Here are my posts for this week: The Alchemy of Finance “Invest However You’re Most Comfortable” Here are some short takes and some weekend reading: Marc Andreessen believes we can improve finance by completely reinventing it. If you think Andreessen is right about this, you may not want to concentrate your portfolio in bank stocks. Boomer and Echo compares 5 different robo-advisors already operating in Canada or coming to Canada soon. Mr. Money Mustache teaches how to get rich with science. As usual, he writes very well and makes you think. Canadian Couch Potato has some interesting examples of how taxes affect ETF performance. Portfolio turnover matters in addition to the mix of dividends, interest, and capital gains. Big Cajun Man asks whether spousal RRSPs have any use now that we have pension splitting. He got some good ideas in the comments section for how spousal RRSPs are still useful. My Own Advisor ’s latest dividend update drew quite a few comments...

It sounds wonderfully inclusive to say that everyone can succeed at investing by approaching it in whatever way they’re most comfortable. In reality, this just isn’t true. One elderly couple I know has been living off GIC interest for many years. Even worse, they’ve just been accepting the interest rates offered by big banks instead of seeking out the best rates. They now have very little left and are forced to live extremely modestly. Given the large nest egg they started with decades ago, they could still be living a middle class lifestyle. But they stuck with what made them comfortable. I’ve known two people well who tried to make money with stock options. Both lost all the money they devoted to the effort. They didn’t like the idea of making money slowly and went for some big scores. So much for seeking success investing in their own way. Many of my colleagues over the years have invested their money trading individual stocks. This was particularly true during the te...

One of the books that I’ve often seen respectable financial writers include on their reading list is George Soros’s The Alchemy of Finance: Reading the Mind of the Market . These recommendations along with Soros’s incredible success as an investor were enough to tempt me to read this book. I found it interesting in parts, but seriously doubt that it will help me as an investor. Soros’s main theme is his idea that people’s collective biases do more than just drive prices; they actually change outcomes. He calls this “reflexivity.” To take a simple example, suppose XYZ Company is overpriced and short-sellers are just waiting for their profits. But then XYZ uses its overpriced stock to buy a fairly valued company, increasing XYZ’s total profits. The market then overvalues this increase in profits, and XYZ makes another acquisition with its over-priced stock. The high valuation on XYZ is self-fulfilling. XYZ keeps using stock to buy other companies cheaply. The short sellers ge...

I wrote one post this week questioning the view that Canada would be so much better off if more of us used financial advisors: Do Financial Advisors Boost Savings Rates? Here are some short takes and some weekend reading: Michael Lewis explains what happens to young people who go to work on Wall Street. I found it a very interesting read. As a lead in to how Wall Street changes people, he says something spot on about writers on the internet: “All occupations have hazards. An occupational hazard of the Internet columnist, for instance, is that he becomes the sort of person who says whatever he thinks will get him the most attention rather than what he thinks is true, so often that he forgets the difference.” Very true. Canadian Couch Potato provides a detailed analysis of after-tax returns of many popular Canadian ETFs. Robb Engen at Boomer and Echo examines the behavioural biases that have kept him in the active stock-picking game. It sounds like he’s going through th...

Recently, The Conference Board of Canada came out with the report Boosting Retirement Readiness and the Economy Through Financial Advice . They conclude that if more people used financial advisors, they would save more money, and the country would benefit over the long term. Unfortunately, it relies on a flawed study. This new study does not do any original research into the effects of financial advisors; the authors rely on previous work. They acknowledge that advisors do not produce enough extra returns to cover their fees, but that “the real benefit of having an advisor may not be performance-related at all. It may have more to do with engendering beneficial savings behaviour among clients.” Unfortunately, the authors rely primarily on the 2012 Cirano study Econometric Models on the Value of Advice of a Financial Advisor to justify the claim that financial advisors boost savings. A couple of years ago I pointed out the serious flaws in this study . I’ll briefly summarize....

Here are my posts for this week: The Empowered Investor Changing RRIF Withdrawal Rates Here are some short takes and some weekend reading: Mr. Money Mustache tells an inspiring story of embracing challenges in living a frugal life instead of complaining and living an expensive lifestyle. Financial Crooks gives a detailed account of what to expect if you sign up for an Equifax Premier Account provided by Home Depot for their customers who made credit card purchases during the “hacking period.” Daniel Solin debunks 8 common investing myths. This is a rare list-type article that is truly worth reading. Million Dollar Journey has some advice for people making investment choices within their group RRSPs at work. The Blunt Bean Counter explains the complex rules surrounding whether you are eligible for the $800,000 capital gains exemption when you sell shares in your small business. Big Cajun Man reports that TD now has the capability for their credit card customers ...

In a recent report Rethinking RRIF Withdrawals , York University Professor Moshe Milevsky makes a strong case for reducing the forced RRIF withdrawal percentages. But what should individual retirees do in the face of a government that won’t reduce the size of these forced withdrawals? People are living longer and guaranteed returns after inflation are lower than they were years ago when the RRIF withdrawal percentages were set. By leaving the withdrawal percentages too high, the government is encouraging people to overspend in retirement and risk being left with too little to live on in their old age. Milevsky looked at the other side of this debate as well: “Of course, defenders of the status quo (and certainly those interested in maximizing tax revenue) might argue that [Required Minimum Distributions] are “red herrings” since retirees are not required to consume the withdrawn funds (but merely to withdraw them from the tax-protected shelter of the registered account).” It’s...