I wrote one post this week revealing my asset allocation and my reasoning behind it: My Asset Allocation Here are some short takes and some weekend reading: The Blunt Bean Counter looks into the tax implications of crowdfunding. Potato looks at a wide range of choices for implementing a passive index investing plan. He rates them by simplicity and costs. Big Cajun Man reports that TD Waterhouse has made it easier to make transactions in their RDSP accounts. My Own Advisor reviews the book The Empowered Investor . Million Dollar Journey shows how to figure out where your hydro dollars are going.

I’ve resisted discussing my asset allocation for some time, but now is finally the time to describe it and the reasons behind it. I’m not holding it out as a model portfolio; I believe it’s suitable for me and not necessarily anyone else. With that warning, enjoy the discussion and feel free to ask questions or take some pot-shots. The main reason why I haven’t discussed my asset allocation in detail before now is that I don’t want readers to treat it like a model portfolio and follow it blindly. Everyone’s situation is different. The need for variation in asset allocation from one investor to the next usually isn’t huge, but there is no one-size-fits-all portfolio. A secondary reason for keeping my asset allocation to myself is that I can’t be sure I’ll never change it. For example, I recently made the minor change of switching from an ETF of small-cap stocks to an ETF of small-cap value stocks . I don’t have any plans to change my current allocation, but I may think differe...

Here are my posts for this week: Stock Market Momentum The 4-Hour Workweek Here are some short takes and some weekend reading: Canadian Couch Potato offers three specific reasons why you should stick with your asset allocation plan in the face of recent stock volatility. The Blunt Bean Counter highlights the huge gap in income tax levels between Alberta and Ontario on incomes above $150,000. So far Ontario has kept the top marginal rate a hair under the psychological barrier of 50%. Their game seems to be to lower the income that gets hit with higher rates. If they ever do go over 50%, it should make some people rethink where they want to live or how hard they want to work. Big Cajun Man managed to finally stop paying for AOL. I didn’t even know that AOL was still around. I used to joke that I belonged to their CD of the month plan. I still use some of their CDs as coasters. My Own Advisor runs through the basics of PRPPs, but finds that they don’t add much to e...

I had heard so many different things about Timothy Ferriss’s book, The 4-Hour Workweek , that I thought it couldn’t possibly cover all the subject areas. But I was wrong. Ferriss gives step-by-step instructions for changing many different aspects of your life all unified under the theme of “escape 9-5, live anywhere, and join the new rich.” The main themes of the book are getting past fear of change, eliminating time waste, creating a low maintenance business, getting agreement to work for your current employer remotely, mini-retirements, and living in other parts of the world. Some of these themes may seem familiar, but Ferriss’s detailed strategies for completing these goals make this book unique. Few readers will attempt everything they read about in this book, but almost all readers will find some useful information for improving their lives. The type of reader who will get the most out of this book is the 9-to-5 cubicle-dweller who yearns for a different life. We get some...

People tend to think of the stock market as something that moves up and down like an airplane. There are problems with this way of thinking that cause investors to make poor choices. If the stock market really were like an airplane, it would have momentum that makes it difficult for the market to change direction from rising to falling or vice-versa. The truth is that prices can change on a dime because they are determined by the bid and ask prices of traders who can change their minds in an instant. There is a technical concept of momentum in stock prices, but it isn’t the same as momentum in physics; there is no physical object that must be slowed down and turned in the other direction. The problem with a false analogy like the airplane is that it creates the illusion that if markets move in one direction a few days in a row, they are almost certain to continue that way for a while. But this isn’t true for stocks. The recent downtrend in stock prices has many commentators s...

I wrote one post this week reviewing a book that solidified my view that I won’t pay any attention to market predictions: Clash of the Financial Pundits Here are some short takes and some weekend reading: Dan Bortolotti discusses the effect robo-advisors will have on the financial advice industry. He concludes that “To justify their fees, advisers will need to improve the level of personalized planning services they deliver.” Million Dollar Journey shows where to get help for starting or growing a business. Big Cajun Man makes his case for allowing couples to split their income. We’ve been getting lots of hints that this is coming but only for couples with young children.

The book Clash of the Financial Pundits by Joshua M. Brown and Jeff Macke promises to tell readers “how the media influences your investment decisions.” For the most part the authors deliver on this promise. In the end this book solidified my view that it’s not worth paying any attention to those who make market predictions, but that’s not what the authors intended as the takeaway for readers. Much of the book consists of transcripts of interviews with various financial pundits, the most well-known of which is Jim Cramer. While I found these interviews somewhat interesting, the best parts of the book were short chapters 9, 13, 15, and 19, none of which contained interviews. Chapter 9 explained that the pundits who attract viewers are those who make the most outrageous predictions. “So long as you’ve still got a recognizable name, you’re still in the [punditry] game.” “And being right is irrelevant, so fire away!” Chapter 13 explains that among pundits “it’s better to be con...

Here are my posts for this week: The Alchemy of Finance “Invest However You’re Most Comfortable” Here are some short takes and some weekend reading: Marc Andreessen believes we can improve finance by completely reinventing it. If you think Andreessen is right about this, you may not want to concentrate your portfolio in bank stocks. Boomer and Echo compares 5 different robo-advisors already operating in Canada or coming to Canada soon. Mr. Money Mustache teaches how to get rich with science. As usual, he writes very well and makes you think. Canadian Couch Potato has some interesting examples of how taxes affect ETF performance. Portfolio turnover matters in addition to the mix of dividends, interest, and capital gains. Big Cajun Man asks whether spousal RRSPs have any use now that we have pension splitting. He got some good ideas in the comments section for how spousal RRSPs are still useful. My Own Advisor ’s latest dividend update drew quite a few comments...

It sounds wonderfully inclusive to say that everyone can succeed at investing by approaching it in whatever way they’re most comfortable. In reality, this just isn’t true. One elderly couple I know has been living off GIC interest for many years. Even worse, they’ve just been accepting the interest rates offered by big banks instead of seeking out the best rates. They now have very little left and are forced to live extremely modestly. Given the large nest egg they started with decades ago, they could still be living a middle class lifestyle. But they stuck with what made them comfortable. I’ve known two people well who tried to make money with stock options. Both lost all the money they devoted to the effort. They didn’t like the idea of making money slowly and went for some big scores. So much for seeking success investing in their own way. Many of my colleagues over the years have invested their money trading individual stocks. This was particularly true during the te...

One of the books that I’ve often seen respectable financial writers include on their reading list is George Soros’s The Alchemy of Finance: Reading the Mind of the Market . These recommendations along with Soros’s incredible success as an investor were enough to tempt me to read this book. I found it interesting in parts, but seriously doubt that it will help me as an investor. Soros’s main theme is his idea that people’s collective biases do more than just drive prices; they actually change outcomes. He calls this “reflexivity.” To take a simple example, suppose XYZ Company is overpriced and short-sellers are just waiting for their profits. But then XYZ uses its overpriced stock to buy a fairly valued company, increasing XYZ’s total profits. The market then overvalues this increase in profits, and XYZ makes another acquisition with its over-priced stock. The high valuation on XYZ is self-fulfilling. XYZ keeps using stock to buy other companies cheaply. The short sellers ge...

I wrote one post this week questioning the view that Canada would be so much better off if more of us used financial advisors: Do Financial Advisors Boost Savings Rates? Here are some short takes and some weekend reading: Michael Lewis explains what happens to young people who go to work on Wall Street. I found it a very interesting read. As a lead in to how Wall Street changes people, he says something spot on about writers on the internet: “All occupations have hazards. An occupational hazard of the Internet columnist, for instance, is that he becomes the sort of person who says whatever he thinks will get him the most attention rather than what he thinks is true, so often that he forgets the difference.” Very true. Canadian Couch Potato provides a detailed analysis of after-tax returns of many popular Canadian ETFs. Robb Engen at Boomer and Echo examines the behavioural biases that have kept him in the active stock-picking game. It sounds like he’s going through th...

Recently, The Conference Board of Canada came out with the report Boosting Retirement Readiness and the Economy Through Financial Advice . They conclude that if more people used financial advisors, they would save more money, and the country would benefit over the long term. Unfortunately, it relies on a flawed study. This new study does not do any original research into the effects of financial advisors; the authors rely on previous work. They acknowledge that advisors do not produce enough extra returns to cover their fees, but that “the real benefit of having an advisor may not be performance-related at all. It may have more to do with engendering beneficial savings behaviour among clients.” Unfortunately, the authors rely primarily on the 2012 Cirano study Econometric Models on the Value of Advice of a Financial Advisor to justify the claim that financial advisors boost savings. A couple of years ago I pointed out the serious flaws in this study . I’ll briefly summarize....