When I look back at the way I thought during my first several years of investing, I realize that my thinking is very different now. I started out too conservatively and quickly evolved to looking for big wins. Now I seek good returns while avoiding big mistakes. That’s not to say that I’m now scared of volatility. I go for the best returns I can get with the constraint that I try to keep the odds low that I’ll permanently lose a significant amount of my capital. To illustrate what I mean, I’ll go through some examples of ways to lose capital and examine how my thinking has changed. Any individual stock can drop 90% or more Over the years I’ve owned several stocks that have dropped 90% or more. Before this happened to me, I didn’t think about this possibility. I once owned a stock that grew to well over half my net worth. Fortunately, I sold most of it before it dropped by more than 98% at the end of the tech boom of the late 1990s. With different timing, I could have lost...

I only managed to write one post in the past two weeks, but it seems to have resonated with quite a few readers: The Average Canadian Family’s Taxes Here are some short takes and some weekend reading: Life Insurance Canada explains one of the tactics an insurance company uses to make it hard to convert your life insurance at work to an individual policy (see the second case in the article). I’ve often said you can’t count on being able to maintain insurability with a group life insurance plan if you become ill. Big Cajun Man explains the catch-22 of having to pay tuition before being able to withdraw from an RESP. Million Dollar Journey answers a question from a reader whose financial position looks strong but contains substantial hidden risk. Boomer and Echo reviews Fred Vettese’s book The Essential Retirement Guide: A Contrarian's Perspective . I reviewed this book as well.

The Fraser Institute recently came out with a study of how the average Canadian family’s total tax bill hs changed from 1961 to 2015. The emotional impact of their conclusions exploits the fact that the “average” family is different from the “typical” family. Before continuing with some criticism of this report, let me explain that I’m not on either extreme end of the often polarized debate on taxes. I’m no fan of government waste. Canada’s public sector does a poor job of removing employees who do their jobs poorly. This leads to an accumulations of poor employees and is demoralizing for strong public sector employees who must work alongside poor employees. All that said, I’m not a cheerleader for reducing all forms of public spending either. When the Fraser Institute examines the “average” family’s income, they are adding up the incomes of all families and dividing by the number of families to get $80,593. If this figure sounds high, it’s likely because you are thinking of...

Here are my posts for the past two weeks: Do You Pay Investing Fees? Is Your Allocation to Stocks Too High? Here are some short takes and some weekend reading: The Reformed Broker tears a strip off market pundits who make extreme predictions. The Irrelevant Investor explains that the S&P 500 has gone up at 18.08% per year for the last 7.5 years, but investors in SPY (an S&P 500 index fund) earned only 11.82% because of poor market timing. Over the entire period, this is a difference of about a factor of 1.5 in invested assets, although the author is being somewhat misleading saying the difference is 115%. The article is very interesting despite this blemish. My Own Advisor has decided on a goal of being financially independent by age 50. I’d say his plans look more reasonable than many early retirement enthusiasts. I’ve seen people hoping to retire in their 30s assuming their current spending level will not change in the future. Some margin for potentially h...

Now that phase 2 of the new Client Relationship Model (CRM2) is fully in effect, we have new possible answers to the question “do you pay investing fees?” Here is a list of possible answers to this question in roughly increasing order of investor knowledge, including two that are specific to the CRM2 changes. No, there are no fees with my mutual funds. Blissful ignorance. No, the mutual fund company pays my advisor. Not thinking it through. Why would the mutual fund company pay your advisor with anything but your own money? My mutual funds used to be free, but my latest statement has a bunch of new fees. Not realizing that the fees were always there. Yes, but it’s just 2% or so. Not understanding that the fees compound to big money. Might think that the 2% applies just to returns rather than the full amount of your savings every year. Yes. I thought the fees were small, but my latest statement shows they’re much more than I thought. Seeing the amount in dollars ...

I recall many articles advising investors to reconsider their appetite for risk in the aftermath of the 2008-2009 stock market crash. However, today is a much better time to do this. After the crash, “experts” said that while it’s foolish to sell stocks when they’re cheap, reducing your percentage stock allocation to a more comfortable level is smart. This is nonsense, of course. Selling low is dumb whether you have a smart-sounding reason or not. It’s impossible to say exactly when stocks are too expensive or not, but it seems safe to say that they’re not very cheap right now. This makes now a good time to think about whether you’re taking on too much risk. Try to remember how you felt back in 2008-2009. How would you feel if that happened again? Personally, I have no intention of reducing my allocation to stocks, but now is a much better time to do this than it was 7 years ago. Sadly, though, individual investors are more likely to decide to increase their allocation to ...