Blind ambition

TREAT modified

Tom and Laura are doing far better than most thirtysomethings these days. “We’re ambitious,” he admits, “but we’re not unrealistic, given our position.”

That depends. They could do well. They could blow up.

“Here’s the situation.  My wife and I own our home in Vancouver.  Yes, it’s a 550 sq ft condo in Kits – but we bought it 10 years ago at non-insane prices and the mortgage is paid off.  We’re fortunate enough to have roughly 200K in cash and are struggling to figure out where to invest our money.”

Nice. Four hundred in a one-bedroom Lilliputian box, and two hundred liquid. That $600,000 in net worth, and real estate equalling about 65% – close enough to my Rule of 90. The key now, of course, is to grow the financial assets consistently, because the real estate has topped out.

“We’ve more or less maxed out RRSPs & TFSAs with some of that invested in equities – although over 50% is currently cash.  We’re hesitant to invest much more into equities at the moment after the run we’ve seen over the past 5-6 years. We have been looking into multi-family residential housing investments but we are both rookies at commercial real-estate and both have jobs and so have limited time to devote to that type of endeavour.”

Oops. Not so good. First, nobody with a portfolio that small should own individual equities. Not enough diversification, too much market risk, beaucoup de company risk. You needs ETFs instead – broad-based, cheap, less volatile. And half in cash? Earning 2% when inflation’s two-and-a-half? Bad idea. So what’s wrong with holding preferred shares paying 5% with a dividend tax credit and far more stability than common stock? Or a REIT, like giant RioCan, paying 5.3% and not correlated to the stock market?

Face it: financial markets may well correct more than the 4% we just saw, but there’s no 2008 coming. The first step is to have the right asset allocation plan, not to wait for the right moment. As for the multi-family housing thing, forget it – unless you find a nice duplex somewhere, and live in half. Even so, cap rates are absurdly low and returns from financial assets are fatter and far more tax-efficient. Remember that rent’s taxed like income. Dividends and cap gains get huge breaks. And no toilets to fix.

“At some point in the next 3-4 years we would like a bigger home for children.  We’d like to invest our money in income-producing assets in order pay some or all of any future mortgage as well as kick our jobs to the curb well before typical retirement age. But we have been kicking around ideas for the better part of the past year and keep coming back to the conclusion that we should just do nothing until the real estate market and/or the equity markets correct and then invest.”

So, big changes coming. You want to invest for max growth for three or four years in order to put the liquid assets into a house, which presumably would also consume 100% of the equity you now have in the condo. Given that the average detached house in Van is north of a million, that would leave you with a house, a $400,000 mortgage and no other assets. And kids.

Tell me again how this is going to help you ‘kick your jobs to the curb well before typical retirement age’. The offspring will need at least a hundred grand for schooling, and unless you have public pensions, retirement will demand a seven-figure pot of cash. So if you bury 100% of your net worth in a house, and take on debt, where will any of this come from?

You are doing well, as I said. That $200,000, invested to earn a reasonable 7% a year, can turn into $1.6 million by age 60. In fact, if the TFSAs were fully funded now, with $11,000 a year added and 7% growth achieved, they alone would hit $1,511,028 in three decades – of which $1.1 million would be growth.

Of course, if you sold the condo, invested $600,000, rented, and kept up with TFSA contributions, you’d have $5.6 million by age 60. Retire early? At 50, the nest egg would be $2.7 million, and you could enjoy $202,000 a year as largely non-reportable income. Or you can buy a bigger house for the kids, take on 15 or twenty years of debt, and hope for the best.

When you decide to do that – now or in three years – ain’t the question. Of course BC Vancouver real estate will correct, but buying at 15% or 25% less won’t materially change the course of your life. If you take the plunge and end up with one asset, your risk will be substantially higher than holding a diversified and balanced portfolio of financial stuff. Your ability to support your family will be more in doubt, and your retirement together less secure. But don’t believe me. Pull out the financial calculator.

As I keep trying to get across on this pathetic blog, the world has changed. Real estate is not a strategy. And investing in financial assets just so you can buy more of it is dumb.

“We would be interested in your thoughts.”

Really? I bet Laura already hates me.

100 comments ↓

#1 Randy on 08.18.14 at 6:07 pm

Diversification is too risky…haha

#2 SUave Direct Investing on 08.18.14 at 6:08 pm

Wow TD too?

TD Waterhouse Rebranded recently to TD Direct Investing
is on death bed…
Last Canadian Bank that stood solid and strong
guided by humble smart ans very inteligent people started to show
signs of decline and perhapes entered death spiral…

Last week it was announced that TD IT will have only
ONE exclusive suplier of IT talent : TATA
That is one of Ratans Tata IT agencies operating
in Canada along with iGaTE, Ajilon, Infosys and many other in USA.

RBC started the trend back in 2008/9 and within 2 years
efectively brough 191 000 IT workers to canada ( source: India Times)
All other banks followed CIBC got burned and learned fast.
TD stood strong and did not needed india manouvers to boost profit
for CEOs and other grredy elements untill now.

TD Direct Investing ( Waterhouse) runs best tools for
trading for non profesional traders, and partly owns
through partnership with Ameritrade : THink Or Swim
tool wich if not best then one of the best for profesionals.

NOTE: Canadian politicinas opened the doors for foreign IT professionals
after heavy lobbying by above RATANS INDNIAN employment agencies
that there is not enough local talent despite IT scools coleges
and UofT producing thousads per year…

And you are thinking of selling kideny to put your kids to scool?

#3 Nattie on 08.18.14 at 6:29 pm

Just wanted to share this link with you, Garth, in case you didn’t see it already: http://www.cbc.ca/news/canada/calgary/calgary-s-derek-johnson-fined-for-posing-as-realtor-1.2739426

#4 LH on 08.18.14 at 6:29 pm

The overentitled middle classes are so screwed.

LH

#5 totalinvestor.com on 08.18.14 at 6:30 pm

“Of course, if you sold the condo, invested $600,000, rented, and kept up with TFSA contributions, you’d have $5.6 million by age 60. Retire early? At 50, the nest egg would be $2.7 million, and you could enjoy $202,000 a year as largely non-reportable income.”

Maybe, but what would that be in today’s dollars?

http://postimg.org/image/kr7yrk8np/

#6 Shawn on 08.18.14 at 6:41 pm

Too Late for Stocks?

“We’re hesitant to invest much more into equities at the moment after the run we’ve seen over the past 5-6 years.”

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

Equity markets were up noticeably today. And this year to date and up a huge amount since the lows of early 2009.

You cannot reap the upside without being in the market – which does however carry the risk of downside.

Trying to time markets seldom works out.

May be best to commit 60% or whatever to equities /ETFs and stick with it. Rebalance on equity market corrections.

They say no tree grows to the sky. True, but many equities and equity indexes actually do. Most notable is Berkshire Hathaway. But also look at the Canadian banks over the long term. Or CN since its IPO, or Enbridge or TransCanada.

Sure, use ETFs they are best for most people. Look at the S&P 500 return since inception. Looks like a tree growing to the sky, albeit with occasional big reversals.

Sometimes a rough ride but over time the direction is up.

Ya Gotta love exponential growth.

#7 Victor V on 08.18.14 at 6:43 pm

https://ca.finance.yahoo.com/blogs/balance-sheet/interest-government-debt-prevents-ottawa-lowering-taxes-report-152807460.html?vp=1

Paying interest on your debt doesn’t just cost more; it can also prevent you from spending money on other needs and wants.

Government debt is no exception, and a new report from the Fraser Institute argues that those interest payments mean less money for public priorities such as hospitals, highways and schools. It’s also preventing governments from lowering our taxes.

“Whether you’re talking about a household or a government, when you take on debt, you have to pay interest, which leaves less money in the budget for other priorities,” states Sean Speer, an associate director at the Fraser Institute think-tank and co-author of the study called, “The Cost of Government Debt in Canada.”

#8 Happy Renting on 08.18.14 at 6:47 pm

If you take the plunge and end up with one asset, your risk will be substantially higher than holding a diversified and balanced portfolio of financial stuff. Your ability to support your family will be more in doubt, and your retirement together less secure.

I can already hear the sputtering. “But, but, but… We’ll have the house! The house!”

Clearly, Tom and Laura have the ability to earn and save (or, at least, collect some big gifts/inheritances.) Imagine how well they’d do if they weren’t trying to time the markets, become amateur landlords, and retire on a portfolio of $0 (what’s left after they upgrade the condo to a house.)

Tom and Laura, all the stuff you want to do (kids, house, retirement) eats up money. You can probably do two reasonably well, but likely not all three.

#9 FormerSaskie on 08.18.14 at 6:48 pm

No, Garth. Laura won’t hate you. She should have been able to predict what you would advise because you are consistent in your recommendations. People keep asking the same question hoping you will give “them” a different answer such as; yes buy the granite, because they are special. You have amazing patience with your public.

#10 TurnerNation on 08.18.14 at 7:00 pm

Whew back to normal ‘programming’ on this blog.

It’s true, the older you get the less of a ‘leftie’/idealist you become.
I’m not talking political leanings, I define ‘left’ as anti progress, anti-risk, will of minority, couching their arguements in grave life-or-death terms. Which is the antithesis of human life and progression. We will muddle on as a race we always do.

Examples:

– Toronto paper reporting residents upset with old, tall tress cut down for new Pearson Airport express train. For sure, would be nice living in forests. But imagine 50 years if Hwy 401 expansion was stopped due to cutting down of forested areas. We’d have 4 million people using a four lane road across the city.

– The reason your kids are banned under pain of expulsion from eating peanut butter ‘n jelly sandwiches in school as we did: tyranny of the minority.

– Pipeline protestors. I bet most of them heat their homes using natural gas delivered via, wait for it, pipelines! Ditto for the fuel in their car’s tank. Sure pipelines carry risk. But it’s an acceptable one. Else go back to a woodstove or double your costs using electricity (which relies upon icky nuke and coal burning).

Would I hold my nose and vote got H and the pipelines, for FordNation and using roads for cars as intended? Not yet.

#11 My observations on 08.18.14 at 7:06 pm

The biggest perception with many people today is that they do not have an understanding of the financial markets, and believe they will become a victim of a 1930 type financial meltdown by investing and lose everything. They mistakenly think that they have an understanding of, and are comfortable with Real Estate.
It takes guts to take the plunge into the investment world.
Garth advise is solid, ie balanced portfolio, ETF’s, Reit’s, and professional management.

#12 not 1st on 08.18.14 at 7:24 pm

Their net worth won’t be $600k for long. That sky prison box is worth about half after reality hits.

They should sell the lot right now, invest and save for that house cause they will get a chance at it within the next few years.

#13 Rexx Rock on 08.18.14 at 7:33 pm

Whoo wee!!!! Don’t you love central bankers?Qe and low rates forever.Its made people who play the stock market and buy crappy houses lots of money.I know savers and pensioners have suffered but hey you gotta play the game that they gave us.So central bankers please,please please keep pumping the market I don’t want to actually work for a living,I just want keep speculateing in this rigged market up and short it if collapses.I don’t think it will collapse because the central bankers will never let that happen.The waters may get choppy but over the last 5 years its been easy sailing.

#14 Millenial on 08.18.14 at 7:38 pm

DELETED

#15 crowdedelevatorfartz on 08.18.14 at 7:41 pm

@#3 nattie
Wow! A person that actually makes Realtors look good!

http://www.cbc.ca/news/canada/calgary/calgary-s-derek-johnson-fined-for-posing-as-realtor-1.2739426

Hell hath frozen over……

#16 devore on 08.18.14 at 7:42 pm

#8 Happy Renting

Tom and Laura, all the stuff you want to do (kids, house, retirement)

Like Fast, Good & Cheap: pick 2.

#17 Don Sanderson on 08.18.14 at 7:44 pm

The only real tax benefit I can see making money from rental units like a duplex, triplex etc. is net rental income is RRSP eligible.

A upfront tax deduction which can be used to top up TFSA’s and tax deferred compound growth with investments in RRSP’s for 25, 30, 35 years at 5%, 6% etc. can help build and diversify ones portfolio tax wise and investment wise.

#18 Realties.ca » Blind ambition on 08.18.14 at 7:46 pm

[…] Source: http://www.greaterfool.ca/2014/08/18/blind-ambition/ […]

#19 Landlord on 08.18.14 at 7:50 pm

Buy a Duplex, Triplex, Fourplex in Kitsalano if you can find one, and that will be the best investment you could ever make! Live in the smallest cheapest unit until the baby or babies arrive and then move to the bigger unit while continually beating down your monster mortgage. by far the the best early retirement plan out there! Of course filling up your tfsas and your RRsps along the way and you WILL be financially in dependant by 50!

#20 Nemesis on 08.18.14 at 8:02 pm

#VagabondAlternatives. #Pricey,ButMuchoMacho.

http://earthroamer.com

[NoteToGT: Like, way more room than a VancouverSpecial… and there’s always BioDiesel. Right? It must be my irrepressible InnerNomad. Personally, I’d prefer a StelvioNTX and a tent. Nimbler.]

#21 Ritalin Prozac on 08.18.14 at 8:12 pm

The powers that be wants the middle class to pay for overpriced housing. Meanwhile, my autocratic professors are quite happy that they are filling my brains with Ritalin and Prozac so that I don’t question authority in the real estate market.

I’d rather spend my savings going my own way (MGTOW) than marrying a woman these days. I don’t need another brain altering drug funded by OHIP won’t ya?

#22 VanDammeCouver on 08.18.14 at 8:12 pm

Garth, I love your blog. I talk about it all the time to friends and co-workers.

Your financial advice is solid. However a lot of ‘realtors’ I’ve spoken to think you’ve been way off the mark in the past, talking about a real estate correction for the past 4 years that hasn’t materialized.

I’m convinced it is coming, just don’t know when.

Do you think it will be precipitous in Vancouver? We’ll all know when it starts? Or do you think it will be slow burner, slowly creeping up? Or is there evidence its already started?

Im more curious about Vancouver specific. I know its tough cause real estate is all local, but what do your spidey-senses tell you?

Can you amuse me with estimate?

#23 young & foolish on 08.18.14 at 8:24 pm

Mark Weisleder says housing is fairly priced in the GTA!

But housing is not an investment anyway (as in something you can expect to grow in value), it is a cost of living.

The problem with the 7% return? Well, you pay 1% to the financial guys, and at least another 1% to the tax man every year. Result looks more like 4-5% after all.

Investment advisory fees are tax-deductible. Nobody should pay 1% as a result. Taxes on unrealized capital gains are untaxed, while dividends earn the dividend tax credit. Realized gains are 50% tax-free. There is no tax within registered vehicles. Interest on capital used to invest is a write-off. But, sadly, there is no deduction for youth or stupidity. — Garth

#24 Mister Obvious on 08.18.14 at 8:26 pm

#10 TurnerNation

“The reason your kids are banned under pain of expulsion from eating peanut butter ‘n jelly sandwiches in school as we did: tyranny of the minority.”
——————————-

The other points of your post are well taken but in the matter above I believe it’s more accurately described as “tyranny of threat of litigation”.

If so much as one allergic kid goes into shock due to somebody else’s peanut butter the school board will face an expensive, nasty court case.

The foolproof solution? Just ban the stuff.

#25 pravchaw on 08.18.14 at 8:29 pm

I bought my first house at the worst time possible early 1989 just before the TO market imploded. In 2005 I sold the house and took a 100K loss and upgraded to a bigger house. It turned out to be a good move. Here are my calculations.
https://docs.google.com/spreadsheets/d/17bmEXlGV9rp0Kg39vMUbBwTI7O6IfHj-_ZBJKTCcz_A/edit?usp=sharing
I had compound annual return of 4.5%. This of course is tax-free.

No it’s not. It was a rental unit, with taxable gains. Besides, did you sell it or just make up the $1.1 million value? — Garth

#26 Snowboid on 08.18.14 at 8:36 pm

On the lighter side, from one of my favourite goofy real estate agents in Kelowna:

http://kelowna.craigslist.ca/reb/4624868796.html

Wow, even though it’s already reduced, I will offer $ 3000 and see if they accept. Problem is I would have to spend a million to furnish the 55,900 sq ft home!

#27 pravchaw on 08.18.14 at 8:38 pm

I have not sold it yet as I still have kids living at home. It is estimated value. I recognize it could be inflated in this market.

When you sell come back with your spreadsheet. Until then, it’s a theory. — Garth

#28 LifeXpert on 08.18.14 at 8:49 pm

Mighty London is feeling the crunch

http://www.bloomberg.com/news/2014-08-17/london-home-asking-prices-plunge-most-in-more-than-six-years.html

The world will follow shortly

#29 eaglebay on 08.18.14 at 8:56 pm

#23 Mister Obvious on 08.18.14 at 8:26 pm

“The foolproof solution? Just ban the stuff.”

That’s it. Let the government or the school board run our lives and tell us what’s good or not for us.
Stop being entitled. Ever heard of personal responsibility? Look after yourself and your kids.
Let the majority prevail. Wimp.

#30 espressobob on 08.18.14 at 9:10 pm

#6 Shawn

Still on the Buffett train? Individual stocks for a portfolio around 200k? Dude, you need to learn to think for yourself instead of following guru’s!

#31 Shawn on 08.18.14 at 9:12 pm

Sour Stock Grapes

Rexx Rock at 13 sarcastically states:

Whoo wee!!!! Don’t you love central bankers?Qe and low rates forever.Its made people who play the stock market and buy crappy houses lots of money.I know savers and pensioners have suffered but hey you gotta play the game that they gave us.So central bankers please,please please keep pumping the market I don’t want to actually work for a living,I just want keep speculateing in this rigged market up and short it if collapses.I don’t think it will collapse because the central bankers will never let that happen.The waters may get choppy but over the last 5 years its been easy sailing.

********************************************
Sounds like Rexx missed out.

Rexx, what exactly is “rigged” about an open market where stocks are traded daily and almost unlimited information is out there on each major company?

For any given stock there are usually thousands of buyers to sell to and usually thousands of sellers to buy from and you automatically get the best price offered that instant. Every stock of CN rail is the same as any other so no need to worry about that. And you never have to worry that that you won’t get the stock you paid for.

Compare that to the market for houses or cars or just about anything else. Compare it to buying stuff on eBay.

“rigged stock market” is an uniformed cliché.

As far as pumped up markets, yes low interest rates support higher P/E ratios. But over time the price of stocks of solid companies go up because their earnings per share rise and their book value per share rises. P/E multiple increases are just temporary gravy.

Companies like railroads and utilities and grocery chains and (yes) banks provide a useful service and make a profit. Share owners profit from this because they took money that they could have spent and they invested it. Learn about the (fair) wages of Capital (Adam Smith chapter 3).

Rexx, get in the game! You don’t have to go in whole hog. But dip a toe in the market and then PRAY for a stock crash so you can plunge in. If no crash keep dipping in the toes and get in waist deep but keep some money aside (or use future savings) for a possible correction. Keep your head above water, always.

#32 Retired Boomer - WI on 08.18.14 at 9:19 pm

Tom & Laura should sell the skybox while the getting is good, and rent for a year, or two. See where the world is then. Change (shift) is happening at an accelerated rate these days.

There is comfort in freedom to act, not in waiting on a sale at an undetermined price.

Use a basic 60/40 stock ETF/bind & preferred portfolio managed by an expert unless you are competent to do it
yourself.

Let us know your progress.

#33 Jay Currie on 08.18.14 at 9:33 pm

Might be a good time to sell the box and rent. But it is also a good time to think about where. Having 600 K liquid in Vancouver is nice but hardly wealthy. In Victoria you’d be nicely set. In the country you’d be well off. You want to kick the jobs to the curb but then what do you do?

Most of us are going to be working at something well past 65 – Either because we want to or have to. Investing a bit in your own skills and coming up with portable occupations may make more sense than shuffling you asset mix.

#34 Joe Schmoe on 08.18.14 at 9:43 pm

#32

Good advice on waiting things out.

I was on the fence about 15 years ago about buying a revenue property…I took my time, the market started heating up meaning I needed to save more to buy…I kept saving, invested it poorly in the stock market (some awful mutuals) and still came out ahead vs buying the house in 1999 and selling the house today.

I like this blog posting better than the enviro-rants. The results are more easily measurable and less hypothetical.

#35 Learn to read on 08.18.14 at 9:43 pm

Brain Drain and Capital Flight: 64% of Wealthy Chinese Plan to Leave China

http://globaleconomicanalysis.blogspot.ca/2014/08/brain-drain-and-capital-flight-64-of.html

#36 Pat on 08.18.14 at 9:46 pm

An influx of Russian and Chinese capital had been driving London housing prices to lofty, unaffordable heights but this trend appears to have come to an abrupt end in July. Bloomberg reports that prices fell 5.9 per cent – the largest decline since December 2007.

#37 Smoking Man on 08.18.14 at 9:55 pm

UNITED STATES Admits Its MH17 ‘EVIDENCE’ is Based…:

http://youtu.be/nqPCejH3mTM

Man, this chic could you a class at The Smoking Man school of bull shit…..

She’s so bad at this..

I’m starting to think our spy and Intel agency’s are cheap… Don’t want to pay for expertise….

I would have handled that way better.

A foot note… She’s cute….

#38 Craig on 08.18.14 at 9:58 pm

Re: young and foolish – Investment advisory fees are tax-deductible. Nobody should pay 1% as a result. Don’t forget the Provincial tax where applicable ( 0 – 10%) and the 5% GST gets added onto that 1% advisory fee and the advisory fee is not tax deductible in a registered account.

Advisory fees come out of a registered plan tax-free. — Garth

#39 45north on 08.18.14 at 10:24 pm

Retired Boomer WI : Tom & Laura should sell the skybox while the getting is good, and rent for a year, or two. See where the world is then. Change (shift) is happening at an accelerated rate these days.

yeah they should, but the clock is ticking, I mean the best to time for Laura to get pregnant is right now. You’re still right. Under Canadian law you can be pregnant and rent. Honest.

#40 MinInMission on 08.18.14 at 10:27 pm

I never really expected to hear of a “bidding war” in my neck of the woods.

Prices have stayed fairly steady here, a little downward pressure, but, not much.

An acquaintance had decided to sell his house and move to a “townhouse” type of thing.

So, he cleaned up the house, tidied up, trashed out, etc.

Then listed. His family thought he should have listed at 425K to 429K. He listed at 415K. He wanted to sell, the realtor said to price realistically.

The listing went out to MLS last Thursday. Open house by appointment only.

Some low-ball offers at around 375k.

First real offer at 415k on Saturday. By Sunday evening, sold at 429k.

20k down, no “subject to” clauses, extended “move in” date.

Purchasers are about 28 – 30 years old.

#41 Freedom First on 08.18.14 at 10:28 pm

Tom & Laura are you DELETED crazy? Freedom First.

I have not been deleted by you Garth, and I didn’t want to be today either, so I will leave it at that. I did really really like your reply to Tom & Laura though. I still lack tact but I am working on it Garth, as I want to learn how to write so as not to offend people but to be truthful and informative, yet kind and gentle like you.

#42 BG on 08.18.14 at 10:30 pm

#2 SUave Direct Investing

I looked for an article about this TD IT sourcing thing and could not find one.
Can you provide a link?

#43 Smoking Man on 08.18.14 at 10:33 pm

http://youtu.be/liPXq2-Kj2M

One more clip of this lady….

Is it a coincidence that she’s dressed, and acts like as a school teacher…

She’s been in the intelligence community for 6 years
..

Come on MkUltra, this is the best you have…

I’m going killing $$ consulting for the spy services… Armature Loral and Hardy at best…. Is what they have now.

Screw hedge funds… Geopolitics is where the action is..

#44 Rexx Rock on 08.18.14 at 11:02 pm

I forgot if any one thinks the fed is raising rates in 2015,keep drinking the kool aid.You have to be pretty naive to believe all those lies.

#45 Smoking Man on 08.18.14 at 11:04 pm

After consuming a big ass bottle of wine, micky of JD, experimenting with mind altering substances, and still no buzz….. On a Monday night.

The good news, I hit the wrong button on Channel changer. I got snow, I yell to the wife, I broke the TV help..

She yelles out, f word… I’m trying to sleep..

I put weightless again on the ear buds from handsome family.

I think I just saw God in the TV snow…

You had to be here..

#46 Be Patient on 08.18.14 at 11:05 pm

For those of you waiting for a y-o-y declines in the price of detached homes in the 416, the time is quickly approaching.

Average prices have been declining steadily since May highs and mid-month figures for Aug are 843K. That looks like a great number, but compared to Sept 2013’s average of 856K we’re looking at a decline. Of course, since the media only looks at y-o-y we’ll have to wait for the first week of October to make it official…then we break out the bubbly.

Now, back in August 2013, average home prices jumped from 783K to 856K the following month. Can anyone explain the volatility other than first-time buyer animal emotions?

#47 sideline sitter on 08.18.14 at 11:31 pm

not too many dividend-paying ETFs out there… there’s a few, but not many.

would I be better off buying 4 or 5 company preferreds versus one or two ETFs?

I think I have enough $$$ to diversify across a few companies.

Open to suggestions.

#48 pbd345 on 08.18.14 at 11:38 pm

I guess it’s ok to try and time the RE market, but not the stock market.

#49 Waterloo Resident on 08.18.14 at 11:45 pm

Compared to prices for places in Dubai (that oil-rich country in the Middle-East), Vancouver is literally a ‘BARGAIN’ in terms of price.

#50 My Life is a Pile of Shit on 08.19.14 at 12:02 am

A couple living in a 550 sq ft apartment (aka bachelor suite)? That’s crazy! Rent or own, their priority is to move to a bigger home that’s at least 900 sq ft. You don’t think about investing if you and someone else are cramped into a shoebox.

By the way, REITs don’t do well in a period of rising interest rates. REITs are typically 75% leveraged. It would be alarming to have an individual investor be 75% leveraged, but nobody finds that alarming for REITs.

#51 Kenchie on 08.19.14 at 12:06 am

“Four hundred in a one-bedroom Lilliputian box, and two hundred liquid.”
+
“We’ve more or less maxed out RRSPs & TFSAs with some of that invested in equities – although over 50% is currently cash.”
Does not =
“That $600,000 in net worth, and real estate equalling about 65%…”

Either they have a lot more in net worth (assuming $400k for 1bd), and likely more cash than $200k if they are basing that figure on what’s in their bank accounts. It would be nice if they added the cash from their trading accounts (TFSAs and RRSPs) to their cash figure and deducting it from equities figure on their family balance sheet.

Also, “First, nobody with a portfolio that small should own individual equities. Not enough diversification, too much market risk, beaucoup de company risk.” is not necessarily correct. The majority of company (i.e. specific) risk in a portfolio of 30 stocks will be diversified away, assuming their select firms in a proportion of their sectors within the overall benchmark index (ex Loblaws or Sobeys would be in consumer staples, which makes up X% of the S&P/TSX, therefore Loblaws or Sobeys should be similar to the X% within the portfolio).

#52 Kenchie on 08.19.14 at 12:17 am

Garth, you can’t be telling ppl this:

“Or a REIT, like giant RioCan, paying 5.3% and not correlated to the stock market?”

REITs are most definitely correlated with the market. Yes, they are less correlated that other types of equities, but it’s more correlated with the stock market than the underlying commercial property they hold.

Also, they are inversely correlated with interest rates.

#53 omg on 08.19.14 at 12:20 am

#23 young & foolish
“But housing is not an investment anyway (as in something you can expect to grow in value), it is a cost of living.”
————————-

Y&F – at current values for housing in most markets in Canada you MUST LOOK UPON IT AS AN INVESTMENT.

Back when I was “young and foolish” a typical starter home was priced at 2 to 5 times annual income, depending upon your city. Even a couple working at retail jobs in S’tooner could by a decent starter – back then it was a place to live and place to build equity versus paying rent.

Now when you are paying 4x income in places like S’tooner, 7x in Victoria and 7-10x in TO and Van for a starter, you have to look at it as an investment, not just a place to live.

Most young and foolish I know are forgoing RRSP and TFSA contributions in order to buy a home – so the home becomes their main if not only investment. Hopefully it works out.

Plus rent is generally WAY CHEAPER than buying.

If as you say housing was a just a “cost of living” the decision is simple – rent – that’s by fair the cheapest choice.

So the “young and foolish” of Canada should buy the house if they want, but at these price levels they need to run it through the investment “lens”.

#54 Jon B on 08.19.14 at 12:20 am

How about another blog dog poll. How many dogs are realizing a 7% return on their investments over the past ten years?

#55 Lurcher on 08.19.14 at 12:56 am

Here is another real estate development failure in waiting… houses between $400K and $500K in the outskirts of Prince George BC. They are dreaming.

http://www.250news.com/blog/view/33042/1/development+gets+green+light

#56 NacpanBeachBum on 08.19.14 at 1:37 am

mmmmhhh…lezzsee… I would sell everything while you can, “invest” (LOL) most of it it producing precious metal miners for 2 to 3 Gs % profit (done before, booring), forget about Garth Turner and his boring Canadians, while living it up in some spectacular “3”rd world countries, like the Philippines. Ooops….you have to be married to one LOL LOL LOL hahaha….and you have to have an open mind, something 99.99% of canucks do not have….but they are soooo niiicccceee

#57 drydock on 08.19.14 at 3:59 am

#37 Smoking Man on 08.18.14 at 9:55 pm
#43 Smoking Man on 08.18.14 at 10:33 pm

If you like Marie Harf Washington propagandist then you should really like Jan Skoyes London Russia Today.

http://www.youtube.com/watch?v=YlXOUW6fB4w

#58 Londoner on 08.19.14 at 4:35 am

#28 LifeXpert

Is the London real estate bubble popping? Maybe, maybe not, but they certainly have the government sponsored MSM on their side. All I know is that I sold my place a few months ago and managed to negotiate a great deal on a rental.

I agree with most of today’s post except for the part about individual equities. A portfolio of $600k can certainly have a portion in individual equities but the size of it comes down to risk tolerance and knowledge. You can’t have one solution to fit all.

#59 gmc on 08.19.14 at 6:44 am

Just read an article that there is a huge amount of Chinese moving out of China due to pollution issues, better schooling in other countries, better retirement etc… we put the brakes on that but the USA and Europe are absorbing athe bulk, we put the stop on that.
Maybe we are different and things will not go down here.
Canada is safe, beautiful, freindly, tons of room, low pollution, great schools ????
60%of the new found rich are moving out?????
just saying
or maybe the housinf crash can be pushed back here,
lots of new Millionaires in China want out?
News Quote: Wall Street Journal total this year 60% is
900 000 chinese
Canada received 2,567 Chinese applications for a similar program in 2011, up from just 383 in 2009, according to its immigration authorities. Demand has been so strong—particularly from China—that Canada imposed a cap of 700 applications per year, starting July 1, 2011. That quota was filled within a week, with 697 of 700 applications from China.

read full here
http://online.wsj.com/news/articles/SB10001424052970203806504577181461401318988

#60 NYCer on 08.19.14 at 7:55 am

Garth, I know you mention not to purchase individual stocks/equities when your investment amount is low. Is there a reason why you recommend buying preferred and REITs individually and not an ETF for them?

In a word, less volatility. But ETFs are a fine choice here. — Garth

#61 Smoking Man on 08.19.14 at 8:02 am

http://www.bloomberg.com/news/2014-08-19/only-rich-know-wage-gains-with-no-raises-for-u-s-workers.html

I’ve been preaching here for years that Central Banks since the housing bust in USSA have been trying to set policy that will bump up wages.. Inflate the debt away..

Link up top..

RE, MY #43 link….

Describing the cute school teacher…. Well I looked at the clip from a sobriety point of view today…

My god, the reporters are dead on que… Playing the role of student, and giving the ding bat teacher respect.

Our programing is deep..

Except for me… Had I been there, second she turned her back side my way, I would launch an elastic band..

Then take my lumps at the principles office….

#62 Mr. Frugal on 08.19.14 at 8:09 am

Tom & Laura:

It seems pretty clear that you are not going to be able to do everything on your wish-list (i.e. family, big house, retire early). You will be fortunate if you are able to accomplish two of these three goals. Pick what is the most important and go from there. But keep in mind that having a family does NOT mean that you need to buy a house. It just means that you will need to move out of the condo. If you choose to have kids, you will undoubtedly spend more. You also need to factor in the high costs of education which will be coming in 20 years just as you are hoping to retire early. If you decide that you want to invest in the hopes of early retirement then spend a little bit of time educating yourself about financial matters. Even if you decide to go with a financial advisor, your time spent learning will be rewarded. Don’t get discouraged. Just keep focused on your priorities.

#63 SUave on 08.19.14 at 8:19 am

#42 BG

..first sorry for horror spelling, typed fast in notepad , and did not run spell-check, and am using bizarre laptop…

anyhow :

My Neighbor knowing that i am fun of Canadian banks
and specially Webroker fan told me yesterday.
He works for TD .
It was emergency meeting in one of large teams,
and they laid out plan.

They are shifting whole team
to India, as they will bring Team leads to get “trained”
by TD employees and then this will be send to India
or they will bring them here.

To me sounds like RBC scenario, the one the blew
up in media recently.

So no link, for now, this is internal but i am sure we will hear about this.

I was big fan of TD. They have best tools for us small traders, and Garth-wannabes…

We all want to be like Garth!

#64 Crossbordershopper on 08.19.14 at 8:22 am

So called wealthy canadians with a condo and some cash. Very good, where is the fun? There was no mention about cash flow, how much do they make? That is the key to everything, it doesnt matter what your shack is worth, you need to live somewhere its a cold place up here.
Real estate values in Canada i think have no basis of anything, my dad lives in a house he paid 30 grand, now worth 500K, he said he is leaving in a box.
I am about the same, same value, paid for, it could be worth 200, or a million (450 probably). who cares. I am not moving or leveraging against it. I think Canada has a lot of dead money sitting around.
I know a farmer who has 28 acres of almost useless land, he was offered 400 grand for it. I said you should sell and live the life for the next 20 years. Instead he lives like its 1921 still, water well, little electricity, no microwave, no cell phone, old beat up truck and he is a millionaire(other land and cash and stuff). But who cares?
Point is, older people have no idea about living, regardless of their financial position. Quebecors who are snowbirds have it right, spend everything all your life, drink and be merry. Retire in Florida in a trailer, come back here for six months collecting your goverment program cheque, you never need to learn about dividend tax credits or anything else, life is simple.
Life is for living, most Canadians have no idea what that means.
Money is not the root of all evil, its hooking up with the wrong women. It could crush you, seen it lots of time. The bottom line is rent a women, cheaper then buying, in life as well as real estate, flexibility, no committments, no contigencies, and in the end we all die alone anyway, regardless who is lying dead next to you in the nice graveyard.

#65 Panhead on 08.19.14 at 8:58 am

#55 Lurcher on 08.19.14 at 12:56 am
Here is another real estate development failure in waiting… houses between $400K and $500K in the outskirts of Prince George BC. They are dreaming.

——————————————————————

A friend of mine moved out of PG when the pine beetle devestated the area. Figured that would be the last time to sell for a good price. He got out but the beetle stayed and killed all the pine trees, miles and miles and miles of them. Guess that doesn’t matter if you’re horny.

#66 Shawn on 08.19.14 at 9:11 am

7% returns

Jon at 54 asks:

How about another blog dog poll. How many dogs are realizing a 7% return on their investments over the past ten years?

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

I track my return very carefully. Conveniently one thing I track is the 10 year rolling return.

I am at 16% the last ten years. My lowest 10 year period was 8% in the ten years ended end of 2002.

The 10 years ended end of 2008 was also a dip at just under 10%.

Strategy has been good stock picking. Mostly large companies. Almost no penny stocks. Almost no resource stocks of any kind.

The average stock picker will trail the market after costs. I happened to be well above the market.

Another strategy, not being a doomer or a bank basher.

#67 crowdedelevatorfartz on 08.19.14 at 9:14 am

@#64 Crossbordershopper
“Quebecors who are snowbirds have it right, spend everything all your life, drink and be merry…..”
+++++++++++++++++++++++++++++++++++

Uh huh.
Until the Province( sorry the Nation) of Quebec realizes its grossly underfunded in its tax revenue and cuts these unprepared “grasshoppers” retirement funds to less than subsistance.
Thank god the rest of Canada isnt on the hook for the QPP what with all those huge catholic families hitting the baby boom tsunami and no one other than “pure laine” childless Gen X’ers to pay for it.
Quebecers have it all figured out…….bwahahahahahaha. That bill hasnt been paid yet.

#68 walltiger on 08.19.14 at 9:52 am

you are right #64.
Garth also saying the same.

#69 aaron on 08.19.14 at 10:07 am

From this post, one can max out TFSA and own a home at the same time. So why bother worry about a ‘potential 15%’ price correction? You’ve been very certain for the past 6 years that a correction is coming and have been so far very wrong about RE. And even if there is one, that only takes us back to 2012 level and far from 2009.

Another note about the condo economy, you stated that over 100K condos is in the pipeline, which is correct. But not all of them are being completed the same. On average 20K units are being completed per year and in line with population growth. If that was out line you would have seen a lot of rental supplies and drop in rental prices as well. That is definitely not the case.

#70 None on 08.19.14 at 10:12 am

#29 eaglebay on 08.18.14 at 8:56 pm

Let the majority prevail. Wimp.

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

The tyranny of the majority is no different from the tyranny of the minority.

I agree those damn kids with allergies that could kill them sure are wimps. You sound pretty tough eaglebay.

#71 anotheranother on 08.19.14 at 10:23 am

Garth, you talk about “nearly nonreportable income”, but have you considered Canada’s AMT?

Yes. Non-applicable. — Garth

#72 Suede on 08.19.14 at 11:56 am

#66 Shawn

Automatic DRIPS? Or reallocation?

#73 Retired Boomer - WI on 08.19.14 at 12:56 pm

Tom & Laura-

You face the same decisions 99% of the rest of us must deal with in life.

Most of us want a family, a house, and to be able to retire early, while providing the kids a decent education for their lives. (great goals, really)

Most of us also must face the ugly fact that maybe, we can’t “have” everything based on our incomes, savings, past choices, etc.

You can clearly have the family, and retire early, by selling the skybox, and renting for now.

You could also buy the house, with the huge mortgage financial uncertainty for years, and likely “NO” early retirement, because you chose big mortgage payments over savings. -sorry there- these are known as ‘choices’
and we all get to make them. Sometimes they work out, sometimes they lock us down for years.

Freedom to choose is worth much more than, making a ‘choice’ at the wrong market moment.

I would listen to the blog host’s advice here, as well as your heart.

Best Wishes

#74 Bottoms_Up on 08.19.14 at 1:05 pm

#44 Rexx Rock on 08.18.14 at 11:02 pm
—————————————–
Fool me once (in 2010, to lock a variable into a fixed rate) shame on you.

Fool me twice, shame on me.

#75 beancounter on 08.19.14 at 1:08 pm

Tom and Laura, check out mrmoneymustache.com if you are serious about kick your jobs to the curb.

#76 Victor V on 08.19.14 at 1:19 pm

Why rents are softening and what’s in store for Toronto’s condo market

http://www.theglobeandmail.com/report-on-business/economy/housing/whats-in-store-for-torontos-condo-market-as-rental-demand-soars/article20103226/

#77 Mister Obvious on 08.19.14 at 1:25 pm

I pay my investment advisors about 1%.

But let’s assume for a minute I had no advisors and managed my own money. Let’s also assume I was able to manage it as well they do (fat chance) and further that I actually enjoyed all the extra work.

A look at some recent returns suggests that a good portion of the fees I pay my advisors would have instead gone to Canada Revenue.

I’d rather my advisors had that money. They will probably use it to boost the economy more effectively than the CRA.

For many years I did my own taxes. What an utter waste of effort not to mention risk. Now I get the pros to do it. They’re boffo good at it and actually seem to like that kind of work (go figure). Bonus: their fees are tax deductible too. Win-win.

Some things are worth paying for.

#54 Jon B

Yes, I have achieved slightly better than 7% (after fees) over the last 10 years and I took a huge hit (on paper only) in the GFC.

#29 eaglebay

No need to bite my head off. I merely stated the rationale school boards use for most of their draconian restrictions. Fear of litigation. Don’t like it? Call the principal.

#78 pravchaw on 08.19.14 at 1:33 pm

“At 50, the nest egg would be $2.7 million, and you could enjoy $202,000 a year as largely non-reportable income.” – I guess you are talking about investing within a TFSA? With RRSP you have to pay taxes when you withdraw.

One way of having your cake and eating it too is to borrow against your house, buy new financial assets in a non-registered account (deducting the interest) and moving any existing non-registered financial assets to registered accounts (RRSP, TFSA, Insurance etc). I have used this technique successfully now since 1999 and managed to compound my financial assets at approx. 9% CAGR.

Cheers. I enjoy your blog and all the discussion.

I referred to distributions in the form of ‘return of capital.’ — Garth

#79 Holy Crap Wheres The Tylenol on 08.19.14 at 1:53 pm

#43 Smoking Man on 08.18.14 at 10:33 pm
http://youtu.be/liPXq2-Kj2M

One more clip of this lady….
Is it a coincidence that she’s dressed, and acts like as a school teacher…
She’s been in the intelligence community for 6 years
..
Come on MkUltra, this is the best you have…
I’m going killing $$ consulting for the spy services… Armature Loral and Hardy at best…. Is what they have now.
Screw hedge funds… Geopolitics is where the action is..

_____________________________________________

You are just learning this now young man? Why do you think every multimillionaire wants to get into politics? Cause money is power but power makes money! What you can’t buy you can legislate or mandate! Friends and acquaintances in the old boys groups will make a ton of dough off of you and hopefully reciprocate when you retire from office. Now go and put your name in for Mayor of Toronto. I don’t live there but hell I’ll vote for you. Your over the edge banter is not even half as crazy as the Gong show going on there now. I’d vote for anybody respectful, oh hell who am I kidding, this is Toronto!

#80 not 1st on 08.19.14 at 1:54 pm

Lets have a little reality check on having a lot of money invested. Most people can handle the movements on a couple hundred thousand in the market. On a bad day, your portfolio might be down $5k or something.

Now put $2.5 million in there and you could see $50k/day fluctuation, even in ETFs. You have to have a pretty firm stomach to watch those and I don’t think most do contrary to what Garth thinks.

(a) That’s why many people with serious money get help. (b) Why would you watch? — Garth

#81 Westcdn on 08.19.14 at 2:09 pm

A lot of things in today’s world bother me but I try not to sweat the things I cannot control. There is no shortage of bad things that can happen; you can even imagine new ones. Climate change is something I don’t know much about but it is obvious that shift happens. I am pretty sure people will adapt so I am not too worried although I can see civil unrest word wide as the changes hit home.
We have pension entitlement problems coming; you just can’t tell people that it sucks to be you. I thought this was a good presentation on presenting the future challenges of securing financial freedom. It is long at 1hr & 20 mins but it gives you food for thought over the longer term. The innovation/technology section starts about the 18 min mark. (ps. The etf ‘XIV’has been recommended several times to me but I don’t have any)
http://new.livestream.com/livecfa/Bever
The thing I like about this blog is identifying the issues we need to deal with – unfortunately talking is easier than doing but solutions come from understanding counter points of view as long as we are willing to shift positions and work together for the long term. (Feeling kinda philosophical today)

#82 Setting the Record Straight on 08.19.14 at 2:23 pm

I am trying to find a discount broker that provides access to European and Asian exchanges, not just the US and Canada.

#83 Shawn on 08.19.14 at 2:59 pm

Achieving High Returns

Suede at 72 about my 16% compounded annual return these past ten years asked:

#66 Shawn

Automatic DRIPS? Or reallocation?

******************************************
Basically neither. First dividends are neither a necessary nor a sufficient condition for good returns.

DRIPS work because the money is reinvested. You can just as well take the dividends and reinvest on your own. DRIPS save nothing but a bit of brokerage fees.

DRIPS at a 3 to 5% discount are sometimes available and THAT is a great strategy if you like the stock. Not one I have used. Applicable in non-registered accounts only, I believe.

I look for stocks of good or great companies selling at good or great value.

I often add on dips and often sell some on rallies. But not extensive trading.

Most of my money is in registered accounts where I can trade without tax consequences. For taxable accounts I try to buy and hold to avoid capital gains tax.

I picked up excellent bargains in late 2008. I was early but that was okay.

I sell the whole position if I conclude the stock is clearly over-valued.

I run an increasingly concentrated portfolio. It’s not unusual for me to have 15% or in each of three stocks.

In the last few years I have kept about 20% to 30% in cash to have ready for bargains.

I don’t bother with bonds.

Lately I have used rate reset prefs at about 4% as a sort of substitute for some of the cash.

This strategy is not for the faint of heart it takes analysis skills and many hours of effort or access to same and it takes both the financial capacity to absorb risk and the emotional capacity to live with risk.

It’s absolutely not a strategy for everyone.

If the whole market is down like in 2009 I spread over more stocks. As of right now I find few bargains and so I am more likely to concentrate.

None of my “reallocation”, to the extent I do that, is automated. It’s all ad-hoc.

There is room for many different approaches. Most people should use an advisor. (If nothing else, it gives you someone to blame if money is lost.)

#84 :):( Ying Yang on 08.19.14 at 3:04 pm

Smoking Man just read you going to Las Vegas again. I’m at convention there in three weeks. Putting us up at Bellagio for three nights. Should be a blast, boys in town no girlfriends. Haven’t been to Seneca in about two months, too much travel and it’s getting old. Been making $$, making even more when girlfriend can’t get her hands on my $$.

#85 Mister Obvious on 08.19.14 at 3:09 pm

#80 not 1st

Sure, a significant portfolio might fluctuate by +/- $5 K per day. I call that ‘breathing’. A larger portfolio or one containing more risk might ‘breathe’ by $20K per day or more in times of volatility.

That may be a fascinating thing to watch but it has no real bearing on the long term utility of one’s wealth.

I look at my portfolio as a personal economic engine that chugs away on my behalf. That engine is designed and maintained with the help of people who are skilled at finance.

I created it to allow myself freedom of choice as I grow older. It takes into account realistic life expectancy and desired comfort level.

Money spins off that engine in several ways. Each is subject to different tax treatment. These things are carefully considered in the design of the engine and my personal goals.

Daily fluctuations are quite irrelevant to a well tuned economic engine. To paraphrase something Garth has said many times: Losing money in the short term is not nearly as bad as running out of money in the long term.

#86 Shawn on 08.19.14 at 3:19 pm

Stomaching Losses

Not First said:

Now put $2.5 million in there and you could see $50k/day fluctuation, even in ETFs. You have to have a pretty firm stomach to watch those and I don’t think most do contrary to what Garth thinks.

******************************************
You build up to it. One of my first losses was $600 and it kept me awake at night. That was 20 years ago or more.

I am not sure what my biggest daily loss has been. I have often had $10k loss days. These days, when I go to bed at night after losing $15k I usually don’t give it a thought. Volatility is simply part of the “game”. It’s a game I am winning at on average so why would I sweat the bad days?

But yes you build up to these things. A guy with $2.5 million simply thinks of $50k in a totally different way than a guy with $50k. To one it is 100% of the portfolio. To the other it is 2%. Totally different.

But you also try to limit your risk to what you can afford and what you can stomach.

Buffett suffered 50% losses from peak to trough in Berkshire stock on at least four occasions. And by accounts it never bothered him. Kept almost all his wealth in Berkshire.

The way you think about portfolio loss is also affected by your confidence in the economy and in the investments you own.

It’s different for each person. Which is why the know-your-client rule exists for advisors.

#87 Snowboid on 08.19.14 at 3:30 pm

#55 Lurcher on 08.19.14 at 12:56 am…

In late June we made our way to PG – first time since about 1996.

The real estate near our relatives is cheap – but then the eau de pulp mill lingered everywhere we went.

I’m not sure how anyone could live there, but I guess you get used to it?

How they think this development will sell is beyond me!

#88 Rabbit One on 08.19.14 at 4:06 pm

Talking about $5K per day fluctuation, people cannot sleep because it is investment.

What if daily valuation is available on $1MM+ real estate properties….?

#89 Shawn on 08.19.14 at 4:08 pm

Canada welcomes 250,000 immigrants per year

And at a faster pace this year as far as citizenship

http://www.newswire.ca/en/story/1399962/welcoming-the-150-000th-new-citizen-of-2014

Would seem to bode well for homebuilders and house prices, all else equal? (Though all else is never equal)

Immigration levels have been basically unchanged for over a decade, and amount to 0.71% of the population annually. — Garth

#90 conor bergevin on 08.19.14 at 4:31 pm

Good times for Canadians.Average SFH at all time highs.Tsx at all time highs it all means a strong booming Canadian economy.Although its sad they are devaluing our dollar which is makes everything more expensive.

#91 Shawn on 08.19.14 at 4:33 pm

Immigration

Immigration levels have been basically unchanged for over a decade, and amount to 0.71% of the population annually. — Garth

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

Thank you, that is good contect. and 0.71% added each year does not seem a lot.

(But what percentage of population GROWTH is that?)

We build about 200,000 new housing units per year in Canada.

Even at 5 people per household, immigrants of 250,000 would account for 50,000 housing units or 25% of the total housing built per year.

That seems a lot, albeit that it has been going on for years.

You think 100% of immigrants come and buy houses immediately? Seriously? — Garth

#92 devore on 08.19.14 at 5:32 pm

You think 100% of immigrants come and buy houses immediately? Seriously? — Garth

They have to live somewhere, whether they buy or rent, someone has to own the property.

The reference was housing starts. BTW, more people die in Canada each year than are born. — Garth

#93 Shawn on 08.19.14 at 5:35 pm

Immigration and housing units

You think 100% of immigrants come and buy houses immediately? Seriously? — Garth

**************************************
Who said anything about buying houses? I believe the 200,000 new housing units per year includes some rental units.

They have to live someplace. 50,000 new households per year would seem to imply 50,000 new housing units per year unless they crowd in with existing households AND stay there forever.

Is the number of occupants per household in Canada increasing? I would think the opposite.

They may move into apartments as the former occupants buy houses.

Let’s try to communicate without further insults. I just gave some facts and simple analysis as I see it.

#94 Smoking Man on 08.19.14 at 5:59 pm

#83 :):( Ying Yang on 08.19.14 at 3:04 pmSmoking Man just read you going to Las Vegas again. I’m at convention there in three weeks. Putting us up at Bellagio for three nights. Should be a blast, boys in town no girlfriends. Haven’t been to Seneca in about two months, too much travel and it’s getting old. Been making $$, making even more when girlfriend can’t get her hands on my $$.
……..

They only get worse… Ha

I would love to go to Macau, but not smoking for 14 hours will kill me…

I can tolerate 6 max…

#95 VMD on 08.19.14 at 6:04 pm

“Centrium” Pre-sale Condo developer skipped town?
RE lawyer declared bankruptcy.
Buyers’ remorse…
http://urbantoronto.ca/forum/showthread.php/10043-Centrium-Condos-(Centrust-Developement-Liberty-Development)-Real-Estate/page11

#96 Angry Schiksa on 08.19.14 at 6:10 pm

“The offspring will need at least a hundred grand for schooling”

A hundred grand is just enough to put them through university if the school is out of province. Add another $100,000 if they opt to go to grad school.

The cost of raising a child to university age is roughly $300,000. There is a huge outlay at ever step of the game….food and clothes are just the beginning. Tutors, after school sports and interests will eat up tens of thousands more.

What about child care for infants…$1500 a month….after about $1000…..that’s $2000 for the twins….until they go to pre-school and/or kindergarten. After school care is $20 bucks an hour these days.

If you’re in a school district that has poor graduation stats….you’ll be forced into private…..my kids tuition was $17,000 p/a. These schools also have international travel holiday/learning/sport trips and you can’t leave your kid out or they’ll be ostracized….add another $5000 a year.

In reality…think a half million….$500,000.00 to get little ‘Booger’ a masters degree and if you’re lucky out the door. I see a lot of kids still living at home into their 30’s …because they want to save up for a down payment…..all food, car insurance…cable, electric and heat etc courtesy of the bank of Mom & Dad.

Some of them brought the dribbling stooge boyfriend or half baked girlfriend into the basement suite…and you get to do their laundry too…what joy.

To the couple mentioned…..good luck retiring early…..have fun with it…..and maybe when you’re seventy they’ll stop calling and asking you for stuff.

#97 nonplused on 08.19.14 at 6:22 pm

Today’s story is a good idea of the squeeze many couples who want children are in. Between stagnating incomes and ballooning housing costs it’s difficult to see how a lot of people can afford it. I think that’s why so many people just say “screw it” and lever up. Most people can’t think through the alternative that maybe they just shouldn’t have kids until they can afford it.

#98 Angry Schiksa on 08.19.14 at 6:26 pm

“Now put $2.5 million in there and you could see $50k/day fluctuation, even in ETFs. You have to have a pretty firm stomach to watch those and I don’t think most do contrary to what Garth thinks”

A 2% swing on any one days trading is out of whack. This could only happen if you were heavily in high beta juniors. During the past two weeks the S&P gave up 2.65%…while the TSX 60 lost only 1.4%. ….over a two week period….not on a single days trade.

Maybe your mix is wrong…maybe you like to speculate in volatile juniors. I have zero exposure to juniors in my portfolio of 35 stocks. I own one stock…GIB.a that doesn’t pay a dividend. The average return on this broad portfolio of five sectors with over weighting in energy and financials is 22% …including dividendsYTD.

There have been times …like the Fukushima disaster and the Lehman Crisis where stocks went down more….but those are extreme anomalies. …and not something you see everyday. We have recovered all but .5% during the past two trading days.

#99 Obvious Truth on 08.19.14 at 7:13 pm

Not First

Nobody with large portfolios has mentioned the 10 and 20 k up days. Everyone remembers their first 10 k day!

So excited I couldn’t sleep. Funny how now even a boring day like today can do 10k.

#100 devore on 08.19.14 at 8:07 pm

The reference was housing starts. BTW, more people die in Canada each year than are born. — Garth

Many new units are bought by investors to rent out. Housing starts satisfy the demand gap between existing stock and net population/household growth, whether the new units will be bought to live in or to rent out. Even though Canada’s birth rate may not be sufficient for stable population, it is still growing, due to immigration.

I really don’t understand the reference to housing starts being only applicable to owners-occupiers. Plenty of new housing stock is occupied by renters.