I’ve been reading a lot lately about how a recent ruling in Ontario has crushed the hopes for making the designation “Financial Advisor” meaningful.  Sadly, this is hardly surprising.  The big banks want to be able to call their employees financial advisors.  Banks will always be formidable foes, and any designation a bank employee is able to hold is necessarily meaningless.  Bank financial advisors may mean well, but they are no match for the carefully constructed banking environment that forces them to sell expensive products to unwary customers. I wrote one post in the past two weeks: Nobody Knows What Will Happen to an Individual Stock Here are some short takes and some weekend reading: Tom Bradley at Steadyhand has an entertaining and important list of investment signs we should look for. Ben Felix and Cameron Passmore come up with estimates of returns for alternative asset classes including private equity, venture capital, angel investing, private credit, hed...

When I’m asked for investment advice and I say “nobody knows what will happen to an individual stock,” I almost always get nodding agreement, but these same people then act as if they know what will happen to their favourite stock. In a recent case, I was asked for advice a year ago by an employee with stock options.  At the time I asked if the current value of the options was a lot of money to this person, and if so, I suggested selling some and diversifying.  He clearly didn’t want to sell, and he decided that the total amount at stake wasn’t really that much.  But what he was really doing was acting as though he had useful insight into the future of his employer’s stock. He proceeded to ask others for advice, clearly looking for a different answer from mine.  By continuing to ask others what they thought about the future of his employer’s stock, he was again contradicting his claimed agreement with “nobody knows what will happen to an individual stock.” Fast-forwa...

I finally got my $84 from the Microsoft software class action settlement .  As I predicted 19 months ago, I had forgotten about this lawsuit, and when the money arrived, it brightened my day (at least until I had to fight with Tangerine’s user interface to figure out how to deposit a paper cheque).  I’m not sure why it pleases me so much to get these small sums from class actions, but I’ll keep putting in claims when it’s convenient to do so. Here are some short takes and some weekend reading: Jonathan Chevreau describes Moshe Milevsky’s latest work on tontines to solve the difficult problem of decumulation for retirees.  Milevsky says “until now it’s all been academic theory and published books, but I finally managed to convince a (Canadian) company [Guardian Capital] to get behind the idea.”  Guardian Capital offers 3 solutions based on Milevsky’s ideas.  I’ve complained in the past that academic experts such as Moshe Milevsky and Wade Pfau write about the be...

I haven’t found much financial writing to recommend lately, and I haven’t written myself, so I thought I’d write on a few topics that are too short for a full-length post. Be ready for anything I sometimes see this advice in portfolio construction: be ready for anything.  On one level this makes sense.  It’s a good idea to evaluate how it would affect your life if stocks dropped 40% or interest rates rose 5 percentage points.  Would you lose your house or would it just be a blip in your long-term plans? However, those who give this advice sometimes use it to mean that you should own some of everything that performs well in some circumstances.  So they advocate owning gold, commodities, Bitcoin, and other nonsense along with stocks and bonds. Just because you always own at least one thing that is rising doesn’t mean your overall portfolio will do well.  What you want is a portfolio that is destined to do well over the long term, with the caveat that you’ll surviv...

I haven’t written much lately because I’ve become obsessed with a math research problem. I’ve also had an uptick in a useful but strange phenomenon.  I often wake up in the morning with a solution to a problem I was thinking about the night before.  Sometimes it’s a whole new way to tackle the problem, and sometimes it’s something specific like a realization that some line of software I wrote is wrong.  It’s as though the sleeping version of me is much smarter and has to send messages to the waking dullard.  Whatever the explanation, it’s been useful for most of my life. Here are some short takes and some weekend reading: Benjamin Felix and Cameron Passmore discuss two interesting topics on their recent Rational Reminder podcast.  The first is that they estimate the advantage factor investing has over market cap weighted index investing.  They did their calculations based on Dimensional Fund Advisor (DFA) funds used in the way they build client portfolios....

EQ Bank says they’re “excited to announce an increased interest rate!”  It’s now 1.65%.  Meanwhile, Saven is up to 2.85%.  Unfortunately, Saven is only available to Ontarians.  It’s normal for banks to offer different rates, but the gap down to EQ is disappointing.  Fortunately, the fix is easy; with just a few clicks, my cash savings are mostly in Saven. Here are my posts for the past four weeks: A Failure to Understand Rebalancing Portfolio Projection Assumptions Use and Abuse Here are some short takes and some weekend reading: Jason Heath explains the advantages and disadvantages of reverse mortgages compared to other options.  He does a good job of covering the important issues, but doesn’t mention home maintenance.  With reverse mortgages, the homeowner is required to maintain the house to a set standard.  It’s normal for people’s standards for home maintenance to decline as they age, sometimes drastically when they don’t move well and can’t...

FP Canada Standards Council puts out a set of portfolio projection assumption guidelines for financial advisors to use when projecting the future of their clients’ portfolios.  The 2022 version of these guidelines appear to be reasonable, but that doesn’t mean they will be used properly. The guidelines contain many figures, but let’s focus on a 60/40 portfolio that is 5% cash, 35% fixed income, 20% Canadian stocks, 30% foreign developed-market stocks, and 10% emerging-market stocks.  For this portfolio, the guidelines call for a 5.1% annual return with 2.1% inflation.  This works out to a 2.9% real return (after subtracting inflation). We’ve had a spike in inflation recently, but these projections are intended for a longer-term view.  The projected 2.9% real return seems sensible enough.  Presumably, if inflation stays high, then companies will get higher prices, higher profits, their stock prices will rise, and the 2.9% real return estimate will remain reasona...