Experts differ on which is the best approach to investing throughout your life. Some say to maintain a fixed percentage allocation in stocks, bonds, and cash regardless of your age. Others advise a lifecycle approach where you invest heavily in stocks while you’re young and shift to bonds and cash as you get older. Larry MacDonald reported on a recent study by researchers Basu, Byrne, and Drew titled Dynamic Lifecycle Strategies for Target Date Retirement Funds (full text of the study is available free). The title hints at a market-timing strategy which piqued my interest. The study compares fixed allocation strategies, lifecycle approaches, and a dynamic strategy the researchers devised. It turns out that the dynamic strategy doesn’t really involve market timing in the sense of trying to anticipate bull and bear markets. The dynamic strategy begins with a target yearly compound return expectation of 10% and makes the following choice each year: - If your compound average l...

Listening to financial experts can be both good and bad. Most of what I know about money has come from one financial expert or another. On the other hand, we need to be initially skeptical of anything new some supposed expert says. Evaluate new information before accepting it. For example, recent research suggests a link between poverty and brain function in children. The researchers believe that poverty is causing brain impairments. My first thought is that maybe some people have brain impairments which prevent them from making much money, and they pass these impairments along to their children genetically. I may be wrong about this, but I won’t accept the researchers’ theory until I see evidence, and I don’t care enough to pay $10 to see the full text of the study . I extend this way of thinking to all experts. Some people take anything their doctor says as gospel. My thinking is that like any other field, doctors have wildly-varying skill levels, and it pays to be skept...

1. Some algorithm at Google thinks this blog might be spam. This is silly of course, but it’s hard to argue with binary code. By contesting this, I’m now in a penalty box where to make a post I have to solve a CAPTCHA (one of those twisted up words you type into a box to prove you’re a person). I’m on some list to be checked out by an actual person at Google. If this blog ever disappears completely, you’ll know that something went completely wrong. 2. BluntMoney observes that it’s harder to spend money you’ve saved up . This is quite true. Found money often gets wasted quickly. 3. I had some plumbing problems this week and so did the Big Cajun Man . Fixing leaks yourself only saves money if you don’t end up calling a plumber anyway. 4. A carnival this week: Investing Carnival

My wife is quite frugal and often comes home from grocery shopping with a cut of meat sold at half price that has to be cooked within a day. We don’t seem to have had any problems eating these cuts of meat, but they leave me a little uneasy. I presume that the reason for the price discount is that these cuts are older than the full-price cuts. Presumably this means that the odds of getting sick from eating discounted meat are higher. I’m wondering how much higher. I’d like to say that we’ve never had a problem eating discounted meat, but it’s hard to know for sure. We don’t seem to have had any serious incidents of food poisoning, but minor bouts of stomach upset are common and hard to attribute to any particular cause. Most likely the risk from eating discounted meat pales in comparison to the risk of driving a car. I’ll probably continue to have a flicker of uneasiness when I’m told that dinner includes half-price meat, but only a flicker, and then I’ll dive in.

My natural gas supplier, Enbridge, has a program in place called TAPS where they give away some hot-water pipe insulation and efficient showerheads and kitchen and bathroom faucet aerators. My savings each year are supposed to be $45 on natural gas and $113 on water. But, plumbing often doesn’t work out very well for me. I started with the kitchen faucet. Swapping an aerator is easy, right? Unfortunately, our house is 19 years old and the parts were nicely fused. I got them apart, but a piece of the faucet broke. A consult with a plumbing expert confirmed the bad news: we needed a new faucet. Am I saving any money yet? Two more trips to the store for another consult and more parts plus a couple of hours on my back under the sink solved the problem. I think it will take a while to recover the total cost of $115.72 with my savings on natural gas and water. I’m afraid to try to install the other parts. This experience reminds me of the time my father-in-law got serious about savi...

My personal experience with trips to hospital emergency rooms is that wait times have increased over the last 25 years. Numerous newspaper articles on the subject seem to indicate that the trend to longer waits exists across Canada. My latest data point came when my son broke a finger playing basketball. He made a nice play stealing a pass and drawing a foul and was rewarded with a finger not quite pointing in the right direction. My wife and I took a deep breath at the thought of a long wait at the hospital, but we had little choice. At least only one of us would have to wait with our son. Sadly, I couldn’t find my two-headed coin when we were deciding who would stay. The wait to see a doctor was less than I feared at just over 5 hours. However, I can recall trips to the hospital for my own injuries decades ago when I waited less than an hour to see a doctor. What has changed? In thinking about the root cause, I see the problem at ultimately coming from government debt. The Ca...

How bad have stocks been lately? Regardless of what the numbers say, what matters to people is how they feel about stocks. Two people can feel very differently about the same events. Here we have a couple disagreeing about stocks: Sue: “After all this excitement in the stock market, the last two weeks have been good.” Andy: “Are you nuts? Stocks have been brutal lately. Worrying about our savings is keeping me awake at night.” Sue: “But I’m talking about just the last two weeks. Look at this chart.” Andy: “That proves my point. The TSX went down below 8000. At this rate, we’ll never be able to retire.” Sue: “But we’re up 2.4% in these two weeks. That’s good for such a short period of time.” Andy’s reaction is more typical than Sue’s. The pink region in the chart measures Andy’s psychological pain of watching stock prices sit well below where he hoped they would be. It’s like watching your favourite sports team when they’re way down. Even if they close the gap somewhat, fans...