Leonard Cohen a Cautionary Retirement Story

I was saddened to hear that Leonard Cohen, yet another famous Montrealer has passed on, but his  music will leave a legacy that will live long past all of us.

Leonard Cohen

A Poet and a Canadian Treasure
Link to Amazon

Mr. Cohen, unfortunately, was also a victim of losing his retirement nest-egg. In 2005, the news of how Mr. Cohen’s retirement funds had disappeared, allegedly due to impropriety from a former manager came to the public eye. Mr. Cohen, lost over $5 million dollars, and was forced to go back to work. Luckily, Mr. Cohen’s talents allowed him to try to recover from this set back, however, it meant his retirement evaporated.

We are continually barraged with stories of athletes and celebrities who have lost their money, due to financial impropriety (or even worse, simple overspending), but don’t get too smug.

It is easy for us to say, this won’t happen to me, but as a former Nortel employee, many folks I worked with (and retirees that I know) have had to dramatically change their retirement plans due to the Nortel Pension (and Stock) collapse.

Are you confident that your retirement plans are safe, and that when you retire, you can stay retired? Will you be healthy enough when you retire? Some good questions that need answering.

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What is Couch Potato Investing?

I had a friend ask me this question, What is Couch Potato Investing? For those starting out, it may not be obvious what I mean when I talk about this investing concept. There are great primers on Couch Potato Investing out there, read them as well.

Couch Potato Investing

Happy Couch Potato Investors

Do These Potatoes have Eyes ?

The Couch Potato Investor label is actually quite descriptive. These are 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 their portfolio (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 couch potato investing, but you’d have to buy something like Berkshire-Hathaway.

Example Portfolios?

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). Others might argue that you are not diversified enough with 2 funds, and should have a more funds, 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? Maybe 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. Use these funds to get back to your original investment percentages. You do this 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

It Can’t Be That Simple ?

Yes, you re-balance, and you sit back on your Couch and eat potato chips, maybe watch Netflix and Relax.

This is meant as a simply primer on the Coach Potato Investing. 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 with.


My Four Best Investments

Over my financial career I have made many mistakes investing, however there are a few of my best investments.

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.

best investments

Trent University

My 3 best 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 (making them my best 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.


Sure Fire Investing Scheme

For my throwback Thursday post I go back to something I wrote over 8 years ago, entitled Gambling: Sure Fire System, and it actually wasn’t just a sure-fire gambling system, it was also a can’t lose investing strategy as well.

What was I thinking? There is no such thing as either a Sure-Fire Investing or Gambling system, but as usual I went for the swerve, no, I would hopefully never write about a sure-fire gambling or investing system, the only sure-fire investing system is quite simple, invest in yourself (first, last and always),

Debt is like fat

Get in shape! Yes, round is a shape, however as you can see, it is not pretty!

You can try to find the greatest stock picks, but you can’t be sure about them, but if you work on yourself, you are going to make yourself better. What kind of investments in  yourself?

  • Education, learn something new, expand your horizons by learning about new things. Don’t criticize things you don’t understand, learn about them so you understand why they are “good” or “bad”. Take courses on topics you want to learn about, and you will not go wrong (even if you learn, you didn’t like the subject).
  • Get the hell in shape, lose some weight and make sure that you follow my first rule of retirement, Don’t Die! If you think you don’t have to work at this, you are mistaken. I am over 50 and my body is now punishing me for being out of shape, and I do not want to think of my retirement years being spent mostly in a wheelchair. Work on  your health and fitness level now.
  • Spend time with your family, and your spouse. Investing your time with your family can also assure that your retirement will be enjoyable as well. Relationships need your time don’t ignore them either.

Sure fire investing schemes? My last name isn’t Madoff, and we also know there are no sure things in investing, sports or gambling.


Make Money the Old Fashioned Way, Earn it!

I loved that old chestnut from Smith Barney, that was so eloquently enunciated by the late John Houseman. It was his authoritative voice that sent droves of investors over to Smith Barney, because surely they will make money for them?

What happened to Smith Barney? It eventually got bought by Morgan Stanley, which then morphed into Morgan Stanley Smith Barney, but now it is just Morgan Stanley (I am shortening the story a great deal, check the link for the full details).

This battle cry continues on in the Investing World, that the only way to really make big money, is to actively manage your investments, and most likely have a broker for advice, that way you are earning your money. While you are earning your money, many parts of the investing industry are earning money as well, so that must mean it is correct.

Index investing or Couch Potato investments seem to fly in the face of this concept (you do very little to earn your money).  I guess the only question I might ask that is the catch phrase I could think might explain this is that Couch Potatos are working smarter not harder.

The question that comes to mind is: Does anybody (in the investment industry) make money the old-fashioned way any more? Seriously, do they?


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