Scott Adams (the Dilbert comic guy) described a very interesting idea for creating a type of marketplace for online teaching tools that would allow people to find the best materials for learning each individual subject. It would also allow highly-skilled developers of online courses to make money. I think some variant of this is likely to replace our current bricks and mortar method of teaching. But the transition won’t be easy. A critical component of online teaching tools that Adams didn’t mention is collecting student feedback in real time. Imagine if software could detect when a student looks tired or frustrated and could adapt the teaching style accordingly. This is what good tutors do and there is every reason to believe that a combination of a computer camera, microphone, and some great software could replicate some of this benefit. A problem that online teaching tools are certain to encounter once they become a bigger threat to the enormous business of bricks and morta...

This week I managed a post each day after Thanksgiving: Are Pensions Worth Zero? BlackRock Canada Launches New Mutual Funds Making Sense of Your CPP Statement of Contributions Here are my short takes and some weekend reading: Tom Bradley at Steadyhand gives us a sample of their improvements to disclosing mutual fund fees on client statements. One of the most financially enlightening things I do for friends and family is tell them how much they pay per month in investment fees (in dollars rather than percentages). For investors who get good advice for their money, this is just some interesting information. For other investors who get little for their money, the monthly cost is surprising and frustrating. Freakonomics performs a gruesome experiment sending fake pet remains to pet crematories to see what would come back. The crematories promise to send back just your pet’s remains, but in each case they sent back bone ash (even though the fake pets were just fur and hamb...

You’ve looked at your Canada Pension Plan statement of contributions and it says you could receive a certain monthly pension amount when you turn 65. What does this mean? What about inflation? Is this the amount I get if I never work again? The truth is that it is hard to understand future CPP payments in terms of dollar amounts. It’s much easier to understand it all when you think in percentages. Doug Runchey, who worked as a specialist in CPP for many years, definitely understands CPP better than I do. The challenge is to explain it clearly to others. Doug’s most recent post on understanding CPP statements of contributions and a much more detailed post on the math of calculating your CPP benefits have certainly helped me. After wading through the details, I find it easiest to think in terms of what percentage of the maximum CPP benefits I will get. Because CPP benefits are indexed (they rise with inflation), talking about dollar amounts gets confusing because the number...

BlackRock Canada has launched seven new mutual funds that are built with the iShares ETFs. The main difference between these funds and the typical mutual funds that Canadians own is that BlackRock’s funds are based on passive index investing instead of active stock-picking and the new funds have somewhat lower fees. However, the new funds are still much more costly than building a do-it-yourself portfolio directly using low-cost index ETFs. The new funds consist of six funds covering a range of risk levels along with a seventh fund focused on monthly income. The following table shows the target allocation and costs of the various new funds (management fees plus administration fees for the Series A funds). I compiled this information from the simplified prospectus. Fund Name Fixed Income Canadian Equities U.S. Equities Foreign Equities Fees BlackRock All Bond Portfolio 100% 0 0 0 1.15% BlackRock Defensive Portfolio 75% 15% 5% 5% ...

A recent Family Finance column in the Financial Post showed something strange about the way that financial planners calculate a person’s net worth. Apparently, having a defined-benefit pension plan does not add anything to your net worth. The article profiled Doris, a grandmother with a simple balance sheet. She has a car worth $3000, owes $10,000 on her line of credit, and can begin drawing a $1400 per month pension in two years. For some reason, her pension just doesn’t count and her net worth is listed as -$7000. This isn’t an isolated case; I’ve seen this in many other net worth statements as well. With a negative net worth at age 63, Doris appears to be in dire circumstances. However, a pension of $1400 per month plus CPP and old age security are more than enough to give her a modest but comfortable life. Without the pension, Doris would be far worse off, so why doesn’t the pension count as part of her net worth? To value her pension we would need more details about t...

This week I summed up my opinions on dividend investing: Dividend Investing: A Good Idea or a Huge Mistake? Here are my short takes and some weekend reading: Canadian Couch Potato discusses what he sees as the biggest challenges for DIY investors. The Blunt Bean Counter has another cheery topic where he explains what happens when spouses don’t leave all their assets to each other in their wills. Big Cajun Man isn’t a big fan of a heavy allocation to stocks after retirement. My Own Advisor goes against the advice of many bloggers and explains why he intends to keep his traditional cable television. Where Does All My Money Go? will be turning into a personal finance video blog, and Preet is looking for feedback on content and a new blog name.

One of the questions the Big Cajun Man asked me and the other panelists in a session at the 2013 Canadian Personal Finance Conference was whether dividend investing is a good idea. My answer was that while it is possible to do dividend investing well, few dividend investors invest well. A common portfolio for Canadian dividend investors is one consisting primarily of Canadian big bank stocks. This is a very concentrated risk. To be invested entirely in Canada is bad enough, but to be invested in a single industry is worse. Who is to say that all the big banks will still be operating in 20 years? The downfall of Nortel was inconceivable 20 years before they declared bankruptcy. The average investor should have stock investments spread across industries and countries. To be invested in Canada and the U.S. isn’t too bad, but it’s better to own some foreign stocks as well. One solution is to own some low-cost index ETFs of foreign stocks along with individual dividend stocks in...