From scratch

GAS modified

Days ago one of the networks gave the results of an Ipsos poll. “Is it getting more difficult to live in Toronto?” was the question, and 90% said yes. In fact almost four in ten respondents claim they’re thinking of moving because the big smoke’s unaffordable.

Now just imagine what the results would be for poor Vancouver, where the average SFD is now $1.26 million as opposed to a mere $952,000 in T.O., and people earn a lot less. Without a doubt, urban dwellers in 416, 604 and Cowtown are paying a huge premium – which many can’t afford. When half can’t survive one missed paycheque, we know it to be so.

For young people the pain and confusion is most acute. So many are over-educated in a society of declining opportunities, rising costs, smothering parents and financial ignorance. When I was 35, I was middle-aged, married for 15 years, with 18 employees and on my third house. Today many thirtysomethings are just emerging from the prolonged adolescence of academia without a clue what to do next. Just the way the condo salesguys like them. Fresh and tasty.

Well, here’s Linda, who at least reads this blog, so there’s hope. “It has changed my perspective on a few things for sure,” she says. Let’s see if we can help her.

“Having grown up in shelters and poverty, and then invested in a very expensive and long professional education, I am now 35 and with less than $10K to my name. I just paid off my massive student loan, but am now earning 6 digits and have little expenses since my employer provides housing. No dependents (apart from a mother and grandmother who occasionally need cash). I am globally mobile and my employment prospects are very good for the next little anyway.

“I am going to save $50K in the next 10 months. I was going to originally make a downpayment on a property, but after reading your blog, I think I’ll wait for the next major recession..

“Since I am new to the concept of having any “cash” and many overeducated folks might find themselves in this zero balance position not until their 30’s nowadays, I am wondering if you could do blog on starting from scratch – where to invest, how to divvy up savings, or even where to look for advice..!

“They say even RRSP’s might go “pouf” in a couple of decades, so even that does not seem like a reliable investment. I know I am probably not in your targeted demographic, but it would be much appreciated!! Thanks in advance, hope you read this.”

I did. And good for you to have risen from poverty to six digits, even if it took until age 35. Now the important thing is, don’t blow it. Here are a few rules for starting from scratch.

Don’t save. Invest.
Your generation’s insanely conservative, Linda, at least when it comes to money (as opposed to tats). Suspicious, cynical and over-Googled, so many in their twenties and thirties are stuffing their meagre holdings into dead-end savings accounts and bank products because they think markets are rigged. They’re not. You must invest. Savings rates will stay low for years, while inflation and taxes creep higher. There is no bank account or GIC that’s going to keep up and actually build wealth – so never keep more cash around then you need to get by for a month or so.

Now that you’re working, go see [email protected] and get approved for a personal line of credit. She’ll easily give you one for $25,000 or fifty grand, which means if there’s ever an emergency, just write a cheque. If you don’t need the money, the line costs you ziltch. Now all of your savings can be gainfully employed.

Forget the RRSP. Do a TFSA first.
Registered retirement plans won’t disappear in the future, and RRSPs can be useful for shifting tax from one year to another, or spitting income with a spouse. But as vehicles to finance your life 30 years from now, forget it. I’m sure tax rates on withdrawals will be higher than the break currently offered.

So, focus on the TFSA. You can slap $5,500 into one for this year, and the same amount again in January. In fact, your tax-free account can accommodate $31,000 in missed, past contributions. Until you reach that limit, put money nowhere else.

But not at the bank.
Bankers want you to believe TFSAs are for saving, because they’d like to pay you 1.5% while lending your money out for double. This is an investment vehicle, not a glorified bank account. So, go online and open a self-investing account with your bank’s online discount brokerage. Yes, it’s scary. No, it’s not hard. Create a TFSA and move in the cash from your savings account. Now you’re ready.

What to invest in.
If you begin with $5,500 in the TFSA this year, Linda, and make the same contribution annually until you retire at 65, earning an average of 7%, you’ll have $561,000 by then. If you average 8%, the total will be almost $680,000. Not a bad start on the future.

These returns won’t come from savings vehicles, but rather from pacing the growth in the economy and corporate profits. At the same time you need some protection from wild swings by having a balance between safe and growth assets, and lots of diversification. So divide the TFSA money into five piles, putting equal amounts into ETFs (exchange-traded funds) that mirror (a) the S&P 500, (b) the TSX 60, (c) a basket of preferred shares, (d) real estate investment trusts and (e) a Canadian bond index.

You can use iShares products, or Vanguard, BMO exchange-traded funds or others. But these five will give you safe (preferreds and bonds) as well as growth (equities and commercial real estate).

Stay mobile and flexible.
The worst thing you could do is take your extra money and buy that condo. Then you’d be 35 with no liquid assets or investments, four hundred thousand in debt, a fat monthly for property, mortgage and condo fee payments and zero mobility. You’d be a sitting duck for mortgage rate increases, higher strata fees, special assessments, property tax hikes and falling condo values. This is not the goal of lifting yourself from poverty to professionalism.

Don’t get extreme.
If you read this pathetic blog, you know what I mean. In our midst are Tea Party whackjobs who hate the banks, bullion-licking gold cultists, America-hating anti-corporationists and whimpering risk-averse GIC-huggers who don’t understand that running out of money is the big fail.

So, Linda, don’t waste your cash on silver. Don’t ever go to a doomer web site. You don’t need to hoard Cottonelle or batteries. Don’t worry when the stock market sheds 200 points.

Most important, remember that you can borrow, beg or earn money.  But you’ll never be 35 again.

 

182 comments ↓

#1 Ferrari321 on 10.05.14 at 5:04 pm

Shocker that she only has 10k to her name

#2 BigM14 on 10.05.14 at 5:07 pm

and whimpering risk-averse GIC-huggers who don’t understand that running out of money is the big fail.

That is so me, but thank you for the information Garth.

#3 MJ on 10.05.14 at 5:22 pm

….with no liquid assets or investments, four hundred thousand in debt, a fat monthly for property, mortgage and condo fee payments and zero mobility. You’d be a sitting duck for mortgage rate increases, higher strata fees, special assessments, property tax hikes and falling condo values. This is not the goal of lifting yourself from poverty to professionalism.

And that is so me, and thank you for the daily dose information, Garth. Some day, I will rise above my inertia :).

#4 CPG on 10.05.14 at 5:33 pm

“Past generations voted to spend more and more money expanding entitlements and the size of government. They are handing the next generation the bill.”

generationscrewed.ca

http://www.generationscrewed.ca

That site is another disingenuous money-sucking scheme by the Canadian Taxpayers Federation. — Garth

#5 Freedom First on 10.05.14 at 5:34 pm

Linda, listen to Garth, and shut out the noise from family, friends, co-workers….etc. I don’t talk about money with others for years, as it has negative consequences from the house/gold/etc. worshipers, much like some of the family rated hate mail that Garth can publicly share with us. However, people who are sincerely self admittedly financially flummoxed, I will refer them to Garth’s Blog.

And Linda, you’ve done very well from where you started from, I know, as I started from the same place, so follow Garth’s advice today, and read the rest of his posts from the past on his Blog. It is time well spent, and will pay you huge dividends. I am so glad I found this Blog a few years ago, as it helps me keep my financial sanity in a world where the masses are financial perverts.

#6 Brian Ripley on 10.05.14 at 5:34 pm

Garth said: “Don’t save. Invest.”

Hillard Macbeth (interviewed by Amanda Lang) notes that the first group of actors to leave the real estate trance are First Timers (can’t afford) and Investors (risk of capital gain loss)
http://www.chpc.biz/history-readings/real-estate-trance

Housing price chart comparison to Vancouver shows the GTA still has late in the season mojo (Sept data):
http://www.chpc.biz/compare-toronto–vancouver.html

Buying a condo is not investing. — Garth

#7 Ben on 10.05.14 at 5:38 pm

Don’t forget the number one advice: build a time machine, get born earlier and farm the young through property / unfunded defined benefit pension schemes.

Do this and you can have a regular job, retire early and live like a king!

#8 devore on 10.05.14 at 5:52 pm

#1 Ferrari321

Shocker that she only has 10k to her name

If you fully finance your education, depending on how many years you spend there and the earning power of your degree, it will take you until your late 20s/early 30s to pay it off. Assuming you’re an independent adult and not mooching off your parents.

#9 JSS on 10.05.14 at 6:00 pm

This was an awesome blog today. Very insightful.
And all the best to linda

#10 not 1st on 10.05.14 at 6:10 pm

Garth, you must have been smoking something today. Someone with no physical assets will never qualify for a $50k credit line. Not unless you go to a shark.

Assets are lent against, not the promise of a paycheck.

An unsecured LOC is widely available. Maybe you just look a like a homeless dude. — Garth

#11 Nemesis on 10.05.14 at 6:12 pm

#CouldBeMuchWorse… #FamousFortMcMurray… #MidLifeInvestmentCrises…

http://youtu.be/1WizROIojlA

#12 FLAWED on 10.05.14 at 6:15 pm

generationscrewed.ca

http://www.generationscrewed.ca

That site is another disingenuous money-sucking scheme by the Canadian Taxpayers Federation. — Garth

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

And the money sucking bloated inefficient govt stealing 60% in the form of taxes in BC anyways – is not a scheme? Govt does not create wealth, gets in the way of everything these days and taxes keep going up because of Govt. How is this website a scheme by comparison? They are not stealing money from anyone.

#13 pravchaw on 10.05.14 at 6:17 pm

#1 – Actually Linda is off to a great start – looks like she has a high flying corporate career. I had less at her age and really started investing at 40 (now am 55) and worth in the high 7 digits. Don’t underestimate the power of compounding corporate income and no tax in the TFSA.
“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”
― Albert Einstein

#14 FLAWED on 10.05.14 at 6:19 pm

Looks like three of the richest men on the planet earth also believe in the phony US Recovery……I guess they got rich by being wrong?

According to a new SEC filing, Buffett is sitting on $55 billion in cash through his company Berkshire Hathaway. This is highly unusual behavior from a man often called “the world’s greatest investor.”

It’s the biggest cash hoard the company has ever amassed, in the 40 years he’s been in charge.

At a cost of $29 million every single day he keeps his money out of the markets, from all outward appearances, this is a risky and costly gamble. Unless Buffett is sure a Wall Street crash is at our doorstep.

Shocking: See the chart that may have caused Buffett to bet on a U.S. collapse.
But he’s not the only famous investor who fears a dangerous correction is coming.

Jim Rogers recently admitted to Yahoo! that he is staying far away from U.S. stocks.

New filings also revealed billionaire George Soros’ massive short position on the S&P 500.

Previously, Soros allocated 3% of his portfolio to shorting the S&P. It’s a common practice major investors use to insure their positions against unforeseen pullbacks.

But he just increased his short position on the S&P 500 over 5X fold, taking it to 16% of his entire portfolio.

#15 Millenial on 10.05.14 at 6:21 pm

‘When I was 35, I was middle-aged, married for 15 years, with 18 employees and on my third house.’

Hey Garth,

I imagine you having a beard and wearing a trenchcoat when you exited your mother’s womb, lol. Anyway, times have changed, I’m turning 33 in a few months and I would just be finished paying off my student loans right now had I not had parental support (I’m a dental specialist). And no, I never took a ‘gap year’ or wasted any time being a bum – I had 11 years non-stop of schooling after high school, and worked pretty hard.

You might be interested to know that getting into dental school in Canada is super-competitive, and many Canadians head south for their education. There are lots of Canadians at schools like Boston University (literally 25% of their class, no joke). You want to see their tuition stats? http://www.bu.edu/dental/about/offices/registrar/tuition/dmd-tuition/
And that doesn’t include living expenses.

I do feel like a big kid sometimes, and I’m alright with that. I have friends that own businesses and practices and their #1 headache is employee-related stuff, not business. Can’t imagine having 18 employees.

We will have little pity when you’re making 500K a year. — Garth

#16 devore on 10.05.14 at 6:22 pm

#7 Ben

But do they have ipads and free internet porn in that kingsley past?

#17 Cow Man on 10.05.14 at 6:22 pm

Sir Garth:
Awesome advice Garth. Now if only today’s script could be handed out to everyone entering a condo sales office. Maybe the tooth fairy could help you out with that. We know the realtors won’t.

#18 Italians love real estate on 10.05.14 at 6:26 pm

Linda, perhaps you can get your employer to pay your income into a corporation .

Now there is a tax saving / avoidance /deferral and Managment vehicle if I ever saw one

#19 Cow Man on 10.05.14 at 6:27 pm

Sir Garth:

Here you go again.

http://www.generationscrewed.ca

That site is another disingenuous money-sucking scheme by the Canadian Taxpayers Federation. — Garth

Closet Socialist?

Get real. The CTA is a dubious outfit. — Garth

#20 Mister Obvious on 10.05.14 at 6:28 pm

Tonight’s blog is suitable for framing.

#21 Ben on 10.05.14 at 6:30 pm

#8 devore – most people over 40 have absolutely no idea what it’s like to be young now. And the example in this blog is in the top what, 5%, probably less.

Next they have to pay more than 500K for a small family home that will see them mortgaged for a *long* time. All without any real job security.

#22 Shawn on 10.05.14 at 6:33 pm

Agreed

It’s rare I don’t find something to disagree with in the article but I see nothing to disagree with regarding the investment advice.

A conventional measure of net worth might say she is worth only $10k. But she has a secure job at six figures and indicates she can save $50k a year. There is a present value to all that education and the job prospects. They are worth hundreds of k in this case.

Linda, you have done well. Don’t let anyone tell you different.

#23 Shawn on 10.05.14 at 6:37 pm

Job Security

When you have really good job security it’s like you have a property right in your job. In fact you can sue for damages if your are terminated without just cause.

A certain amount of job security is good for society and promotes stability (and the ability to borrow from the bank). But too much job security promotes lack of incentive to work and lack of flexibility for employers.

We have no doubt given a bit too much job security to government workers in particular.

#24 Shawn on 10.05.14 at 6:41 pm

Your Biggest Asset?

Due to job security it can often be your job as opposed to your house. If you are young and have a great job in a field where it’s not easy to get a similar job then you better keep your nose clean.

It may not get listed on net worth statement but yes it may in fact be your biggest asset.

For those who have a good job and who can move easily to another one (many trades people), your biggest asset may be your earning power.

All those with good jobs, look after yourself. And get disability insurance.

#25 Shawn on 10.05.14 at 6:49 pm

Generation Screwed – A Half Baked Story

Regarding the link at 15…

The folks at that web site are misguided and believe debt is inherently bad. They forgot entirely the asset side of the balance sheet. (Which far outstrips the debt side.) Do they really think that any of the Canadian governments have a net worth of less than zero?

By their logic the share owners of just about every corporation are screwed because they own in some sense a share of the debt of the corporations they own.

#26 Dr. Mike Hunt & Nurse Pat Magroin on 10.05.14 at 6:59 pm

“That site is another disingenuous money-sucking scheme by the Canadian Taxpayers Federation. — Garth”

I’m glad you said what that was. I thought it was another one of those dating sites.

#27 robert james on 10.05.14 at 7:04 pm

Nice going, Linda !! You are a smart girl !!

#28 Joseph R. on 10.05.14 at 7:06 pm

Linda,

Garth gave you some good advice but here’s another one:

You can open an TSFA account at Tangerine, and register for their mutual funds as a one-fund solution. No monthly fees and MER of 1.09% or 11$/year per 1000$ invested. Unlike other funds, they use an index-investing approach, as suggested by the Bearded Wonder:

Dan Bortolotti, the couch-potato guy, speaks very highly of them:

https://www.pwlcapital.com/pwl/media/pwl-media/PDF-files/Justin%20Bender%20Assets/2014/2014-05-02-PWL_Bender-Bortolotti_The-One-Fund-Solution_hyperlinks02.pdf?ext=.pdf

Unlike a discount broker that works from some guy’s basement, Tangerine will provide you with a much better service.

I suggested a bank-owned, not basement, brokerage. And paying over 1% for no human guidance is ridiculous. — Garth/em>

#29 IloveCharts on 10.05.14 at 7:23 pm

Linda – Congrats and your climb! Now just don’t start living a six figure lifestyle – amass wealth instead.

Garth and blog dogs: Can’t someone just come up with a single ETF that is a balanced portfolio instead of having to buy five or six different products in two different currencies and then re balancing them all the time?

Why don’t we just send you cheques? — Garth

#30 Arfmooocat on 10.05.14 at 7:32 pm

Garth use this pic one day.

DELETED

#31 Bob Copeland on 10.05.14 at 7:32 pm

Anybody know if a TSFA is the same as a 401k in the states?

Roth IRA. — Garth

#32 TEMPORARY® Foreign Prime Minister on 10.05.14 at 7:37 pm

Excellent post tonight.

I printed two copies, one for each of my up and coming rugrats.

#33 Son of Ponzi on 10.05.14 at 7:39 pm

#25 Shawn
The folks at that web site are misguided and believe debt is inherently bad. They forgot entirely the asset side of the balance sheet. (Which far outstrips the debt side.
————–
That’s what the realtor people have been telling the property virgins.
“Debt is good because it builds equity, and you can then use the equity from your condo to move up the property ladder”
Until, of course, the property ladder tips over.
Ouch!

#34 Shawn on 10.05.14 at 7:39 pm

More Flawed Thinking

At 14 Flawed alerts us to Berkshire’s big cash position and calls it highly unusual.

It’s another example of people taking a fragment out of context and jumping to the wrong conclusion

Now for some context:

Berkshire’s assets are $504 billion of which a “whopping” 11% are in cash.

Berkshire always keeps a lot of cash on hand because it is an insurance company (in large part) and at any time may need to issue cheques for catastrophic losses.

The reason its the largest in history is mostly because the company grows fairly dramatically almost every year (last year book value was up 18.2%, making the cumulative gain since 1964 a staggering 693,518%)

Please stop jumping to misguided conclusions.

Read some Buffett.

#35 Arfmooocat on 10.05.14 at 7:40 pm

DELETED

LOL…

#36 TEMPORARY® Foreign Prime Minister on 10.05.14 at 7:40 pm

“…..That site is another disingenuous money-sucking scheme by the Canadian Taxpayers Federation. — Garth……”
========================

The CTF’s sole claim to fame is coughing up a vindictive, sociopathic, war-mongering, asthmatic hairball who envisions himself as a self-appointed deity emperor playing the piano while Rome burns.

#37 Nacho Cheese on 10.05.14 at 7:42 pm

So if Linda were to choose to invest her money in individual stocks that are priced low compared to their current or future value, which should she consider? I am looking forward to Shawn’s suggestions in particular as he has a history of picking well.

Nobody with just ten thousand should own individual stocks. — Garth

#38 sweep on 10.05.14 at 7:43 pm

Garth,

I just switched my entire TFSA from XBB into XIU.

I am in my 20’s and I figured what the hell, my reasoning being XIU will increase distributions but XBB will just hold steady and not actually increase my income.

Thoughts ?

Yes. Foolish. One-asset strategies increase risk and volatility. — Garth

#39 Son of Ponzi on 10.05.14 at 7:47 pm

In Canada, only students from rich parents can afford to attend University. Of course, Smoking Man is the exception.
To be 35 before you can benefit financially from your education is absolutely ridiculous.
In Austria and Germany an University education is free.

#40 crossboardershopper on 10.05.14 at 7:48 pm

Wait till she is 42 and wants a kid. The looser guys will gladly help her out. I have seen some intelligent women nice polite be railroaded by their biology.
She can support a deadbeat the rest of her life. I used to think it only happened to men but i have run into a few in the last few years.
A worthwhile profession means nothing if u dont have someone to share wit with. Women are always going to bejudged by their offspring who cares about an old spinster. Ive seen a bum take advantage of nice old70 year old lady. It took a long time but he finally met a lonely lady with bucks he could take advantage of.

#41 TEMPORARY® Foreign Prime Minister on 10.05.14 at 7:49 pm

12 FLAWED on 10.05.14 at 6:15 pm
“…..Govt does not create wealth, gets in the way of everything these days ………”
===========================

Wrong.

Governments (at least the un-lobbied, democratic ones) are elected to legislate a conscience on those who were born without one.

Remember the last time nurses, firefighters, etc. played casino with the entire wealth of the middle class, rewarded themselves with unwarranted outrageous, uber-bonuses and brought the whole global financial world to its knees?

Me neither.

#42 Just curious on 10.05.14 at 7:55 pm

Why no international and emerging markets ETFs?

In time. Enough diversification for just 10K. — Garth

#43 Playing4fun on 10.05.14 at 8:05 pm

For the sake of hope not all young ppl. are destined for debt slavery starting out. Our two children were included as shareholders in a holding company for our business. Unbeknownst to them, upon selling, we made sure multiple six figures were provided to each of them in trust, tax free through their own capital gains exemption.
Today we are currently still giving them an allowance and ask them to budget, citing future expenses. But, for the time being, the peace of mind for school is all ours…not theirs.

#44 deaner on 10.05.14 at 8:06 pm

The example in the post is +10k. Many younger people have negative net worth. Should a younger person wait until their student loans are 100% paid off before investing anything?

Not doing so is effectively leverage, but probably more expensive than the big guys.

I guess it depends on the rate of your loan versus expected returns?

As an aside, I initially took 15k from my LOC and put it into my TFSA as a down-payment. The mortgage guy said it just had to be there for 90 days or something before it could be used as a down-payment. I never went through with the home purchase, as I’m waiting things out. But one guy in my class did bought his East Van house that way.

RRSP, not TFSA. — Garth

#45 rower on 10.05.14 at 8:08 pm

Excellent post, Garth, and thanks for the education. I have a print copy of this one.

Linda, you are an inspiration! All the best to you.

#46 Casual Observer on 10.05.14 at 8:20 pm

#29 IloveCharts on 10.05.14 at 7:23 pm

Can’t someone just come up with a single ETF that is a balanced portfolio…

The best alternative I have found is the Mawer Balanced Fund. It’s not an ETF, but it’s no load and doesn’t pay trailer fees.

It can be bought through most major discount brokerages, except RBC (they stopped offering it because it doesn’t pay them a trailer fee).

It’s returned more than 8% over the last 10 years, and is relatively cheap compared to other funds with an MER of 0.96%.

Obviously picking your own ETFs would be the cheapest, but for a single purchase DIY balanced product, you could do worse than the Mawer Fund.

http://www.mawer.com/mutual-funds/fund-profiles/mawer-balanced-fund/

The alternative would be to use a fee-based financial advisor and let them worry about picking ETFs and re-balancing, but expect to pay about 1% per annum.

For that 1% you will (should) get a complete package of financial advice including portfolio asset allocation, retirement and tax planning, etc.

So if you need or want that kind of “complete picture” advice, a fee-based advisor would be the best way to go, IMO.

Plus the fee will most likely be tax deductible.

#47 Trojan House on 10.05.14 at 8:23 pm

Read a lot of comments from the previous blog post blaming the bankers for the problems in today’s economy. Unfortunately, I have to agree with Shaun. It is not the bankers you have to be weary of. It is the government(s).

Throughout history, everything that could be tried has been tried when it comes to how government(s) handle countries economies, social policies, etc, etc. For example, the debasing of coins goes back to Roman times and even before. All of these systems have collapsed – all of them. However, there has been one constant that remains intact thousands of years later: human nature. Unfortunately, humans don’t learn from their mistakes. You can’t blame banking problems on the creation of central banks. They were tested and tried long before 1913. Tested and tried by who? Governments of course. Think about it like this, if you were in power, wouldn’t you like to continue to be in power? Sure a president has two terms, but you can’t tell me that the Democrats wouldn’t like to retain the presidency in 1916? How about the Conservatives here in Canada? Harper is doing everything now, about a year before an election, to make sure he retains power.

Anyway, history has a lot of lessons. And by the way, Shaun, you have too much time on your hands. Try to keep the comments down to a minimum of 20 per blog post.

#48 Trojan House on 10.05.14 at 8:24 pm

Sorry, that should read “2016” obviously.

#49 Shane on 10.05.14 at 8:28 pm

Garth, when the correction starts in 2015 for the gta how much do you think a house would correct in whitby if it’s worth 650k

#50 Just curious on 10.05.14 at 8:29 pm

Another question if I may – how much in investments qualifies for a good financial advisor to make it worth his 1% while? We ditched our TD Waterhouse advisor years ago, and are self-managing our two TFSAs and two RRSPs. I heard we’d need at least half a mil before a good advisor would consider us as clients. We currently have almost 250K, so would need to double it if it’s true…

It normally gets economical above 150K. — Garth

#51 KommyKim on 10.05.14 at 8:34 pm

RE: That site is another disingenuous money-sucking scheme by the Canadian Taxpayers Federation. — Garth

Good to hear that you don’t trust them either. Now if they renamed themselves the “Canadian 1% Federation” at least they could claim to be partially honest.

#52 Arfmooocat on 10.05.14 at 8:35 pm

Maybe why Keystone is taking forever

Remember when Buffet flew over the tar sands and spit on it?

Well reading U.S. blogs on North Dakota shale revolution and pipeline vs rail, I didn’t know Buffet owned the railways and is in bed with Obama.

#53 SOS on 10.05.14 at 8:36 pm

Thanks Garth. I’m going to the bank tomorrow to apply for a line of credit which I have no intention of using and to see if I can convince them to stop auto renewing my GIC.

#54 Joseph R. on 10.05.14 at 8:37 pm

#42 Just curious on 10.05.14 at 7:55 pm
Why no international and emerging markets ETFs?

In time. Enough diversification for just 10K. — Garth

A 5-fund portfolio is 2000$ per asset class. With the average broker fee of 10$ per transaction, that 50$ to make that portfolio.

50$/10000 * 100 = 0.5% percentage in brokerage fees. Add ETF MER of around 0.30% for the portfolio and you have 0.80 % of fees (80$). Also, Brokerage firms often add an additional fee if your total assets are less than 25 000$ (15 000$ for RBC DI: http://www.rbcdirectinvesting.com/RBC:IonRGKwYUA4BGQBe2DMAAACG/commissions-fees-schedule.html) typically, 25$/quarter so that’s another 100$ a year.

In total, you are looking at 180$ in fees for that 10 000$ investment while with Tangerine, you be paying 110$ per year, which also includes quarterly rebalancing of the index funds.

So there, you come up ahead with Tangerine. For small portfolio (less than 50k) like Linda, that 1% isn’t so ridiculous. :)

The brokerage costs are tax-deductible. The orange jelly fees are not. You lose. — Garth

#55 Nemesis on 10.05.14 at 8:53 pm

#Ooops… #Or,AsMillenialDentists… #AreSoOftenWontToSay… #WouldYouMindOpeningThatUp… #JustALittleBitWider?…

[BloomBergBizWeek] – Is a Market Crash Coming? The Dental Indicator Says Yes

…”If you’re looking to predict where the economy is heading, look under your nose—right at your teeth. When times get tight, dental care slips. Tracking the performance of the nation’s dental industry, then, may suggest broader themes in the overall economy.

Sikka Software provides business health-care applications to small and midsize practices, including dentists’ offices. The company has immense amounts of aggregated data on patient behaviors, and an analysis of patients at 12,200 American dental practices suggests some early economic warning signs.”…

http://www.businessweek.com/articles/2014-10-03/is-a-market-crash-coming-the-dental-indicator-says-yes#r=hp-lst

[NoteToGT: Just between the two of us… When it comes to forecasting, I’d forget about flossing through DentalStats and focus on HemLines, instead – way more fun: http://tinyurl.com/luxcm4y …]

#56 lee on 10.05.14 at 8:55 pm

Why invest in Canadian or US corporate bond etfs at 2 to 3 per cent? Is it it better to just plop that money in preference share etfs?

Nobody buys bonds to collect interest. — Garth

#57 Happy Renting on 10.05.14 at 8:56 pm

Linda, in addition to all of Garth’s excellent advice I would add: if you aren’t married and wish to be, don’t marry the wrong person.

Divorce is a wealth-destroyer. Marry someone if you’re confident the commitment between you will last a lifetime.

Pick someone who is hard-working, responsible, and also wants to save and invest. His/her level of income isn’t as important, you’re not better off marrying someone who makes $1M a year but in the same year spends $2M.

Linda, you are doing great. Be smart managing your finances and career, and your life will overflow with options.

Garth, congratulations on being married 45 years. Though you broke my heart a little by calling 35 “middle-aged”. 40 is the new 30? ;)

#58 Shawn on 10.05.14 at 9:00 pm

Where to put $10,000?

So if Linda were to choose to invest her money in individual stocks that are priced low compared to their current or future value, which should she consider? I am looking forward to Shawn’s suggestions in particular as he has a history of picking well.

*************************************
Well we don’t usually get into individual stock names on this site. I like two of the larger U.S. banks that are not much involved in investment banking (which is helping companies sell shares in IPOs and such and to sell bonds). Each of these two is headquartered in places other than Wall Street.

All of the Canadian banks are probably okay.

With $10k and new money of $50k a year flowing in risk is of little concern, She should pray for a stock market crash even after investing the first $10k because such will benefit her. She should read Buffett’s annual letters to understand why she should not be at all bothered by a down-turn in the stock market at this point in here life.

I’d spread the $10k across two to three stocks and be prepared to embrace volatility. But she must first understand and embrace the risk. If not, stick it in a balanced ETF or balanced mutual fund. It’s $10k, peanuts for this girl who will save an additional $50k this year.

#59 Smoking Man on 10.05.14 at 9:03 pm

#39 Son of Ponzi on 10.05.14 at 7:47 pmIn Canada, only students from rich parents can afford to attend University. Of course, Smoking Man is the exception.
To be 35 before you can benefit financially from your education is absolutely ridiculous.
In Austria and Germany an University education is free….
…….

Yes and the product is superior, look at German innovation and technology.

Universities in Canada should pay students for wasting their time..

Big business is retarted here.. Most millenials grow up with computers.. Take the ones that didn’t go to school, give em a bit of training, you will have a good skill set with out having to premium wages…

I’ll bet the un schooled will be much better than the schooled..

#60 Setting the Record Straight on 10.05.14 at 9:04 pm

I ask again; Why no interest in closed end funds?

#61 Singaporean Investor on 10.05.14 at 9:22 pm

Linda, go get yourself a nice condo. Thank me later.

#62 Cici on 10.05.14 at 9:29 pm

#1 Ferrari321

Not really…she paid for an expensive education BY HERSELF (i.e., no mommy and daddy lifting her up and giving her rent, school, car, house, and other payments). And she mentioned that it was a long program.

And now she’s making six digits, knows how to save (obviously, since she’s managed to pay off the expensive education and still has something left over).

I have full confidence that she will be able to put $50,000 aside this year. If she’s really smart, she’ll continue to do that next year and the year after, while topping her investment account up in accordance with Garth’s good advice.

Kudos to Lady Linda: Keep up the smart habits, and forget about luxury cars and condos and the like…well, at least for just a little longer yet. After all, there’s no future in a depreciating car or condo, or other expensive luxury items that will ultimately just fall apart. Set yourself up now, then enjoy the freedom knowing that you’ll have a cushion should anything happen on the employment front. And, if all remains swanky and stable, you’ll be able to ensure your future family’s security (if you so choose to have a family) and probably be able to retire early (if you so choose to), and support any charities you believe in.

#63 Mr. Frugal on 10.05.14 at 9:29 pm

#58 Shawn on 10.05.14 at 9:00 pm

My guess is Wells Fargo and Bank of America. Am I right?

#64 Smoking Man on 10.05.14 at 9:33 pm

http://m.huffpost.com/us/entry/5910224

They say you shouldn’t drink and drive.. Let’s take it a step further…

Shouldn’t drink and fly a space ship… And I thought I was in pensilvania this weekend…

#65 ozy - If we all sell, will Stock market go to ZERO? on 10.05.14 at 9:35 pm

If we all sell, will Stock market go to ZERO?

hahahaha – just curious? or those “indexes” are “designed” from 10000 and up :)

#66 devore on 10.05.14 at 9:35 pm

#33 Son of Ponzi

That’s what the realtor people have been telling the property virgins.

You are not comparing apples to apples. Just because realtors don’t know what they are talking about, and miss the point, does not make debt risky. It is a complex subject, that you cannot reduce to a witty soundbite on either side.

Debt used to finance productive activities is fine. Real estate can fall into that category, because you have to live somewhere, a house you own means you don’t pay rent, so it always earns rental value. There is also the land, which in many cases increases in value predictably in the long term due to densification. But like any asset, you can overpay for a house to the point where you are misallocating capital and are going to lose money, at least on an opportunity cost basis. Just like you can overpay for a stock, or gold, or a pair of jeans.

#67 Shawn on 10.05.14 at 9:44 pm

Nobody buys bonds to collect interest. — Garth

Interesting… suggests they offer no decent return from the interest. But if of any maturity beyond a few years there is risk of a decline in value if interest rates rise. So wags have said bonds now offer return free risk.

If they are bought for stability I would rather go with a short-term cash deposit which offers 100% stability.

I explained yesterday that many bonds are bought by Zombie buyers who are mandated to buy no matter the interest. (pension funds, insurance companies, banks)

If bought as a way to bet that interest rates will fall and give capital gains, that is a dangerous idea.

If bought because they will rise when stocks fall, that is simply not always the case.

It’s hard to talk about bonds without knowing which bonds, short, long, government, corporate, junk. My comments would apply to investment grade and government bonds of say 3 years duration and longer. None of these offer any decent yield especially given the risk of a decline in value at higher interest rates.

In my view (and that of Mr. Buffett) If bonds are not attractive for their interest then they are simply not attractive.

#68 Shawn on 10.05.14 at 9:46 pm

Mr. Frugal: I think you know the answer to that.

#69 CdnFlyer on 10.05.14 at 9:50 pm

Walked by a school the other day. They had the kids all lined up ready to enter, waiting for the teacher to open the door. Those ankle biters learn obedience early. One boy was at the side, not in line. Just standing there, picking his nose. A real trailblazer. He’ll do well in this world full of obedient robots.

#70 Blacksheep on 10.05.14 at 9:54 pm

Shawn # 215,

“Blacksheep – you ask why certain things are not done at 208. But then, without knowing the answers you judge failure to do these things an injustice which is allowed to continue”

“If you have not yet achieved success in life it is not because of bankers or the monetary system.”

“Those who are most successful in life do not sit around railing about the injustice of banking or blaming others.
Change your thinking and actions to change your outcomes.”

“Sadly, a number of people who regularly post here are probably beyond help. In any case, if they are to be helped, they must help themselves and stop hurting themselves. The banks and monetary system are not their enemies. They are the enemies of their own success.”
——————————————–
Clearly, your grade school report card stated:
“Shawn reads without comprehension”

Don’t feel bad cause you don’t understand the questions.

This stuff can be confusing, huh? You didn’t need to respond with a long winded, irrelevant critique, of what you assume to be, my personal short comings.

I was attempting conversation amongst the adults, but I guess you felt left out, how cute : )

If you’d like, I can explain the questions and the answers posed?

I can type, v e r y s l o w l y, if that would help?

#71 Tom from Mississauga on 10.05.14 at 9:55 pm

And don’t count on CPP. You’ve already missed 17 years of contributions.

#72 Joseph R. on 10.05.14 at 10:00 pm

“The brokerage costs are tax-deductible. The orange jelly fees are not. You lose. — Garth”

I did not know that! I will definitely declare them on my taxes next year.

Also, Tangerine is a fruit; a small orange. The orange jelly stuff is called marmalade.

#73 young & foolish on 10.05.14 at 10:04 pm

Would it be wise to invest a 1 million dollar portfolio like Garth suggested above?

Not in a TFSA so, obviously, no. — Garth

#74 Courage and poo on 10.05.14 at 10:10 pm

Get some bitcoins and then diversify into a 100 different shitcoins. Dowload Armory and print it out, hide it, come back in 10 years

#75 Ronaldo on 10.05.14 at 10:20 pm

#52 Arfmooocat on 10.05.14

”Well reading U.S. blogs on North Dakota shale revolution and pipeline vs rail, I didn’t know Buffet owned the railways and is in bed with Obama.”

Not only that but the tank cars that he hauls the oil in. No grass growing under that guys feet. Always one step ahead.

http://www.businessweek.com/articles/2013-11-14/2014-outlook-warren-buffett-cashes-in-on-railroad-tank-cars

#76 devore on 10.05.14 at 10:23 pm

#57 Happy Renting

Pick someone who is hard-working, responsible, and also wants to save and invest. His/her level of income isn’t as important, you’re not better off marrying someone who makes $1M a year but in the same year spends $2M.

Yeah, but women think they can change their man, because, well, you know why. Of course it doesn’t work, so divorce happens.

#77 Basil Fawlty on 10.05.14 at 10:24 pm

“Get real. The CTA is a dubious outfit. — Garth”

I totally agree! In addition, is anyone else tired of being referred to as a “taxpayer” by these twits? What ever happened to being a citizen?

It would also be interesting to see their funding list.

#78 devore on 10.05.14 at 10:25 pm

#60 Setting the Record Straight

I ask again; Why no interest in closed end funds?

Lots of liquidity/premium/discount risk, for what benefit?

#79 Republic_of_Western_Canada on 10.05.14 at 10:32 pm

Nobody with just ten thousand should own individual stocks. — Garth

Wrong. Three different rate-resets in three different industries, bought at historically low prices will give you upside and unusually high returns – say up to 8.5%. For ratings of about 3-pfd.

Even ETF’s and REIT’s have to be examined in the context of past pricing and current/future fundamentals.

You have to do your homework regardless of which way you point and pull the trigger.

Foolish cowboy advice for a newbie, young, inexperienced investor. You must be insecure. — Garth

#80 Ronaldo on 10.05.14 at 10:51 pm

#76 devore on 10.05.14 at 10:23 pm
#57 Happy Renting

Happy Renting says:

”Pick someone who is hard-working, responsible, and also wants to save and invest. His/her level of income isn’t as important, you’re not better off marrying someone who makes $1M a year but in the same year spends $2M.”

Devore responds:

”Yeah, but women think they can change their man, because, well, you know why. Of course it doesn’t work, so divorce happens.”

Yes it does and the highest rate of divorce in Canada is between the ages of 55 to 59 at 47.8%. 66% initiated by the woman and just at about the time that you are thinking of retiring. Be nice to your woman and don’t spend too much of your spare time blogging or you may one day find yourself part of that 47.8%. Just saying.

#81 Son of Ponzi on 10.05.14 at 11:09 pm

Gregor Robertson & Bob Rennie.
A match blessed by the Developers of Vancouver.

#82 Retired Boomer - WI on 10.05.14 at 11:16 pm

Garth tonight’s article advice was PERFECT!!

Linda lead on, live on, invest as discussed, and prosper. No you don’t need to invest in individual stocks, Linda until you have amassed about 7 figures in investments. Individual stocks contain more risk. Then, by all means go for the bluest blue chip dividend payers to help build your own annuity if you prefer.

Someday you might look at real estate, but at 35 with mobility a key, and unneeded debt an unwanted burden, wait prices will moderate -someday- when you might b e interested in staying in one place.

Good luck, you have done superb!!

#83 Son of Ponzi on 10.05.14 at 11:17 pm

Credit is a want not a need.
Realtors tell you you need granite countertop when you actually want just a simple stove to cook a decent meal for your family.
Turning wants into needs it’s the snake oil salesman’s job.
Beware!

#84 Calgary = done on 10.05.14 at 11:17 pm

http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/slowing-global-growth-drives-down-oil-prices/article20899893/
http://www.cbc.ca/news/canada/calgary/statoil-decision-to-shelve-oilsands-project-is-concerning-prentice-says-1.2779952

And today we have this PR gem
http://www.calgaryherald.com/business/Ewart+falling/10261557/story.html

#85 james on 10.05.14 at 11:21 pm

#39

“In Canada, only students from rich parents can afford to attend University.”

Empirically, this is obviously false. Very few students at University have rich parents.

Tuition in Canada is not that bad. Barring UofT law and a few other programs, it is not at all out of reach, and represents only a fraction of the true cost of putting a student through a program.

“To be 35 before you can benefit financially from your education is absolutely ridiculous.”

For most people, yes. If you are a physicist or cardiac surgeon, it is going to be a long time before you are at the proper level in terms of skill and accreditation to be marketable. Particle physics is not a 2 year training regimen.

Now, someone with a BCom should be able to work soon after graduation.

“In Austria and Germany an University education is free.”

Yes, and in Greece, Italy, many places in the middle east, etc. There are also legions of unemployed and underemployed university graduates in many of those countries. German graduate students tend to be pretty weak, the same with Italy and Greece. Why? Because there are no jobs, and since everything is free students have an incentive to stay in school even when they may not be particularly good at their craft.

The grass is always greener on the other side of the fence. Take a trip to those european countries with free tuition and get the other side of the story.

#86 Jon B on 10.05.14 at 11:31 pm

The stats paint a bleak picture about the personal finances of the average Vancouverite. But take a drive into the city and it’s all luxury cars, busy stores and shiny happy people. What am I missing?

#87 Terrier on 10.05.14 at 11:34 pm

Linda, you mentioned you’re globally mobile? This is my advice … find yourself a nice nest, somewhere in a southern hemisphere, place where you can work and live. With extra cash buy a decent health care insurance and bring your mom and granny with you. Keep it cool for a decade or two …

#88 Hawk on 10.05.14 at 11:41 pm

#14 FLAWED on 10.05.14 at 6:19 pm

Links please?

#89 Son of Ponzi on 10.05.14 at 11:49 pm

#85 James
Now, someone with a BCom should be able to work soon after graduation.

“In Austria and Germany an University education is free.”

Yes, and in Greece, Italy, many places in the middle east, etc. There are also legions of unemployed and underemployed university graduates in many of those countries. German graduate students tend to be pretty weak, the same with Italy and Greece. Why? Because there are no jobs, and since everything is free students have an incentive to stay in school even when they may not be particularly good at their craft.

The grass is always greener on the other side of the fence. Take a trip to those european countries with free tuition and get the other side of the story.
———–
Tired of ignorant Canadians comparing Germany and Austria with Greece and Italy, only because they are part of the Euro.
James, I visit my relatives in Austria at least once a year, and yes, the grass is greener over there.

#90 Son of Ponzi on 10.05.14 at 11:52 pm

#86 Jon B on 10.05.14 at 11:31 pm
The stats paint a bleak picture about the personal finances of the average Vancouverite. But take a drive into the city and it’s all luxury cars, busy stores and shiny happy people. What am I missing?
————
What are you missing: HAM.

#91 Shawn on 10.06.14 at 12:06 am

A Changed Man

Devore at 76 said:

”Yeah, but women think they can change their man, because, well, you know why. Of course it doesn’t work, so divorce happens.”

*****************************************
A hot wife may respond: “My Man will change or I will change my man.”

#92 KommyKim on 10.06.14 at 12:08 am

RE: #65 ozy – If we all sell, will Stock market go to ZERO? on 10.05.14 at 9:35 pm
If we all sell, will Stock market go to ZERO?

No, because to sell, someone has to buy. Unless you want to GIVE me all your stocks for $0. Think about it. If you sold me Royal bank stock at $2.84 a share, the dividend payout for me would be at 100% per annum .

#93 Mike T. on 10.06.14 at 12:11 am

Blacksheep:

I don’t mean to get into it with you and ‘Shawn’?

He’ll never get it – he benefited from the slave system. Lots of people do.

He is the perfect example of Goethe’s ‘No one is more a slave than he who falsely believes he is free’.

He’ll never know what pyramids are really for, how fractals are the basis of creation, that fractional lending is…dangerous? That in a proper world you don’t need ‘doors’ because when you think of a door a door appears.

I have known tons of these people. They like this world. In order for us to have our experience here, they have to exist. We should thank him, and all those like him.

And sure yeah – I am crazy – according to ‘the real world’, and that’s fine with me. I have so long ago forgiven any ridicule thrown my way.

I hope this message finds you well.

#94 omg on 10.06.14 at 12:26 am

THE AMERICAN ECONOMY

Never BET AGAINST the US.

I just returned from my organization’s annual meeting. We provide totally discretionary services mainly to individual home owners, landlords and small businesses. From that perspective we are a good gauge of the the average guy is doing.

Since the recession I have made a point of asking my American colleagues how things are down in their areas.

The story has been the same YEAR AFTER YEAR for the past 4 years – things continue to IMPROVE, people are SPENDING money on new things and fixing up old. Its not on fire but its recovering, but some areas like the midwest are still suffering.

I know a lot of people that did not participate in the massive recovery of equity markets over the past 5 years and that is too bad.

But I think we are going to see more of the same in terms of US recovery and that will spill over into the world economy.

BET AGAINST THE AMERICAN SYSTEM OF WEALTH CREATION AT YOUR PERIL.

#95 omg on 10.06.14 at 12:35 am

#4 CPG

………..generationscrewed.ca

http://www.generationscrewed.ca
———————————————
That site is another disingenuous money-sucking scheme by the Canadian Taxpayers Federation. — Garth

————
Disingenuous and Money Sucking! – just like the politicians they are railing against!!

#96 Barry on 10.06.14 at 12:56 am

Yes – it’s nuts to buy a home in Vancouver today. White Rock is cheaper and an hour away by bus/sky train.

I own my own condo outright in WR, and Garth is right about the costs ( and feeling “special” about the “assessments”) but since I haven’t any debt it works well enough for me.

For investments – In my non registered account, CDN dividend paying stocks with a long history of raising their dividends (CN Rail, Fortis, CDN Utilites etc) is the strategy I’ve been using for years. You want to keep them here … the income is tax free up to $45,000 (BC) if you have no other income source. For your RRSP put your American dividend growth payers (JNJ MCD) since there is no US withholding taxes (15%) and you would have to pay regular tax on the rest anyway. REITS should go in your TFSA since a sizable portion of the distribution is Return of Capital (sometimes up to 90%!) which you would have to pay Capital Gains taxes on when you sell it in a non registered account. Ia TFSA there are ZERO tax consequences.

#97 Small Business on 10.06.14 at 1:21 am

What I do:

Every stock I own pays me a dividend. If it doesn’t pay me a dividend that I don’t want it. You take that dividend and you put it back into your investment account. Once you have hit 6 digit territory the dividends start to roll in and it is beautiful when you realize that many of the future stocks you purchase were paid by the dividend of another stock. Buy safe companies with a good history. Do your home work.

Always pay yourself first. Invest something every month.

Go big and go quick so you can get compounding working for you.

#98 tren on 10.06.14 at 1:25 am

Long time lurker here

Parents just gifts 300k cash… planning to buy a house and have kids. What’s wrong with that?

#99 wellimaybeabitoff on 10.06.14 at 1:30 am

“Why don’t we just send you cheques? — Garth”

Your point is like anything, becoming good at something takes work. Well what if I don’t want to waste one iota of my brain power learning the rules of a rigged sadistic game, so that I may scuttle under the table like a roach, trying to get lucky on the crumbs that drop from the roulette wheel played above by dynastic fat cats.

We shouldn’t have to play these insane, whimsical fanciful games with money, when the end goal is the same for most people: do not end up on the street eating catfood. Tax the corporations, tax the rich at 80% (like america did to break out of the depression) and give me a guaranteed, including cost of living increases, government cheque at 55 (if i make it) for the god damn cpp that i have been paying into my whole god damn life.

If france can figure out a decent pension plan, guaranteed weeks of vacation, subsidized daycare and mandatory full pay maternity leave, i’m sure we can.
Why play these games? Elect someone who will fix the system next time. We need a whole system audit, not to simply get a rush as we pick up speed, riding the coattails of the titanic all the way down.

#100 FLAWED on 10.06.14 at 3:24 am

#34 Shawn

READ the entire article from Saturday. I read you have a problem with READING these days

#41 TEMPORARY® Foreign Prime Minister

Thank’s for cherry picking 0.28% of the Public Service. Now…..about those 90% of lazy useless pencil pushers who do nothing make nothing accomplish nothing to make the economy better – in fact quite the opposite is true (less than 10% of the public service are FRONT LINE workers – nurses, teachers, firefighters etc)

The more taxes the Govt sucks away to regular working family in BC (60% in taxes) the WORSE they are for the economy as they have no money left to drive the economy. Especially when at the same time there are CUTS CUTS CUTS CUTS everywhere but yet somehow taxes keep going up.

In essence…….the Public Service is allot like Ebola – a parasite which eventually kills its host – the taxpayer. Because of course Public Servants don’t pay taxes. NO they don’t. They are PAID with taxes. A Public Servant getting some bloated 100K salary would still receive the same salary if they did not bother taking taxes off and paying them 60K or whatever it is. You can’t pay taxes if you are paid with taxes. They cancel each other out. Only the private sector pays taxes which pays the Public Service and their CUTS CUTS CUTS to the Public.

Enter Shawn to tell me I’m wrong with some goofy accounting statistic…….

You have been banned from this site three times in the past under different names for your hatred and vitriol. Go pollute another blog. — Garth

#101 FLAWED on 10.06.14 at 3:29 am

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#102 FLAWED on 10.06.14 at 3:32 am

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#103 FLAWED on 10.06.14 at 3:39 am

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#104 FLAWED on 10.06.14 at 3:41 am

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#105 Basil Fawlty on 10.06.14 at 6:31 am

“Don’t get extreme.
If you read this pathetic blog, you know what I mean. In our midst are Tea Party whackjobs who hate the banks, bullion-licking gold cultists, America-hating anti-corporationists and whimpering risk-averse GIC-huggers who don’t understand that running out of money is the big fail.”

Hyperbole aside, don’t be afraid to think outside the box. Nothing is as it seems.

#106 maxx on 10.06.14 at 7:10 am

#1 Ferrari321 on 10.05.14 at 5:04 pm

“Shocker that she only has 10k to her name”

Perhaps, but given her intelligence and resolve, she won’t stay at 10K for long. My prediction is that she will retire a multi MM.

#107 Inglorious Investor on 10.06.14 at 7:48 am

#99 wellimaybeabitoff on 10.06.14 at 1:30 am

Have you looked at France lately?

#108 Nomad on 10.06.14 at 8:24 am

“CMHC’s Zielonka on Covered Bonds, Securitization, Housing”

Garth is there anything interesting to comment about on this Bloomberg video?

http://www.bloomberg.com/video/cmhc-s-zielonka-on-covered-bonds-securitization-housing-hmbZjetbR7ShJPdQ8pq_kw.html

Got the link from Twitter: ‏@CdnMortgageNews: 40% of fixed rate Canada Mtg Bonds are bought by foreign investors. 8% by central banks.

Is CdnMortgageNews saying that 40% of fixed rates mortages are owned by foreigners? No way.

#109 Kevin on 10.06.14 at 8:28 am

Now that you’re working, go see [email protected] and get approved for a personal line of credit. She’ll easily give you one for $25,000 or fifty grand, which means if there’s ever an emergency, just write a cheque.

In what world does it make sense to immediately plunge deep into debt upon losing your job? When faced with the disappearance of your income, debt is the last thing you need.

Save up 2-3 months’ worth of expenses and hold it in cash as an Emergency Fund. Invest everything else.

A LOC is not debt, unless you spend it. This makes infinitely more sense that sitting on three months’ worth of income earning nothing, in case you encounter a problem. Do you understand what a line of credit it? Apparently not. — Garth

#110 Nomad on 10.06.14 at 9:09 am

Perspective from investment industry on Canadian housing:

“It’s the longest period in my 15 years career I haven’t seen a housing correction”

“When the shoebox condo market cracks, it’s going to be ugly.”

“When Flaherty died, banks rates went back below 3%, nobody cared”

“The shoebox condo is a piece of cement with a hole in it”

http://www.bnn.ca/Video/player.aspx?vid=459834. Advance to 3:15.

#111 gmc on 10.06.14 at 9:22 am

yes and Mr Buffet also purchased 130 tons of silver, just saying.
my grand dad always said have 10% in real money (gold and silver) and gamble the rest with the new fandangle financial instruments, ask Blyth Masters, her CDO worked wonders for some….. NOT.

just saying
i have a balanced portfolio, plus some awesomely cheap Canadain junior mining compnaies in my TFSA , why not , That part I don’t get about Garth, all my family has had a great life and benefits working in the mining industry, Garth loves to see the Bay street boys kill these good companies, I know most are scams but a lot are not, check them out, ER in quebec, NVO, in ausiie land, and don’t forget all of the up and coming mining companies in north west BC, once BC hydro finishes their new transmission line it will open up many new mines, Check out Pertium, I am from the Holinger mining camp and proud of that heritage, many have made good there, hard working people and honest living, stick that in your TFSA.
cheers retired 52, new wife 36, cost of living is cheap, and food is great, never any winter and all are welcomed. A person can live confortably on $1000/month.

and presenlty live in Thailand, $17 for a round of golf

#112 Kevin on 10.06.14 at 9:42 am

A LOC is not debt, unless you spend it. This makes infinitely more sense that sitting on three months’ worth of income earning nothing, in case you encounter a problem. Do you understand what a line of credit it? Apparently not.

No, I get it, it sits there doing nothing, costing nothing, until you have an emergency. Like losing your job. Then your advice is to start borrowing from that line, racking up debt at the worst possible time – when you’ve lost your ability to repay it.

Also, LOCs can be revoked at the bank’s discretion (such as, for example, if they get wind of the fact that you’ve lost your job).

While I appreciate your desire to minimize the amount of “dead money” just sitting around collecting dust, I think 2-3 months’ worth of expenses is not a lot of money in the grand financial picture, and it’s worthwhile insurance. Not every single penny of your money has to be maximized. Worry about squeezing returns out of the rest of your portfolio, but the Emergency Fund’s job isn’t to generate a return – it’s to act as catastrophic insurance. It’s paramount that it be completely liquid and non-volatile.

An emergency fund is a total anachronism. — Garth

#113 Inglorious Investor on 10.06.14 at 9:45 am

#109 Kevin on 10.06.14 at 8:28 am

I believe debt instruments should only be used for wealth-building purposes, unless it utterly cannot be avoided (bad things can happen). I agree with you that a reserve fund is better than a LOC. I don’t see why a reserve fund has to earn nothing when today you can invest it in a pretty safe instrument life a less risky ETF in a non-registered account. You can sell the ETF and transfer the money into your chequing or savings account in a few days at most.

Also, building the reserve fund requires more discipline. Indivudual circumstances aside, if one relies on a LOC as a crutch, one is more apt to spend with less discipline.

This goes to the whole idea of saving for retirement. Not spending money, and saving/investing it instead, is just as important as earning it. Al other things being equal, the person who makes $30,000 per year but saves/invests $5,000 can retire earlier than the person who makes $500,000 per year but spends it all. Mind you, the $500,000 earner will certainly have a better lifestyle up until then.

#114 Kenchie on 10.06.14 at 9:58 am

Gov’t support of SMEs is outsized (in the UK) compared to their importance to the economy.

http://www.economist.com/blogs/schumpeter/2014/02/invitation-mariana-mazzucato

#115 Mark on 10.06.14 at 10:06 am

“Parents just gifts 300k cash… planning to buy a house and have kids. What’s wrong with that?”

A terrible investment, to use $300k to buy a house instead of a portfolio that will, at current prices, kick off $30k/year in return (stock market is currently priced for a 10-12% annualized rate of return). But if you have money to spare, go for it.

#116 Herb on 10.06.14 at 10:15 am

#39 Son of Ponzi and #59 SM,

what North Americans don’t realize about the German and Austrian higher education systems is that you are selected for them at age 14. At that point in public school education, the school decides on the basis of performance and record whether a student will continue to the academic stream in a Gymnasium, or become a Smoking Man in the trades apprentice system.

It is not democratic and no doubt unfair to late bloomers, but it works and is affordable. There are fewer but better students in universities, and tradesmen are properly trained and qualified.

(Interesting aside for blog dogs: there is only one profession in the German professional structure that is not regulated and has no training or qualification requirements. You guessed it: real estate!)

#117 liquidincalgary on 10.06.14 at 10:31 am

You have been banned from this site three times in the past under different names for your hatred and vitriol. Go pollute another blog. — Garth

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

thank you

#118 Daisy Mae on 10.06.14 at 10:38 am

#86 Jon B: “The stats paint a bleak picture about the personal finances of the average Vancouverite. But take a drive into the city and it’s all luxury cars, busy stores and shiny happy people. What am I missing?”

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

Leased vehicles and lots of credit?

#119 hawn on 10.06.14 at 11:13 am

what Am I Missing?

#86 Jon B: “The stats paint a bleak picture about the personal finances of the average Vancouverite. But take a drive into the city and it’s all luxury cars, busy stores and shiny happy people. What am I missing?”

*****************************************
You are missing out?

You are missing the fact that the people with luxury cars doing the shopping are not average.

A good coping mechanism for those not doing as well is to imagine that almost everyone with the luxury cars is living on credit and living a “fake” life. Some are, most may not be. But whatever helps you cope…

#120 Garths ETF List on 10.06.14 at 11:18 am

(a) the S&P 500,

XSP iShares Core S&P 500 Index ETF (CAD- Hedged)

(b) the TSX 60,

XIU iShares S&P/TSX 60 Index ETF

(c) a basket of preferred shares,

CPD iShares S&P/TSX Canadian Preferred Share Index
ETF

(d) real estate investment trusts and

XRE iShares S&P/TSX Capped REIT Index ETF

(e) a Canadian bond index.

XCB iShares Canadian Corporate Bond Index ETF

#121 kommykim on 10.06.14 at 11:25 am

RE:#101 FLAWED on 10.06.14 at 3:29 am
DELETED
. #102 FLAWED on 10.06.14 at 3:32 am
DELETED
. #103 FLAWED on 10.06.14 at 3:39 am
DELETED
. #104 FLAWED on 10.06.14 at 3:41 am
DELETED

And the “deleted” achive gets a little bigger. LOL!

#122 Son of Ponzi on 10.06.14 at 11:28 am

A LOC is not debt, unless you spend it. This makes infinitely more sense that sitting on three months’ worth of income earning nothing, in case you encounter a problem. Do you understand what a line of credit it? Apparently not. — Garth
—————–
Of course it’s not debt until you spend it on useless stuff rather than use it for emergency.
That’s why the banks indulge us.
They know we are weak.
BTW I’m guilty as charged as well.

#123 Son of Ponzi on 10.06.14 at 11:31 am

An emergency fund is a total anachronism. — Garth
———-
It is.
Until you need it.

What about an unsecured, personal line of credit do you not understand? — Garth

#124 Son of Ponzi on 10.06.14 at 11:39 am

#116
Interesting aside for blog dogs: there is only one profession in the German professional structure that is not regulated and has no training or qualification requirements. You guessed it: real estate!)
——————
Fortunately for the Germans, only about 50% of them own homes, and those who do tend to stay in them for a long time.
Therefore, the destructive influence of Realtors is minimal.

#125 kommykim on 10.06.14 at 11:44 am

RE: LOC vs emergency fund

I guess another method would be to open a margin account and borrow against your investments if needed. This can blowback really badly if you get laid off during a recession so you’d have to be careful not to borrow too much.

An LOC is cheaper. — Garth

#126 Mike S on 10.06.14 at 11:45 am

“I’m sure tax rates on withdrawals will be higher than the break currently offered”

I’m not sure how can you be sure of that. tax rates might go up in the next 1-10 years, but after some level they become inefficient, so they might as well go down 30 years from now

Anyway for a young 6 digit earner it is an efficient tax shift mechanism. Say if one wants to finance a maternity leave (or a couple) and/or have that around the world trip. Anyway, what is the probability to keep earning that nice salary each year out of next 30?

#127 IM in C on 10.06.14 at 11:46 am

An emergency fund is a total anachronism. — Garth

Until you actually need one

Then you use your LOC. — Garth

#128 Mixed Bag on 10.06.14 at 12:02 pm

#1 Ferrari321 on 10.05.14 at 5:04 pm

Shocker that she only has 10k to her name

Did you not read the article? Or just trying to be first?

Pfft.

#129 Mixed Bag on 10.06.14 at 12:06 pm

#10 not 1st on 10.05.14 at 6:10 pm

Garth, you must have been smoking something today. Someone with no physical assets will never qualify for a $50k credit line. Not unless you go to a shark.

Assets are lent against, not the promise of a paycheck.

An unsecured LOC is widely available. Maybe you just look a like a homeless dude. — Garth
——————–

I know a couple who were able to get a mortgage while both were unemployed, this was in the late 90’s. They were surprised themselves, but the bank told them, you’re both , and expect you are employable at a good salary.

#130 Mike S on 10.06.14 at 12:14 pm

“Can’t someone just come up with a single ETF that is a balanced portfolio instead of having to buy five or six different products in two different currencies and then re balancing them all the time?”

Why? It is not really that hard to manage
But the more important part is that the various asset classes should go to various accounts to maximizing the tax benefits. The decision what gets where is personal and depends on age/salary/net worth/… No one fund can do it equally good for everybody

Moreover if your net worth is only 10K, and you don’t expect it to be significantly increased any time soon, there would be no benefit in going to etfs

#131 OttawaMike on 10.06.14 at 12:22 pm

RE sales rebound in many Canadian markets for September.

Sorry but no melt yet.
Risk on! Party on CANADA!

#132 Son of Ponzi on 10.06.14 at 12:29 pm

#123 Son of Ponzi on 10.06.14 at 11:31 am
An emergency fund is a total anachronism. — Garth
———-
It is.
Until you need it.

What about an unsecured, personal line of credit do you not understand? — Garth
———–
I have a LOC. 15k.
Maxed it out a while ago on non emergency things.
Guess many other are in the same situation.
Just to tempting.

#133 Son of Ponzi on 10.06.14 at 12:33 pm

So, Rob Ford used the K word. Many people will wonder what the K word is.
We know the F word and the N word.
Soon somebody will use the L word, and the X word.
Until the Alphabet is used up.
We’ll be all talking in code.

#134 FLAWED on 10.06.14 at 12:39 pm

DELETED

#135 T.O. Bubble Boy on 10.06.14 at 12:41 pm

Can’t you have “cash”-type investments that are also your emergency fund?

i.e. keep a small percentage (5% or less) of investments in money market or similar. So, with $200k total assets you have $10k in cash – then probably reduce the percentage from 5% as total portfolio grows.

Why would have any money making 1.5% when you can earn four times that amount invested, and have the bank ready to give you money with no standby charge should you need it? Why are we even having this LOC conversation? — Garth

#136 Sam on 10.06.14 at 12:46 pm

Thanks for this post, Garth! I discovered your blog a few weeks ago, and have been following it religiously ever since!

My situation is actually very similar to Linda’s. I’m in my early 30’s, who just got out of debt completely and is now looking to invest about $40K a year. I have about $40K in my RRSP that is invested in an actively managed mutual fund through my work. They currently match 5% and I put in 5%. I can’t move my investments until I leave the company.

I started only learning about investing and was going to invest my money by maxing out my TFSA contribution limit via TD’s e-series index funds (25% CDN bonds, 25% CDN index, 25% international and 25% US). The MER is from 0.33-0.52 only. I never looked into ETFs because I thought that it only made sense for people who have $100K+ portfolio. From reading today’s post, I guess I’m wondering if I should look at ETFs instead of TD’s e-series. I plan to take the Couch Potato approach and just rebalance once a year. With the interest rates set to go up, I’m also not sure if I should be investing 25% of my portfolio in the Canadian bond index right now, or just put it into a regular TFSA account with 1.33% return, to be on the safe side. TIA for your help!

#137 Aj on 10.06.14 at 12:47 pm

@ #75 Ronaldo

Your very right, Buffett does own lots of rail interests in CP and BNSF which should not be a surprise why pipelines get so much opposition from Obama.
If you want to really find something interesting, find out what billionaire has grabbed a good share of CN rail.

#138 Shawn on 10.06.14 at 1:03 pm

Bill Gates owns CN shares

AJ at 137

If you want to really find something interesting, find out what billionaire has grabbed a good share of CN rail.

*****************************************
Yeah, Bill gates, he has been the largest shareholder for 10 years maybe more. Dates back to before oil by rail was much of a topic.

People should have been following his wise move then instead of finding it “interesting” well after the fact.

There was a silly post yesterday about Buffett spitting in the oil sands. Never happened.

#139 Reasonfirst on 10.06.14 at 1:12 pm

“I suggested a bank-owned, not basement, brokerage. And paying over 1% for no human guidance is ridiculous. — Garth/em>”

I’m not sure my ability to pick humans is any better than my ability to pick stocks….

#140 gladiator on 10.06.14 at 1:16 pm

Shall we clarify the purpose and method of using a LOC?

The bad times may come or may not come at all. Since you have this element of uncertainty, the best way to deal with it to invest your money in liquid assets, but also have a LOC with a balance of zero. If you need funds urgently, you borrow from the LOC and get those funds instantly – to cover urgent expenses, then you take your time to review your portfolio and decide which holdings to sell in order to cover the amount borrowed. While you may sell the liquid assets in a moment, you may have to make a hurried decision on what to sell, the settlement or the transfer of funds from the investment account into your chequing account may take time, etc. The LOC resolves the issue of urgency, as well as serves as a nice way to have access to funds while your hard-earned money keeps growing.

This is my view on it. I do have a 25k LOC with a zero balance specifically for this situation.

#141 George on 10.06.14 at 1:18 pm

Garth, what do you think about investing into US preferred ETF (NYSEARCA:PFF)

http://www.ishares.com/us/products/239826/ishares-us-preferred-stock-etf

Thanks

#142 kommykim on 10.06.14 at 1:33 pm

RE:#136 Sam on 10.06.14 at 12:46 pm
I’m also not sure if I should be investing 25% of my portfolio in the Canadian bond index right now, or just put it into a regular TFSA account with 1.33% return, to be on the safe side.

One option is to buy TDB8150, TDB8155 or TDB8159 if you are using TD’s discount brokerage and want a low but 100% safe return for the fixed income side. It will make it easier to rebalance if you keep it all in one TFSA account.
A bit more risky is a short term bond ETF/fund.
Or go with a mix and sell the bonds when they are up or use the “cash” to buy on sale equity ETFs if bonds are down at the same time.

#143 Nemesis on 10.06.14 at 1:33 pm

#@BasilFawlty/77…

“What ever happened to being a citizen?” – Basil Fawlty

The short answer, Basil… is that – linguistically and practically speaking – “Citizen” implies personal agency whereas, “TaxPayer” connotes passive consumption…

The companion questions to yours are, naturally enough, “Who got that ball rolling… and why?”

For the Who&Why… you may well enjoy the following:

[TheTyee] – Meet the People Who Made Possible Stephen Harper’s Reign: An excerpt from Donald Gutstein’s new book ‘Harperism.’

http://www.thetyee.ca/Opinion/2014/10/06/Reign-of-Stephen-Harper/

#144 Inglorious Investor on 10.06.14 at 1:53 pm

#132 Son of Ponzi on 10.06.14 at 12:29 pm

” I have a LOC. 15k.
Maxed it out a while ago on non emergency things.
Guess many other are in the same situation.
Just to tempting.”

And you are not alone, oh Son of Ponzi. The psychology of money is just as important as the mechanics of investing. There is nothing wrong with a line of credit if you can use it responsibly. I, for one, use credit all the time. But in all my years I have never paid a penny of interest. Why, because I do not buy that which I cannot afford. But, alas, I fear most people would find the crutch of ready cash too tempting to maintain the required discipline and not get into a situation where you would need the LOC in the first place. In other words, the LOC creates its own demand.

Another thing…
Every time you go to the bank, everyone who works there is trying to ram a line of credit down your throat. Now, I operate by the simple rule that when someone is trying to sell you something you don’t really need, then chances are the sale will benefit the seller far more than the buyer. And indeed, it is very likely that buying the product or service in question will actually be to your detriment. LOCs are one potential example. Extended warranties are another.

And the latest thing? Identity theft insurance from credit card companies.
“But sir, you do realize that identity theft is the fasting growing crime, don’t you? And if you don’t get identity theft insurance right this instant you will suffer horrendous pain; the Earth’s mantle will collapse; the sky will fall; strange matter will swallow the Earth; and ISIS will nuke America. You don’t want to be responsible for ISIS nuking America, do you, sir?”

#145 nobody on 10.06.14 at 1:58 pm

#99 wellimaybeabitoff on 10.06.14 at 1:30 am

“We shouldn’t have to play these insane, whimsical fanciful games with money, when the end goal is the same for most people: do not end up on the street eating catfood. ”

Well said, unfortunately most here including the host don’t get it.

#146 bigtown on 10.06.14 at 2:04 pm

In my immediate family in Toronto I know of three adults who share one house…this allows them to live well and keep most of their income unlike many who make $60,000 per year in the GTA and spend close to 50% of income on housing.

#147 Holy Crap Wheres The Tylenol on 10.06.14 at 2:13 pm

#59 Smoking Man on 10.05.14 at 9:03 pm

#39 Son of Ponzi on 10.05.14 at 7:47 pmIn Canada, only students from rich parents can afford to attend University. Of course, Smoking Man is the exception.
To be 35 before you can benefit financially from your education is absolutely ridiculous.
In Austria and Germany an University education is free….
…….

Yes and the product is superior, look at German innovation and technology.

Universities in Canada should pay students for wasting their time..

Big business is retarted here.. Most millenials grow up with computers.. Take the ones that didn’t go to school, give em a bit of training, you will have a good skill set with out having to premium wages…
I’ll bet the un schooled will be much better than the schooled..
____________________________________________

Smoking Man can not say that for sure as I can think of many unschooled people out there that will do better than the schooled. What you fail to realize is that if you have an educational background you have more opportunities unfold before you. Unschooled (basic education) on your CV automatically precludes you from some of those opportunities. Having said that the two have nothing to do with DIY, or self-motivated individuals who by choice or by folly have to improvise and create their our career.
Case in point my wife taught a very nice young man in grade 12 who had a very bright future in hockey. Drafted to a team the whole enchilada. He was not however that bright when it came to academics. Which is OK we are not all brilliant Einsteins. Anyway he dropped her math class, dropped an English class and concentrated on his career path in hockey. This poor kid had a crash into the boards one day at a game in Michigan and wham-mo his shoulder was done, as was his hockey career. He never did finish his grade 12 and came back to the school to take night classes and then perhaps attend collage. He suffered out there for two years trying to get jobs and all he could do was general labour and due to his injury couldn’t even do that well. This kid was not that stupid as even he recognized that you need education to better yourself.

#148 Herb on 10.06.14 at 2:14 pm

#124 Son of Ponzi,

yes and no! Realtors in Germany extend their “destructive influence” to rentals, collecting a commission of two or three months’ rent – from tenants! No doubt one of a number of good reasons why Germans don’t move frequently.

#149 bigtown on 10.06.14 at 2:21 pm

This young 20 and 30 something generation starting out is not the first one to encounter late starts or finish off better by taking divergent routes to success.

IN Emile Zola’s title: MONEY is as close to our present story as France is to late 19th century Parisian wealthy offspring living with their parents after being very well educated and unable to find gainful employment. This was during the Second Republic when France was at war with Prussia(1870). The young adults did not have much choice: army or find someone with a good DOWRY to marry. So this issue of young people having it hard is as old as the hills.

Of course, now dowry is something out of the old countries and cultures and not so much in the West. But anyone believing that the young have it hard ought to pick up Emile Zola. In Money we see the French all over the MIDDLE EAST building the Suez Canal and there was a big stink with the British who objected to the Egyptian use of slave labour.

It is funny how everything repeats.

#150 None on 10.06.14 at 2:45 pm

Hey FLAWED. Gov’t people do pay taxes. You’re just too blind to see that.

I went to school with one of the Canadian Taxpayer’s area directors. It was amazing how the guy could not even stop towing the party line for even the most casual conversation. As I said, we went to school together, so from time to time we had casual conversations in the hall, etc. and even though he knew many of his classmates were Civil Servants, or public workers, he constantly ranted against them both outside the classroom and in it. It was amazing how one-sided he was. When a few of us did some research into the CTF and pointed out that it’s not a grassroots organization owned/directed by members, but rather than a board of corp. elites his response was that we were just a bunch of leftists who preferred to have our lives directed by a Nanny State. As you’ve probably guessed, not many folks wanted to get stuck in a group with him.

#151 Son of Ponzi on 10.06.14 at 2:50 pm

Article in G&M:
“Hewlett-Packard splits into 2 companies, lay off 5,000 workers”
——————–
Strange. Usually, you lay off workers in a consolidation of operations.

#152 Kenchie on 10.06.14 at 2:58 pm

“The proportion of men ages 25 to 29 able to support a family of four at the poverty line dropped from 78 percent in 1970 to 47 percent in 2012, according to Ruggles’s research. Even with the rise of dual-income households, this has had an effect, he said.”

http://www.bloomberg.com/news/2014-10-06/in-seinfeld-nation-millennials-delay-marriage-for-selfie.html

#153 Blacksheep on 10.06.14 at 3:20 pm

Mike T # 93,

Thanks for the support. I must admit, your post was a little over my head.

I fully support parties sharing their independent thoughts and opinions, as this is a fairly open forum (thanks to our gracious host) and as adults, can discuss just about anything.

I’ve heard the word ‘censorship’ tossed about here now and then, but of course is not the solution.

Accordingly, I absolutely despise any one telling me or others, what to believe or do, or what not to believe or do (Garth aside, his blog). Propose your idea and be prepared to explain / defend your position if factually, incorrect. Beyond that, let critical thinkers do what they do best.

When misinformation is intentionally posted, over and over, even after already being clarified in previous conversations here, I can’t help but question the posters intent.

I believe this forum has a significant enough influence on the financially minded population to make it an attractive platform for the spreading of propaganda, masked as an anonymous parties opinion.

Rant over.

#154 devore on 10.06.14 at 3:31 pm

#116 Herb

(Interesting aside for blog dogs: there is only one profession in the German professional structure that is not regulated and has no training or qualification requirements. You guessed it: real estate!)

I think people who complain about MLS and Canadian realtors and their practices, need to get acquainted with the Austrian real estate system. It’s downright barbaric. Lets be thankful for the small things.

As a totally side aside, I used to go to school in Austria for about a year, but I was yet too young to go through the gymnasium/trade school split. It’s basically the equivalent of our high schools. Yes, university may be free, but because it is free, it is government controlled, so you have to be able to jump through all their hoops and pass all their tests and satisfy all the bureaucrats in your way before that benefit is dispensed to you.

#155 Sheane Wallace on 10.06.14 at 3:48 pm

Hating a whole asset class is one thing.

Advocating against it and calling every investor in it names is rather strange.

I know it is Canada after all but can we have some respect, shell we?

Go peddle your gold elsewhere. — Garth

#156 Mike S on 10.06.14 at 3:51 pm

“A terrible investment, to use $300k to buy a house instead of a portfolio that will, at current prices, kick off $30k/year in return (stock market is currently priced for a 10-12% annualized rate of return). But if you have money to spare, go for it.”

How so? Didn’t you expect deflation to happen in Canada?

#157 Shawn on 10.06.14 at 3:54 pm

Blacksheep’s irony

Blacksheep says:

When misinformation is intentionally posted, over and over, even after already being clarified in previous conversations here, I can’t help but question the posters intent.

************************************
You are talking about your own misguided views on banking that you keep posting, correct? The list of totally wrong and dangerous-to-wealth conclusions that you have posted would be very lengthy indeed.

Did you write that as a kind of apology, has the self help group had its first meeting and the first step was admitting you were wrong? Good then.

#158 Sheane Wallace on 10.06.14 at 3:58 pm

I am sorry,
I have no gold. So that hatred should be redirected somewhere else.

A smart guy on this blog yesterday bashed gold and I asked him in a post to leverage short it (in particular GDXJ) to prove his guts. He would have lost 10 % today. Of course that post was deleted.

I know that we need to respect our employers Garth and that whoever pays orders the music but can we have some professional ethic please?

#159 Mark on 10.06.14 at 3:59 pm

“How so? Didn’t you expect deflation to happen in Canada?”

P/E of the TSX is around 15 at current prices. Invert, and add nominal GDP growth of 2-4%/year (which should be reflected in earnings growth). 1/15 + (2-4%) ~= 10%/annum.

Yes there will be deflation in the domestic “consumer” economy, but very few TSX components are significantly exposed to such in a negative way. Banks actually stand to benefit significantly. As will gold miners if deflation is a worldwide theme.

#160 JuliaS on 10.06.14 at 4:00 pm

I’m in a similar situation to Linda’s. Only a lot more savings. Very few investments. Don’t trust RRSP’s, don’t like TFSA’s. Banks pressure me to open an account every time I go in and I instinctively know that such attitude indicates they need it a lot more than I do.

Living in a co-op that is about to have its 25-year mortgage paid off. Best of both worlds when it comes to renting and owning. The rate is way below market (3 bedroom costs as much as 1 bedroom elsewhere). The only downside is that you can’t resell property, as it is owned by all residents collectively, not individually. You get mobility in return and once the mortgage is paid off, taxes and maintenance will be all that remains. Even more savings!

70% Canadians own property and those who are retiring will need to sell their homes to non-existent buyers to finance retirement. Likewise, those who own stocks, or have investment based pension plans will need greater fools to dump their paper onto. They want me to cash in, so they could cash out. Well, I like my money where it is – in my pocket. Thank you very much.

#161 Smoking Man on 10.06.14 at 4:11 pm

Seems like no one told the bond market that rates are going up…

Ouch..

#162 Mark on 10.06.14 at 4:21 pm

“Likewise, those who own stocks, or have investment based pension plans will need greater fools to dump their paper onto.”

At least most stocks have an underlying business which generates cash flow which can be used to repurchase the stock. So no ‘greater fool’ required.

#163 Smoking Man on 10.06.14 at 4:23 pm

#147 Holy Crap Wheres The Tylenol on 10.06.14 at 2:13 pm

There are many ways to make money, my point being school reinforces, trade time for wages. The higher up you go in school, your time is reward with higher wages for your time.

It sucks, when you can easily take ownership and hire these people to make you money..

Gazillions of investors searching for yield these days. , one good idea and your funding is there…

What stopping anyone from playing master today when it’s so easy.

It’s call schooling…

#164 Mike S on 10.06.14 at 4:24 pm

“I started only learning about investing and was going to invest my money by maxing out my TFSA contribution limit via TD’s e-series index funds (25% CDN bonds, 25% CDN index, 25% international and 25% US). The MER is from 0.33-0.52 only. I never looked into ETFs because I thought that it only made sense for people who have $100K+ portfolio. From reading today’s post, I guess I’m wondering if I should look at ETFs instead of TD’s e-series. I plan to take the Couch Potato approach and just rebalance once a year. With the interest rates set to go up, I’m also not sure if I should be investing 25% of my portfolio in the Canadian bond index right now, or just put it into a regular TFSA account with 1.33% return, to be on the safe side. TIA for your help!”

I think you should invest more into learning. I suggest you answer the following questions:
– Is the risk of 75% equity is appropriate for you?
– Should you look at ETFs instead of TD’s e-series? (Same question you asked, but in my opinion every investor should be able to do that calculation for himself)
– What are the risks in bonds/bond funds? What is the reason to hold bonds?

#165 Shawn on 10.06.14 at 4:39 pm

American Real Estate can be expensive too

Waldorf Astoria sold by Hilton for $1950 million.

I walked through the lobby last year. It’s big but not THAT big. I don’t even need to know how many rooms to know this is EXPENSIVE.

Good move for the sellers.

https://ca.finance.yahoo.com/news/hilton-worldwide-selling-waldorf-astoria-york-anbang-insurance-154944522.html

It was not immediately clear if Paris Hilton would get any of the money. I believe she was cut out of the will of Conrad Hilton.

This just shows that real estate in a city really can soar. Here the price reflects not just location but also brand name. But yes location is a key to this value as well as the brand.

#166 Shawn on 10.06.14 at 4:39 pm

P.S. I would not have paid more than $300 million.

#167 Shawn on 10.06.14 at 4:57 pm

Waldorf Astoria…

Well maybe it is not so bad there are 1415 guest rooms plus 181 suites, so really they are not paying much more than a million per room and they get the restaurants and meeting space.

Almost as expensive as a Vancouver Condo?

#168 Blacksheep on 10.06.14 at 5:01 pm

Shawn # 157,

“Blacksheep’s irony

Blacksheep says:

“When misinformation is intentionally posted, over and over, even after already being clarified in previous conversations here, I can’t help but question the posters intent.”
******************************
You are talking about your own misguided views on banking that you keep posting, correct? The list of totally wrong and dangerous-to-wealth conclusions that you have posted would be very lengthy indeed.

Did you write that as a kind of apology, has the self help group had its first meeting and the first step was admitting you were wrong? Good then.”
—————————————————
Shawn…the irony is your name was never mentioned, but you sure responded lickity split.

Little close to home there, boyo?

Do you need the BOE link…again? You should bookmark it and save us both some time.

I already apologised for thinking you were a liar, when it turned out you were simply stupid.

#169 saskatoon on 10.06.14 at 5:11 pm

#154 devore

“Yes, university may be free, but because it is free, it is government controlled, so you have to be able to jump through all their hoops and pass all their tests and satisfy all the bureaucrats in your way before that benefit is dispensed to you.”

addendum:

alas, canadians do all this too…AND pay for it.

#170 Kenchie on 10.06.14 at 5:12 pm

Canada is the third most popular place to move to by “Workers” after the US and UK, according to BCG’s 203,000 person survey.

https://www.bcgperspectives.com/content/articles/human_resources_leadership_decoding_global_talent/?chapter=3#chapter3

https://www.bcgperspectives.com/Images/ex-006-lrg_tcm80-172518.png

#171 Mike S on 10.06.14 at 5:14 pm

“P/E of the TSX is around 15 at current prices. Invert, and add nominal GDP growth of 2-4%/year (which should be reflected in earnings growth). 1/15 + (2-4%) ~= 10%/annum.”

VCE etf shows price/earnings of 21.5?
In addition it is concentrated in financials and resources. Are you sure they will be able to keep growing the recent earnings?

#172 John on 10.06.14 at 5:14 pm

Garth

Your attitude towards an ’emergency fund’ or whatever one chooses to call it is silly. There is a lot to be said to keep 3 months or more of liquid cash around. Much better than to borrow from a LOC. You keep making fun of people who suggest this. Cash is good, to say people are better off to invest every dollar of their savings is the main reason I don’t think I would want you as an advisor. I’m sure that really hurts :)

#173 Shawn on 10.06.14 at 5:37 pm

TSX expected return

Mark says:

P/E of the TSX is around 15 at current prices. Invert, and add nominal GDP growth of 2-4%/year (which should be reflected in earnings growth). 1/15 + (2-4%) ~= 10%/annum.

**********************************
Mark you are somewhat close to the model Buffett uses but he (properly) uses the dividend yield not earnings yield as you do.

In 1999 he wrote about this warning return expectations were too high, he then followed up with a second article in 2001. He arrived closer to 7%.

http://archive.fortune.com/magazines/fortune/fortune_archive/1999/11/22/269071/index.htm

http://archive.fortune.com/magazines/fortune/fortune_archive/2001/12/10/314691/index.htm

#174 Kenchie on 10.06.14 at 5:47 pm

“The Problem With Vacant Houses amid Vancouver’s Housing Boom”

http://www.theglobeandmail.com/life/home-and-garden/real-estate/the-problem-with-vacant-homes-amid-vancouvers-real-estate-boom/article20945702/#dashboard/follows/

#175 Honey Dripper on 10.06.14 at 5:48 pm

DELETED

#176 D.D. Corkum on 10.06.14 at 6:17 pm

#100 FLAWED on 10.06.14 at 3:24 am

“…Public Servants don’t pay taxes. NO they don’t. They are PAID with taxes…”

There are a couple problems with this argument. Ignoring the hatred laced throughout your post, I’ll focus on a single technical problem:

Canada has a progressive tax system where larger incomes receive higher marginal tax rates. Although their salaries obviously cost tax-payer money, public servants do pay tax any additional sources of income at an appropriate marginal tax rate.

If public servants received a “smaller, tax-free salary” then they would pay much less tax on any additional income beyond their salary. This would ultimately be to the benefit of public servants and the determent of other taxpayers.

#177 espressobob on 10.06.14 at 6:42 pm

#172 John

A non-reg account or even a TFSA properly invested can easily provide one with ’emergency funds’ should the need arise. Is that so hard to figure out?

#178 John on 10.06.14 at 7:55 pm

#177 espressobob

Umm gee no. But why bother? Guess what.. “emergency funds”.. small amount, maybe 3 months… don’t need to invest it.. guess what.. investments don’t always work out, they …. go down sometimes. I PERSONALLY think cash is good. YOU and Garth apparently don’t. Fly at ‘er

#179 Tony on 10.06.14 at 8:14 pm

Re: #138 Shawn on 10.06.14 at 1:03 pm

For Bill it’s the same thing as giving money to charity for a tax deduction. When Bill sells his CN shares after they tank 80 to 90 percent in a stock market crash he gets the same tax write-off.

#180 Kolbie on 10.06.14 at 9:43 pm

Just wanted to say, as someone in my mid twenties with a bunch of cash waiting to be invested and no idea what to do, this is super helpful! It’d be great to also know what to buy inside an RRSP if this is what the TFSA looks like? Thanks again for all the free advice!

#181 battler519 on 10.07.14 at 1:33 am

Garth you don’t think that the person you wrote about should give serious consideration to $ilver bullion at all in her current position? Personally I see marginal downside risk in the current environment other than the possibility of an ’08 style washout.
Regards.

#182 Linda on 10.07.14 at 2:42 am

Thank you Garth for your consideration and great advice! I am glad many others found this blog posting useful as well. It is simple, useful, straight forward advice that saves me from navigating a multitude of confusing, conflicting and time-consuming books on personal finance ( I will still read some but at least now have a benchmark for reference I trust). Someone also recommended reading the rest of your postings too, which in time I will.
But there is anothef point I’d like to make, which came to mind after reading #40’s strange and ignorant remarks about being a successful female spinster in danger of being taken advantage of, etc. and that is, that I believe financial independence is key to being a woman. Perhaps I have learned from my mother’s mistakes, but financial illiteracy and a couple of wrong choices can lend you and your kids in some pretty wormy places.
Personally, I have a wonderful fiancé with similar income to mine and we will plan our family and grow our wealth together. It’s just that I’d like to amass my own cushion.. Hope for the best but prepare for the worst?
Thanks again