5 Mistakes Rich Folks Make

I read with great amusement an article in Business Insider Rich people make the same 5 mistakes over and over. I found it amusing, because it attempts to fool you into thinking that if you act like rich folk, you’ll become one. Unfortunately, Lies travel faster than truth.

Maybe the article is attempting to convince you that Rich Folk and you are similar, since you make the same mistakes? This is hardly the case.

Rich People Can Make Financial Mistakes

That is what you should take from this story. Rich folk have the luxury of being able to make financial mistakes, they can recover from them. Most of us don’t have the wiggle room to escape financial blunders.

Rich folks can become like the rest of us, if they make mistakes, that is true. The story the great Investment Monolith wants you to believe is that the reverse is possible too. I think it is possible but the former is much more likely than the latter.

Mistakes are easily made, we all do them, every day. To succeed financially takes dedication, discipline and damn hard work. The mistakes mentioned in this article are bad:

  1. Assuming they can out-earn bad spending habits. That is not a mistake reserved to the rich, in fact this is how we all dig the big hole called debt.
  2. Not automating their savings. Another spin on pay yourself first, which is something you can do as long as you are not spending more than you make.
  3. Not speaking with a professional for tax-planning or estate-planning purposes. This seems like sound advice, if you take it as, making sure you do your taxes well, and you have your Will and Power of Attorney up to date.
  4. Assuming they don’t need a financial adviser because they’re successful. This is the heart of the article, as it seems to have been written by a financial professional. I have a great mistrust of the financial industry in general and in advisors in specific, but if you use this type of service, you had better trust them (and you had better watch them closely). In the end, it is your money.
  5. Not having any idea how much they spend, again not a mistake reserved to the rich. I had no idea I was that far in debt ? We’ve talked about that before.

What Should You Do ?

Don’t make financial mistakes? Easier said than done, but you must be careful with your money. Don’t make rich folk financial mistakes? Absolutely, because you don’t have the luxury of making them.

{ 0 comments }

Exposed on Banks

Even as a simple country Index Investor (to paraphrase Bones McCoy), you need to understand the Index you invest in. If you own a TSX-based, Canadian S&P Based or Dividend Royalty based index you hold a lot of Banks.

Two examples of this are:

  • S&P/TSX Composite Index, (OSPTX) which holds 36 % “Financials“. The top 10 holdings 4 are banks (Royal Bank RY, Bank of Nova Scotia BNS, TD Bank TD and Bank of Montreal BMO).
  • S&P/TSX Composite High Dividend Index ETF (TXEI) which holds 30% “financials”. You find 4 banks in their top 10 holdings (Bank of Montreal BMO, Bank of Nova Scotia BNS, Canadian Imperial Bank of Commerce CM, National Bank of Canada NA)
exposed on banks

Why this imbalance? Banks are doing very well lately, and have done well for over 15 years.

Are banks likely to “Nortel out“, in the near future? No, but realize that you are holding a lot of Banks if you are investing in Canadian Indexes.

My problem is that I am highly exposed on Banks. From my days as a Stock holder, I still hold TD and BMO in one of my larger investing portfolios. In this same portfolio I also hold a TSX index fund, which means my exposure to banks is too large (given I may retire within the next 10 years).

As Interest Rates slowly rise to more normal rates, I should start thinking about some more stability and start building a GIC Ladder in my portfolio. I should be looking for more stability given I am within 10 years of retirement.

Treat This as Informational

I am not offering advice. I am simply pointing out that many passive investors are heavily exposed to the Financial Sector in Canada.

{ 0 comments }

FUD Financial Messages

What is FUD Financial messages? FUD is a technical term from the world of politics where you try to create Fear, Uncertainty and Doubt with your message. FUD is usually a strategy to influence perception by spreading negative and dubious or false information leading to fear-mongering and concerns by the public. Naturally, you do this to create an advantage for yourself, or cast aspersions on an opponent.

It is easy to see the power of FUD in the last few elections, but politics is not the only arena where FUD works well.

FUD financial messages are out there. Usually to cause you to wonder whether you are using the right bank, insurance company or you are missing out on a great deal. All Fear of Missing Out (FOMO) messages are in this genre.

Fear Uncertainty and Doubt

Some might argue this blog is a FUD financial message, however, getting out of debt is not really FUD in my book.

The message continues to be confusing to most folks. The Truth in finances is not clear to many folks (if any), and there are few places where consumers can get clear and truthful financial information.

Investing FUD

I find the entire investment industry seems to be a FUD Factory.

  • Cryptocurrency seems to be the leader in FUD. You will miss out on untold riches unless you buy one of the over 200 cryptocurrencies (even though you have no idea what it is).
  • In Canada there is tons of FUD swirling around legalized Marijuana, even though most of the companies seem to spend a great deal more than they are making currently.
  • Actively managed funds want you to be unsure that you are not making the huge growth they can offer, however, Index Funds point out that actively managed funds can’t keep up their claims (and thus are part of the financial FUD game).

Get the tools you need to comprehend truth from fear-mongering, and create Financial Firewalls to filter out the disinformation.

Remember that sometimes FUD is a good thing, and the sales person you are dealing with is trying to allay your personal FUD, with any lie that will cause you to buy their product.

{ 0 comments }

Risk Profiles and E-series Orders Rejected

My daughter is running into the same issue that I did when I had my TD E-series orders rejected, due to my investment risk profile. She has set up a TFSA, unfortunately with TD Mutual Funds (not TD Direct investing). As we learned to use TD E-series funds in a TD Mutual Fund account, you must complete many steps. None of these steps include the change your investment risk profile to stop having your TD E-series orders rejected.

e-series orders rejectedI have talked about how to use the E-series funds to set up a simple Couch Potato investment portfolio, so my daughter is going to use this for her TFSA account.

The application to allow you to use TD E-series Index Funds in your TD Mutual Fund account is straight forward and easy to fill in. You must do this if you end up with a TD Mutual Fund account, which is what you end up getting steered into if you go into a TD Branch. My daughter thought she was opening a TD Direct Investing account, but it ended being a TD Mutual Fund.

If you fill in the form, you assume that you then buy E-series funds (they even show up in your list of funds that you can buy), however, that is incorrect.

The E-series funds are Index funds with low MER fees (and I use them in many of my accounts, as full disclosure, but I am not receiving any recompense for talking about them). Many different web sites have talked about them, and how useful they are, but they are tricky to use in a TD Mutual Fund account.

A TD Mutual Fund Investing Risk Profile is filled out when the account is first opened, and periodically after that (every year or two). The profile questions usually push folks into a lower risk Balanced profile, and evidently the E-series funds are far more riskier funds.

The E-series Funds have turned into the red-headed step-child of the TD Mutual Funds group. None of their staff seem to want to sell them or use them in any kind of form. It is easier to use TD E-series funds in a Questrade account than a TD Mutual Fund account.

My opinion is that due to the E-series being lower cost, the TD Mutual Fund reps don’t make much money (if any) off them, so they are less motivated to sell them. Why the TD Mutual Fund on-line system seems to default to E-series orders rejected, is another issue.

Simple Solution to E-Series Orders Rejected ?

A simple fix which I will suggest to TD Mutual Funds who be to add the following “initial” block.


Ο  I allow the TD Mutual Funds group  to alter my Investment Risk Profile to allow me to use the E-series funds in my investment portfolio.

Name:  ________________           Initials: _____________


Seems straight forward to me. I doubt this will happen, it is too straight forward and nobody makes money.

{ 6 comments }

2 Key Investment Strategies

There are two key investment strategies that all folks need to have, that are obvious, but rarely ever spoken about. The second strategy is the one that most folks seem to forget about.

A Buy Strategy

Why are you buying? What is the reason you are investing? Is this for a retirement fund, emergency fund, or just savings in your TFSA ? You need to answer that question and that is the cornerstone of your buy strategy.

When are you going to buy can be important, but market timing isn’t going to work out. When are you going to start investing is more important in your buy strategy.

What are you going to buy? Stocks, mutual funds, index funds, ETFs, and GICs are just some of the investment vehicles you can use to invest your money. Depending on what you buy, you will then need to think about how often and when you buy.

How much are you going to buy? How much money do you have to invest? Another important aspect of your buy strategy.

The other aspect of your key investment strategies is one that far too many folks don’t have.

Is there another investment strategy I need other than Buy?!?

{ 2 comments }

%d bloggers like this: