Please welcome a person I’ll call John Doe.  The following “interview” is loosely based on a real conversation with an acquaintance. Michael James:  Hello, John.  Thanks for agreeing to discuss your ideas on wealth inequality. John Doe:  I’m glad to be here. MJ:  Let’s get right to it.  How can we solve the wealth inequality problem? JD:  Nobody should be allowed to have more than a million dollars. MJ:  Interesting.  Some people already have more than a million dollars.  What should we do about this? JD:  Take it away. MJ:  So, somebody should take away the excess above a million dollars.  Who should do that? JD:  The government. MJ:  I have some questions about how this would play out.  Let’s look at a specific case.  You work for the federal government, and your pension is currently worth about $1.2 million.  You also have about $400,000 of equity in your house.  It would be easy for the go...

It’s amazing how little that gets written about investing remains relevant once you’ve decided not to try to beat the market.  Even a great writer such as Morgan Housel has beating the market as the underlying motivation for much of his writing.  Once you choose indexing as an investment strategy, there’s little to do or say on a day-to-day basis other than enjoy other aspects of your life. Here are my posts for the past two weeks: Reboot Your Portfolio Invest As I Say, Not As I Do The Procrastinator’s Guide to Retirement Here are some short takes and some weekend reading: Preet Banerjee explains the good and bad parts of commission-free trading.  I definitely learned a few interesting things about how brokerages make their money. Justin Bender explains key concepts about asset location decisions, including the main one that it is your after-tax asset allocation that determines your portfolio’s returns and not your before tax asset allocation.  This means that Just...

David Trahair’s recent book The Procrastinator’s Guide to Retirement has a great title.  With so many Canadians fearful that they’re way behind on retirement readiness, this book seems like it could rescue them.  Unfortunately, the actual contents leave a lot to be desired. The main idea is that if you save a lot of money every year during your last decade of work, you can build an acceptable retirement.  There are detailed examples overflowing with numbers where people whose big mortgage and child expenses fall away in time for a decade-long sprint to retirement.  However, if you can’t suddenly save a lot of money every year, this book offers no magic for building wealth. Questionable Analyses and Advice A chapter on whether to contribute to an RRSP or pay down your mortgage begins with a question whose answer “is obvious”: “Should I contribute to my RRSP or pay down my credit card, which is charging me 20 percent interest per year?”  Trahair proceeds to expla...

When I answer investing questions for friends and family, I tend to steer them to simple solutions that are consistent with their level of interest in investing.  However, I run my own portfolio differently in certain ways.  In reading Dan Bortolotti’s excellent book Reboot Your Portfolio , I noticed that the advice I give usually matches his advice, and it’s my own portfolio choices that sometimes differ from what’s in the book.  Here I see if the differences between my portfolio and Bortolotti’s advice hold up to scrutiny. Before I go any further, I want to be clear that this isn’t a case of me having a “smarter” portfolio where I’m actively trading to beat the market.  I steer people to low-cost passive investing and that’s what I use myself.  The main difference between me and other do-it-yourself (DIY) investors is the degree to which I’ve built most of the complexity of my portfolio into an elaborate spreadsheet that alerts me by email when I need to take ...

Dan Bortolotti is well known as the creator of the authoritative Canadian Couch Potato blog and podcast.  His latest book Reboot Your Portfolio: 9 Steps to Successful Investing with ETFs is my pick for best investing book for Canadians.  The writing is clear, the advice is practical, and it anticipates the challenges readers will have in following through on his 9 steps.  Whether you work with a financial advisor or manage your own investments, reading this book will make you a better investor. Stop Trying to Beat the Market One of the many strengths of this book is that Bortolotti explains why his advice makes sense without being dogmatic.  While explaining the advantages of investing in index exchange traded funds (ETFs), he allows that “Some skilled (or lucky) investors have been able to” “outperform the overall market,” but “research reveals that the probability of beating the market over the long term is distressingly low.” “The first step in becoming a success...

I’m sometimes surprised by the things that make me happy.  Lately, whenever I look out at my pool and see that the water level is the same as it was the day before, I smile.  I didn’t realize it at the time, but a decade ago I had a repair done that left a small leak when some parts weren’t fitted together properly.  Each passing year the leak got a little bit worse.  It took me until three years ago to figure out what was wrong.  I began calling around to find someone who would replace the problem parts.  The job required cutting cement, a little digging, and patching the cement, so I needed someone with some skill and it wasn’t going to be cheap. So far this story isn’t too surprising.  A guy who knows little about pools takes forever to find a problem.  The next part still feels surreal to me.  All the pool repair places just said no.  I called dozens over the three years, and sought recommendations from friends.  They could have...

It’s no secret that Canadian house prices have been rising rapidly in recent years.  Many young people feel that they’ll never be able to afford to buy a home.  However, as fast as house prices have been rising, the stock market has risen faster. The following chart shows a decade of my cumulative investment returns compared to the rise in Canadian real estate prices.  There was nothing special about my returns over this period; the stock market was booming.  My investments were primarily in stock index ETFs, although my returns were reduced somewhat by the 20% or so I’ve had in fixed income since I retired in mid 2017. To measure real estate prices, I used Teranet-National Bank House Price Indexes for Toronto, Vancouver, and a composite index of all Canadian metropolitan areas. The chart shows that even high-flying Toronto real estate didn’t keep up with my investments.   Vancouver real estate growth is a little further behind, and Canada as a whole is eve...