When Canadians own foreign stocks, taxes on the dividends are often withheld by the foreign country. This can apply with U.S. stocks as well. This is a complex area. The amount of taxes silently withheld and whether you can effectively recover them depends on the country and the type of account you have. Yesterday , I said I wanted to know the foreign withholding tax drag on the new Vanguard Canada ETFs. Justin Bender has done the analysis. He has a pdf with the foreign withholding tax details for RRSP and TFSA accounts , as well as an article discussing other aspects of Vanguard’s new ETFs . In a personal note, Justin goes on to explain “The withholding tax drag in a taxable account is only about 0.01% to 0.02% for the three ETFs.” Thanks, Justin.

My only post in the last two weeks was about TFSA advice: Puzzling TFSA Advice Here are some short takes and some weekend reading: Canadian Couch Potato reviews Vanguard’s new one-fund solutions. They look like excellent single ETF solutions for DIY investors. One thing I’d like to see is an analysis of foreign withholding taxes to help DIY investors make informed tradeoffs between cost and simplicity. John Robertson has an interesting message for those very nervous about the recent stock market decline. Big Cajun Man coins a new term for exploiting the elderly with slimy sales practices. Robb Engen at Boomer and Echo explains that the recent big drop in stocks may have been a record when measured in points, but is far from a record in the sense that matters. Unfortunately, it is mostly media types who hype such “record” drops, and their desperation for headlines will keep them from understanding Robb’s message. Remember the Upton Sinclair quote: “It is difficult to...

I often see advice related to TFSAs and RRSPs that is strange or just plain wrong. I hate to pick on Gail Vaz-Oxlade, but her recent article giving TFSA advice was spot-on except for one puzzling part I didn’t agree with: You can hold any investment you can buy for your RRSP inside your TFSA, including stocks, bonds, GIC, and mutual funds. But you should probably stick with interest-bearing investments. Why? Well since all the capital gains inside [a] TFSA [are] tax free, it also means any capital loss can’t be claimed [to] offset your other capital gains. To start with, your mix of investments in cash, bonds, and stocks should be based on personal factors that have nothing to do with the tax properties of various types of accounts. Because few people use up all of their RRSP and TFSA room, all of their savings outside of a chequing account should be in either RRSPs or TFSAs. If your asset mix includes $50,000 in cash, perhaps as emergency savings, and you have no savings i...

Here are my posts for the past two weeks: The Incredible Shrinking Alpha I’m Done with RRSPs Your Complete Guide to Factor-Based Investing Here are some short takes and some weekend reading: Rob Carrick reports on new ETFs from Vanguard that contain both bonds and global stocks. Big Cajun Man explains the regulations against tied selling by banks. They apply to such things as requiring you to get a chequing account with a bank in order to get a mortgage. Robb Engen at Boomer and Echo discusses using annuities to create your own pension income. He says “I perked up when I saw the payout rates were between 5 and 7 percent of the initial deposit. Now, keep in mind, those rates won’t increase with inflation each year, but it’s still a healthy (and guaranteed) amount to receive for life. … why wouldn’t a relatively healthy 70-year-old male not want to turn $250,000 into annual income of $17,669.89?” He’s downplaying the devastating effects of inflation over many years. ...

If you’ve ever wondered whether you should be taking advantage of the historically above average returns of small stocks, value stocks, momentum stocks, and other types of market anomalies, Your Complete Guide to Factor-Based Investing , by Andrew Berkin and Larry Swedroe, is the book for you. It’s based entirely on “evidence from peer-reviewed academic journals,” and it helped me focus my thoughts on the degree to which I want to pursue factors. The authors begin with a treatment of the seven factors they consider “worthy of investment”: market beta, size, value, momentum, profitability and quality, term, and carry. For each of these factors they discuss persistence, pervasiveness, robustness, whether they are investable given real world concerns such as trading costs, and whether there are logical explanations for the existence of above-average returns. In the case of size and value factors, “While small-cap stocks as a whole have provided higher returns (the size premium), sma...

For years, a big personal financial focus for me and my family has been making annual RRSP contributions, but no more! I’m done with RRSPs. Or at least I’m done with contributing to them now that I’m retired. It’s a strange feeling to contemplate starting to withdraw from RRSPs/RRIFs. Long-time successful savers often have a hard time turning off the saving habit, and I’m no different. My spreadsheets that contain multiple layers of conservative assumptions tell me how much I should be spending each month, but I rarely get there. RRSPs are a great personal finance tool to reduce income taxes over a lifetime. But, barring unforeseen new sources of income, I expect that the RRSP room created by my 2017 income will go unused. Instead, I expect to make annual withdrawals starting at the end of 2018 to use up my lightly-taxed income room. I’m interested in hearing from others about how it felt to transition from being savers to spenders.

Over the decades it’s been getting harder to beat the average returns of purely mechanical investment strategies according to Larry Swedroe and Andrew Berkin in their book, The Incredible Shrinking Alpha . Looking for superior stocks may have been profitable many years ago for intelligent investors with the right temperament, but even the most brilliant money managers today usually fail to beat the markets. In this short book, the authors go through their reasons for why markets have been getting tougher: there is less “dumb” money to exploit, the market is being “overgrazed,” and “the level of competition is getting ever tougher as better data and technology are used by ever more skilled managers.” Then they go on to give their prescription for how you should invest your money. In the article Measuring Stock-Picking Skill , I explained the meanings of the terms alpha and beta in this context, and why I don’t fully agree with the authors when they try to prove that past successfu...