetalks.com/viewforum.php?f=8

Look at some of this Realtor’s recent posts and the comments they garnered. It is important to put those videos you link to in context with all his preceding posted videos which may explain the deep trouble he got himself into given the fact the forum is visited by many in his profession.

Unfortunately, this young Realtor dug and fell into a very big hole of his own making.

I have a feeling that he posted his Sept 26th “firing” video in the forum, too, and it was subsequently deleted and the ‘administrator’ added a new forum rule (dated Sept 26, 2013) regarding language use.

#12 Garth please try to use tags on 09.27.13 at 8:05 pm

I know that your blog must have the option to tag articles. Please use that feature and tag all the Investing 101 articles that you will be writing from now on so we can easily find them
Of course you can use tags for RE related articles too. One tag that comes to my mind in the light of recent events is “RE Fake statistics” .
We would like to be able to point to that group of articles any new “RE agent #1” that came to this site to excrete the recent production of his mind. This again, will save us time.

Of course you will need to add a widget called ‘Tags’ just below your tweets widget, so we can find the articles in question.

thanks

#13 PF on 09.27.13 at 8:09 pm

@ChickenLittle #5
#3 We open an online petition and we send that to CBC to go after these guys.

This is a too good opportunity to miss!

#14 Liquid on 09.27.13 at 8:10 pm

Thanks for addressing my question from your earlier post this week Garth :) Great article as always, with just the right amount of humour :D

One other thing I wouldn’t personally put in my TFSA is dividend paying US companies because US dividends face withholding tax in TFSAs, but not if they’re in RRSPs.

It’s great to read about your insight into the investment industry. I think my favourite point you mentioned is Diversification because it can often lead us to indirect opportunities like furthering our investment knowledge. I started out with stocks and fixed income but now realize there are a lot more asset classes out there such as the exempt markets, real estate, and precious metals.

Staying liquid is also essential. There’s a term called “liquidity premium” which is the opportunity cost, or extra performance expected by investors for locking in their capital for a period of time, which some estimate to be more than 5% a year. One of the worst thing people can do is get stuck in a long term investment with low returns that they can’t get out of when a better opportunity arises.

#15 omg on 09.27.13 at 8:18 pm

Good list.

I would add three lesson I have learnt the hard way over the last 30 years.

1) Your buddies will always tell you about their WINNERS that are up 80% – they won’t tell you about their LOSERS that are down 80%. So be really happy if you can get 7% in a nice balanced portfolio.

2) You absolutely, positively cannot TIME the market. The day traders and chart watchers – may make some money in the short term – but all of them get slain over the long run. Do you really think you can beat Goldman Sachs and their rocket scientist traders doing milli-second trading?

3) The DOOM and GLOOMERS are always wrong. They have always been wrong in the past and will alway be wrong in the future. The closest they have come is in 2009 and then they sat on the sidelines waiting for the S&P to collapse to 1,000 and missed the huge market rally.

Just put money away each month – don’t worry about how high or low the market or interest rates are and forget about it. If you start when you are 25 you’ll be rich at 60.

#16 More Garth Prophecies on 09.27.13 at 8:20 pm

Please for the love of god Garth, let him post more!

#17 supa guy on 09.27.13 at 8:21 pm

fees

My advisor charges 1.75% – is this Negotiable?
He works for rbc and i chose him because he bought a cottage next to me and i got to know him over a few years. He Manages about 160k and i’d give him another 60k that i handle myself if his rates were lower

Portfolio is all stocks bonds

Too much. Is it a nicer cottage than yours? — Garth

#18 This post sounds like Financial Tai Chi on 09.27.13 at 8:28 pm

Especially the paragraph “Balance, Rebalance”.

“Find your center” “Control the energy” :-))

#19 supa guy on 09.27.13 at 8:28 pm

Hell yes lol

#20 Waterloo Resident on 09.27.13 at 8:29 pm

What to read something that will CRAP YOUR PANTS?

http://www.bloomberg.com/news/2013-09-27/soros-adviser-turned-lawmaker-sees-crisis-by-2020-japan-credit.html

Yes, that’s right boys: 10-year bonds at 70% interest rates, by 2020 !

No, that’s not a typo, that’s 70%, not 7.0%

Now when you figure that Japan is one of the biggest holder of US bonds, when their bond rates shoot up, the US bond rates will almost certainly will shoot up also; probably to the same levels, or at least half of that. So by 2020 Canada and the US will have both 10-yr bond and mortgage interest rates at anywhere from 20% to 70%.

If your mouth has not hit the floor by now, then you simply don’t understand how extremely serious all of this is, and you probably won’t until it hits you SMACK in the face.

#21 Canadian Watchdog on 09.27.13 at 8:31 pm

From the email data provided in the video, we can now confirm REBGV reported active listings are different from CREA. Most likely, REBGV is seasonally adjusting their monthly reported figures.

REBGV Reported (Implied Seasonally Adjusted)
May-13__17,222
Jun-13__17,289
Jul-13__16,618

CREA Vancouver (Non-Seasonally Adjusted/Actual)
May-13__18,388
Jun-13__18,473
Jul-13__17,826

This is a problem because if there was a surge in listings, nobody would notice until many months later. I suspect TREB and CREB are reporting the same way.

#22 T.O. Bubble Boy on 09.27.13 at 8:31 pm

Canada accounts for about 4% of the world’s financial markets, and yet 70% of investors here have nothing but Canadian assets.

Where is that 70% stat from? That just seems insane.

Canada doesn’t even offer companies in many key industries (not many retail, tech, pharma, or manufacturing companies). Also, there are many ETF options that are only available on U.S. markets — even with a bunch of newer TSX-listed ETFs from Vanguard and others.

#23 father on 09.27.13 at 8:32 pm

hey canadian watchdog I believe the guy, it makes perfect sense, even ross kay has said it, The media has done nothing so what are we to do and how

#24 Joseph R. on 09.27.13 at 8:36 pm

Nice list but you forgot the most important item:

Don’t get married! (Marriages means MIL while you are in, and divorce lawyers when you’re out!)

#25 habbit on 09.27.13 at 8:39 pm

A very accurate summary of investing you have been informing folks about for years. Thanks. Problem is in small markets finding that person. At times contact is made,questions are answered,information requested is provided then nothing. One then thinks their amount to invest is to modest to be bothered with and one is left on their own or with [email protected] Is this something anyone else has been thru? Wonder why GIC’s and such are so popular? Will no one here treat us (with modest amounts) as equals? I feel better now. Take care all.

#26 M on 09.27.13 at 8:40 pm

SP500 is a bubble itself
http://www.forbes.com/sites/jessecolombo/2013/09/27/bubblecovery-why-our-economic-recovery-is-actually-an-illusion/

The article lists equities among other notable bubbles.
http://www.advisorperspectives.com/dshort/charts/valuation/PE-ratio-overview.html?SP-and-PE10.gif
I tend to believe that the article is saying the truth. How can S&P be up when the entire global economy seems to be so instabile?

#27 Investment Virgin on 09.27.13 at 8:48 pm

Nice post Garth.

With the US debt showdown on the way and Bernanke waiting to do his thing with the stimulus program, do you think it’s a good idea to wait until one or both of these things happen before making investments for the first time? Will these have any negative impact? Or is waiting just a waste of time?

I’ve been sitting on $10,000 in my TFSA direct trading account because I just don’t know when to buy. I have a few ETF’s picked out though. Is $10,000 to small an amount? I could dump the other $15,000 into the account to have more to work with.

#28 Nemesis on 09.27.13 at 8:50 pm

FridayNight ‘Portfolio’ GrowthTips from Arnold Schwarzenegger…

“ThePump” [a special euphoria – apparently, not unlike that experienced by some successful investors]

http://youtu.be/6RThA6gisxY?t=2m14s

#29 Ralph Cramdown on 09.27.13 at 8:52 pm

#1 TurnerNation — “In our little free firedom you are most likely supporting – with your weekly grocery shop – these following billionaire families: Westons […]”

It isn’t like these guys got to be billionaires by selling the Greek government a vanilla swap and being so smooth about it that the Greeks didn’t even shop around to see if the rate was competitive. Groceries are a fairly low margin, undifferentiated business with low stickiness and no moats. Please the customer or go broke.

Besides, elderly relatives of mine bought a small position way back when, and just sat on it collecting dividends for decades. Came time for me to manage the family money and I discover that it’s grown to such a big position that I have to unwind it over a few years to avoid paying huge top-bracket capital gains taxes (first world problems, I know). So disregard the annoying commercials by the “rich and flaky” scion and keep shopping there for a few more years, please.

And for those convinced that Dave Nichols was their ne plus ultra pitchman, may I present Presiden’t Choice Aged Quebec Ham… It’s out of this world!

http://www.youtube.com/watch?v=I3Kh8Pii0p4

#30 :):( Ying Yang on 09.27.13 at 8:57 pm

Smoking Man was at the bar here in Seneca for one hour. I am the tall Asian guy, white shirt blue jeans. OK I’m Chinese, girlfriend is plowing though my cash. She won $2000 playing a slot machine and conveniently kept that in her purse. Oh yes I ain’t forgot Ha, Ha she had to pay 30% tax. Anyway she wants to go play after she buys me a drink with the money she won after I gave her the initial cash. No logic in it, I’m always screwed. If you see me just say hey Garth!

#31 JO on 09.27.13 at 9:02 pm

Purely anecdotal for now but my office has noticed an unusual uptick in the number of late mortgage payments…will keep an eye but it seems like the credit cycle is turning..more NPLs coming..Garth , what are your suggestions for buying in next year in west end not including Hamilton…how about Burlington ?

#32 AK on 09.27.13 at 9:09 pm

The road to recovery for GM has just begun

Warren Buffett also owns 40,000,000 shares.

#33 In the cold from Toronto on 09.27.13 at 9:11 pm

Hi Garth,

What else should one have in the portfolio? From your article today I can make up:

REITS, 6
preferred shares, 18
emerging markets equity, 5
US equity  17
Canadian equity 30
what else: 24?

Thank you,
Itc

Just examples. — Garth

#34 jamerta on 09.27.13 at 9:11 pm

#27 JO

Burlington, Mississauga, and Oakville all seem as overvalued as Toronto when looking at average price increases graphs.

Burlington prices went up by 80% between 2002-2012.
Oakville prices went up by 120% between 2002-2012.

#35 thoughtful humans on 09.27.13 at 9:18 pm

#5 Chicken Little

canada needs more patrick gunvilles.

thanks for the links.

#36 Son of Ponzi on 09.27.13 at 9:22 pm

Garth,
Why does everyone have to be in the bond and stock market, making only the brokers and advisers rich.
What about doing it the old fashioned way: Working and saving?

#37 Max Jones on 09.27.13 at 9:27 pm

BC is going into it’s annual Property Tax Sale on Monday Sept 30 (Vancouver on Nov 13). Plenty of properties are available, in Delta alone there are 43 going up to the highest bidder. The minimum bid has to cover 3 years of outstanding property tax plus penalties and a 5% administration fee, typically less than $20,000. Since the owner has the right to redeem the property within 1 year, most of these properties will not be taken over by the purchaser.

So why buy one of these, well you are guaranteed a 6% return on your investment. Risk free. Well aside from the risk of actually getting to own a house at a ridiculously low price.

http://www.richmond.ca/cityhall/finance/taxsales.htm

#38 young & foolish on 09.27.13 at 9:27 pm

Everybody wants RE … that’s why they come here to read about it.

Example: JO has noticed late mortgage payments, and suggests credit cycle may be turning … then goes on to ask about buying in Burlington! See what I mean?

Most people rent because they don’t have enough money to buy, or because they are waiting for lower prices. But sooner or later, they’ll buy. It’s a cultural preference. All else is more or less about “timing the market”.

#39 Son of Ponzi on 09.27.13 at 9:29 pm

Garth,
There is a guy in Vancouver being crucified by the RE philistines for saying what you have been saying for a long time, that the official RE numbers are Franken numbers.
Don’t be a philistine yourself, dedicate a post to him.

#40 TheCatFoodLady on 09.27.13 at 9:31 pm

The old fashioned way works. Work hard, keep your costs low & save.

Stocks, bonds, etc. are what you do with your savings to make them work for you.

#41 Post Haste on 09.27.13 at 9:34 pm

Awesome post Garth, I do feel like a little fish in the investment pond. Many moons ago when the techs were all the rage in the market, you could buy a stock in the morning and by that evening be up 20% on a company you had little idea what it was all about – crazy! I took $3900 and made $21,800 in under 9 months by pure luck – Nortel, Rim or my personal favourite JDS, that was the mother load – the days of bliss – today a whole new environment – Garth has it down perfect –

#42 T.O. Bubble Boy on 09.27.13 at 9:35 pm

what is wrong with people?

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/young-renters-dilemma-buy-now-or-wait/article14577678/

This “young renter’s dilemma” is whether to buy a Vancouver condo at age 26 — putting her entire net worth into it (still not covering 20% down to avoid CMHC), and spending more than double her current $800/month rent to support the condo mortgage and expenses.

#43 young & foolish on 09.27.13 at 9:42 pm

Solid investment advice from Garth. But to do this well, you’ll need plenty of money to start. You get that by saving (and most people can’t seem to do this well), or by speculating (that takes brains and balls, and sometimes foolishness … unless you received an inheritance).

Ralph’s relatives had it right though … buying positions in useful and growing enterprises and re-investing the dividends over many years.

#44 Obvious Truth on 09.27.13 at 9:44 pm

14 liquid and 15 omg explain it right. It sounds easy but isn’t for most people. Thats why my insurance guy sells crappy products to them.

Emotion is the killer. It’s why we get peaks and valleys. Taking emotion out helps some of us take advantage of this. Rebalancing does this just by using math. Make no mistake. This is a time tested strategy with low cost as a primary advantage. It’s not a sales product. It’s you taking control of your finances. What you should be doing.

T.O. Bubble Boy and those wondering about 1M plus. We buy a diverse basket of individual securities that can mimic most ETFs. Can buy and rotate in sufficient quantities or hold forever for a small fee of 9.99. Diversity with no carry costs.

A temporary loss in a single position never forces us to sell.

The buying costs are too high if you are saving just a few hundred a month. This will change with time and as you learn.

Just get started. If you’re a lady and you like to shop buy a consumer ETF. Go to ishares and find the list of the companies included in it. Like technology. You can own google, apple, Facebook and more in a tech ETF.

Buy a bunch of them. Rebalance by shifting dollars or simply adding to those that have lagged.

Why not invest in the products you use daily.

Investing is like shopping really. Buy stuff on sale.

This stuff is fun. Houses are boring and cause you to give all your money to great investable companies.

I for one love it when oil goes up and banks raise their fees. Keeps profits coming and portfolio rising. I don’t want people to buy stupid insurance products but live it when my insurance guy says people are loving them. I smell a dividend hike.

Not as well written as 14and 15 but maybe gives you a perspective of how one guy has fun with it.

Did I mention I spent a few hours at the apple store last weekend. It was research. Knew that number was going to be huge.

How are the Lulu stores in your city. Anyone think holiday sales will be strong. Hear the new fashion is great. Help an investor out ladies!

#45 Smoking Man on 09.27.13 at 9:47 pm

#30 :):( Ying Yang on 09.27.13 at 8:57 pm
Smoking Man was at the bar here in Seneca for one hour. I am the tall Asian guy, white shirt blue jeans. OK I’m Chinese, girlfriend is plowing though my cash. She won $2000 playing a slot machine and conveniently kept that in her purse. Oh yes I ain’t forgot Ha, Ha she had to pay 30% tax. Anyway she wants to go play after she buys me a drink with the money she won after I gave her the initial cash. No logic in it, I’m always screwed. If you see me just say hey Garth!
………………………………………..

Going Tomorrow night……

Just discovered office 365, Sky Drive.

VBA + Sky Drive = Millions $$$$$$$ to the ones out of the gate fast

They have a Store like Android To…….. :) evil laugh

Buy Microsoft, This will be a Big comeback………..

Official Prediction

#46 Carpe Diem on 09.27.13 at 9:55 pm

#22 T.O. Bubble Boy

Unless you are smart … you shall have to ask stupid questions … but there is no stupid questions. Just stupid people.

If 70% of Canadians are home owners in Canada, most people have only equity in one asset.

Substract the 10% that can(or have) actually diversified.

And add the 30% who can’t owe homes but (maybe) have bank accounts.

You have at least 70% of the people invested only in Canada.

I actually have no equity in RE but I do have REITs … maybe I should be more REIT heavy …

Or maybe I should finally jump back into growing a business.

I’m so tempted to leave the cushy consulting job to feed my 3 kids and go big or broke for my idea.

Or both?

Time to ponder.

#47 john dowin on 09.27.13 at 9:56 pm

Stocks did very well lately. Will do well for a while.

What is the take on bonds? Profit free risk?

Gold has no utility. Why then China buys it massively?

Oil? Maybe. ..

Garth, what is you take on commodities?

Own the large caps, and you own enough. — Garth

#48 Ralph Cramdown on 09.27.13 at 9:57 pm

#36 Son of Ponzi — “Why does everyone have to be in the bond and stock market, making only the brokers and advisers rich. What about doing it the old fashioned way: Working and saving?”

The pile of money you save is, unless you’ve got it stuffed under the mattress, growing exponentially FOR SOMEBODY, either the counterparty to the mortgage you’re paying off, or the bank which is borrowing your money for peanuts, or you if you invest it effectively.

Working and saving is how nearly all of us get started, but the whole “rich people keep getting richer” thing isn’t mainly about working and saving, it’s mainly about compound (exponential) growth of the saved pile.

#49 JSS on 09.27.13 at 9:58 pm

Garth –

What is your opinion regarding Dividend Reinvestment Plans (DRIPs)?

Do you recommend?

Why keep buying more of the same thing? — Garth

#50 john dowin on 09.27.13 at 10:01 pm

$ 15:

The DOOM and GLOOMERS are always wrong. They have always been wrong in the past and will alway be wrong in the future. The closest they have come is in 2009 and then they sat on the sidelines waiting for the S&P to collapse to 1,000 and missed the huge market rally.
…………………………….

Having seen the collapse of the communist block I can say that you are deadly wrong. Doom and Gloom happens in the middle of proclaimed ‘recoveries’/perestroijka/….

#51 john dowin on 09.27.13 at 10:02 pm

Own the large caps, and you own enough. — Garth
…………………………………
Thanks Garth, how much is enough, 20 %?

#52 Ralph Cramdown on 09.27.13 at 10:06 pm

#43 young & foolish — “Ralph’s relatives had it right though … buying positions in useful and growing enterprises and re-investing the dividends over many years.”

They didn’t even reinvest the dividends, just spent them. I don’t even want to do the math on where they’d be had they been reinvesting them.

#53 I'm stupid on 09.27.13 at 10:07 pm

#27 investment virgin

Get help… What you posted isn’t enough info. 10k in tfsa but you can add another 16k to give you more to work with. Investing 101 time is your best friend. How much can you save per month, is 26k your entire net worth, how old are you? You must be disciplined to invest, a trait most don’t possess. Learn the basics and the risks then hire someone. You have a job and a life, why waste your time researching different investments to save $260 a year? It’s not worth your time.

#54 Doberman on 09.27.13 at 10:08 pm

The Great Gartho,

Your investing philosophy is sound but WON’T take you to the promised land.
I know you love to dis gold but I tripled my life savings investing in gold miners, you read that right.
Besides, if one wants to take their life to the next level just watch my good friend Tim Sykes make 12K in one day trading. And anyone else can do it to:

http://www.youtube.com/watch?v=O91pjfJDVQ0

Life is too short for diversified liquid portfolios, if you want to be driving a hummer you have to go hard or go home! Listen to my friend.

#55 Yuus bin Haad on 09.27.13 at 10:18 pm

Let’s see what it takes to earn the coveted “DELETED” flag.

Ready?

Here goes …

Blubber!

#56 Bob on 09.27.13 at 10:30 pm

“Better to find a fee-based advisor charging 1% or less, which is deductible from taxes.”
———————————————–
How does the “or less” work? Is it based on the amount you have invested? Or, do you just go around from fee based advisor to fee based advisor and negotiate a better rate?

No, hire the best one. — Garth

#57 not 1st on 09.27.13 at 10:33 pm

So ETFs have only been around for a few years. What were people supposed to be buying before that?

#58 Saskatoon-Living on 09.27.13 at 10:35 pm

Agree with all your rules Garth except the 1st one. It’s fine to buy ETF’s and REIT’s (or other fixed income) if you’re 50+, but for someone in their 20’s or early 30’s individual stocks are the way to go if you have an hour a day to do a little homework on the stocks in your portfolio. I say this because being so young you have your whole life to make money, so you can be a little riskier and have about 5%-10% of your portfolio in speculative stocks. Other than that, you give some great basic rules to investing.

You have no idea what you are talking about. You will be crushed. — Garth

#59 Ralph Cramdown on 09.27.13 at 10:36 pm

Remember folks, mutual funds aren’t bought, they’re sold.

CI Financial is running TV ads touting a product that “guarantees 5% a year for 20 years.” I love stuff like this, because I always know it’s going to be a terrible deal. And so it is. You don’t get 5% for the first 20 years, you get it after a 5 year “accumulation period” of no distributions. After 25 years, you may get a payout of the balance remaining IF THERE’S ANYTHING LEFT — no guarantees.

You’ll note that 5% x 20 years is 100%. So they’re promising to give you all your money back and not a penny more, except that your first monthly cheque for 0.417% doesn’t come for 60 months, and the last doesn’t come until month 300. Ah, but the fees. Fees larded on fees. Management fee, risk manager fee, protection manager fee totalling 2.55%/year, an administration fee to cover operating expenses (and then some) at 0.22%/year, and did we mention that the above isn’t enough to hire a stock picker, so we invest in other funds with more fees? And trailer fees for your financial advisor at 0.5% or more (included in the above fees? Can’t tell from the prospectus), plus other fees I won’t bother to enumerate.

All to sell to rubes who just see the 5%… GUARANTEED! Of course there may be something left over at the end, once they’ve gotten their end, but overall, this would appear to be the world’s worst term annuity.

Remember what I said. Your savings grow exponentially. If not for you, then for somebody else.

#60 FATHER on 09.27.13 at 10:37 pm

If we want to hire the best one, then we need you garth

#61 Bob on 09.27.13 at 10:40 pm

No, hire the best one. — Garth
———————————-
No disrespect intended, but what is the best way to come to that conclusion? Testimonials?

#62 D.D. Corkum on 09.27.13 at 10:42 pm

#36 Son of Ponzi on 09.27.13 at 9:22 pm

Why be in the bond and stock market? What about doing it the old fashioned way: Working and saving?

—-

If you don’t need those savings for a few years since you are still working, why not use the bond and stock market to grow them a little?

#63 Retired WI Boomer on 09.27.13 at 10:49 pm

FREE LUNCH !!!!

Well we all know there is NO Free Lunch.
However, you can start saving money by bringing your lunch, rather than eating out, when practical.

Yes, saving is first, then investing. Tough to invest what you have not first saved. (I’m not a margin player, sorry).
I DO believe in developing a Budget that allows for saving and investment funds.

At my age, you had better be at mid six figures or better and Debt Free or, you will not have it as easy as you thought. The sooner one starts, the better the numbers look when you reach retirement. Didn’t start early enough? Two choices: live cheaper, or work longer.
Both choices really suck.

Yes, would like to earn the top numbers every year, but they always elude me – dam it! Still, I will earn what the market returns in each segment I invest in, as I believe in low cost index investing, and ETF’s for the most part.

Sorry Garth, I do own some big cap dividend paying stock bought in 2009-2010 while they were relatively cheap. But they only make up 15% of the whole portfolio.
A bit light in bonds presently, that will change. Rest ok but will rebalance at years end, and will be consolidating some outlying accounts.

Your advice Garth is excellent, as usual.

#64 straight 6 on 09.27.13 at 10:57 pm

When it comes to investing, you people in TO are waay too detail oriented..
Out west we abide by.. know your limit and play within it!
or that other investment strategy.. double or nothing.

#65 MarcFromOttawa on 09.27.13 at 10:58 pm

Hi Garth,

Do you have a preference as to which ETF provider you choose to invest with?

Do you own ETFs from more than one provider?

#66 Uh Oh Canada on 09.27.13 at 10:59 pm

Thank you very much Garth, I am now a big fan.

I put 7K in a self directed investment account and it already gained 300 bucks in a few months using your recommendations. (This was money I was willing to lose in case I failed miserably.). I will now move the rest of the stash over and invest it myself. Thanks for the DIY investing tutorials.

#67 Son of Ponzi on 09.27.13 at 11:13 pm

Garth,
How does your investment advice apply to the divorced single mother of two, who can barely pay the rent?

#68 Bob Rice on 09.27.13 at 11:14 pm

I am reading Millionaire Teacher right now and he suggests a simple “couch potato” approach.. Investing in index funds (US, CDN and Intl) and short term government bond index. Depending on your age, the ratio could be 35, 35 and 30 if you’re in your late 30s and 40s.. Bond portion increase as you age… What do you folks think? Book is a great, easy read for investment newbies like myself.

Here’s a question that I’d appreciate answered if possible: We sold a property and are renting since the spring. We have about 100K sitting in a 1% interest “high-interest” savings account. We haven’t committed to anything yet b/c we may or may not buy in the coming months. We may just continue to invest. What should we park our money in the meantime? TFSA? Would would like to be able to access it anytime b/w now and next spring if we had to.

Also, we made money on the sale of our property. Is this taxable?

Thoughts? Thanks..

#69 Canadian Watchdog on 09.27.13 at 11:16 pm

What to lookout for in Q3 is Walmart and it's suppliers. Chart These giants are heavily weighted in indexes and ETFs, making them large enough to drag down the market. There are ways to offset these companies in your portfolio using options, or for simplicity sake, inverse ETFs weighted to match companies you want to cancel out.

Another concern is emerging market consumption that make up a good portion of revenue from large US companies. EM YTD currency performance have taken hit, which in turn, lowers purchasing power or consumption. Chart

Lastly, expect volatility with the announcement of a new Fed chair.

Sectors I like going forward are select EM currencies, agriculture and equipment suppliers, 3D printing, appliance and diamond companies that export to China.

#70 Amateur Investor on 09.27.13 at 11:23 pm

Garth,
I am in my mid 30s and I do all of my own investing, but my dual citizen (US and Canadian) tax status makes lots of Canadian investment vehicles (ETFs especially) tricky, so I invest in a mix of U.S. sector ETFs and individual Canadian equities. Other than a bunch of Canadian preferred shares and REITs that I picked up on deep discount in July, I hold ZERO fixed income, and other than some individual high dividend Canadian stocks held in the unregistered account most of my ETFs and equities skew heavy towards growth, quite a few with high betas. I understand the risk, but my view is that my defined benefit pension plan (it’s a cadillac plan, and about as bulletproof as civilization itself) is essentially like having a big fixed income fund. So far its working. This year especially I am killing it and even in the past two months most of the indexes are flat or slightly down and my portfolio is up 3 or 4% (hint: U.S. technology sector ETFs and a number of gangbuster Canadian small and mid-caps). Six years ago I had about 10K in a savings account, now i’ve got well over 250K invested and my main fear is that my wife will figure out how large the kitty has gotten and demand that we buy a house with it.

#71 Matt on 09.27.13 at 11:23 pm

Garth – what would constitute a ‘good’ advisor or the best one?

#72 Van guy on 09.27.13 at 11:39 pm

This is how you invest,

http://www.stock-o-matic.com/home

#73 Jolly on 09.27.13 at 11:40 pm

I don’t think it’s necessarily true that you can’t buy stocks if you aren’t a millionaire. You do have to have a good strategy. Choose the best companies in undervalued and emerging sectors and then wait – as long as it takes.

Tesla was undervalued at $35 when they announced they were profitable. With a current market value greater than Fiat or Mazda (I think) it’s too late now.

All Chinese solar was hammered due to massive debt and the threat of bankruptcies. A perfect time to buy the best companies. Trina is up over 500% from its lows. There is a little more upside for solid yet less loved companies like Renesola.

Gold miners were unloved due to falling prices, but are enjoying a recovery. Still lots of upside.

Natural gas hasn’t realized gains yet. The fact that it is cheap and plentiful will ensure its future is bright. Pipelines, ports, powerplants replacing coal, and trucks switching over all help. Might have to wait a long time to realize gains here, but little downside risk for such a shunned sector.

#74 Smoking Man on 09.27.13 at 11:44 pm

MSM got the marching orders from the machine, IPCC has doubled down, MAN MADE GLOBAL WARMING REAL.
Aggressive as ever.

In spite of the fact that we have had record ice build ups. and rising temps no where to be found.

Temps have gone no where in 15 years, Is Dalton getting ready to take over where Al Gore left off. Or will Gore do the road show again.

A massive world tax awaits. Do they not realize that the world is broke…..The schooled ha.

I haven’t figured out how the loot is made, or how I can get in on some of that action, I just know that with the psychotic push and aggressiveness with no supporting body language by the priests of Global Warming.

This shit has to be hugely lucrative.

#75 AisA on 09.27.13 at 11:46 pm

Like joining the 35% ers would be such a sorry lot in this life.

The lack of reality on investing and ESPECIALLY trading a margin account posted in the comments section is astounding at times.

Any move you make to double your net worth in a given amount of time can just as easily halve it. If you lose half your money, you need a 100% increase on the remainder just to break even.

I’ve done it a bunch of times, but I’ve got almost 7 years experience in the arena floating above the clouds and plummeting to earth when my wax wings got too close to the sun.

If you are not well funded to begin with, the pressures can do strange things to a man, I KNOW. Stop pushing pipe dreams on people just getting by, and looking to build a cushion for when their limbs give out. Especially if you got lucky and you know it, don’t talk like sage wisdom got you what you have, if you even have it.

#76 zee on 09.27.13 at 11:46 pm

Garth

Picking stocks is the way to go….thats what i have been doing……buying good stocks when they go on sale….and being patient with them when it is volatile….they dont always go up right away when you buy them and then selling them when they start to hit their 52 weeks high…

#77 aaci home-dog on 09.28.13 at 12:01 am

Good stuff. So if my 20 something sons have no tfsa yet, I can do it on their behalf ?

#78 calgaryPhantom on 09.28.13 at 12:45 am

One does not simply take his 150000 dollars and put it in a 60 40 portfolio. Instead, one should average out over a year to build that 60 40 balance. Putting 20 % of your 150 k in US equities at its top is not smart. Instead one should slide money as buying opportunities come ( like debt cieling saga) and ty to average out to the 20% alocation. Same goes to other asset classes.

#79 Mister Obvious on 09.28.13 at 12:47 am

#39 Son of Ponzi

“There is a guy in Vancouver being crucified by the RE philistines for saying what you have been saying for a long time, that the official RE numbers are Franken numbers…”
————————————

Do not equate what that foolish, misguided puppy did with Garth’s comments about questionable real estate statistics reporting. Garth’s ‘information’ was gleaned from keen observation of data available to any member of the public who cares to do some investigation, not by verbatim public exposition of internal memos.

To do an equivalent transgression Garth would have to take private and confidential communications with a financial regulator’s office and make them public on YouTube. That wouldn’t simply be bad judgement; it would be career ending stupidity.

A post dedicated to this young (former) agent might be construed by some as a backhanded endorsement of his actions. That’s dangerous and pointless territory. He made his own bed and now he gets to lie between the cold sheets.

#80 The Man From Nantucket on 09.28.13 at 12:55 am

#10 T.O. Bubble Boy on 09.27.13 at 8:01 pm

………That advisor better work some magic at $1M, because that 1% fee = $10,000 per year.

I don’t need magic, just careful stewardship.

If I have a million bucks that I do not trust myself to manage, I want a smart guy to give it a bunch of his attention.

If that smart guy costs, let’s say, $150 per hour, well, hell, he’s only even working on my portfolio for 65 odd hours per year.

So, is 1.2 hours per week enough to properly care for a million bux? :)

(I realize there are efficiencies because most clients have some variation of a model portfolio so research and analysis costs are spread over the entire client base. Also, the advisor will have lower-per-hour-cost folks doing much of the grunt work)

Anyway, my point is the guy doesn’t need to work magic, he just needs to preserve, grow, and assume part of the worry.

#81 g on 09.28.13 at 1:07 am

I have been thinking about buying ETF’s, but have been averaging just over 15% annually with mutual funds(TFSA and RRSP)from one of the major banks, and another investment company(GF found this one and got suckered in for 5 years).I have become my own advisor and am doing better than when I let the advisors pick the funds for me.I kind of get the feeling that advisors pick funds they are trying to promote and don’t really have my best interest in mind.
I prefer dealing with the banks as it is easy to switch funds online(no fee after 30 days) and if the market starts to crash, I can quickly switch all funds to a money market account.

#82 Dan7 on 09.28.13 at 2:20 am

don’t buy individual stocks unless you have a mess of money.Prices can fluctuate enough in one day to erase a year’s worth of dividends.

But Garth when you DRIP your dividends and when the stock market eventually see-saws higher total return will be much better. Dividends are a bear market protector and a return accelerator.

#83 al on 09.28.13 at 3:00 am

1oz of gold is costing about a $1000 effort nowadays just to get it out of the ground physically – digging, rinsing etc.

so the gold is gold

anyways folks, if you have any money just keep it under the mattress since no matter what you wish to hope , you’d get sodomized by the market players every time

no hope for a working stiff to “make money investing”

any fashion of s.c. “financial investing” is the same fecal matter as RE flipping

#84 Michael on 09.28.13 at 3:08 am

This probably sounds like such a stupid question, but what would be the better thing to invest in – gold/silver or stocks?

I’m only 19, so excuse the ignorance if there is any.

#85 live within your means on 09.28.13 at 5:16 am

And above all, for the love of God, take no advice from a blog.

…………………………..
LOL

#86 Buy? Curious? on 09.28.13 at 5:42 am

Hey Garth! You know what today is? It’s the fourth month that my neighbour has had their house on the market! They’re have ANOTHER open house today and tomorrow! So you know what that means? Early drinking and less clothes! Right on! You should see the face of this real estate agent as she watches me through the side window into my back yard. I didn’t think one could contort their face so much.

http://www.youtube.com/watch?v=jGSa3XV3ZIE

Oh, one more thing, what do you think about that Real Estate agent that got fired in Vancouver and posted a video about it?

http://www.youtube.com/watch?v=2zMTHIkv-n8

#87 live within your means on 09.28.13 at 5:49 am

Garth & others

I’ve a question. I had been using TurboTax to file our taxes for years. Had to go to a CA to straighten out our taxes 2 yrs ago due to capital gains issues I didn’t understand. Last year I bought TT again & read, from a a reply to a question, that the cost of trades can be deducted from income tax. Is this correct?

#88 Koshy Alex on 09.28.13 at 7:28 am

Easy central bank policy risks new crises: Raghuram Rajan, RBI governor

http://articles.economictimes.indiatimes.com/2013-09-27/news/42463766_1_raghuram-rajan-interest-rates-easy-monetary-policy

#89 BG on 09.28.13 at 7:33 am

#6 BG

OK, so I’m not getting any personalized financial advice from this blog.
I’s fine. Don’t blame a guy for trying.

Still, I find this “101 investing” post quite useful and I concur with another comment: such post on investing should be flagged so that we can find them quickly.

For a newbie like me (and we know most Canadians are newbies too!), understanding that doing a “all-in” in real estate is suicidal is indeed useful.

The second step is to figure out what to do with the saving, and that’s why I really appreciate this kind of post.

#90 Mr. Frugal on 09.28.13 at 8:53 am

These are all good points. The only thing I would add is that we need to teach this stuff to our kids and spouses. I used to be a GIC investor. But the low interest rates woke me up and I started reading alot of books on investing and asset allocation. Everything I read I would pass on to my wife and kids. For a while I was a pretty unpopular guy. But, they are starting to come around, now. The kids (16 and 18) want to setup their own investment accounts and the wife is onside. I wish someone had shared this knowledge with me when I was a younger. Thanks for your efforts. I’m sure it’s helping, if only for a few.

#91 nutty squirrel on 09.28.13 at 9:03 am

Has anyone heard of the company called DIVIDEND 15 SPLIT CORP. They have two funds called FN.t and DFN.t. They pay around 15% and 10%. These are a basket of stocks (split capital and preferred shares). My guess would be to stay away from something like this as “it sounds to good to be true”. Has anyone had any experience with these.

Currently all I buy is ETFs.

Those companies create, essentially, derivatives from dividend-producing stocks, and amp up returns using leverage. Be careful. — Garth

#92 T.O. Bubble Boy on 09.28.13 at 9:50 am

@ #46 Carpe Diem on 09.27.13 at 9:55 pm
#22 T.O. Bubble Boy

Unless you are smart … you shall have to ask stupid questions … but there is no stupid questions. Just stupid people.

If 70% of Canadians are home owners in Canada, most people have only equity in one asset.

Substract the 10% that can(or have) actually diversified.

And add the 30% who can’t owe homes but (maybe) have bank accounts.

You have at least 70% of the people invested only in Canada.
———————–

Somehow I highly doubt that this stat (70% invested only in Canadian assets) is including RE. I would assume that it refers to financial assets.

Given that many will only buy GICs and Savings Bonds, I’m not entirely shocked. But, in years like 2013 (USA up > 20%, Canada up < 5%), it certainly proves the point about diversification.

#93 T.O. Bubble Boy on 09.28.13 at 9:58 am

@ #81 The Man From Nantucket on 09.28.13 at 12:55 am
#10 T.O. Bubble Boy on 09.27.13 at 8:01 pm

………That advisor better work some magic at $1M, because that 1% fee = $10,000 per year.

I don’t need magic, just careful stewardship.

So, is 1.2 hours per week enough to properly care for a million bux? :)
———————————

Here’s my point: what is different about the approach to investing $100k (with say $1000/year going to the advisor) vs. investing $1M?

Isn’t the amount of time to come up with a portfolio the same? Isn’t the amount of effort to track and re-balance the same?

To me, it is the plan itself that is worth the $$$. Re-balancing and tracking are important, but those activities seem secondary to selecting the right asset mix (inside of the right types of accounts).

I don’t see the value of the advisor in the 1.2 hours per week that he/she spends checking in on the investments… I see the value coming from putting the right investments in place in the most tax-efficient way. I can use any online investing tool to track investments, but those tools can’t tell me what is better inside a RRSP vs. outside, what the tax treatment would be for a particular REIT, whether I can claim back witholdings on dividends for certain stocks/ETFs, what rate to use for a spousal investment loan, whether to look at a RRSP mortgage, etc. etc.

#94 Renter's Revenge on 09.28.13 at 10:01 am

#88

You don’t deduct the cost of your trades from your income for income tax purposes in the same way that you would deduct RRSP contributions, for example.

Commissions get added to the adjusted cost base of your investments. When you sell, you subtract the cost base from the proceeds of disposition to calculate your capital gain/loss. Ultimately, commissions reduce your gains, thus reducing your tax on those gains.

#95 live within your means on 09.28.13 at 10:26 am

Eons ago I worked for 1 & then 2 FA’s to a very wealthy family in Mtl. One of the FA’s tried to convince me to take the stock broker’s course. His wife was one. Well one day our office was raided. We had to hand over all files. Those FA’s were charged w/insider trading. They both high tailed it out of the country with their families – to Israel & the other to Switzerland. I won’t divulge their names. I don’t believe the family knew what their FA’s were doing. I stayed on & worked for the accountant. I will say the family were the greatest I ever worked for. When I moved to NS in ’76 I had the best reference anyone could have & the man who hired me (former Mtl’r) recognized it.

#96 Canadian Watchdog on 09.28.13 at 10:48 am

CMHC is hiring!

Featured Job Opening: 20-Sep-2013 Senior Financial Risk Officer

As a member of credit risk management team, you will be responsible for providing substantive strategic analysis in the area of credit risk management and oversight for a wide range of investment, hedging, securitization and insurance exposures in a variety of portfolios, sectors and instruments, including performing complex financial analyses of rated and non-rated counterparties.

It's no coincidence that CMHC is searching for a new senior risk officer as Macquarie exits its leveraged subprime loans while MCAP absorbs the remaining subprime deadbeats.

#97 Sean on 09.28.13 at 11:03 am

Wow, it goes to show how many people who read this blog just post canned comments on RE every time Garth posts. Riding on the coat tails of a successful RE (nope, personal finance this time!) blog.

Anyway, I like the advice about how to allocate your investments to the right accounts. I’m just starting out. I’m on the way to max out my registered accounts. It will probably take a another year. With my initial investment I put all my Canadian equities in my TFSA. As I invested more I had to put them in my RRSP because I ran out of room in the TFSA. I suppose once I max out the registered accounts I’ll rebalance my investments across my accounts. Assuming only registered accounts I think I would prefer the following.

RRSP: US, Intl Equity (traded in USD): No withholding taxes. Taxes on dividends aren’t taken by the IRS.
RRSP: Bonds (real return, corporate, government, Preferred’s when I figure out a good allocation for them)
TFSA: Canadian Equity (most potential growth outsides US/Intl equities)
TFSA: Canadian REIT’s
TFSA: Other allocations that spill over from RRSP

Inspired by an older post by Dan.
http://canadiancouchpotato.com/2010/03/05/put-your-assets-in-their-place/

Since you usually only respond to boneheaded comments I hope that a lack of a response to this one is a good sign ;)

#98 Infused with Opiates on 09.28.13 at 11:23 am

70 watchdog – I thought you would have been all over equal weight etfs. Some good points here:

“You may be reducing your exposure to giant megacaps, especially when they reach bubble territory, but you’re also dramatically increasing your exposure to small and midcap stocks, which tend to be more volatile,” says Samuel Lee, an ETF analyst at investment researcher Morningstar Inc. “There’s no free lunch.”

http://www.marketwatch.com/story/equal-weight-etfs-arent-the-most-balanced-2013-03-04

#99 Donald Trump on 09.28.13 at 11:32 am

Canada’s population reaches 35 million

http://www.vancitybuzz.com/2013/09/canadas-population-reaches-35-million/

On July 1, 2013, three-quarters of Canadians were living in three provinces: Ontario (38.5%), Quebec (23.2%) and British Columbia (13.0%).

Provincial differences in the intensity of the population growth in the past 30 years can be attributed to several factors. For example, interprovincial migration was generally more favourable to the Western provinces and less favourable to the Atlantic provinces.

Natural increase was generally higher in the Prairie provinces and in the territories and lower in the Atlantic provinces.

Finally, a greater influx of international migrants was observed in Ontario and British Columbia.

#100 Mister Obvious on 09.28.13 at 12:21 pm

#88 live within your means

I’ve been using Turbo Tax (formerly ‘Quick Tax’) for fourteen years. I find it’s quite adequate for most people’s requirements.

I can’t tell you about the specific methodology for deducting transaction fees but I do know this: If you have a fee-based financial advisor who does all of your trading, you have no transaction fees.

Your receive a statement of your annual fees and that amount is fully deductible. Sweet.

I believe transaction fees are covered by the financial institution with whom your advisor is associated. That is, up to a certain maximum number of trades per year (perhaps 100 or so).

If you need more than 100 trades per year (normally used for purposes of rebalancing etc.) you are probably entering ‘day trader’ territory. Proper financial advisors do not day trade.

#101 omg on 09.28.13 at 12:29 pm

#27 Investment Virgin

Think about averaging into your ETFs of choice over the next few months. Make sure to look at ETFs with low fees (Vanguard has about the lowest).

READ, READ, READ. By this I mean books about long-term investing. Do not read stock trader blogs or message boards – those guys generally do not have a clue and get slain. Newspapers are spotty too – generally they have a 1-2 day time horizon.

YEP the stock market may tank by 20% this year, or conversely it may charge up 20% – who’s to know. But history has shown that 20 years from now it will be up significantly.

#102 Nemesis on 09.28.13 at 12:47 pm

WeekEndZen for SaltyDogz…

FirstUP: GentrificationOnSteroids – Quote ‘O TheWeekEnd

“For more than a century San Francisco has been a Mecca for young people who were different in some way, who wanted to start again. Most young people arrived here poor, with enough to rent a place then get a job. We moved here and built a life from what we had and could find. The people who move in now are the same age – but they’re already stinking rich.” – Tim Redmond, Former Editor of The San Francisco Bay Guardian

[UK Independent] – The dawn of the ‘start-up douchebag’: San Francisco locals disturbed as Google, Facebook, Apple and eBay professionals move in: As Google staff flock to the city, a battle is raging at the heart of San Francisco’s middle class

http://www.independent.co.uk/news/world/americas/the-dawn-of-the-startup-douchebag-san-francisco-locals-disturbed-as-google-facebook-apple-and-ebay-professionals-move-in-8845193.html

NextUP: Saudi Medic WarnsWomen Driving Will SheikYerBouti!…

[AlArabiya] – Driving affects ovaries and pelvis, Saudi sheikh warns women

http://english.alarabiya.net/en/variety/2013/09/28/Driving-affects-ovary-and-pelvis-Saudi-sheikh-warns-women.html

#103 Ogopogo on 09.28.13 at 12:53 pm

Great post, Garth. Like someone else said above, I read the whole post to my wife. When I first starting reading the blog out loud to her about a year ago she would just roll her eyes. But now that she understands the fundamentals she listens and even asks questions occasionally.

I’ve also been updating her on the amounts we get paid in dividends every month and quarter. Yesterday, for instance, our emerging markets index holding (VWO), US index (VTI) and developed markets index (VEA), all safely ensconced in a Spousal RRSP of course, coughed up sweet dividends. I walked over to my wife as I held the laptop with our Questrade account page open and asked:

“babe, guess how much we got paid today in dividends?”

She kept under guessing and her eyes kept widening as the sum kept increasing, until she hit the jackpot. She could hardly believe how much we’d earned in just one quarter. I then turned the laptop her way to show her the figures. I also reminded her that in a few days we get another wallop from our bond index holding (BND). Oh, this is just our US account. Our CAD accounts are even more fun to watch because we don’t have to think about currency conversion. Bottom line: this is how you get your significant other excited about investing, dudes and dudettes:

SHOW them the money!

#104 Viewpoint on 09.28.13 at 12:53 pm

Hey Garth.

Isn’t it about time for a new book?Is there one waiting in the wings?

#105 not 1st on 09.28.13 at 1:18 pm

#58 not 1st on 09.27.13 at 10:33 pm

So ETFs have only been around for a few years. What were people supposed to be buying before that?
_____

Respectfully asking again…what basket of safe diversified dividend bearing stocks could a person have bought 10 years ago? Already tried mutual funds and that didn’t end well. Bought the Nasdaq index in 2000, that definitely didn’t end well.

#106 Greed is God on 09.28.13 at 1:41 pm

Garth,

I want to take advantage of the recent haircut on Preferred ETFs, but you recommend those should go in a non-registered account. What if I’m nowhere near my TFSA or RRSP maximums? Should I still keep them outside those accounts? Seems like a waste to not have any tax advantage…

#107 AK on 09.28.13 at 1:50 pm

#98 Sean on 09.28.13 at 11:03 am
“RRSP: US, Intl Equity (traded in USD): No withholding taxes. Taxes on dividends aren’t taken by the IRS.”
====================================
International based Equities do have withholding taxes within the RRSP.

TEVA, LUX and NVO to name a few.

#108 HDJ on 09.28.13 at 1:52 pm

Recently noticed that Norway has accumulated nearly $750 billion in savings (petroleum income), and thus has the world’s largest sovereign wealth fund. Surprisingly, the fund earns only about 3% per year. They should hire Garth and get at least 7%.

#109 TurnerNation on 09.28.13 at 1:59 pm

Realtors have progressed from panic to sobs.

That Youtube example in Vancouver has moved to sodden & diaspora.

Maybe he can get a new job, at NamGnikoms Enterprises.

#110 Victor V on 09.28.13 at 2:23 pm

http://www.thestar.com/news/canada/2013/09/27/the_financial_elephant_you_just_cant_see_mallick.html

As Erica Alini wrote in June, “MBSs backed by government insurance currently make up about a third of all outstanding residential mortgage credit in Canada, up from one fifth.” These are astounding figures.

The Bank of Canada has no problem with this, is calm and reassuring. It’s not like the U.S. in 2008, Alini reports, where investors fled as mortgage securities tanked. In Canada, they won’t tank. They’re backed by Ottawa.

But this brings up another set of problems. Say Ottawa did get stuck with the bill. Farewell three-station subways in Scarborough, farewell national parks, armed forces, railroad safety, old-age pensions, EI, farewell to all the good things that taxes pay for.

This is the fear, this is the dread, that we will have to reframe our small fears to fit huge complicated financial matters that bypass our understanding.

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

You know the tide is changing when Heather Mallick from The Star is talking about MBS and credit bubbles.

#111 Soylent Green is People on 09.28.13 at 2:34 pm

I loved that pic you posted of Stephen Harper on the world stage in NYC last week.

hahahah

#112 HAWK on 09.28.13 at 2:41 pm

Has anyone heard of this insurance company Desjardins?

In one of their recent seminars that I attended they made a strong case about how insurance vehicles, with investment components are excellent for estate planning (as opposed to banks, since the Insurance Act is more favorable for Estate Planning) since the policy payouts cannot be subject to estate probate fees.

However, I am a bit skeptical of (a) what kind of investments they put your money into, (b) what their fees and charges are and (c) whether or not over long periods of time such investments make money (that a beneficiary could inherit)? Having been burned by non-performing, fee laden mutuals once, I tend to be conservative now :-)

Any comments / observations,——– thanks.

#113 omg on 09.28.13 at 2:42 pm

#106 Not First

ETFs were around back in 2000 but to my recollection not too many small investors used them. SPY (S&P 500) was around as well as others. YEP, SPY has been dead money since 2000 but did pay a decent dividend. You mentioned you had some QQQ, most people that bought QQQ likely didn’t know it was an ETF.

But I expect most people just bought mutuals funds, with their crazy high fees and resultant below market performance.

You got burnt like a lot of people did on the tech bubble. That’s history – look into some good, broad low fee ETFs, buy them and forget about them (assuming your not 65 years old and need $$ today)

#114 ripped on 09.28.13 at 3:02 pm

If you want to play the markets, make sure you have a U.S. account set up. There’s one hec of a lot more choice then just Canadian dirt mining.

#115 Ralph Cramdown on 09.28.13 at 4:07 pm

#106 not 1st — “Respectfully asking again…what basket of safe diversified dividend bearing stocks could a person have bought 10 years ago?”

If you’d just bought XIU 10 years ago, and didn’t reinvest the dividends, you’d be up 99% or 7.15% annualized.

This one’s been around a while:
http://www.marketwatch.com/story/vanguard-flagship-fund-going-strong-at-80/print?guid=790AB9A7-ED1A-40C2-B774-CA84920141E8

Most mutual funds are a bad deal because their performance doesn’t justify their management fees. Worse yet, retail investors tend to chase performance (“buy high”) and lose their nerve (“sell low”) so their returns are even worse than a strict buy’n’holder, a dart throwing monkey or a robotic rebalancer.

Nonetheless, there have been active funds that outperformed for decades (John Templeton managed a few) and there are fund companies which specialize in passive index funds with very low fees, Vanguard being the largest and oldest. Vanguard Dividend Growth has a ten-year of 9.01% and a since-inception in ’92 of 7.78%. Needing income need not mean high yield — you can always buy Berkshire Hathaway and sell a few shares when you need folding money.

#116 live within your means on 09.28.13 at 4:10 pm

Elder sis called me today – during the conversation she thanked me for being constantly after her to pay of her charge cards, etc. She doesn’t have much money, but has no debts.

We chatted about family members. Over the years, Hubby & I have sent several family members money as they were in dire straights. Then we learned they went out & bought expensive items. We’ll buy & send something to our grand niece. If we send money, our niece will spend it on herself or.. We’re so fed up helping some family members (on both sides) who then go & buy frivolous items. Never again.

#117 Ralph Cramdown on 09.28.13 at 4:13 pm

#113 HAWK “[… Insurance salesmen] made a strong case about how insurance vehicles, with investment components are excellent for estate planning (as opposed to banks, since the Insurance Act is more favorable for Estate Planning) since the policy payouts cannot be subject to estate probate fees.

However, I am a bit skeptical of (a) what kind of investments they put your money into, (b) what their fees and charges are and (c) whether or not over long periods of time such investments make money”

I guarantee you that if you read the prospectus, you’ll know more about the product than the guy trying to sell it to you. Usually, high fees and commissions are the killer in these types of products, but you need to read the prospectus to be sure.

#118 live within your means on 09.28.13 at 4:15 pm

#101 Mister Obvious on 09.28.13 at 12:21 pm
#88 live within your means

I’ve been using Turbo Tax (formerly ‘Quick Tax’) for fourteen years. I find it’s quite adequate for most people’s requirements.

I can’t tell you about the specific methodology for deducting transaction fees but I do know this: If you have a fee-based financial advisor who does all of your trading, you have no transaction fees.

Your receive a statement of your annual fees and that amount is fully deductible. Sweet.

………………..

Thank you. Guess who is our FA.

I believe transaction fees are covered by the financial institution with whom your advisor is associated. That is, up to a certain maximum number of trades per year (perhaps 100 or so).

If you need more than 100 trades per year (normally used for purposes of rebalancing etc.) you are probably entering ‘day trader’ territory. Proper financial advisors do not day trade.

#119 Evangeline on 09.28.13 at 4:23 pm

#115 “If you want to play the markets, make sure you have a U.S. account set up. There’s one hec of a lot more choice then just Canadian dirt mining.”

Also, I believe BMO and RBC both offer U.S. TFSA accounts. TD-W doesn’t offer a U.S. account, but they do have a “wash” that amounts to the same thing. But the U.S. and Canadian equities are all kept together in the same account.

I’m thinking of opening another discount broker account at RBC or BMO (are we allowed to do that?). I’d like to have access to a broader spectrum of analysis and research. I’m finding TD-W’s analysis universe rather limited, lots of obscure gold mines and oil spec stocks, but they don’t even cover the big banks, which after some cursory reseach, it appears that both BMO and RBC do, as well a many other Canadian companies that TD-W doesn’t cover, for example Magna International, which has doubled in value over the past year.

#120 OlderbutWiser on 09.28.13 at 4:24 pm

#113 – hawk

RUN don’t walk away from insurance products. Unless you have 7 figures to invest your problem is going to be running out of money…not worrying about estate planning. Once you have maxed out your RRSP’s, TFSA’s you can make your taxable investment accounts joint so they can transfer outside of your estate and therefore will not be subject to probate.

You can bet your life on that insurance product incurring HUGE fees. You will also likely be locked in and unable to get at your money.

It is TELLING that the presenter did not think it necessary to ensure that attendees had the answers to your questions before they left. They seem pretty basic for anyone who would be interested in handing over their money. Another baffle them with bullshit attempt to get your money. Run…….

#121 Evangeline on 09.28.13 at 4:30 pm

Maybe we should start a Greater Fool investment club, and then Garth could write a bestselling book about it, like the Beardstown Ladies did, about how humongously sucessful it is, and get even richer than he already is.

(I betcha Garth just loves all the ideas that people come up with to help him fill his time.)

#122 live within your means on 09.28.13 at 4:34 pm

#101 Mister Obvious on 09.28.13 at 12:21 pm
#88 live within your means

I’ve been using Turbo Tax (formerly ‘Quick Tax’) for fourteen years. I find it’s quite adequate for most people’s requirements.

I can’t tell you about the specific methodology for deducting transaction fees but I do know this: If you have a fee-based financial advisor who does all of your trading, you have no transaction fees.

Your receive a statement of your annual fees and that amount is fully deductible. Sweet.

………………..

Thank you. Guess who is our FA.

I believe transaction fees are covered by the financial institution with whom your advisor is associated. That is, up to a certain maximum number of trades per year (perhaps 100 or so).

If you need more than 100 trades per year (normally used for purposes of rebalancing etc.) you are probably entering ‘day trader’ territory. Proper financial advisors do not day trade.
…………..

Sorry. Screwed up my previous reply to you Obvious. Thanks for the info. Guess who is our FA.

#123 OlderbutWiser on 09.28.13 at 4:39 pm

Playing poker with a friend the other night and he tells me about his daughter putting in an offer on a SFH on the Danforth. Asking price was $1.1 million, they offer $1.25 million and it goes for $1.35 million to some other greater fool. Has a leaky basement, needs a new roof….all in about $75k of repairs required. WTF?!!! Anyways, the kid and her SO maybe earn $250k between them. How on God’s green earth can they afford to pay over a million for a home? I think they were going in with 5% down!!! What happens when interest rates go up?

This younger generation is going to find that “going all in” on RE will be the single biggest mistake they will have made in their lives. My generation, and my parents made $$$$ on RE (in an environment of declining interest rates and rising salaries) and unfortunately they are counseling their kids to get in as well. I guess the advice is as good as the money you paid to get it…..

#124 TurnerNation on 09.28.13 at 5:23 pm

You know when the Bush II regime took power I welcomed the seemingly fresh diversity in Condaleeza Rice, Colin Powell. Finally some regular people. Turns out they were unrepentant neo cons & globalist too. Colin less so (he no longer has a stage). Under their watch the death tolls mounted in US (9.11) and Iraq, Afghanistan. No one was blamed.

Let’s look at Canada. I mentioned Alberta – previously an economic powerhouse. A much-ballyhooed Calgary mayor of Muslim faith. In Edmonton there is one with a seeming Jewish sounding last name. Something different something new.

Now also we have women running the (formerly) Provincial economic powerhouses: BC, AB, ON, QC.
ON’s is unelected. Slipped into to power as faces turned red due to Dolton.
I welcome the diversity…unless all turn out to be Globalists following the plan of destroying our economies? Killing us softly?

What do you think: will we see our unemployment peak over 10%; our taxes, hydro, insurance and gas spike as much under their watch? Or will we see prosperity (with our wage demand far in excess of low cost producers’ worldwide). I bet.

http://www.cbc.ca/news/canada/montreal/protesters-converge-on-montreal-to-oppose-hydro-rate-hikes-1.1872076

#125 Donald Trump on 09.28.13 at 5:28 pm

DELETED

#126 Donald Trump on 09.28.13 at 5:36 pm

Every RE virgin that swallows the bogus monetary kool -aid screws the rest of the collective..aka …see what happened in the world with fiat money and the given countries future. The Banks get bailed….everyone else sinks.

#127 Evangeline on 09.28.13 at 5:51 pm

#83 “But Garth when you DRIP your dividends and when the stock market eventually see-saws higher total return will be much better. Dividends are a bear market protector and a return accelerator.”

I love not having to pay transaction fees.

I find DRIPS act like compounding interest. The dividend buys more shares therefore the next dividend is larger and it then buys more shares and the next dividend is larger, and on and on. Add that to the dividend rate increases that occur at least once a year, and the income growth is noticeably rapid.

The downside is tracking average cost, number of shares and average yield per share which all change from quarter to quarter.

#128 Donald Trump on 09.28.13 at 5:51 pm

#126 TurnerNation on 09.28.13 at 5:23 pm

Listen son….I got lots to tell you.

In 1933 people of..shall we say “European descent ” …were 35% of the planets total population.

Now? it is approx 8 %

So …..what is going on ?

The Globalist Cabal has decided that established Cultures and Nations must be eliminated…

The rest of this post has been DELETED and this person has been permanently BANNED from contributing to this blog. — Garth

#129 Saskatoon-Living on 09.28.13 at 6:06 pm

You have no idea what you are talking about. You will be crushed. — Garth

My returns prove otherwise.

Over what period? What amounts? — Gsrth

#130 A Nightmare on Bay Street on 09.28.13 at 6:07 pm

An excellent documentary from the BBC :

The Black-Scholes Formula
http://www.youtube.com/watch?v=o_UxB6EEqWo

You know, these guys authors of the famous formula that eliminated the risk in investing ?

#131 Waterloo Resident on 09.28.13 at 6:08 pm

I think that investing in U.S. ETFs are a wonderful way to build wealth, however, with this crazy debt-limit thing going on in Congress, I saw the writing on the wall and sold ALL of my stock holdings a week ago. I plan to stay liquid until some time around the middle of October. When the politicians get their act together and vote for a debt ceiling raise, THEN I will re-invest back into the market, but not until then.

#132 Signpost in the bushes on 09.28.13 at 6:22 pm

For #106

Here’s and interesting read from Rob Carrick at the Globe and Mail;

http://www.theglobeandmail.com/globe-investor/investment-ideas/got-two-minutes-you-can-beat-the-market/article7243076/?page=all

#133 Evangeline on 09.28.13 at 6:44 pm

#126 “I welcome the diversity…unless all turn out to be Globalists following the plan of destroying our economies? Killing us softly?”

What is diversity? Ten people of different sexual orientations, races, linguistic groups, nationalities — all believing the exact same thing? Or ten people of the same colour, speaking the same language, from the same country and all of the same sexual orientation — each having a very different world view?

#134 eddy on 09.28.13 at 6:46 pm

re hydro rates protest.

Protesting won’t help. It’s the new form of tax collection.
What good is payroll deduction when the jobs (sometimes including payroll) have gone to Mechindia?
It’s a war on the Canadian family. Have you seen ‘debt retirement’ on Toronto Hydro bills? Translation- we don’t have a government.

#135 Bobby on 09.28.13 at 7:36 pm

#126, Tell what kind of idiot over bids to buy a house?

#136 TurnerNation on 09.28.13 at 7:42 pm

#133 Evangeline

Did you read the book 1984? ‘Diversity’ will be what they tell us. All-think-same. Delivered in the Trojan horse of Diversity.

I like the ‘CIA’ in their name. Logo’s a bit risqué.
I hope they teach books from all genders, unlike that other prof. Though ‘Gender’ is a social construct…

http://www.brescia.uwo.ca/

“Brescia at a Glance
Brescia is Canada’s only women’s university. In a liberal arts and sciences setting, with small classes and strong faculty-student relationships,”

#137 TurnerNation on 09.28.13 at 7:44 pm

Cramdown, a funny thing happened on the way to Loblaws. A Dollarama opened up. Yes on my way.
Sounds Old-mannish but I bought at Loblaws Glad 100m clingfilm ‘on sale’, at 2.50.
Dollarama carries Reynolds 100m for a buck. Seems to be a name brand.

I’m going there to hoop more deals.

One day maybe I’ll be ‘The Dollar Store Millionaire’. Enter: “Good day fine chaps. Might you have more of that fine overseas confectionary for a mere dollar? It most certainly suits my constitution”.
Clerk: Si Senior?

(That’ll be in 2025…)

#138 Smoking Man on 09.28.13 at 7:48 pm

So I’m at the senica main bar, hit my short cut to greater fool, then main title bar to go to comment section to see if yang ying checked in.

But I hit the pic by accident, these chics I was wheeling looked at the pic, then me.

And walked, I said I’m not guy, my thumb slipped.

Damn, NO MORE HALF NSKED MEN garth.

#139 Daisy Mae on 09.28.13 at 7:53 pm

#98 Sean: “Since you usually only respond to boneheaded comments I hope that a lack of a response to this one is a good sign ;)”

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

Nope! Not suggesting that yours is one, but Garth doesn’t waste his time on ‘boneheaded comments’. LOL

#140 Cici on 09.28.13 at 8:08 pm

Garth, I love this post. Thanks so much for the tips. One thing I don’t get; however, is the whole notion of not being able to diversify adequately with stocks? I mean, most stocks trade at similar price points to stocks, yet as far as I can see, stock gains are usually in higher proportions. For instance, people who invested in banks in 2009 probably saw increases to the tune of $15 – $20 per share with most big banks, isn’t that right? Also, if you have a $100,000 to $200,000, can you not “diversity” by say buying stocks in two or three major companies across 5-7 major sectors? Would $20,000 per sector distributed among 5 sectors not be adequate as a starting point? Then you could put another $40,000 into safe stuff?
Sorry, I’m trying-but I don’t get why you need a million.

#141 Cici on 09.28.13 at 8:09 pm

Oops, sorry Garth – I meant that most stocks trade at similar price points to ETFs.

#142 Daisy Mae on 09.28.13 at 8:12 pm

#122 Evangeline: “(I betcha Garth just loves all the ideas that people come up with to help him fill his time.)”

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

I doubt Garth HAS

#143 Daisy Mae on 09.28.13 at 8:13 pm

….any spare time! :-)

Who knows what happened there. Suddenly all hell broke loose!

#144 espressobob on 09.28.13 at 8:19 pm

#131 Waterloo Resident

Debt ceiling worries & pulled the plug! Thats market timing! You could be wrong & loose some upside? Globally diversified investments help smooth out the ride, and what issue?

#145 Nosty in Knickersville on 09.28.13 at 8:25 pm

#126 TurnerNation and #134 eddy — “It’s a war on the Canadian family.” and “will we see our unemployment peak over 10%; our taxes, hydro, insurance and gas spike as much under their watch? Or will we see prosperity (with our wage demand far in excess of low cost producers’ worldwide).” — Agenda 21 Bingo! Sure glad we’re retired, got our lives and income streams sorted out. Gonna be rough on people in a few years.

Yo SMan — In order to keep most sheeple pissed off at moi, here’s a few links, along with the Quote of the Day from wrh.com keeping you updated on the other stuff that’s happening. Say, does any of this have to do with the debt ceiling / shutdown of the US govt. and gun grab thingie? — “Three Stars don’t get canned without a damned good reason. And I find it alarming that this incident happened three weeks ago but was kept secret until now, because it was just about that time that a nuclear weapon was moved to the US east coast without the proper paper trail! This suggests that a plan to set off a nuclear weapon inside the US, to blame on Iran, is already underway.* Debunking Mars-made GW.
*
This link adds to the following — “I do not believe in the creed professed by the Jewish church, by the Roman church, by the Greek church, by the Turkish church, by the Protestant church, nor by any church that I know of. My own mind is my own church. All national institutions of churches … appear to me no other than human inventions, set up to terrify and enslave mankind, and monopolize power and profit.” — Thomas Paine (wrh.com).

#146 Canadian Watchdog on 09.28.13 at 8:38 pm

#99

I only use broad ETFs as a layer for liquidity purposes and prefer fundamental index weighting for the core. Right now I’m heavy cash until there’s political clarity, i.e., debt ceiling, Italy’s debacle and Fed chair selection.

Market timing. Why sheep always get sheared. — Garth

#147 Vangrrl on 09.28.13 at 8:53 pm

#69 Bob:
Get that 100 grand OUT of that ‘savings’ acct asap! Even if you put it in TD e-series or ING Streetwise index (passive index, automatic re-balancing, easy as pie to set up) until you’re ready for a brokerage acct, it will make a difference. Read Cdn Couch Potato for beginner investors. Mr Money Mustache just did a Cdn RRSP vs Tfsa article a few days ago.

#148 espressobob on 09.28.13 at 8:56 pm

#107 Greed is God

Preferred shares in a TFSA or RRSP don’t benefit from the ‘dividend tax credit’. Thats the whole point! Think T3 not T5!

#149 Canadian Watchdog on 09.28.13 at 9:24 pm

Market timing. Why sheep always get sheared. — Garth

Nope. A two fold plan for any outcome. Being balanced for dividends during risk-off markets is a complacent strategy that is vulnerable to interest sensitive assets, price action and inverse correlations that might not have been expected.

A passive portfolio at these price levels is not a good strategy just because everyone else is doing it. That's called hope. Not my game. I prefer agility and control.

Now tell us about all the times you urged people to buy gold in the last two years. — Garth

#150 VT on 09.28.13 at 9:33 pm

http://canadiancouchpotato.com/2010/03/05/put-your-assets-in-their-place/

Pulling all this together, here’s an example of how you might divvy up an ETF portfolio across different accounts with an eye toward keep taxes to a minimum:

RRSP
Vanguard Total Stock Market (VTI)
Vanguard Europe Pacific (VEA)
Vanguard Emerging Markets (VWO)
iShares Canadian Bond (XBB)

TFSA
iShares Canadian REIT Sector (XRE)
Cash (GICs or money market fund)

Taxable account (assuming no more RRSP or TFSA room)
iShares Canadian Composite (XIC)
Claymore S&P/TSX Preferred Share (CPD)

With respect, I don’t think the guy who came up with that mix should be advising anyone. — Garth

#151 eddy on 09.28.13 at 9:33 pm

@Nosty

Climate change or global warming is man made. But not by men like us. It’s man made by the military at HAARP . The freak storms in Calgary and Toronto last summer (and Sandy in US) IMO were orchestrated.
Motive? Insurance. With exposure, payouts and publicity like that, who would dare question a rate increase? BTW if you can’t get a household policy, you cant get a mortgage, sweet?

#152 Julie on 09.28.13 at 9:37 pm

#75 Smoking Man on 09.27.13 at 11:44 pm
MSM got the marching orders from the machine, IPCC has doubled down, MAN MADE GLOBAL WARMING REAL.
Aggressive as ever.
————————-
Agreed. Everyone knows its a tax scam. But people are too chicken or lazy to do anything about it especially here in Banana BC. There are record cold temps all over the world. Oh no…..if one day it’s hot out it will be all over the Main Scam Media about how it’s climate change.

I would really hate to be a useless unemployable govt worker in the years to come….

Why didn’t someone tell me it was Neanderthal night? I’d have worn tinfoil. — Garth

#153 Ralph Cramdown on 09.28.13 at 9:41 pm

#107 Greed is God — “I’m nowhere near my TFSA or RRSP maximums? Should I still keep [Preferred ETFs] outside those accounts? Seems like a waste to not have any tax advantage…”

#149 espressobob — “Preferred shares in a TFSA or RRSP don’t benefit from the ‘dividend tax credit’.”

The goal is always to minimize tax, which may not be the same as maximizing credits. “Keep interest-bearing securities in tax-advantaged accounts and dividend payers outside” is a great rule of thumb when bonds are paying 5%, stocks are yielding 3% and you’ve got regular earned income (i.e. a day job), because it’s almost always the right answer. But if your fixed income is T-bills yielding 0.25%, your dividend payers are paying 4% and you’re in a high bracket from your day job, you’ll probably pay the least tax with the divvies in the shelter and the T-bills outside. If you’ve got no day job, you can collect $50k in dividends from non-registered accounts and pay nothing, so why put money into an RRSP and have those dividends eventually taxed as earned income instead?You have to work the numbers based on your bracket today and the yields in question. For RRSP’s, you sometimes have to guess what your bracket will be when you withdraw as well.

But if you’ve got room in your TFSA, I can’t think of a reason not to fill that up before worrying about further allocation decisions.

#154 not 1st on 09.28.13 at 9:44 pm

Garth, you do realize that a significant portion of the volume on the exchanges is due to day trading? If it doesn’t work, how come so many are still doing it? They haven’t been handed their hat yet?

Prove it. — Garth

#155 Canadian Watchdog on 09.28.13 at 9:45 pm

Now tell us about all the times you urged people to buy gold in the last two years. — Garth

I clearly stated when I was accumulating gold (and silver) when everyone on this blog was shouting the price going to $300-$800. Starting price matters, not YTD as if everyone buys or rebalances in January. That's a misleading reference point of opportunity.

In other words, you revised yourself. — Garth

#156 TheCatFoodLady on 09.28.13 at 9:46 pm

Conspiracies much? Various levels of government/military can manage to spend gazillions developing weather control, somehow manage to keep everyone involved quiet about it in order to… get small increases, (relatively), on insurance premiums?

If I could control weather like that, I think I could find much better and/or more effective nefarious modalities of use.

Of course you can & should question premium increases! The interwebs is your friend. Call up your insurance company’s stock prices, gross/net profits & dividend payments. Have those ready when your next premium bill comes in. Our company tried to hit us with a 16% premium increase last spring. 20 years with the company, not a single claim, premiums paid in full on time every year – I wasn’t having it.

They caved. The reasonable increase I was prepared to pay was cut to less than $10 for the year.

The consumer who takes a half hour to educate themself rarely gets shafted.

#157 Obvious Truth on 09.28.13 at 9:52 pm

#140 cici

Your idea is great and can pay off. But only if you pick the right two companies.

You also have the problem of dead money and opportunity cost if 5 of your companies crap out. Your emotional side will cause you to throw in the towel.

Like I’ve said it’s all easy till you try it.

ETFs take all that away. A sector never goes bankrupt and never gets sued by the government.

You need a lot of time and know how to buy individual securities. A couple of hours a day if you have 15 or 20 positions. Just checking charts and news could take that. Then you have the quarterly earnings news anxiety. And the dreaded ‘stock has been halted’. Everyone is out to eat your lunch. Including the machines. They get you even if you are long term right. They will flush you out of positions if you don’t have the liquidity. If it was easy we would all be liquid multimillionaires.

That’s not to say it can’t be done. You would use mostly ETFs while you were learning anyway. Taking only small individual positions as you learn.

Again. ETFs solve most of this for you.

Personally I’m waiting for some new buys to break out into a gap. If they don’t soon I will bail. No matter how good earnings will be. Machines will crush me if they sniff technical weakness. Most people don’t need that headache.

The questions and discussion tonight are great. Shows that people are interested in taking control of their own finances. That’s what we are supposed to do. The wealthy of the world didn’t wait for insurance salesman to make them rich.

#158 Ralph Cramdown on 09.28.13 at 9:56 pm

Twentysomethings stock-picking based on an hour a day. Be serious. — Garth

90% of people will be best served by buying index funds and rebalancing once or twice a year, it’s true.

But if you want to pick stocks, it’s a dumber idea to wait until you’re old and wealthy with time on your hands to start doing it. You’ll need to put $10,000 or more in each position just to move the needle on your portfolio return, and then one of your picks will blow up, loss aversion will kick in, and you’ll either quit entirely or invest too conservatively from then on.

Far better to start getting an education when it’s cheap and you’ve got lots of time to recover. Then when it really counts you’ll have 20 years of experience.

Besides, there’s a whole universe of stocks that are too small and illiquid, listed on the wrong exchange, or priced too low for the big funds in their big boats to play in, or for equity analysts to cover. Not all of them are speculative longshots, but you can bet that when 90% of the money won’t consider owning them on principle, that’s where someone willing to do some homework can find bargains.

That’s called ‘gambling.’ Do not confuse it with ‘investing.’ — Garth

#159 Obvious Truth on 09.28.13 at 9:57 pm

Oops 142.

#160 Ralph Cramdown on 09.28.13 at 10:13 pm

#157 not 1st — “[A] significant portion of the volume on the exchanges is due to day trading? If it doesn’t work, how come so many are still doing it?”

I believe that it probably works for some people.

A lot of people seem to be getting by selling trading systems, seminars, newsletters and the like to gulls. It should be obvious that if you find a system that works, the best strategy is to trade it yourself rather than sell it to people who click on banner ads.

There’s one born every minute. I once had an acquaintance who had a serious aversion to authority and to working for his daily bread, so his strategy was to enrol in drug trials to build up a bankroll, and then off to the casinos to attempt a livelihood playing poker. Rinse and repeat.

There’s a lot of things that masses of people do which, statistically, are losing propositions.

#161 guelphstudent on 09.28.13 at 10:19 pm

GUESS WHAT?
The ex-CMHC president is giving a lecture on whether the Canadian housing market is a BUBBLE or a BLESSING!

http://www.schulich.yorku.ca/client/schulich/Schulich_LP4W_LND_WebStation.nsf/2013-Real-Estate-Perspectives-Lecture.pdf

#162 Julie the Cavewoman on 09.28.13 at 10:22 pm

Uggg….I make this up : http://www.cfib-fcei.ca/english/article/5039-public-sector-pensions-unsustainable-and-unfair-canada-s-pension-tension.html

Ugg….I make this up too: http://www.globalclimatescam.com/

And of course this total invention: http://www.globalclimatescam.com/

Me um think that govt and MSM people should stop believing their conspiracy theories about global warming, strong US economy and righteous rebels (Al CIA da) and start listening to FACTS from dumb ass cave people who search out truth and do not drink MSM and govt Kool Aid.

#163 Julie the Cavewoman on 09.28.13 at 10:25 pm

Me make um mistake on third link……sorry. I is dumb ass cave woman:

http://shoebat.com/2013/08/27/evidence-syrian-rebels-used-chemical-weapons-not-assad/

#164 Christopher Lackey on 09.28.13 at 10:59 pm

I understand a broad net has to be cast and you don’t want to go and tell people to invest in the stock market since historically a lot of money has been lost there. However, a lot of money is made and continues to be made there and if you want to your money to work you have to play, so to speak. Unless you want to be like the delusional people who have come on here and bragged about their all-GIC portfolios.

For foreign and US, ETFs are the way to go but I don’t understand the discouraging of stocks for the Canadian market, virtually all large Canadian cap funds are just going to own big banks, big telecoms, suncor, couche-tard and the like. Why not own these yourself, harvest the dividends directly and avoid the MER (even if its 0.4 on an ETF). Same goes for the REITS, I have XRE and the BMO one but they are probably redundant since I own a lot of their holdings individually as well.

Point is, self-directed STOCK investing is rewarding and worth it for those who learn how to do research and diversify. I don’t think you should always revert to the extreme example of equating it with energy and mining juniors to discourage people from doing it as holding BCE and RY in your portfolio, for example, is a long way away from going all in on penny Gold stocks

#165 Van guy on 09.28.13 at 11:08 pm

#115 ripped on 09.28.13 at 3:02 pm

If you want to play the markets, make sure you have a U.S. account set up. There’s one hec of a lot more choice then just Canadian dirt mining.
——————————–

Agreed, only canadian banks are decent and maybe a couple of oil companies. US is so much more liquid and way more chances of finding stocks that break out. I’ve left the TSX completely and now only trade US equities.

#166 Canadian Watchdog on 09.28.13 at 11:14 pm

Tiny Saskatoon community complains of 'ghost town' designation by StatsCan

Residents in the Saskatchewan hamlet of Davin are upset after learning that Statistics Canada had incorrectly classified their tiny community as a “ghost town” with a population of zero. Estimates of the hamlet's population vary, but CTV Winnipeg reports that approximately 70 people live in the community located about 40 kilometres southeast of Regina. "Someone must have pushed the wrong button on the computer…wiped us clean," resident Elfie Duesterbeck told CTV News.

No someone didn't push the wrong button, rather purposely excluded this tiny town and perhaps some others so population growth figures conceal how many new immigrants are flooding Saskatoon.

Another Canadian city gets Agenda 21ed!

#167 espressobob on 09.28.13 at 11:17 pm

#161 Ralph Cramdown

Something doesn’t add up here. Stocks for newbies? What happened to a diversified & balanced portfolio? Oh, and compounding? Seems like a brighter path for our youth, no? Easy on the bourbon dude!

#168 i love libraries on 09.28.13 at 11:23 pm

This post is the most common sense I’ve read in a long time…reminds me why I keep coming here.

#169 Cici on 09.29.13 at 12:18 am

#160 Obvious Truth

Wow, thanks for the information. I guess I thought it was easier than that.
So, I have a lot more learning to do. But I do know that at some point I’m going to want to venture out a bit further than just ETFs, although I definitely don’t want to spend 3 hours a day tracking and researching. Between required sleep and required day job, I already feel like I’m missing a large chunk of the “living” portion of my life portfolio.
But thanks very much for clarifying that for me, your points are very valid. I think I’m going to try ETFs while I learn, and devote 1.5 hours a day to learning. Then I will try small individual positions.
If I fail, I’ll go back to GICs…(don’t worry, that was joke).

#170 :):( Ying Yang on 09.29.13 at 12:27 am

Smoking Man I was at Seneca on Friday evening. Next time buddy. Girlfriend took a lot of cash home. Ying Yang not so lucky. It’s all good, just fun times.

#171 Evangeline on 09.29.13 at 1:00 am

#138 Turner Nation: “Did you read the book 1984? ‘Diversity’ will be what they tell us. All-think-same. Delivered in the Trojan horse of Diversity.”

Yes, I’ve read 1984. One of the most remarkable books that has ever been written, imo.

#172 cynically on 09.29.13 at 1:32 am

Nosty #147 and eddy #154 – I’ll bet both you guys check under your beds before you go to sleep at night.

#173 No Debt on 09.29.13 at 3:02 am

Are all land transfers not registered and within reach of using for an accurate assessment of current and previous market activity?

Not sure whether or not buyers that have not taken title while waiting on completion of the exploding balcony, would be accounted for.

#174 Gunit on 09.29.13 at 8:11 am

Thanks professor Garth for the great article. I’ve been following your solid advice for years. Just curious, when can we look forward to Investing 201?

#175 Ralph Cramdown on 09.29.13 at 8:36 am

Flash: British PM Cameron calls Bank of England Governor Carney a ‘tool’:

[His government’s “Help to Buy” program] will provide government-guaranteed mortgages for buyers with a deposit of as little as 5 percent of the value of a home costing as much as 600,000 pounds ($968,000). The guarantees are meant to spur 130 billion pounds of mortgage lending.

He said the nation should put its trust in the Bank of England, which has “tools to stop bubbles from occurring.”

http://www.bloomberg.com/news/2013-09-29/cameron-accelerates-help-to-buy-plan-amid-housing-boom-concerns.html

#176 T.O. Bubble Boy on 09.29.13 at 9:25 am

#28 Cici on 09.25.13 at 9:39 pm
http://www.greaterfool.ca/2013/09/25/dog-fight/#comment-263439

Great work Garth and Ross, and YES, the mainstream and all those virgins are catching on.

Want proof? Gail Vaz-Oxlade’s September 24th pro-rent blog posting titled “Save Money By Renting.”

She even addresses the “Renters are throwing good money down the drain!” argument/cliché in the opening paragraph!

My faith in humanity is slowly being restored :-)

The Jar Lady. There is hope yet. — Garth
————————————–

So, I actually went to Gail’s blog, and found some scary posts (scary because of the situations of the people writing her). Here’s one:
http://gailvazoxlade.com/blog/archives/5212

My husband and I are big fans of your shows and philosophy.

I am a lawyer and my husband works in financial services.

I make approximately $124K plus bonus that is a % of company’s EBITDA so it may be high or non-existent year over year. Husband makes approximately $69K with an annual bonus of 10-15% of base. At this time we have no other sources of income, but I have a business I want to start at some point.

We have no credit card debt. We have 1 car that is being financed over 72 mos and we pay $815 a month for it. We have a mortgage of $820K on our home valued at approx. $1.2M.

We have approx $222K in our combined RRSPs and $40K combined in our TFSAs and $14,300 in our joint chequing account. We have a $6000 RESP for our child who is 18mos.

We want to have more kids, save for our retirement, plan for the kid’s university education, pay down the mortgage AND send the kids(s) to private school.

We live on a monthly budget that include some major costs like our nanny which eats up $1600/mo plus whatever extra in food and utilities are attributed to having her live with us. On our budget we’ve set for 2013, which is fairly tight, we should save about $25K. Obviously, if we have baby #2 and I go on mat leave the savings go down.

Can we do all of this? We’d greatly appreciate your wisdom and advice.

WTF is wrong with people!?!?

To recap the financial highlights…

Income: They make approx. $200k pre-tax, or something like $120k net ($10k/month).

Key Expenditures:
>> $820k mortgage on “$1.2M house” (about $4k/month if the mortgage is @3% / 25yrs)
>> $500/month property tax (probably more if this is a $1.2M house)
>> $815/month for a car payment
>> $1600/month nanny

So, add those pieces up, and you have $7,000/month right there ($84k per year)… and this ignores a bunch of other basics.

They claim to have $25k/year in savings… but this doesn’t add up at all.

Doing the math:
$120k net income
– $84k in the handful of expenses
– $25k in savings
= $11k (less than $1000/month) for everything else!

Put in any sort of vacation, gas for that $810/month car, clothes/diapers for the baby, insurance, utilities, etc. etc. and you’re definitely not saving $25k in that budget — more like barely breaking even.

And, this is with a mortgage that is pretty much at the lowest level in history, and with only 1 kid (apparently they are planning for 2 or more).

Is this what the “average” Toronto family is doing these days? Buying a $1M+ house with a $820k mortgage, and saving zero?

I thought Gail was supposed to be the tough lady who told people like this to open their eyes and stop lying about their finances? Her main points are around the expensive car, getting an emergency fund, and planning for lower income on the next mat leave… nothing on the fact that they have made themselves house poor despite above-average household income, and are trying to “keep up with the Joneses” far too much (the post also mentions private school plans for the 2+ kids).

#177 T.O. Bubble Boy on 09.29.13 at 10:24 am

apologies for the extra-long post… should have edited more.

Anyway – back on investing 101, here is a U.S. version of the couch potato (for reference)… diversification in 6 ETFs:
http://finance.yahoo.com/news/build-diversified-401-k-portfolio-105118268.html

#178 HogtownIndebted on 09.29.13 at 10:36 am

Catch it live – right now on CBC Radio 1 Sunday Edition, a panel about the boomer retirement wave and effects on the economy and pensions.

#179 Ralph Cramdown on 09.29.13 at 11:14 am

#180 T.O. Bubble Boy — “Is this what the “average” Toronto family is doing these days? Buying a $1M+ house with a $820k mortgage, and saving zero?”

Hey now, at 3% they’ll pay down $120k of the mortgage in the first five years. That and the average bonus, and they’re saving, if not investing it in the most diversified portfolio.

Not the average, perhaps. But people don’t anchor their spending expectations to others who earn similar salaries; they anchor them to more successful people and what they see in the media. Add that to constant blarings that EVERYBODY is in hock up to their eyeballs and a note from your friendly banker that you’re such a great earner that he’s approved you for more, and the normalization of the lifestyle is complete. And every time there’s a bidding war in the neighbourhood and the place goes for $150k above asking, your path is further validated.

Oldie but goodie:
http://www.torontolife.com/informer/features/2012/02/15/almost-rich/?page=all

#180 TurnerNation on 09.29.13 at 11:41 am

#159 TheCatFoodLady
Insurance companies? Like AIG, who let the GFC, in 2008 ? Or people betting on these exchanged traded products:

http://www.cmegroup.com/trading/weather/

Temperature
U.S. Cooling Monthly
U.S. Cooling Seasonal
U.S. Heating Monthly
U.S. Heating Seasonal
U.S. Weekly Weather
Canada CAT Monthly
Canada CAT Seasonal
Canada Cooling Monthly
Canada Cooling Seasonal
Canada Heating Monthly
Canada Heating Seasonal

….

Ps. those trillions came from our taxes taken during the ‘Cold War’ (wink wink we went to space with the Russian), Star Wars, the ‘War of Terror’ etc.
I saw a headline US gave 1 billion in ‘aid’ to Syria. Checking population stats this is like $5000 for every person there, equal to their existing GDP. Do you think they’ll see a penny ever? Or into Arms?
Canada gave them a quarter billion of our tax money. Never asked.
This is how the world works. Also it is 100% weaponized – underwater, in space, around us.
Some might look down and see the ‘Intel Inside’ sticker on their PC. It certainly is.

#181 HAWK on 09.29.13 at 12:03 pm

118 Ralph and 121 Older but wiser

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

Thanks; I suspected as much.

Same trick as Mutuals, bury heavy fees and charges in the submerged part of the iceberg, non-visible to the surface sea-farer.

Perhaps a “self-directed” insurance policy, similar to self-directed trading accounts might solve that, but I doubt we’ll see it in our lifetimes.

#182 TurnerNation on 09.29.13 at 12:03 pm

One more point: 1/4 bill of our money to the arms/banking cartel for use in Syria, but our Armed Forced risk their lives in antiquated Sea King helicopters – daily. Every ask your MP why?
Even 3rd world, despotic countries have the latest in hardware (usually left over from CIA-led coups, natch).
Why Avro Arrow was killed? Same reasons. We were decided to be the resource extraction country. Not a military strength. Personally I think they’re moving us close to the China model.

During the pre-G20 residents meetings in Toronto I noticed a govt spook in attendance. At a later one I was not at some teens called others out. All this for some kids who might engage in petty vandalism? State security apparatus surviellence needed for a few broken windows by some lower middle class kids? What power could they have. The Intel is Inside and they have it.

Trillions stolen. We know they have WMD.
I’d do something, but the fluoride…

“Apr 30, 2013 – Canada can’t account for $3.1B in anti-terror funding, AG finds … “It’s a matter of missing that last link in putting that information together,” he …”

#183 Cici on 09.29.13 at 12:13 pm

#180 Toronto Bubble Boy

I admit, those people are drones. They’ve got everything classified into nice little columns and itemized lists (baby #2 = another To-Do in the Agenda).
I don’t read the Jar Lady very often (usually only when I’m excited to read Garth’s blog, but he is late in posting and I’m looking to kill time). And I usually avoid the comments over there like the plague (usually dull and monotonous from a bunch of do-gooder, yet out-of-touch old ninnies). But I was cheerfully delighted by the tone on that blog forum the other night.

#184 I'm stupid on 09.29.13 at 12:17 pm

#167 Shawn

I agree with your argument. It is impossible that day trading represents a large portion of volume. The reasoning is that a true day trader ends the day with cash (paper profits become real after the are sold). If this is true who bought the securities? Even short term investors must represent a very small portion of the market. If they didn’t the % volume of outstanding shares of each company traded would have to be really large. Look at Bank of America for example
Market cap 150billion
Shares outstanding over 10billion
Average volume 90million
That’s less then 1% per day
just saying

#185 Island renters on 09.29.13 at 12:18 pm

Thanks Garth! We are a couple with young kids who took your advice and are happily renting. Talking to our friends I feel like the only one who isn’t drinking the Kool-aid. When I started reading your blog I was keeping all my money in ING, but as per your advice have opened a q trade account. I was pretty shocked at how many of your points I am already doing. Really appreciate the basics and would love to see more posts like this. Don’t ever doubt the impact you’re having for some of us little guys with limited financial education Garth :)

#186 Dan on 09.29.13 at 12:22 pm

There are differences between investing, aggressive investing, trading and gambling.

The ETF/index-based asset allocation investment strategy espoused here is not as contrarian or against the grain as some would have you believe.

Advising people to “diversify” and pile in to different types of risk assets (even a perceived safe combination of REITs, preferreds, bonds, and some global and domestic equities) at these highs is not a great idea for those new to the game and with few assets.

During a significant market correction or crash, everything gets dumped, even gold and silver.

#187 Smoking Man on 09.29.13 at 12:32 pm

Why didn’t someone tell me it was Neanderthal night? I’d have worn tinfoil. — Garth

Garth spots a potentially amazing good business, tin foil fedora’s, huh…

Has potential….

#188 Nemesis on 09.29.13 at 1:03 pm

@Ralph/#179

ChortleChortle!!!… and now, courtesy of an assortment of OldTools, some amusing context:

…”Angel Mas, president of mortgage insurance Europe at mortgage insurance giant Genworth, said it was “very surprising” the scheme was being launched when it lacked “clarity” on key points.”….

And now for your clarity:

…”The scheme, which comes in the wake of Labour’s sudden poll boost following its pledge to cap domestic fuel bills, prompted scepticism and surprise in the City.”…

[UK Independent] – Fears of debt and a housing bubble after David Cameron hurries out second phase of Help to Buy three months early: Vince Cable and Sir Mervyn King among those concerned that the Government could be exposed to billions of pounds of future housing debt whilst inflating the property market

http://www.independent.co.uk/news/uk/politics/fears-of-debt-and-a-housing-bubble-after-david-cameron-hurries-out-second-phase-of-help-to-buy-three-months-early-8847563.html

#189 ripped on 09.29.13 at 1:11 pm

#157 not 1st

Actually program trading makes up 30 to 40% of the volume in U.S. securities

#190 CantRememberMyName on 09.29.13 at 1:28 pm

Millionaires are the new middle class. Inflation, globalization, and all… :P

#191 Canadian Watchdog on 09.29.13 at 2:10 pm

#181 T.O. Bubble Boy

Can you guess which of those ETFs are overvalued? Here's a hint using actual data for ETFs listed in that article: chart

#192 KommyKim on 09.29.13 at 2:27 pm

RE: #59 Saskatoon-Living on 09.27.13 at 10:35 pm
Agree with all your rules Garth except the 1st one. It’s fine to buy ETF’s and REIT’s (or other fixed income) if you’re 50+, but for someone in their 20′s or early 30′s individual stocks are the way to go….

I have to agree with Garth. Most people in their 20’s and 30’s don’t have enough cash to invest in enough stocks for proper diversification.
Also, since 90% of the mutual fund managers fail at beating a simple index fund, what makes you so sure your stock picks will?

#193 Victor V on 09.29.13 at 2:34 pm

http://themashcanada.blogspot.ca/2013/09/and-it-went-for-18-tranby-avenue-annex.html

I first posted this 5 bedroom, 3 bathroom row house on 25 x 77.8 foot lot at 18 Tranby Avenue in the Annex in December 2012.

It had already been listed since September 2012 when the asking price was $1,695,000.

Considering how much work this place needs, that was a bit high.

It didn’t sell and the price was dropped in October to $1,625,000.

When I posted it in December, I thought there would be another price drop in the new year to $1,579,000.

In February, they dropped the price to $1,588,000.

Again no sale and they dropped the price in April to $1,518,000.

No sale and the price was dropped again in June to $1,445,000.

Still no sale and the price was dropped in August to $1,428,000!!!

I thought this house could sell for $1,495,000.

It sold last week…

For $1,405,000.

#194 espressobob on 09.29.13 at 3:11 pm

#190 Dan

Your first sentence made sense. Contrarian investing seems to be quite profitable considering the markets are moving higher! No doom & gloom there! At these highs, really?

And the “risk assets”? Risk is mitigated through diversification. Don’t forget balance!

Market crashes (though real) are in fact rare! Homework!

#195 Tony on 09.29.13 at 3:53 pm

Re: #188 I’m stupid on 09.29.13 at 12:17 pm

Stocks with no volatility represent a small fraction of what day traders trade. I’ve been day trading since around the fall of 1983. Most money is made shorting stocks for day trading at least for me.

#196 espressobob on 09.29.13 at 4:59 pm

#188 I’m Stupid
#200 Tony

You two are a prize! Care to share your predictions? Unlikely! Thats understood!

Investing is over your heads, deal with it!

#197 Australopithecus afarensis on 09.29.13 at 5:26 pm

#126 “I welcome the diversity…unless all turn out to be Globalists following the plan of destroying our economies? Killing us softly?”

*****

a) when you hear ‘diversity’ or ‘sustainable’ watch your wallet
b) they are All globalists, they All think the same, renegade politicians are asked to leave (cough)

#198 Old Man on 09.29.13 at 5:42 pm

#174 Ying Yang – I have done a booking at the Seneca Casino for a suite on October 26th, and have tickets at the Bear’s Den for the show at 8:00 PM, and Lady on my arm holding me up will be Miss Hong Kong, so eat your heart out; she asked me for this all, and said will do my best, as loves this group; not to mention her love for good food, and throwing the dice on the crap table, so made her request come true.

#199 T.O. Bubble Boy on 09.29.13 at 6:10 pm

@ #183 Ralph Cramdown on 09.29.13 at 11:14 am
#180 T.O. Bubble Boy — “Is this what the “average” Toronto family is doing these days? Buying a $1M+ house with a $820k mortgage, and saving zero?”

Hey now, at 3% they’ll pay down $120k of the mortgage in the first five years. That and the average bonus, and they’re saving, if not investing it in the most diversified portfolio.

Not the average, perhaps. But people don’t anchor their spending expectations to others who earn similar salaries; they anchor them to more successful people and what they see in the media.
————————————

ok – yes, they are paying down the mortgage to $700k in the first 5 years, but only by paying $115k in interest!

and – the breadwinner is ready to go on mat leave with kid #2, so even paying the current mortgage seems like a stretch, let alone what happens if they have to renew at 5% or higher after the 5-yr term is up.

Plus – what if that $1.2M house drops to $1M? They just lost 1/3 of their net worth! ($200k of $600k total assets)

#200 Trading Naked on 09.29.13 at 7:29 pm

For all you day traders and chart readers and stock pickers who come here to talk about your successes: of course it’s possible. I know this because I am one of you. Anything is possible in this beautiful, crazy world. But just because something is possible doesn’t mean that most people can or should do it. Sword-swallowing is possible, too, but it’s not something most people can or should do. It would irresponsible of Garth to talk about trading considering his line of business (maybe he could lose his license?) and his core audience (people, some of them newbies, with jobs, lives, and families). I keep my trader mouth shut when I post here because I know what kind of room I’m in.

Now let’s talk about real estate for a second. I’m in Warsaw, Poland right now and I see a condo trouble brewing – construction cranes building tiny 31- square- metre lofts in the dumbest places and standing unsold. Not sure how badly mortgaged people are. Some Polish women have adopted North America-style shopaholism. I only hope that a currency or interest rate hiccup won’t destroy them.

#201 That’s a wrap! | Canadian Performer's Money on 09.29.13 at 10:33 pm

[…] Fool is a wealth of information about Canadian stocks and real estate. This week’s post Investing 101 is a must […]

#202 Maxime on 09.30.13 at 12:49 pm

I’m 26 and my financial advisor make me put the bulk of my saving in this mutual fund:
Invesco Intactive Growth Portfolio. I saw good result since I have it (+- 6%)

Is this a good idea ? I think ETFs are not what I need since I don’t have a good amount to invest but monthly saving to invest.

Thanks!