Preet Banerjee gives his take on his interview with Martin Horvath about a tax-saving scheme. How to Invest Online gives a primer on investor protection in case a business connected to your investments goes belly up. Canadian Financial DIY does an interesting financial case study of installing a geothermal home heating system. Big Cajun Man rants about places that accept Mastrercard or Visa, but not both.

Eleven years ago I took the plunge (pardon the pun) and put an in-ground pool in my back yard. I’ve always known that it was expensive to buy and is expensive to maintain, but I didn’t know how expensive the maintenance is until I added up the costs. Anyone considering an in-ground pool may be interested in the costs that await. My pool costs may be higher than typical because I put in a large (20x43 feet) pool with a longer and deeper deep end than is typical. So, some costs may be lower for other pool owners. My costs are laid out below. Most are actual figures including taxes. I estimated the costs for natural gas based on an average of the last couple of years. Hydro is a little more difficult. I based this cost on the power draw stamped on the pump. The figure I came up with seems consistent with the increased hydro cost we see in summer months. The repair cost is an average over the many years I’ve had the pool. Initial Costs $27,862 – pool + installation + heat...

Moshe Milevsky’s book, Your Money Milestones brought up so many interesting topics that I chose to write about four of them in earlier posts: Smooth Consumption over a Lifetime Owning a Home vs. Renting Human Capital Portfolio Construction Taking into Account Employment This very thoughtful book is worth reading. Its ideas are deep, yet the text is understandable. I didn’t agree with everything written, but the ideas were worth thinking about. To add to the points made in the four earlier posts, I include a few interesting tidbits below. Choosing a Career It turns out that not all university degrees are a good deal from a financial point of view. Some types of degrees won’t increase your expected lifetime earnings by more than the cost of acquiring the degree. This is reasonable as far as it goes, but may mislead kids coming out of high school. Engineering may pay better than Fine Arts, on average, but this isn’t helpful to most individual students.  A given stu...

Taking into account the nature of your employment when constructing your investment portfolio makes sense. Stock brokers may not want to expose their portfolios to too much stock market risk because their wages depend on the stock market performing well. However, paying too much attention to risk at the expense of expected returns can lead to problems. In his book, Your Money Milestones , Moshe Milevsky quotes a study saying that MBA students interested in a Wall Street career should consider shorting the stock market upon entering school. This is a good example of focusing on risk at the expense of expected returns. It is definitely true that these MBA students are exposed to stock market risk. If the markets perform poorly while they study, their job prospects upon graduating may be grim. Shorting the stock market would yield profits in this case and reduce their overall financial risk. However, stocks have a built-in tendency to go up. We may disagree on how large the r...

We often hear the following two seemingly contradictory claims: 1. Most investors need financial advice. 2. Most investors should get rid of their financial advisors. How could these both be true? The answer boils down to what we mean by advice. If you imagine the advice coming from a savvy investor who has your best interests at heart, then you would do well to listen. In this case, even experienced do-it-yourself investors could benefit. Investors need good advice, not just any advice. If someone suggests that you borrow $100,000 and bet on red at the roulette table $1000 at a time until the money doubles or is gone, this qualifies as advice, but not good advice. (By the way, your chances of doubling your money this way are less than 1 in 30,000!) Unfortunately, in the mutual fund world, “advice” means whatever tactics a mutual fund salesperson uses to get your money into a set of funds. Typically, the clients pay about 1% of their assets each year for this so-calle...

1. Preet thinks that Warren Buffett is not a poster child for active management . I agree that Buffett’s approach doesn’t bear much resemblance to the typical actively-managed mutual fund. However, Buffett is an active manager in the broad sense that he doesn’t own the index. I think Buffett’s approach is the only one that has a hope of consistently outperforming. I don’t have the skill, but it is conceivable that some investors can see that a given company has above-average long-term prospects. This seems more plausible than believing that some people can anticipate short-term moves without inside information. 2. Potato wrote an excellent review of Benoit Mandelbrot’s book, The Misbehavior of Markets . 3. Ever wondered how an expensive restaurant menu item can affect you even if you don’t order it? The story of the $69 hot dog explains it.  4. Big Cajun Man’s Registered Disability Savings Plan (RDSP) saga continues . It seems that bank and government systems are not ov...

Most of us have heard of the rule of 72. If you are paid an interest rate of say 6%, then it takes about 12 years to double your money. The “rule of 72” part comes from 6 times 12 equals 72. Similarly, it would take only about 8 years at 9% interest. However, this so-called rule is just an approximation. When you multiply an interest rate in % by the number of years it takes to double your money, you get the following chart: The rule of 72 turns out to be exactly accurate at about 7.85%. But up at around 26%, it should be called the rule of 78. Down around 1% or 2%, it should be called the rule of 70. Blindly applying the rule of 72 for interest rates of 1% and 2% gives answers that are slightly off. The real times to double your money are about 70 and 35 years rather than 72 and 36 years. This kind of error certainly isn’t a big deal when doing back-of-the-envelope calculations, but I prefer to know when rules are accurate and when they are just approximations.