1. Jason Zweig wades into the dark pools where hedge funds trade large share volumes at lightning speed . How can the little guy hope to compete with these shadowy figures that purportedly trade on inside information? The answer turns out to be by trading very infrequently. 2. Canadian Financial DIY has opinions about the new ability for Canadian retail investors to trade in Contracts For Difference (CFDs) . Buyers beware. Remember that whenever you enter into a financial transaction where you don’t fully understand what you’re buying, there is a good chance that it won’t end well for you. 3. Preet wonders what the point is of having an ETF with only a few holdings when it can be cheaper to just buy the individual holdings yourself . 4. Big Cajun Man explains why debt is like fat .

In an ideal world we would all make our maximum RRSP and TFSA contributions each year and look forward to being a millionaire in retirement. However, people who are able to do this are in the minority. Most Canadians have more combined RRSP and TFSA room than they will ever be able to use. But don’t despair! Having excess room gives us some tax-saving strategies: Income Smoothing If your income is highly variable from year to year, you can smooth it out by making RRSP contributions in a high income year and withdrawing some RRSP money in a low income year. This reduces the tax burden if your top marginal rate is higher in the contribution year than it is in the withdrawal year. One disadvantage of this approach is that the RRSP room will be lost permanently, but this is of little consequence if you have more room than you can use. There used to be another disadvantage before we had TFSAs: any gains on the money withdrawn from the RRSP in the future would be taxed. Howeve...

As Canadian Capitalist reported, BMO has come out with several new exchange-traded funds, including some bond ETFs. Any investor considering these bond ETFs should check whether it is cheaper to buy a bond directly. The safest of the new bond ETFs are ZFS (0.2% MER) which invests in Canadian 1-5 year bonds, and ZPS (0.25% MER) which invests in provincial 1-5 year bonds. These MERs are a huge improvement over the typical bond mutual fund MERs, but they can still be high for large investments. An alternative to these ETFs is to simply buy a bond directly. Discount brokers allow investors to buy bonds that make periodic payments, or buy another type of bond called a coupon that just pays a fixed amount at a given end date. The safest of these bonds are backed by the Canadian government or provincial governments. Let’s suppose that you want to invest $20,000 in Canadian bonds for 5 years. You could buy ZFS and pay 0.2% each year for a total of about 1% after 5 years. The total ...

Finance Minister Jim Flaherty has said that pension reform is coming soon. Unfortunately, it may not be what many Canadians are hoping for. With existing company pension plans underfunded by a total of about $50 billion, many Canadians who are retired or near retirement are justifiably worried. One of the more notable company pension plans in trouble is Nortel’s. Without any reasonable prospect of further contributions to Nortel’s pension plan, pensioners would like to see the government back the plan with financial guarantees. The same is true for those hoping to draw from other pension plans that are in financial trouble. But the Harper government hasn’t given any sign that it intends to pony up the massive pile of cash that would be necessary to back these pension plans. All indications at this point are that Flaherty intends to change the rules going forward to encourage companies to be more conservative in their pension funding. For example, the surplus cap of 10% may b...

I’ve argued in the past that trying to time the market is a near impossible game for most of us to win over the long term. This prompted the question “why should we bother trying to do anything like becoming a doctor or a lawyer – there will always be someone else who is better.” It’s certainly true that we can’t reasonably expect to be the very best doctor, lawyer, programmer, or poker player in the world. However, doctors don’t have to compete against every other doctor in the world. It might be tough if the world’s best doctor has the office next door, but under typical circumstances, a doctor merely needs to be in the middling range among his peers to run a successful practice. In the case of a poker player, he just needs to find a game where he is an above average player. The fact that better players exist in the world is of no concern if they aren’t seated at the table. However, when it comes to market timing, you can’t choose your opponent. Equity trading is essential...

This is a Sunday feature looking back at selected articles from the early days of this blog before readership had ramped up. Enjoy. Not to be too philosophical, but my experience has taught me that I’m best off to conduct myself as though there exists a single objective reality that applies to all of us rather than each of us having our own separate realities. What does this mean for the investing world? If several people all buy 100 shares of ABC stock at the same time for the same price, then they will all get the same return over a given period of time. Some of these people bought ABC stock for very smart reasons, and some might have bought it because they have the initials ABC. Some of the investors are smart, some dumb, some nice, and some mean, but they will all get the same return. This all seems obvious enough, but you have to keep it in mind when you read the come-ons for businesses that want to set you up with an account to trade stock options. Stock options are s...

1. Potato makes the case that while market timing in stocks is near impossible, it may be possible to time the real estate market . 2. Preet explains why over the long run stocks have to give better returns than guaranteed investments . 3. Canadian Financial DIY reviews the book The Secret Language of Money .