More Pensions, New CTC, and #MoneyTalk

According to our friends at Stats Canada more Canadians are in Pensions (up by almost 1.2%), which really surprised me. This would suggest all this palaver and gum-flapping about Canadians not having enough money to retire was just Media over-reaction, however if you read the report a little closer, there is a telling statement:

Dangerous Pension Conditions Ahead

Dangerous Pension Conditions Ahead? More people using different kinds of pensions that is for sure.

In 2014, just over 4,380,000 employees were in defined benefit pension plans, down 0.5% from 2013, and down 8.3% from a high of 4,776,000 in 1992. Defined benefit plans accounted for 70.0% of employees belonging to an RPP in 2014, a drop from 71.2% in 2013, and down from over 90% in the 1980s.

So the Defined Benefit Pension Plan is slowly dying off (except in the Public Sector) and the Defined Contribution (and the hybrid mutations of that concept) are where there is growth. This makes more sense, most private sector companies cannot afford a defined benefit pension system (whether the Government can afford their pension system remains to be seen).

For those of us with kids, that aren’t making too much, the new Child Tax Credit (CTC) just kicked in. The good news it is tax-free, but if you make too much money, you get nothing. There is an old (but still helpful) video from Preet about this exact topic at the end of this article.

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My Writings for Week Ending July 22nd

In summer mode, I am actually accumulating more unfinished titles in my writing pile, but What is Couch Potato Investing? came up as a question a co-worker (who is an occasional reader) asked me what it meant, and to my surprise I have talked about the topic a lot, but I have never really given as simple overview of what it meant, so there it was. I have written about the concepts of Couch Potato investing, but this article let’s folks understand the basics (I hope).

A Money Thought

Given Mr. Trump is now the Republican Candidate for the President, I have been researching some of his more interesting quotes, I like this one from “Trump University Entrepreneurship 101: How to Turn Your Idea into a Money Machine”

If you’re not satisfied with the status quo in your career, read this book, pick one key idea, and implement it. I guarantee it will make you money. —Donald J. Trump

I am reading the book for free on-line, so I feel I am already ahead of the game (i.e. I saved money by not buying the book).

A Tweet to Remember

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What is Couch Potato Investing?

I had a friend ask me this question, What is Couch Potato Investing, and for those starting out, it may not be obvious what I mean when I talk about this variant of an investing concept. I present to you a simplistic primer on Couch Potato Investing.

Couch Potato Investing

Happy Couch Potato Investors

The Couch Potato Investor label is actually quite descriptive, in that it describes investors who do not wish to be bothered by day to day investing issues, they simply want to set up their investments and occasionally come back and take simple actions on the investments in place (in military terms, fire and forget).

Most of the time, Couch Potato Investors are typically Index Investors (i.e. they are not investing in individual stocks, or investment vehicles, they will invest in an area), thus single day changes in the markets become less of a concern (to quote a well-known investor, “I am an indexer, I don’t care what the Index did today”). I suppose you could be an individual stock investor and be a couch potato, but you’d have to buy something like Berkshire-Hathaway or something like that.

How big or small your portfolio ends up being, is up to you. It is possible to have the greatest couch potato portfolio, which is a two Index Fund (yes, that is possible), but others might argue that you are not diversified enough, and should have more diversity, so typically your portfolio ends up being:

  • Canadian Index – to invest in your country and such
  • US Index – you may as well invest in the economy that is mostly driving the world’s economy
  • International Index – this is murkier water, as there really is no definitive index, so you will need to do some research in this area
  • A GIC-like fund or a Bond Fund – remember Bonds can go down in value in the short term
  • Maybe a REIT of some kind (but not for a specific city, or you might really get burned when the inevitable correction happens)
  • Cash? Cash is always nice to have around, but don’t put it in your mattress

How much of each you buy is up to you, but keep track of your initial investment percentages, because you will need to re-balance your portfolio (so you take your profits on occasion). What is re-balancing? Every little while (a period you choose typically either every quarter, 6 months or yearly), you look at your portfolio and either:

  • Add funds to the portfolio, to get back to your original investment percentages, by buying more of the lower total value indexes.
  • Sell off higher valued indexes and buy lower valued indexes to get back to your original investment percentages

That is about it, you re-balance, and you sit back on your Couch and eat potato chips, watch Netflix and Relax.

This is meant as a simply primer on the topic, there are many great articles written by other folks outlining good Couch Potato portfolios (using either Index Funds or ETFs) that you can research and simply choose which one you are comfortable using.

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The Bank of Canada’s opinion is that Brexit is going to hurt the Canadian Economy (and its possible recovery) this year, which isn’t really news, but it is an interesting observation. This and a bunch of other information was reported by the Bank of Canada, when they reported they will not be doing anything to their key overnight rate. The Canadian economy continues to be in a very fragile state, and raising interest rates is unnecessary (or ill-advised, depending on how you read the report) at the moment. There exact statement was:

Inflation in Canada is on track to return to 2 per cent in 2017 as the complex adjustment underway in Canada’s economy proceeds. The fundamentals remain in place for a pickup in growth over the projection horizon, albeit in a climate of heightened uncertainty.

Mailbox in Canada

Open For Delivery (for now)

We do seem to be living in very uncertain times.

So far we have no lock out or Postal Strike, while they keep talking,  but should you really be waiting for the fat to hit the fire? Remember to sign up for Direct Deposit with the Government (although allegedly those cheques will keep going?). Get your bills delivered by E-mail as well (most of your major bills will do that). For your packages, well that might be an issue.

As a practicing Anglican, I was appalled to see that when a motion at Synod (think of Church Parliament) is either defeated or passed by a single vote, there is not an automatic recount. While Anglicans are nice folk (in general), we do seem to have some very odd ways of dealing with issues.

What will Oktoberfest do now? Evidently Polka King Walter Ostanek won a lottery grand prize of $1M, who will be playing Roll out the Barrel or Too Fat Polka in Kitchener in October? Someone call Uncle Franz! Ach, du lieber Gott in Himmel !

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My Writings for Week Ending July 15th

I am slowly getting through my archive of nearly started articles (still over 220) and My Four Best Investments was written on the way back from my daughter’s graduation from Trent University. This isn’t meant as a jab at those who choose not to subsidize their kids post-secondary education, just that if I hadn’t invested in my kids’ education, I most likely would have blown it on something else.

0% Financing On Cars, That’s Good, Right?

Preet has been busy this week and he has a new white board session outlining why 0% financing on your car might not be your best deal. I buy used cars, and you never get 0% financing on those.

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My Four Best Investments

Over my financial career I have made many mistakes investing, however there are a few very good investments that I can point to as successes.

My first investment (but not my best) is buying into the Federal Public Service Pension Plan. Thanks to blind luck, I was able to do this, and while it is my biggest investment (yes, even more than my house), it is not the investment that I am most proud. As I outlined in a previous post, thanks to some excellent timing (read luck) on my part I was able to transfer my Nortel Pension into the Federal Public Service Pension plan, and that will (hopefully) allow me to actually retire.

Trent University

Trent University

My 3 other investments (of which I am equally proud) are:

  • A Bachelor of Arts Degree from Wilfrid Laurier University
  • A Bachelor of Kinesiology Degree from Acadia University
  • An Honours Bachelor of Science Degree from Trent University (and hopefully a teaching diploma from Queens University)

As you can tell from the list these are the three degrees that, thanks to some help from my RESPs ,that I helped my daughters’ receive. My youngest daughter has just graduated from Trent University, and as I mentioned in the post I did for me eldest daughter’s degree So That is What $50,000 looks like, it was another excellent investment. Whether my son goes to post-secondary education, we shall see (we are hopeful), but so far aside from being able to retire, I feel I have gone 3 for 3 on these investments.

This is not to say, that if you have decided not to help your children with their post-secondary education you are a bad parent (far from it, many folks just cannot afford to help their kids), just that I have made some awful investments in my time, luckily I have made a few good ones as well.

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Suppose you devised a plan to get the UK out of the EU, and it actually worked, what would you do? Evidently if you are Boris Johnson or Nigel Farage, you quit (while you are ahead?). After pulling off one of the more memorable upsets in the past little while, the two main faces of the Brexit crew have simply resigned and now the UK has very little leadership on either side (having lost Prime Minister Mr. Cameron earlier on, and the Labour Party Leader seems to be under siege as well). Who has the rudder on the good ship Brittania ? Don’t know, but the markets seem to suggest they are not happy with the current situation. Now might be the time to book a vacation in the UK this summer?

Moving Back Home

A Badge for Those Contemplating Moving Back Home (aka Kippers)

More than once I have written about how children should aspire to stop living with their parents as soon as possible, and for some that has been construed as Millenial Bashing (to quote Rob Carrick), and while it does sound like harsh advice, I stand by the statement. You know how you learn to live on not much money? By living on not much money (and not living in your parent’s basement, claiming you are saving up for a down payment). My opinion is there are really not that many more youngsters doing this, but the main stream media has latched onto it, as their cause celebre of the year. If you want to read an excellent book about Millenials and how much better than they are than all previous generations read Grown Up Digital: How the Net Generation is Changing Your World (amazon link), well worth reading. My parents complained about me watching too much TV, and yes, I lived with them when I went to University too (for full disclosure).

I was sad to see that the Welsh Football (soccer) team lost in the semi-finals of the European tourney to Portugal, but it is an astounding result for the team (not quite as astounding, as Iceland, but still pretty darn good). As I have said, I am the proud son of Welsh and English immigrants, glad to see Wales soccer is improving (Welsh rugby has been severely pounded by New Zealand, unfortunately).

My Writings for Week Ending July 8th

Another week with only 1 article, but hey, it was a long weekend and it is the summer, I could be like the Blunt Bean Counter and leave up a Gone Golfing notice. More than one person has asked me about whether I might be downsizing, as 3/4 of my kids are old enough to move out, but I am not thinking of it (for the next little while). My opinion is that Down Sizing: Another Money Maker for Real Estate Agents, remember it used to be you bought a starter house, and then the one you were going to live in for the rest of your life, now they have added one more major Real Estate transaction, Downsizing! It’s like McDonald’s creating a new meal Brinner (about 3 PM when you are hungry for a snack, have a Big Mac!).

Inflation?

Bank of Canada has some theories on the next 2 years on the topic of inflation.

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