Here are my posts for the past two weeks: Aren’t the Banks the Investing Experts? Temporarily Losing Money on Stocks is Inevitable Here are some short takes and some weekend reading: A Wealth of Common Sense takes a look at a hedge fund claiming miraculous performance but sporting a huge number of red flags. Canadian Portfolio Manager gives preferred ETFs for different asset classes as well as second choices that are suitable for tax-loss selling. Big Cajun Man shows the impressive list of fees charged for a university term. He’s right when he calls this a business. Universities work hard to extract as much money as they can from students. My Own Advisor predicts that CRM2 will lead to sticker shock for investors. This is likely true for the many mutual fund investors who think they don’t pay fees. It would be interesting to know how many investors think the fees they now see are new rather than having been hidden in the past. Boomer and Echo feels paralyzed by...

A common theme among investors who get poor returns over the long run is that they change their investment approach whenever stocks drop sharply. This applies to those who pick their own stocks, ETFs, or mutual funds, but I see it more often with those who work with financial advisors. It is inevitable that stock markets will occasionally drop 20% or more. We can’t predict when this will happen, but it will keep happening. It’s not your fault or your financial advisor’s fault. It’s not realistic to think you or your advisor should have seen it coming. It makes no sense to change investment strategies or advisors over something we can’t control. When I hear about an investor changing strategies, sometimes the reason makes sense. For example, seeking lower fees or better advice or both. But too often I hear an investor complain about losses with a previous advisor and deciding to switch to a new advisor. Usually, the losses come from the whole stock market dropping rather tha...

I listened to a few young people discuss where to go for help investing some savings and one asked whether the banks are the right experts. After all, they handle all the money. Wouldn’t they know more about investing than anyone else? It has taken me a while to think of a reasonable answer. It’s true that Canadian banks have massive resources and could probably use them to try to generate above-average investment returns. However, they have little incentive to do this with your money. It’s so difficult to beat the market with a massive portfolio that it’s not worth their effort to try very hard. Banks have an obligation to their shareholders to seek profits. They make money on assets under management. This means they focus on getting your money in the door and keeping it there. Generating above-average profits for you only helps the banks a little, and trying to do so is expensive. All they really have to do is avoid terrible returns so you won’t take your money elsewhere...

I’m losing track of the days while on vacation, so I’m a day late with my short takes. Here are my posts for the past two weeks: Possible Ban on Trailing Commissions No Fear: Tales of a Change Agent Home-Buying Dreams Here are some short takes and some weekend reading: Tom Bradley clearly explains the issues at stake in the battle over banning mutual fund trailing commissions. Dan Bortolotti offers a cynic’s guide to spooking index investors. He gets important messages across and he’s funny. The Reformed Broker has a story about fund companies whose employees sue to not have to eat their own cooking in their retirement plans. It’s funny and sad at the same time. Preet Banerjee ’s video explains why 0% financing on a car might actually be more expensive than paying interest on a car loan from another lender. Canadian Couch Potato and Justin Bender have updated their excellent paper on foreign withholding taxes to take into account recent ETF changes. Fortunately...

I’ve written several times about the benefits of renting in Canada’s high-priced housing market (see here , here , and here ). What I hear back from many young people is some version of the following: But owning a home is one of my dreams. I want to have children and raise them in a house, not some apartment. This is quite understandable. I bought my current home to suit my children’s needs. We’re near a school and have a nice big yard they played in when they were younger. I can certainly understand why my sons and their peers want the same thing for themselves and their own families. Unfortunately, today’s house prices are much higher relative to incomes than they were when I was starting out. For many young people today, stretching to buy the house of their dreams is a bad idea financially. Does this mean the dream of owning a house is dead? Absolutely not. The path may be different from what it was for me and possibly more difficult, but there is still a way. Th...

Having worked at Nortel years ago, I was interested enough to read Tim Dempsey’s book, No Fear: Tales of a Change Agent , mainly for its alternative title, or Why I Couldn’t Fix Nortel Networks! I was hoping to get more insight into the causes of Nortel’s demise. Too many other accounts focus on Nortel’s final years when little could have been done to save the company. I was hoping for more insight into what went on in the final years of the tech bubble ending about the year 2000. Unfortunately, the book only makes passing references to the excesses of that period when Nortel made a number of choices to please analysts and keep its stock rising. Nortel hired indiscriminately to meet growth expectations and describe itself as having “over 90,000 employees worldwide.” It also grew through numerous acquisitions. But likely the most damaging activity came from trying to meet revenue and profit expectations. Nortel built billions of dollars’ worth of telecom equipment and shipped...

The Canadian Securities Administrators (CSA) has issued a proposal to ban mutual fund embedded commissions. This would force financial advisors to charge their clients directly instead of getting commissions from the mutual funds that hold their clients’ investments. Whether this makes sense depends on how we view the mutual fund industry. There are two extreme narratives that characterize the fund industry in Canada. Which one you think is closer to the mark will likely decide whether you support CSA’s proposed changes. Narrative 1 : Financial advisors are hard-working professionals who must be paid for the initial work they do for their clients and must be paid a lesser amount each year for their ongoing work helping their clients. Paying the advisors out of client assets within mutual funds is just a convenient way to complete the transaction with a minimum of hassle for clients. Narrative 2 : Mutual funds that pay trailing commissions know that investors are clueless ab...