Become a Tangerine client today

I Like My Money Like I Like My Coffee

Safely invested, with low fee drag and growing every year.

Big Cajun Man 2020 (with respect to Letterkenny)
I Like My Money This Way

Frankly this makes as much sense as a lot of financial advice that I hear these days. At least the punch line is on point.

The Debt doesn’t matter crowd seems to think that due to low interest rates, debt is an afterthought. Unless the entire economy changes, Debt is going to comeback big time.

These days it is reminiscent of the hay days of the Internet Bubble. Back then the statement was:

Profits don’t matter. It’s eyeballs!

90’s Internet Bubble Investing Credo

That drove the 90’s Internet bubble. When you read that I am sure you smirked or laughed how insane that reads, but it was the gospel of investing in the 90’s. We saw the explosion of that bubble, and the associated side effects (i.e. loss in wealth for day to day investors).

Show your love of The Times. Shop Now!

One More

I like my women, like I like my coffee. Respected in the workplace and compensated at an equitable and fair level.

Big Cajun Man 2020

Same Topic

best advice

I wrote an article in 2005 about Experts? It’s your decision where Harry S. Dent Jr., back in 2000 advised how great the Internet was as an investment. This was written as the Bubble Exploded.

Index Investors, who purchase Canadian Indexes need to remember they are Highly Exposed on Banks. Banks hold a high portion of most major Canadian Indexes.

Key investment strategy

You need Two Key Investment Strategies, if you plan on investing for the long term. The first is easy, when to buy, but what might be the second?

{ 3 comments }

MER : A Worm in the RESP Money Tree

The RESP can be like a Money Tree for parents (and children) wanting to save for  post-secondary education.   If you invest your money you can get:

All of this free money is there for the asking. Truly it is like having a Magic Money Tree, however, as with all orchards, you can lose some of your fruit due to  worms.

In this case the worms can be:

  • High MER (Management Fee) Mutual Funds, many of the time they are hidden under the guise of Balanced Funds.
  • Badly performing Mutual Funds, usually pushed by an “Investment Person” who is making money on the purchase.
  • Very low interest paying saving devices (e.g. Bond Funds, Money Market Funds, GICs and HISA).

These financial worms chew into the potential growth of your RESP. Remember that most RESPs can have about a 23 year lifespan. The government stops adding money after the child turns 18, but  the  money  can continue to  grow for  a while after that, unless the  worms get in there.

When I opened my kids’ RESPs (more than 23 years ago), I didn’t know much about investing, so I spoke to my Canada Trust “Investment Person”. This person warned me that this was a short-term investment, where I didn’t want to risk losing money, so I should put the funds in safe Mutual Funds. I didn’t know so that is what I ended up getting was a small amount in a Balanced Mutual Fund (MER 2.8%) a larger amount in a Bond Fund (paying 1.2%) and a Money Market Fund (which paid 0.9%).

Become a Tangerine client today

As time passed, I learned more about investing, and started looking at my TD Mutual Funds (CT had been bought by TD), and saw the High MER I was paying. I read about the E-series Funds from TD, saw they had low MERs, so I went to TD to ask how to  transfer to  these Mutual Funds. You would have thought I was about to fall into an abyss, the way the investment person reacted, but I was not to be dissuaded. I got all the needed forms and changed the RESPs so that I could purchase the E-series funds.

I changed my investment mix, to be more like my other Index Fund portfolios, while still holding all grant money in safe(r) funds (i.e. Money Market funds). I didn’t want to lose the grant money, so I figured they were safe in a Money Market fund (which is wrong, Money Market funds can lose value too).

I lost a great deal of possible growth during that time, to High MER funds and badly chosen Mutual funds as well.

Don’t let the worms eat away at the growth of your RESPs.

BCM 2020

{ 4 comments }

RESPs and High Fee Mutual Funds

RESPs and high fee mutual funds seem to go hand-in-hand in Canada. Most RESPs, are set up with an “adviser” of sorts (usually at a bank), who makes helpful suggestions as to where your money should go. The question to ask, who profits from this advice? Sometimes both adviser and investor, but always the adviser.

Mutual Fund companies want you to buy high MER funds for 18 years, so they can profit from you. This does not mean RESPs and high fee mutual funds are inevitable.

High Fee Mutual Funds

Whether your investment goals succeed is not their goal. Their goal is to extricate as much money from you in fees and increase their profits. Mutual Funds are businesses, sometimes with shareholders, and employees who want bonuses, remember that and you will be fine. Who and how are profits made, is always the question to be answered.

I have friends ask me about RESPs, as they are aware that my kids have graduated from University, so they ask if I used the  program. My answer is yes, but  I start with warning them that when I set up these accounts they were Canada Trust Mutual Fund accounts. The CT Mutual Funds turned into TD Mutual Funds, but it was not until later that I learned about the TD E-series funds I should have used (and the bear trap in using them).

The typical answers or comments that I get (that really cause my gears to grind) are:

  • I talked to my Manulife One guy and he helped set up the account for us.
  • While I was at the bank, I saw an adviser who set up some RESPs.
  • My insurance broker said they had a really good product for RESPs so I had her set it up for
  • Someone told me about these great Group RESPs, sounds like a great idea I usually go for a beer after hearing this stuff, and sometimes I just weep.

Let’s unwrap these malodorous gifts, first, your Manulife One guy is going to put you into Manulife Mutual Funds because that is where he (or she) makes their money. These funds have MERs that are far too high for a shorter term savings program like the RESP.

The same is true for your local bank. I once mentioned the TD E-series funds to my Bank’s “TD Mutual Fund Expert”, she looked them up and said that she couldn’t  actually  sell me those  funds. I asked why, the  answer, “they don’t let me”. So TD doesn’t allow their “Mutual Fund Expert” sell some  of their Mutual Funds? In fact you can buy only their I-series in your account, you cannot access their E-series, D-Series, O-series or any other unless you have a TD Trading Account).

Your insurance company’s RESP is going to be closed and the only thing you can buy is their High MER funds. I hope you are noticing a great deal of repetitiveness here.

The Group RESP thing, I had to go look up and then almost cracked a tooth while clenching my teeth. Group Scholarship trusts are throwbacks to before the day of the  RESP. They can work for folks, and their forced savings is a good thing for many folks, but read all the rules very carefully. What are the penalties if you take money out quickly (or early)? Are there penalties if your child doesn’t go to post­ secondary school? What are the rules about what is a post-secondary education.

If I could just hand someone a simple outline like say this article, this article or this article, I would, but I guess no one writes about RESPs much? Yes, that is sarcasm, why do people spend more time worrying about what organically grown kale they want to  buy, than this important  investment?  Rhetorical  question, don’t  answer that.

Are RESPs a Good Idea ?

An RESP is a great idea for your kids’ education, but don’t jump at the first one you see. Do some research; know what you are buying and how much it is going to  cost you. Mutual Funds and other associated firms are hoping you get confused in terms of how much you pay in management fees. It can get confusing especially with the grant money going into the account which can muddle your figures. Your goal is trying to pay the least in fees, and maximize your growth and grants received.

{ 4 comments }

Wanting the Big Piece of Chicken in the Financial World

Michael James, inspired me to write another rant/commentary on the financial industry. He wrote about Mouths to Feed in the Financial Industry and it reminded me of a very funny monologue by Chris Rock: Bigger and Blacker (Amazon Link) about how Fathers don’t ask for much in life:

What does daddy get for his hard work? The big piece of chicken at dinner! My mamma would kill us if one of us ate the big piece of chicken by accident!

Daddy's piece of chicken

That is a BIG piece of Chicken

What does this have to do with the Financial System? Everybody in the financial system thinks they are Daddy, they all want the big piece of chicken.

  • Mutual Fund managers want you to pay the front-end, back-end and high MER fees because they are doing that much work to invest for you. That is a whole chicken, not just part of it.
  • Banks think they are the Daddy, just for taking care of your money. There are banks in Europe giving negative interest on your money. The money shrinks if you leave it in the bank.
  • Any Cell Phone Company (in Canada) is your Daddy, how much do you think their service really costs, but they are making sure you get quality service.
  • Internet Service Providers are plumbing, but they want a big piece of Chicken for the way they count your packets (and charge you if you use too many)

Let Daddy have that big financial piece of chicken? No way! They get enough, without taking the big piece of chicken too!

 Image courtesy of piyato. at FreeDigitalPhotos.net

 

{ 0 comments }

Is Your Toilet Flushing Hot Water ?

That is a very odd title, but it did happen. My Brother had just moved into a new town-home complex, and there were a few idiosyncrasies that he found in his new place, but he didn’t notice this issue for a little while after moving in. He really only noticed one day when he sat down and noticed the warmth emanating from the commode, and only then realized that his toilet was connected to the hot water system for his house (not a huge issue, but it would waste a little money for a long time).

toilet flushing hot water
No, it wasn’t that hot

Financially Flushing Hot Water?

Are you flushing hot water in your financial world? How many fees are you paying that you are unaware of, or worse, are ignoring? What kind of fees am I commenting about?

  • Bank fees, do you still pay those? There are so many banks that offer zero fee accounts, why are you flushing that hot water (money) down the toilet?
  • Entry fees, exit fees and high MER Mutual funds? Seriously, how many times do we (pretty much everyone writing about investing) have to write about this topic? Evidently, we have not hit the maximum count yet. They are called Index Funds, look it up.
  • What are you paying in Insurance rates? Are you shopping around? Remember that insurance is only for ” … in case stuff happens …” (to paraphrase Chris Rock).  If you are overpaying for insurance your money is flushing away.
  • Memberships that you are no longer using? That fitness club membership, are you using it? Do you really read the newspaper?

Am I missing any other Financial Toilets that flush hot water ?

{ 0 comments }

%d bloggers like this: