The explosion in exchange-traded funds (ETFs) in Canada continues with the launch of five new funds in September by Purpose Investments . I had the pleasure of talking to Som Seif (CEO) and Ross Neilson (Vice President, Sales) over dinner recently to get their take on where Purpose fits in the investing landscape. ( Disclosure: Som paid for my dinner, but if you think that affects what I write, you should see how many times per week I turn down offers of far more than the cost of a dinner to place “guest” posts on my blog that masquerade as real content.) Som Seif is a very smart, high-energy guy who started Claymore back in 2005 and now runs Purpose Investments. Ross Neilson is no slouch himself, but even he tends to sit back and watch Seif go. Som shows passion and communicates clearly in a way that I think is likely to resonate with a significant fraction of investors who hear him speak. I don’t know how his funds will perform, but I wouldn’t bet against Purpose Investments ...

Here are my posts for this week: Antifragile A Reader Question about Choosing Winning Mutual Funds Here are my short takes and some weekend reading: Mr. Money Mustache explains some wealth advice that should be obvious, but isn’t. Larry Swedroe reports on studies showing that active bond funds won’t protect you in a bear market. With the current fear of rising interest rates, no doubt some investors will try active bond funds anyway in the hopes of avoiding losses. Canadian Couch Potato doesn’t think that now is the time to abandon bonds. Where Does All My Money Go? knocks off a few cobwebs and features a podcast with Som Seif who launched Claymore back in 2005 and is now CEO of Purpose Investments. My Own Advisor gave a great summary of the 2013 Canadian Personal Finance Conference that was held in Toronto last weekend. I had a great time at the conference and enjoyed answering questions as part of a panel. Many thanks to Mark Goodfield, a.k.a. The Blunt Bean Co...

A long-time reader who prefers to remain anonymous asked an interesting question about a strategy to pick winning actively-managed mutual funds. Here is an edited version of his question: I'd love to hear your input on a friendly discussion with a good friend on active mutual funds versus passive indexing. I fall on the indexing side of the debate but I'm having trouble finding flaws with the approach he's been using. He looks for 5-star active funds with "low-risk, high-return" characteristics as dictated by Morningstar and/or Scotia Research, then selects funds that have performed better than the group average over short and medium term (1 month to 3 years) under the same management. He will then hold these funds and review every 3-6 months or so, selling them if they no longer exceed the group average returns. Whenever I pick a suitable index (regardless of asset class, though he favors Canadian and Global Small Cap), his funds have almost always done co...

Nassim Taleb’s latest book Antifragile is hard for me to describe succinctly. It contains a number of interesting ideas that made me think, which is a very good thing. On the other hand Taleb sets a new standard for incomprehensible meanderings. Taleb sees himself as part philosopher, but I can usually understand the writings of philosophers. Two of Taleb’s previous books had messages important in shaping a sound investing strategy. Fooled By Randomness teaches that we tend to mistake skill for luck and see patterns when there is just randomness. Most sensible investors should conclude that they do not have the skill to trade against investing professionals even if they feel like geniuses in a rising market. Taleb’s The Black Swan teaches that extreme events are much more likely to occur than standard theory based on the Gaussian bell curve predicts. However, I preferred the treatment of this subject in Benoit Mandelbrot’s earlier book The (Mis)Behavior of Markets . Inves...

Here is my post for this week that drew quite a few reader comments: One Thing Investors Must Do for Themselves Here are my short takes and some weekend reading: Potato does some analysis to show that renting out part of your house doesn’t help all that much to make Toronto’s high house prices more affordable. Dan Hallett points out problems with floating rate note (FRN) funds that some investors like because they don’t have to lock in long-term fixed rates and suffer if interest rates rise. The trouble is that these funds carry significant risk that isn’t properly reflected in fund risk ratings. Big Cajun Man had some post-dated cheques stolen from his son’s school which led to him paying several stop payment charges. A fee of $12.50 seems manageable until you have to pay it 10 times, but not 11 as his bank tried to charge him. Million Dollar Journey answers a reader question about which type of investment account is best for holding Canadian index ETFs.

Despite my enthusiasm for do-it-yourself investing, I understand that most people need help. The problem is that far too many investors who seek help end up just being sold expensive mutual funds. This got me thinking about what is the minimum that investors need to do for themselves; what one thing can they not afford to leave to their advisors? Here is my suggestion: All investors should be able to work out for themselves how many dollars they pay per year in fees across their portfolios, including management expense ratio (MER) costs, fund loads, commissions, and any other costs. Instead of focusing on the “top ten things to look for in a financial advisor,” investors would do well to learn enough to be able to protect themselves from bad advisors and recognize good advisors. I think the knowledge required to add up portfolio costs is a great starting point for learning how to evaluate advisors. Reasonable financial advisors should be able to help their clients understand ...

My posts for this week: Getting Some Money Back from Tyco Stock Mystery of the Missing Month of Savings Here are my short takes and some weekend reading: Potato tells the amusing story of an article making fun of traders who seemed to confuse stock tickers on different exchanges. However, these traders didn’t seem so confused after all. The Blunt Bean Counter explains how CRA could hit you with a 20% penalty on unreported income. My Own Advisor explains why he isn’t a fan of mortgage life insurance. Big Cajun Man has his wife give a turbulent account of trying to get a cheap hotel room.