Canadian Personal Finance Blog

Attention Ottawa-area readers: CBC Ottawa is looking to talk to a regular investor between the ages of 25 and 50, who actively keeps an eye on the stock market and may have lost money during the economic downturn and are changing their investment strategy. If you are interested please contact Sannah Choi at 613-288-6471. You can also reach Sannah via e-mail at Sannah-(dot)-Choi-(at)-cbc-(dot)-ca.

RRSPs are Coming to Town

Yes it is that magical time of the year, where banks and institutions beg you to put more money into your RRSP, because it would be a good thing for you when you get older.

Show of hands: Who believes they do this because they are worried about your Golden Years? None? Not surprised.

Banks (and Insurance companies and whomever else sells Mutual Funds) want you to put money into your RRSP now, so that you go and buy their High MER Mutual funds (with the big fat entry fee, and exit fee as well).

How many times have I heard co-workers or friends say, “I just put my money in the Canadian Stock Fund and will move it later”. When I query about the MER for this Canadian Stock Fund usually the buyer is unaware, and what the front or back load is on these funds is a mystery as well. How many folks will move it from this fund at a later date? Don’t know, but my guess would be not many move the funds ever.

I don’t have time to think about this, is another argument folks have given me for buying some very dubious Mutual Funds, which may be true, but why did you spend your money is the answer I give. Would you buy a car, house or even major appliance without knowing that there were hidden fees to buy it and then a yearly “support” fee?

So I shouldn’t buy RRSPs now? No I didn’t write that either, but wherever you invest your money, be sure you understand the costs of investing in this financial device. This doesn’t mean you should blindly go out and buy ETF’s or Index Funds, if you don’t know where (or how) they invest.

Get educated is what I am saying before you go out and buy your RRSP. If you don’t have time to do it right now, then wait until you can figure it out.

Maybe I should just get a Financial Advisor?Caveat Emptor is my response to that idea. The past few months more and more stories are coming out about Financial Advisors, and how they work, so you need to find one that you trust, and ask them, How do you make money? especially if they are offering you their services for “free” (you would be surprised what free really costs). If the advisor suddenly tries to sell you whole life insurance, get up, get your coat and walk out without a single word, and don’t come back.

The hasty or rushed decisions I have made in my life (financially) are rarely the ones I look back on with fond recollections.

Top 10 lists

I was wandering through yet another Top 10 List, and it struck me just how many Top Ten lists there are out there (not to mention David Letterman’s output of a list every night), so here is:

Top 10 Top 10 Financial Lists

Here in no real order is my Top 10 list of Financial Top 10 Lists I have seen over the past little while:

• Top 10 Reasons why High Tech will recover (published in 2001).
• Top 10 Ponzi Schemes to invest in, and the questions to ask your Advisor about their latest Home acquisition.
• Top 10 Ethical Reasons for failed Bank CEO’s to get their bonuses
• Top 10 Ways to save money by not paying off your credit cards.
• Top 10 Most expensive bank service charges, and why we love them
• Top 10 Matresses to store your money sorted by level of comfort (assuming you are only using paper money, no loonies or twonies please).
• Top 10 Mutual Fund by MER (sorted by highest MER), and why they really are a good investment
• Top 10 ETFs that have nothing to do with any index and why you will outperform the market doing this
• Top 10 Reasons that Whole Life insurance policies are better than term policies.
• Top 10 Why 1,000,000 slugs love Vancouver’s weather (even in the winter) and why they are the only ones who can afford to live there

Did I miss any? (yes this is what happens when I get stuck in long meetings and my mind wanders)

Time to get your collective brooms out and sweep out your investments.

As a start of year/end of year task I went through my many investment accounts (boy I really do have a lot of those, holy cow), I noticed that I had a lot of investment vehicles that I should really just eject from my portfolio. Why was I keeping them around? Some of the odd reasons I think were in my mind were:

• They might actually rebound sorry Charlie, that boat has sailed for these stale leftover investments (some from the tech boom), so that is not a good reason.
• They seem to be paying OK dividends might not be a bad reason, but then again, if I looked at the MER on these Mutual funds, I was paying other people a lot of money to get these dividends.
• I’m a lazy sod who just won’t admit when he is wrong I believe we have a winner!

What were the nature of this financial clutter?

• Two AGF Mutual funds that plodded along but had absurd MERs on them
• Some left over Cisco stock that used to pay out, but still has not got back to where I bought it some 10 years ago
• A crappy TD bond mutual fund that was useless as well

Took all the proceeds from those sales and bought a Dividend ETF, unfortunately the losses cannot be taken advantage of, since they were in an RRSP. Should I be buying Dividend devices in an RRSP? Some say no, I like dividends, so that is what I did.

Still have a few Nortel shares hanging around, not sure what the heck I can do with those, guess I have to “sell” them to incur the loss which I can then use next year. Is this right? Any comments on this appreciated.

Yes the year may only be a few days old, but it can still teach us some important things even in it’s short life.

No Such Thing As a Sure Thing

After watching the Swiss Junior Hockey Team beat a talented Russian team, 2010 has taught me there is no such thing, as a sure thing. If someone had said this might happen before the World Junior Championships started, they would have been laughed at, and when Russia was due to play the Swiss in the Quarter Finals, it was assumed that Russia would win and face Canada next, however, sometimes the sure thing, does not pay off.

Yes this is a real long shot, and the Swiss came back to earth against Team Canada in the Semi-finals, however, it is an example of how there are no sure things, and you should hope for the best but plan for the worst.

This year has already shown it may be a year of big (and hopefully not nasty) surprises. Remember this if you get a “can’t lose” piece of financial advice (or investing tip).

Things Can Change Fast

After leaving Burlington where the grass was green and then arriving in my home in Ottawa which was under 2 feet of snow, this year showed things can change quickly (and not necessarily for the better) very quickly. I looked at my in-laws back yard and saw green grass (OK it was a little cold down there, and there was traces of snow), but I knew that snow was going to be part of the equation, it was just when would we run into it, and how deep would it be. After skiing into my driveway, which was buried, I learned that things can change very fast.

In the world of Financial Advice, be nimble and be ready for things changing really fast (and again, not necessarily for the better).

What will the rest of this year hold for us? I don’t know, but strap in, looks like it might be a very interesting one.

I am just that lazy busy that I can’t think of writing something for the Monday before Christmas so I instead give you some of the best writings from other folks this past week.

With the Holiday Season upon us, I trust everyone is finished their preparations and are all just relaxing and waiting for the festivities to commence. Yes, I am a sarcastic so and so sometimes aren’t I, but let’s not dwell on the obvious, what did those other authors write?

• The Canadian Capitalist must be finished his shopping, as he has time to read a bunch of books including The Investor’s Manifesto , which he thinks is well worth stuffing into someone’s stocking.
• Gail Vaz-Oxlade talks about another great book for Christmas in The Glass Half Full (ok it’s her book, but it’s still good to get for Christmas).
• Michael James is making sure that there are no Mice stirring in his house when he states Sometimes Frugality Can be Taken Too Far . I always thought they were disposable too.
• Preet at WhereDoesAllMyMoneyGo gets festive with a post about The Elves Index, OK it has nothing to do with Christmas, but the title does.
• Larry MacDonald points out the importance of keeping things over the holiday in the correct perspective in his post Ten Things to Know about rebalancing. No, again, nothing to do with Christmas, but work with me people!
• Canadian Dream at 45 suggests we Slow Down a Bit This Holiday Season which really is about Christmas and the holidays!
• The Four Pillars gets into the holiday season with their Last Minute Cheap Gift Guide, remember a roll of toilet paper is cheap and most of us can use it this time of year too!
• AllFinancialMatters talks about 3 more books Three Great Books to Give Away This season, to be exact.
• Riscario has a catchy holiday title The Gift of Networking, and networking is very important if you are looking for a job!

Hope your shopping is going well, remember YOU are the economic stimulus the economy needs (me, I’m too cheap to matter).

As the Magic 8-Ball tells us (OK Stats Canada tells us, but it sounds like the Magic 8-Ball), indications are good that the economy may be turning around. Yesterday stats Canada announced that the Leading Indicators jumped 1.3% , which suggests things may be turning around slowly in our economy.

The index seems a bit of a mish-mash of a lot of information, but as usual if you read closer you’ll see that there are some very interesting tid-bits of information in there.

• The housing index is up 2.5% from last month, which means it is costing more to buy a house, so someone must be able to buy them if the prices are going up.
• The TSX S&P is up 2.0% from last month and if you look back to June 2009, it is up 18% over that period, which is a big number (but it did have a long way to go as well, after the great drop of ‘08)

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Stocks and Houses

So two areas of “investment” are up a fair amount which is good, and the questions now are, will this last? We shall see is the only answer, but with stocks returning to pre-crash valuations in some areas (some will never come back folks, remember that), is it safe again? Can’t tell, and we’ll only really know looking back in a few years whether this was the start of the recovery or a “suckers rally”.

Given I bought my house a long time ago, fluctuations in it’s value mean little to me, as I don’t plan on refinancing it.

Christmas Laziness and Cheer

I am planning on doing a Top 10 postings for the Christmas/New Year stretch (given I may or may not be around), so if you have any suggestions for this kind of a list (top 10 for this year), please leave a comment with a title or story you may have particularly liked (written by me, that is).