In 2019, my investment return was 15.8%. This sounds good in isolation, but withers when we consider that U.S. stocks were up over 30%. So, is my investment approach a failure? Hardly, as I’ll explain. To begin with, when you diversify, you’ll always have some part of your portfolio that performs better than other parts. Because I can’t predict which investment will work out best in a given year, I’m best off diversifying. So, why did my return trail U.S. stock returns by so much? There were many factors. One is that I measure my returns in Canadian dollars. Because the Canadian dollar rose in 2019, U.S. stocks rose by less than 30% when measured in Canadian dollars. Another factor that reduced my return was that other asset classes didn’t perform as well as U.S. stock indexes. Canadian and foreign stocks didn’t do as well, and I have a small cap value tilt that didn’t do as well. Another drag on my returns comes from the fact that I’m retired and keep 5 years of spendi...

The high cost of having a financial advisor has been in the news lately. A recent example is Jonathan Chevreau’s discussion of the problems with Deferred Sales Charges (DSCs) and the future of financial advice . The banning of DSCs everywhere in Canada except Ontario is reshaping how financial advisors get paid. However, this discussion only covers a fraction of the costs mutual fund investors pay every year. Mutual fund companies silently dip into Canadians’ mutual fund savings every year for a percentage called the Management Expense Ratio (MER). Too often, this is 2% or more. This may not sound like much, but when you lose 2% of everything you have saved every year, it adds up quickly. Over 25 years, about 40% of your money is gone. Out of this MER, mutual fund companies pay financial advisors roughly 1% to choose their funds for investors. The remaining money from the MER goes to the fund company. But what do they do for their money? Most of the largest mutual funds ...

How your credit card company recovers from blocking your legitimate purchases matters: Credit Card False Positives Here are some short takes and some weekend reading: Morgan Housel explains how the world keeps getting better for us even if it seems to be getting worse. Retire Happy gives a nice summary of the high points of managing your financial life well.  He frames it in terms of New Year’s resolutions, but it’s really some easy-to-understand advice that applies any time. At one point, he throws out an interesting statistic: “What I find amazing is that 83% of those that file taxes have unused RRSP room”.  I have recently become part of this 83%. I used to use all my RRSP room each year, but I have no use for the room that arose from my last year working. I actually withdraw a little from my RRSP each year now to reduce lifetime income taxes.  So that last year of RRSP room sits unused. No doubt many retirees who used to use all their RRSP room contribute t...

It’s disconcerting when we find fraudulent charges on our credit cards.  A different type of problem is a “false positive,” which is when a legitimate charge is denied.  After having my credit card denied when trying to check into a hotel, I wished credit card companies would do more to help customers recover from these false positives. It was my Tangerine credit card that wouldn’t allow the hotel charge.  Tangerine certainly could have done more to prevent this problem and to make it easier for me to recover from it. I alerted Tangerine to the dates I’d be traveling and the country I’d be visiting.  I certainly could have given more detail, but all they wanted was “USA.” With more detail, maybe they could have seen that the hotel charge was legitimate. The bigger problem was their response as I tried to fix the situation.  I called Tangerine customer service, but there was no option for “you denied a legitimate purchase.”  The closest I found was an ...

I reviewed Tim Geithner’s book defending his actions during the financial crisis: Stress Test Here are some short takes and some weekend reading: Robb Engen explains how to get lots of inexpensive life insurance. The Blunt Bean Counter explains the steps of a year-end financial clean up.  Big Cajun Man shows how to guess someone’s salary from the date they stop paying CPP for the year.

It’s widely believed that the U.S. government bailed out the bankers who caused the financial crisis just over a decade ago and left the American people to suffer. President Obama’s secretary of the Treasury, Timothy F. Geithner, defends his team’s actions in his book Stress Test: Reflections on Financial Crises . What makes the book so believable are his admissions of mistakes and how uncertain they were about the correct actions to take throughout the crisis. However, he is very clear that protecting banks was a necessary evil to avoid cascading failures that would have led to meltdown in the greater economy. There was a very real possibility of a depression and massive unemployment. “Our only priority was limiting damage to ordinary Americans and people around the world.” We’re familiar with the anger over bailing out the bankers who caused the problems in the first place, but less well known is the anger banks had for the government. “Conventional wisdom holds that we aband...

It’s gift-buying season. Each year, more of my Christmas shopping shifts online. It’s still tough to come up with good ideas for presents, but at least I don’t wander aimlessly in malls much anymore. Here are some short takes and some weekend reading: Tom Bradley at Steadyhand says that the profits Canadian banks earn from their individual customers (all of us) is the highest in the world. This reminds me of a scene from Wolf of Wall Street where Canadians are on the phone and DiCaprio plays the banks. Ryan Krueger explains how we lose huge amounts of money in everyday banking. Robb Engen at Boomer and Echo gives an overview of his financial life for the past decade. He definitely worked harder than I did during the 2010s. After quitting his day job, that’s going to change. Preet Banerjee explains new research showing that people tend to pay down debts by “balance matching,” which has none of the benefits of the debt avalanche method (pay highest interest first) or t...