Occasionally, I get questions about my portfolio’s asset allocation now that I'm retired. I’m happy to discuss it with the understanding that nobody should blindly follow what I do without thinking for themselves. When it comes to the broad mix of stocks/bonds/real estate, my answer used to be very simple: 100% stocks. But now that I’m retired, I do have a fixed-income allocation that consists of high-interest savings accounts, GICs, and short-term government bonds. My current mix is roughly 80% stocks and 20% fixed income, but I plan to increase the fixed income component over time. The way I think of it is that I have 5 years of my family’s spending in fixed income and the rest in stocks. Over time as I spend down my portfolio, the fixed income percentage will rise. For example, it will be up over 22% in a decade. Some investors use a “bucket” strategy that resembles my approach, but there is a crucial difference. These investors typically plan to make active decision...

My most recent post argued that all of us have shortcuts in our decision making that can lead us astray and make us look irrational at times: Behavioural Biases are in All of Us Here are some short takes and some weekend reading: Tom Bradley at Steadyhand explains what investors should know before diving into illiquid investments. Boomer and Echo explains when you should or should not defer taking OAS to age 70. It’s important not to get too caught up in guessing how long you’ll live. The important thing is having a decent income in case you live long. This tends to make deferring OAS to age 70 look like a good idea for those with the savings to pay their own way through their latter 60s. David Robson explains how the gambler’s fallacy finds its way into decisions unrelated to gambling. I suspect that the real life examples have more complex things going on, but it’s clear that there are biases at play. The problem is that most people think these biases are things tha...

The findings of behavioural economics are often cast as the ways that we’re irrational. This allows us to laugh at the foolish things other people do and know that “since I’m rational, none of this applies to me.” But this isn’t true. Many of these biases are baked into all of us. Consider the tendency to heavily discount the future. To take a cookie now instead of two cookies in a year is to give up a 100% return. However, look at this from the point of view of our distant ancestors who lived on the edge of starvation. They couldn’t afford to plan too much for the future and possibly starve today. When people refuse a 50/50 coin flip to either lose $100 or gain $200, they are using a rule of thumb that appears to be baked into all of us to avoid a loss even at the expense of the possibility of a much larger gain. We seem to have many such rules of thumb baked into the automatic part of our brains. These rules of thumb have served us well throughout human evolution, but th...

My most recent post was answering an interesting reader question about whether to leave TD e-Series funds for ETFs: Reader Question: Switching Portfolios Here are some short takes and some weekend reading: Tom Bradley at Steadyhand has some good therapy for investors who trade individual stocks without knowing much about the companies they buy. This is a point I’ve tried to make in the past without much success. During my not very stellar stock-picking period I pored over financial filings trying to understand the businesses I wanted to own. But it wasn’t enough to compete with other traders effectively. Andrew Hallam explains how he fell for a Ponzi scheme. Retire Happy explains when you shouldn’t contribute to an RRSP.

A reader, Doug, asked the following interesting (lightly-edited) question about whether it’s time to switch portfolios: I currently have over $200K in my RRSP sitting in TD e-series mutual funds (25% bonds, 25% each in CDN/US/Int'l Equity). The resulting MER is 0.37%. Does it now make sense for me to switch over to ETFs? I was thinking another Canadian Couch Potato portfolio with the ETFs VAB and VEQT. The MER is around 0.22%, a savings of $300 per year. However, I'm very comfortable with e-series funds as I've been using them for 6 years. With ETFs, I also have to pay commissions to buy which will amount to perhaps $120 to $240 per year as I purchase twice a month. What are your thoughts? Any other pros and cons that you can think of? Does it make sense to switch given the saying that perfection is the enemy of good? First of all, Doug, congratulations on amassing over $200k in savings over 6 years. You’ve given yourself more choices in life. Your last...

Here are my posts for the past two weeks: Mutual Fund Costs not in the Spotlight My Investment Return for 2019 TD to Start Charging More Interest on Credit Cards Here are some short takes and some weekend reading: Jon Chevreau profiles several mutual fund companies offering much better choices than the typical expensive Canadian fund. Canadian Couch Potato makes some changes to his model portfolios.  The biggest change for the better is dropping Tangerine funds.  They’ve always been just too expensive. The Blunt Bean Counter tackles the difficult subject of whether to pay for a child’s wedding.  A good starting point is to control the cost of the wedding no matter who pays for it. Preet Banerjee interviews Justwealth CEO Andrew Kirkland.  If you have questions about Justwealth’s offerings, there’s a good chance Preet asked it in this interview.

Recent reports that TD will start charging compound interest on all personal credit cards are only partially true.  TD was charging some compound interest on these credit cards and will start charging more. The relevant section of the credit card agreement used to read as follows: If interest is charged, it is calculated on the average daily balance of each Transaction from the transaction date until that amount is paid in full.  The total is the amount of interest we will charge you on each statement on the last day of your statement period. The new agreement replaces the last sentence with the following: We add your unpaid interest charge to your balance at the end of each statement period.  As a result, we charge interest on unpaid interest. The difference is in the time from the end of a statement period until the due date for your payment.  During this time on certain personal credit cards, TD is now charging daily interest on the newly accumulated i...