I noticed that some of the Olympic events don’t seem to be particularly well attended. I’ve heard officials blaming this on “no shows,” but I wonder if it has more to do with ticket prices. A quick check of beach volleyball ticket prices revealed that if you want to watch the semi-finals and finals only, the cheapest seats cost a total of 320 Pounds, or about $500. Middling seats would be about $1000 per person and the best seats closer to $2000. Toss in another few other events, and a couple could easily spend a 5-figure sum on tickets. At these prices, I can certainly see why many people would choose to watch the games on television.

A group of Canadian bloggers and an online insurance specialist got together to write The Beginner’s Guide to Saving and Investing for Canadians , edited by Dan Bortolotti. Having followed the authors’ excellent blogs for years now, it’s no surprise that the book is well-written. At only about 100 pages long, the book’s main strength is that it sticks to the big important issues rather than diving too far into minutia. At the bottom of this review, I’ll describe how you can enter a draw to win a copy of the book. The first chapter, by Krystal Yee, covers budgeting and basic cash-flow planning to get out of debt and create savings. Although quite basic stuff, many Canadians make the kinds of mistakes Yee describes. It’s hard to build a solid financial future while paying interest on credit-card debt. Jim Yih goes through the alphabet soup of different types of savings accounts (RRSP, RESP, TFSA, etc.). It’s possible to write a complete book on the details associated with each ...

Rob Carrick talks to author and financial advisor Carl Richards about whether to risk investing in stocks. A good quote: “If you’re going to get out of the market, make it a permanent decision, please.” Richards fears that investors who get out now will climb back in again when stocks are flying again at high prices. Canadian Couch Potato makes the case that we can’t know whether we are in secular bear or bull markets until they are over. Big Cajun Man is in full rant mode about so-called “good debt.” I think he has a point. Taking on debt may be the right thing in some cases (think of buying a home or getting an education), but that doesn’t make the debt good. It just means that you’ve paired up a good thing (a home or degree) with a bad thing (a debt). Million Dollar Journey looks at the tax efficiency of dividend investing through a corporation.

An effort to boost donation amounts for a charity succeeds, but not in the way we expected. I’ve been involved with Little League Baseball for many years now. Instead of charging admission during tournaments to cover costs, we “pass the hat.” This is where spectators are asked to toss money into a hat that is carried around at one point during each game. It used to be that many people would just pull a few pennies, nickels, and dimes out of their pockets, which makes for a lot of coin rolling, but doesn’t help the donation total much. Sending young people with a puppy around to carry the hat improves the haul somewhat, but better ideas were needed. A recent bright idea was to offer a league pin to anyone who donates $5 or more. At first this didn’t seem to help much because few people donated enough to get a pin. But there was a nice secondary effect; the typical donation became $2 instead of a few low denomination coins. Just mentioning $5 had the anchoring effect of draggi...

Jason Zweig looks at the incredible appetite investors have for high-yield investments despite the fact that these yields are mostly just a return of investor capital. Million Dollar Journey explains payday loans and their regulations (but the post has disappeared from the internet). He points out that the typical annual interest rate is 652%. But this is based on “simple interest” which doesn’t exist in the real world. Compounded out, this is about 33500%! Big Cajun Man implores readers to call their bank’s bluff and jump to a new bank. Preet Banerjee reports on some recent research into shoppers’ troubles with math. The Blunt Bean Counter asks whether you’re selfish with your money and financial advice. Jim Yih has a new book out about guaranteed investments.

Shoppers are bombarded with messages of sales, specials, and deals. These marketing messages almost always make the deal sound better than it really is. Here are a few common messages along with translations into more neutral language. Buy one and get the second one at 50% OFF! Translation: “25% off, but you have to buy two of them.” We’ll pay the HST! Translation: “11.5% off.” The HST may be 13%, but taking it off saves only 11.5%. Fill all 10 spots on your sub card and you get a FREE SUB! Translation: “9% off, but you have to buy 11 subs before this promotion ends.” Buy with our card and collect valuable points! Translation: “Trade dollars for another form of currency called points whose value we control and can devalue with redemption rule changes any time we please.” None of these deals is necessarily good or bad. They just aren’t as good as they seem at first. Do readers have any more good examples?

Rob Carrick reported that so far cover-call ETF results have been disappointing. Some investors have been surprised by this, but the real surprise is that so many seemed to expect outperformance. At its core, a covered-call strategy involves owning stocks and selling call options on those stocks. Compared to a strategy of just owning stocks, the difference is obviously the short position in call options. So, for a covered-call strategy to outperform, the excess profits would have to come from the options. For the options to be profitable, traders would have to consistently trade call options far above their real value. Why would anyone expect this to be the case for such short-term financial instruments? Even if writing covered calls has no expectation of excess profits, it is reasonable to expect that it will change the volatility of investment returns. But again, I see no reason to expect that we will be left with anything other than the usual relationship between risk and...

Reader B.C. sent the following question about the Management Expense Ratio per Quarter century (MERQ): I have been reading through some of the old posts on your blog, and came across your idea of the MERQ as a more valuable indicator of management expenses than the MER, and I wholeheartedly agree. What is not obvious to me though is what equation you are using to calculate the MERQ. Would you be able to provide me with the equation? I'm sure that I am just forgetting some basic math :-) A fund’s Management Expense Ratio (MER) is the management expenses and certain other fund costs for the year divided by the average assets under management during the year. This is then expressed as a percentage. The problem with this measure is that it gives a low-looking percentage (usually between 0.1% and 3%) that seems harmless. But, this bite out of your savings gets taken out of the same money year after year. Suppose that Fund A’s expenses lead to year-end assets being 2% lower...

Rob Carrick looks at the upside of falling house prices. The Blunt Bean Counter explains the ramifications of a recent ruling by the Tax Court of Canada on what constitutes a “set” when selling personal use property. This could be important if you ever find yourself selling off valuable collectibles. Canadian Couch Potato announced a new service for do-it-yourself investors to look at their financial plans. Big Cajun Man sings the praises of slow thinking. I know I make better decisions when I take my time and think things through. My Own Advisor shares his reasons for owning ETFs. Million Dollar Journey looks at the pros and cons of rent to own houses. Preet Banerjee’s latest podcast features a discussion of mobile wallet technology and two ways to save on cellphone roaming charges.

Jim Yih wrote an interesting article about the importance of discipline over conviction when it comes to financial success . He says “most investors think that investment success comes with conviction or intuition when really the thing that matters most is discipline.” I agree with Jim, but the problem is that investors who make the most money quickly make their fortunes with conviction and intuition. If a thousand investors each take a wild chance and pour all of their savings into their favourite stock, a few will make a fortune. Of course, most of them will end up with far less than someone who chooses a well-diversified portfolio, but the few lucky ones stand out. There is a parallel here with lottery tickets. A huge majority of lottery players lose money over their lifetimes. But a lucky few strike it rich, and these lucky people are very visible. It’s obvious that buying lottery tickets is a poor financial move, but it is less obvious that relying on conviction and intu...

There is a curious paralysis that hits people when they are forced to make decisions about large sums of money. Very frequently, they end up making the default choice that involves no action at all. But these same people will throw themselves into decisions about small amounts of money with zeal. The most frustrating example of this for me occurred in 1994 when the government eliminated the $100,000 lifetime capital gains exemption. The government was allowing people to file an election with their 1994 taxes to treat capital assets as though they were sold so that they could use up some of their capital gains exemption before it disappeared. By doing this, the adjusted cost base of the assets would be higher and less tax would be owing in the future when the assets were sold (or deemed to be sold). Three elders in my extended family shared ownership in a cottage. I carefully explained all this to them. I even tossed in some emotional stuff: “if you don’t do this, when you pas...

Million Dollar Journey reported on the 6-month point of a stock-picking contest among 10 bloggers . They’ve been doing this for a few years now. I’m not in the contest, but I like to stick my nose in by comparing my actual portfolio results to their stock picks. The stock-picking results so far range from -26.55% to +13.34% with an average return of -1.5%. My portfolio’s return for the first half of 2012 is +1.9%. If you add my portfolio to the group, I’d be fifth out of 11. So, as usual, my (mostly) index-based portfolio isn’t first or last and is a little above average. This is what you expect from indexing compared to concentrated portfolios; rarely first or last over short periods of time, but always tending to be a little above average. Over longer periods of time, indexing rises toward the top.

Rob Carrick asks whether an email explaining to investment advisors how to aggressively take more money from their clients is just the product of a rogue sales rep or is standard practice in the industry. Million Dollar Journey pokes some fun at big predictions that fizzled. Canadians have, on average, 15 years left on their mortgages . I find this interesting, because 15 years is the longest amortization I’ve ever had, and because I doubled my first payment, my amortization period dropped almost immediately. This shows that I’m quite conservative about debt compared to the average Canadian with a mortgage. Big Cajun Man anticipates yet another September of spending on his children’s education. Preet Banerjee announces that he will be the next host of the show Million Dollar Neighbourhood on the Oprah Winfrey Network. Preet’s a good guy and I bet he’ll make this show quite interesting.

A while back I listened to a pitch designed to get employees at my company to sign up for a group RRSP plan. One of the points the salespeople made that resonated with the audience was that employees could have their entire bonus payment deposited into their RRSP accounts without any withholding tax. Many employees were left with the false impression that this would save them a bundle on their taxes. To make this more concrete, suppose that employee Megan receives a $20,000 bonus and has a 45% marginal tax rate. Megan will only get to keep $11,000 of her bonus. But if she signs up for this group RRSP, she can deposit the entire $20,000 into her RRSP. It seems like she is able to save $9000. A first objection to this naive analysis is that Megan could have put the $11,000 after-tax bonus into an RRSP and would later get back $4950. So, Megan only saves $4050 with the group RRSP. However, even this analysis is flawed. Suppose that Megan has $9000 in other savings. She could...