The 2024 investment return for my overall portfolio measured in Canadian dollars was 18.0%, which is below my benchmark return of 19.0%.  The difference is primarily due to my choice a few years back to adopt an automated plan that shifts gradually away from stocks when stock prices are high as measured by the cyclically adjusted price-to-earnings ratio (CAPE) of world stocks .  My benchmark doesn’t take CAPE into account. In years when stock prices are high but they give good returns anyway, this automated plan costs me money.  That’s what happened in 2024.  But I’m content with this outcome.  By shifting away from stocks when they’re expensive, my portfolio risk is lower at a time when stocks are riskiest.  I don’t expect my strategy to pay off during normal times.  I’m reducing my losses if we have a scenario where stock prices are high, and then they crash.  This is a kind of insurance, and it has a price during normal times. The method I use ...

Here’s a scenario related to credit cards that plays out far too often.  To some degree it’s a problem from the past, but it still affects older people today.  It has the potential to affect younger people too if they’re not careful. Auntie : But why did the bank take away my credit card? Nephew : The bank thinks it’s your husband’s credit card, and when he died they cancelled it. Auntie : But it has my name on it. Nephew : Yes it does.  But that card was created as an added card on your husband’s credit card account, even though they printed your name on it. Auntie : How was I supposed to know this? Nephew : I’m not sure.  The account statements show your husband’s name, which tells us that the bank considers it to be his account.  But many people don’t know that this is how it works. Auntie : Why won’t the bank give me my own card now? Nephew : The bank’s computers don’t know who you are. Auntie : But everyone at the bank has known me for decades. Nephew : Ban...

The subject of foreign workers is heating up in the U.S. right now, and has been a hot topic in Canada in recent years.  Local workers often see foreign workers as cheap labourers who take away their jobs.  Employers see foreign workers as a way to find scarce skills and cut costs.  As is common in debates, both sides are partially right and partially wrong. In a simple but flawed view of the world, there is a fixed set of jobs available in a country, and workers compete for these jobs.  With this way of thinking, when a foreign worker gets a job, that’s one less job available for local workers, and when a foreign worker leaves (or any worker retires), there’s one more job available to local workers. This way of thinking is reasonable for most jobs, but it’s wrong for the most skilled positions.  There are only so many highly skilled people to go around.  These workers help make businesses succeed.  They create more jobs than the one job they occupy....

Recently, Braden Warwick at PWL Capital created an excellent CPP calculator that we can all use.  One of the numbers this calculator reports is the IRR (Internal Rate of Return) you’ll get between your CPP contributions and the CPP pension you’ll collect.  Some financial advisors (but not Braden) decide it makes sense for their clients to take CPP as early as possible (age 60), and invest the proceeds.  Their reasoning is that they believe they can earn a higher return.  Here I explain why this logic compares the wrong returns. The return you’ll get on your CPP contributions depends on the contributions you and your employer have made and the benefits you’ll get.  These amounts depend on many factors about your life as well as some assumptions about the future.  Typically, the return people get on CPP is between inflation+2% and inflation+4%.  (However, it can go higher if you took time off work with a disability or to raise your children.  It al...

Inflation is a risk we have to face in financial planning, particularly in retirement.  We need to measure inflation risk correctly to be able to make reasonable financial plans.  The best guide we have to the future takes into account past inflation statistics.  But the field of statistics is full of subtleties, and even Dimensional Fund Advisors (DFA) can make mistakes. DFA creates good funds, and their advisors tend to do good work for their clients.  I’d prefer to find errors in the work of a less investor-friendly investment firm, but they provided a clear example to learn from.  They misapplied a statistical rule, and as a result, they misinterpreted the history of inflation over the past century. I discussed this issue with Larry Swedroe in posts on X.  I respect Larry and have followed his work as he tirelessly explains evidence based investing to the masses. A Simple Example To explain the problem, let’s first begin with a simpler example.  So...

Scott Galloway uses a unique style in his book The Algebra of Wealth: A Simple Formula for Financial Security .  Rather than offer generic advice to choose a career that pays well, Galloway takes the tone of someone telling you privately what he really thinks of various career options, for example.  He takes a similar approach to other topics as well.  Readers may not agree with all of his advice, but they can’t say his opinions weren’t clear.   The book is divided into chapters on focus, good habits, and avoiding mistakes; choosing a career and developing skills; spending, saving, and budgeting; and investing.  The blunt commentary on choosing a career was the most interesting part of the book.   For those concerned that this is some sort of math book, it isn’t.  The few formulas in the book are mostly not intended to be taken literally.  For example, “focus + (stoicism x time x diversification),” and “value = (future income + terminal value) x d...