Regular readers of this blog are very familiar with the arguments that seemingly small costs can cause big damage to your portfolio over an investing lifetime. To make this more clear, I’ve proposed the MERQ (Management Expense Ratio per Quarter century) as a better measure than a single-year MER. One thing I’ve discovered about the MERQ in casual discussions is that many people simply don’t believe it. For example, the Investors Group Beutel Goodman Canadian Balanced Fund Series A has an MER of 2.89% (as of 2012 Feb. 9) which translates into an MERQ of 51.4%! This means that after 25 years, more than half of your portfolio would be consumed by fees. In contrast, a balanced portfolio of index ETFs from iShares (XIU and XBB) has an MER of 0.235% for an MERQ of 5.7%. So, a portfolio that would have come in at a million dollars without fees would end up with $486,000 with the Investors Group fund and $943,000 with the iShares ETFs. This difference is so large that people are sk...

In a recent post, I showed that under current rules, baby boomers will get more from Old Age Security (OAS) than they contributed through their incomes taxes . I expected to get angry comments from boomers who don’t like the idea of changing OAS. Instead, several readers observed that boomers will get more from CPP than they paid in as well. Robert Hurdman pointed out that CPP is not fully funded which means that retirees get some of their benefits from current CPP contributions. Fortunately, the situation is improving as the degree of funding increases each year. This should reduce future inequities. Reader Greg put together a CPP spreadsheet analysis concluding that the oldest baby boomers will collect about twice as much as they paid into CPP. Changes to CPP contribution rates between 1986 and 2003 have made CPP less of a good deal for younger baby boomers. Greg’s second spreadsheet summarizes results for different birth years. Here is Greg’s summary of the spreadsheet ...

Just about every other blogger has written a “7 links” post where they choose posts in 7 categories, including most beautiful, most popular, etc. I have resisted this for some time because I knew I would agonize over which of my posts to choose in each category. Thanks to Tripbase and The Blunt Bean Counter for being the most recent to push me to stop procrastinating. On with the 7 links. My most beautiful post Market Timing in Pictures takes you from fantasy to reality. My most popular post My most popular post as judged by the number of comments was where I observed that preferred shares offer a 2% higher return than the interest rate on 3-year closed mortgages . But how large is the hidden risk in this potential arbitrage? My most controversial post In Understanding Ontario’s Switch to the HST , I explained that the HST is not all bad compared to GST plus PST. Some unhappy readers weren’t in the mood for hearing anything positive about the HST. My most helpful ...

I’ve never read a book about baseball I liked more than Moneyball by Michael Lewis. Before reading this book I had no idea that professional baseball teams were so dumb about what contributes to winning and what doesn’t. Lewis tells the story about how the Oakland A’s had much less money than many other teams yet managed to put together winning seasons by finding undervalued players. At its core, this book is about how statisticians and mathematicians revolutionized baseball, but you don’t have to care about math to enjoy Lewis’s compelling story. It might be a stretch to say that you don’t have to like baseball to enjoy the book, though. In very simple terms, the Oakland A’s general manager Billy Beane and his assistants showed that walks are far more valuable than most people realize, and bunting and stealing bases are far less valuable than people realize. Over the years I figure I’ve played or coached about 2000 baseball and softball games. A simple rule I used to judge ...

Canadian Mortgage Trends reports that CMHC is approaching its limit on mortgage default insurance and takes in in-depth look at what this could mean for the industry and borrowers. Where Does All My Money Go? provides further analysis of the impacts of the CMHC reaching its limit. Boomer and Echo have some clear thinking on health and dental “insurance”. The Blunt Bean Counter explains the rules and pitfalls with claiming automobile expenses on your taxes. I tried keeping a log book for a while. What a pain! The tax savings would have to be quite substantial to get me to try this again. Canadian Couch Potato evaluates market forecasters. Wealthy Boomer quotes a BMO Retirement Institute report saying that “younger Canadian job-seekers should be looking for employers that offer traditional Defined Benefit pension plans.” A problem with this strategy is that expecting to spend you whole career with one employer is unrealistic. Finding an employer with a DB pension is ...

I had the pleasure of listening to Tom Bradley give an update about Steadyhand mutual funds this week. Instead of trumpeting a few winners, he discussed successes and failures. Instead of avoiding index benchmarks, he showed them beside each of his funds. Instead of pretending he knows what will happen in the future, he told us what modest bets he plans to make for the upcoming year. ( Disclosure: Although I have no financial relationship with Steadyhand, I like the guys who run it and they did give me some cheese to nibble on during the presentation. ) I’ve made no secret of the fact that I’m a do-it-yourself investor using low-cost broadly-diversified index ETFs. Nevertheless, I believe that many people would benefit from investing with Steadyhand, but not for the reasons that people might think. I don’t trust myself to judge who is likely to beat the market. So, I don’t pay much attention to performance. Steadyhand has some funds that have won the race with their index an...

In a CBC interview about pension reform, Susan Eng of CARP was discussing the taxes baby boomers have paid to support old age security (OAS) payments: “These are the same people who paid their taxes all through their working lives and have funded their retirement in this way.” So, she is saying that it is an issue of tax fairness; boomers paid for their OAS benefits and would be cheated if these payments were reduced. Unfortunately, if we really introduced tax fairness it would decimate OAS. The reason for this is a combination of the way OAS is funded and demographics. Unlike CPP, OAS is paid from current tax revenues. While the CPP amounts deducted from our pay are saved to cover future CPP benefits, OAS payments to retirees are paid for by current taxpayers. This means that boomers paid for their parents’ OAS and they will collect OAS payments from their children. Boomers were in the middle of their careers around the year 2000. They will be in the middle of their retirem...