Here are my posts for the past two weeks: Financial Dreck Getting Rid of Excess Money: Binary Options How Should New Investors Enter the Market? Identity Theft for $6668.49! Here are some short takes and some weekend reading: Barry Ritholtz says the movie The Big Short gets it right. I agree with him. Canadian Couch Potato reviews Ben Carlson’s book A Wealth of Common Sense . Preet Banerjee uses this video to explain employer matching in retirement plans. Boomer and Echo say that indexers are terrible at indexing. It’s definitely true that most people who call themselves indexers invest quite actively. The Blunt Bean Counter lays out the elements of a messed up estate plan (or non-plan). Big Cajun Man is now coming up with plausible sounding names for investing strategies designed to confuse investors. I don’t think financial institutions need help with this, but maybe this post will help to make people more wary of investing strategies they don’t unders...

I don’t get a lot of meaningful paper mail any more. It’s almost all junk mail. I thought this was the case with a Rogers’ envelope, but for some reason I opened it anyway. It turned out to be a bill for $6668.49. That got my attention. It turned out to be a bill for a Rogers Wireless account. Flipping through the pages trying to figure out what was going on, my eye was drawn to a green box telling me “You saved $0.32 on your Wireless services this bill.” I was thinking I’d better save a lot more than that. My first hope was that this was a bogus bill not sent by Rogers. But everything appeared legitimate. The web address and telephone numbers were all authentic. So, I called Rogers Wireless to see what was going on. A helpful woman named Cynthia confirmed that this really was a bill from Rogers. She then confirmed that none of the information used to set up the account matched my information except for my name and address. So, she knew this was fraud. It turned out...

A reader, T.S., asked the following interesting question (edited for brevity): “I have become convinced about index investing. But as a recent investor, my issue is how to begin. For example: Is now a good time to enter the market? Or how would one begin investing at this time given economic head winds, declining consumer disposable income, market distortions from the central banks and governments, and the current market valuations?” T.S. went on to examine a number of factors: — Cyclic patterns in the past 55 years of stocks returns — The Shiller 10-year price to earnings ratio history for the past 135 years — Volatility of stocks for the past 3 years — Goldman Sachs ’ earnings projections for S&P 500 companies for the next 3 years — Currency fluctuations He finished with the question: “So what advice do you offer your readers for people who are but starting to invest in the stock market?” As usual, I’ll begin by saying I don’t offer advice. What I can do is expl...

My son tells me that he’s been inundated with ads for phone applications to do binary option trading. His gut tells him that this is “incredibly dangerous” and looks to him like “making a game out of day trading that you can play on your phone.” He’s got a smart gut. Don’t be intimidated by the phrase “binary option trading”—it just means gambling on stocks. Want to bet that Google stock will go up in the next hour? You can do that with binary options. It doesn’t matter how much the stock goes up. You either lose your bet, or you get it back along with some pre-set amount of winnings. It’s very similar to gambling on sports. I poked around a few binary options web sites and they feel surprisingly similar to gambling and poker web sites. They use words like “investing” and “trading” but they’re really promoting gambling. What’s the purpose of binary options, you may ask? Let’s start with regular stock options. One purpose of regular stock options is to control investment...

If you’re interested in why many of the blogs you read have some strange and useless posts, the following query I received about my blog might enlighten you: “How much would it be for an article placement with a do-follow link to a leading finance/forex site in the main content area of a new article , taking into account the 3 points below: We will get the content written . The content will be of excellent quality and will fit the topic/nature of your site. The article is not marked as sponsored and will stay on the site permanently even if it rolls over into the archives. We will pay you via Paypal once the article is live.” The sender wants to place an ad on my blog disguised as an actual article. I wouldn’t have to write anything and I get to name a price. The purpose of the placed article would be to improve the target site’s Google PageRank (that’s what the “do-follow” means) and to steer traffic to the site. Another condition is that I cannot alert my readers tha...

Here are my posts for the past two weeks: New Year’s Financial Resolutions The Index Card Questions from Financial Hell Money Talks My Portfolio Return for 2015 Here are some short takes and some weekend reading: Freakonomics has a fascinating podcast on the pay equity gap between men and women. Claudia Goldin, a professor of economics at Harvard University, explains research showing that the gap exists mainly because men and women make different choices in their careers. Popular explanations such as discrimination and pay negotiation are minor factors at most. Scott Adams briefly describes the situations where he would recommend an active money manager. Don’t drink anything while reading this one. I just about shot water through my nose. Big Cajun Man reports that TD has added a new $75 fee to transfer money to a TFSA at another financial institution. If I banked at TD, that would definitely be a one-way transfer. The Blunt Bean Counter describes various r...

Each year I calculate my portfolio’s overall rate of return and compare it to an appropriate benchmark. Whether you’re a stock picker or an indexer, I think this is an important exercise to make sure you’re not getting worse results than a dead-simple indexing strategy. Even indexers get the benefit of making sure their portfolios don’t have any hidden leaks. My family’s returns still don’t exactly match the benchmark because my wife still holds a small amount of Berkshire Hathaway stock. She’s slowly selling it off each year to spread out the capital gains income. This year our total portfolio earned a 7.63% return. Because I measure my returns in Canadian dollars, this year’s return benefited from the drop in the Canadian dollar relative to the U.S. dollar. So, Canadian stocks performed poorly, but U.S. stocks performed well (in Canadian dollars). When you’re well-diversified, there are always parts of your portfolio performing well and other parts poorly. Here is my comp...

When I first heard that Gail Vaz-Oxlade’s newest book was called Money Talks , I misunderstood the theme as “money talks and BS walks.” But the book’s focus is making a strong case for talking about money. Gail covers just about every imaginable way that people can have trouble with money and offers specific help for each case. I couldn’t put it down. As someone with strong finances and good habits, I often find the self-defeating actions of others puzzling. “Stop spending stupidly” makes perfect sense to me, but is completely unhelpful for most others. In this book, Gail tells dozens of small stories to illustrate different causes for financial troubles. I’ve found them to be very helpful in understanding the many ways people mess up their finances. Because financial troubles usually have an emotional basis, much of the value in Gail’s scenarios is that she gets the emotional parts right. Then to go with each theme of financial woes she gives a prescription for how to help ...

Every so often I encounter a simple financial question that makes me cringe. It’s not that the asker is a bad person or that the question is stupid. It’s just that the question gives me a peek into a financial world that looks scary to me. I like to help people, but sometimes it’s hard to know where to start. Here’s the list of questions (edited for brevity) that I’ve collected so far. 1. Does a mortgage count as debt? Uh, yes. And consolidating your debt into your mortgage doesn’t count as paying off your debt. Don’t fall into the trap of thinking that a mortgage is good debt. The house is good and the mortgage is bad. Most other types of debt are even worse than a mortgage. 2. Do I need an emergency fund if there is still room left on my line of credit? Yes. Don’t think of room on your line of credit as available wealth to spend. One of your goals should be to pay off your line of credit and live debt-free. Emergencies shouldn’t throw you into more debt if you can...

Is good personal finance advice so simple that it can fit on a single index card? Sort of, but not really. That’s why Helaine Olen and Harold Pollack had to write the book The Index Card to explain a list of 10 rules of personal finance created by Pollack. This book lays out a series of simple steps for managing our money that steer us away from the unnecessary complexity that gets marketed to us. Each chapter of the book explains one of the 10 points on Pollack’s index card. Some are standard fare, such as “Strive to Save 10 to 20 Percent of Your Income,” but others may surprise readers, such as “Never Buy or Sell Individual Stocks.” This book is aimed at Americans with its discussions of 401(k) plans, health insurance, and tax breaks for mortgages, but most of the advice carries over well to Canada. The authors sprinkle stories of their own mistakes and successes throughout the book. One example is a clever idea Olen uses to deal with erratic income: “All incoming funds ar...

I’ve never been much for setting New Year’s resolutions for myself – I tend to make changes on my own schedule. But if making resolutions works for you, then that’s great. The Findependence Hub published a list of financial resolutions that are very sensible. What surprised me was how they all missed the mark for my circumstances. Here are the resolutions and how they fit into my situation: 1. I resolve to figure out my finances. I did this years ago. They seem quite figured out. Maybe I’ll learn new things around the edges, but I can’t think of anything major that needs figuring out. One thing I’ll need to sort out sometime is how to minimize taxes as I draw down my various accounts in retirement, but that’s hardly the intent behind this resolution. 2. I resolve to stick to a budget. Nope. I refuse. My finances are ticking along wonderfully without ever having created a budget. I fully realize that most people would benefit from budgeting. I’d venture that even mo...

Here are my posts for the past two weeks: Capital in the Twenty-First Century Reader Question: Small cap and Value Tilts Here are some short takes and some New Year’s Day reading: Gail Vaz-Oxlade takes a couple of people to task for their claims that Canadians’ debts aren’t that big a deal (in a post no longer online). I’m with Gail on this one. In the past I’ve explained why all debt is bad and have explained my personal philosophy on debt . Andrew Hallam explains why stop-loss orders can be a bad idea for ETF investors. Canadian Mortgage Trends calls for stricter punishments for bad mortgage brokers, citing the case of a broker caught violating rules and got a few “slaps on the wrist” but will “still be allowed to operate as a mortgage broker.” Big Cajun Man walks away from Rogers to save about $100 per month. My Own Advisor evaluates how he did on his financial goals. Three out of four ain’t bad. But it’s the dollar amounts that matter. How well he did hing...