My only post this week drew some good comments: Anchoring and Income Taxes Here are my short takes and some weekend reading: Canadian Couch Potato weighs in on the banning of financial advisor commissions debate and the arguments made by the president and CEO of Advocis. Tom Bradley at Steadyhand explains what really has him concerned about Canadian real estate. No matter what happens over the next 5 years, I’m sure that his last statement will be true: “we’ll look back in 5 years and say, ‘Wow, what were we thinking? It was so obvious.’” Human brains are such that things we can’t predict in advance seem inevitable in hindsight. The Blunt Bean Counter gives three tax-saving strategies that he says are an easier way to save money than being frugal with every small purchase. Million Dollar Journey explains stop-loss orders. Some traders seem to like this type of order, but I don’t see how they’re any use for investors.

My employer pays a modest bonus for each invention employees have that result in a patent filing. I had a few of these this year and recently received a letter showing me the size of this bonus. But this is a gross amount before the taxman takes his bite. So now my mind is anchored on the gross amount of the bonus. Next week’s pay cheque will be somewhat of a let-down because I will actually receive just over half of this figure. I don’t mean to sound like I’m complaining about getting a bonus. This should be a happy event and it is happy for me. But, I think my employer makes a mistake by giving me a piece of paper with the gross amount printed in bold. Perhaps many people don’t really look at their pay stubs and wouldn’t be struck by the much smaller after-tax amount. However, I do look at each of my pay stubs. This incentive scheme would work better on me if the letter they gave me had a prominent after-tax figure.

I wrote 4 posts this week that drew quite a few reader comments that are worth checking out: Can a Raise be Bad for Your Finances? Foreign Exchange Fees Invest Side-By-Side with Me Couch Potato Investors are Rare Here are my short takes and some weekend reading: Canadian Couch Potato explains why a new ETF based on strip bonds is tax-efficient for fixed-income investors using taxable accounts. The Blunt Bean Counter thinks that both investors and their advisors are to blame for TFSA over-contributions. Big Cajun Man says you shouldn’t make big financial decisions late in the day, and that people who try to sell you big-ticket items know you’re less likely to buy the next morning. My Own Advisor explains why he’s not interested in trading futures. Million Dollar Journey is getting close to a million dollars. I assume the blog will disappear the instant the magic million dollar mark is reached :-)

Passive investing using low-cost index ETFs and mutual funds is rising in popularity. The number of investors who are excited by the idea of couch potato investing is growing every day. However, in a recent conversation I had with Canadian Capitalist, he observed that enthusiastic couch potatoes usually don’t really invest passively. Sadly, I have to agree. Let me start by admitting my own transgressions. It took me many years as a stock-picker before I finally decided that I was better off investing passively. Even then I took my sweet time selling off individual stocks and buying low-cost broadly-diversified ETFs. I still hold one individual stock (Berkshire Hathaway) for less than 10% of my portfolio. I don’t intend to ever buy more Berkshire, but this is still a deviation from index investing. So, I’m not a pure passive investor. But, even if we adopt fairly lax standards for what constitutes passive index investing, few self-described couch potatoes meet the test. Fo...

Inspired by side-by-side arrangements where a mutual fund invests in the same assets as a hedge fund, I’ve decided to start my own side-by-side arrangement. Just as these mutual funds give small-time investors access to the investment choices of hedge fund managers, my arrangement will give investors access to my stock-picking. Just take a look at the chart of my 1999 portfolio return and you’ll see why this could be a great deal for investors. They will get access to a fund that contains my stock picks. The best part is that I won’t charge any management fee. Here’s how it will work. Every 3 months, I’ll buy shares in my top 100 stock picks using a mixture of my personal assets and fund assets. After the 3 months are up, I’ll allocate a non-random set of shares to my personal account (based on purchase price) in proportion to how much of the purchases were made with my money. The rest of my purchases go to the fund. Then I do it over again with another 100 stock picks. F...

Reading a review of Qtrade at Money Smarts , I was struck by the description of the foreign exchange fees as “pretty good”. They may compare favourably to foreign exchange fees at other discount brokerages, but compared to a reasonable fee, they are horrendous. For amounts over $25,000, Qtrade charges 0.96%. This is $240 on $25,000. What is there to justify such a high cost? I can understand the need to recover costs when handling actual cash. It costs money to pay employees to give out cash, and you have to take on currency risk for days to hold onto cash. However, these costs don’t apply to electronic transactions. A simple fee of $10 plus 0.1% for electronic conversions among major currencies would leave plenty of profit margin for banks and brokerages. This corresponds to $35 on $25,000. I understand that businesses seek profits and will charge what the market will bear, but it is time that investors demanded more reasonable foreign exchange fees.

A heuristic I’ve heard about a few times is that you should have 12 times your gross salary saved before you retire. I’ve always had a vague feeling of uneasiness about this rule of thumb, but the problem with it never hit home with me until I started thinking about a raise I’m expecting soon. Suppose I currently have retirement savings equal to 11 times my salary. I’m close to being able to retire by the 12 times salary heuristic. Suddenly, through no fault of my own, I get a 10% raise. Now my retirement savings are only 10 times my salary. My retirement dream is slipping away. I probably have to work an extra year or two and pray I don’t get any more raises. This is crazy. The ratio of savings to salary just makes no sense for me. I should be calculating the ratio of my savings to my yearly spending instead. Focusing on this spending-based ratio means that raises are a good thing because they allow me to build my savings faster. It may be that the savings to salary rat...