For anyone who got their first mortgage more than a decade ago, the reality of getting into today’s housing market can be an eye-opener. In describing the effects of the latest new government mortgage regulations, Rate Spy writes “Today, someone with 10% down who makes $50,000 a year can qualify for a $300,000 home purchase. That hypothetical maximum mortgage amount will plunge 18% to $246,000.” Mortgage experts have become desensitized to such numbers, but to me they look like there must be a typo. Someone earning $50,000 per year can get a $300,000 home with only $30,000 down! That leaves a mortgage of about five and a half years of gross earnings. It seems crazy for someone to dig such a huge financial hole. Dropping this mortgage size to about four and a half years of gross earnings isn’t enough better. Rate Spy goes on to write “This one regulation alone could shut out more buyers from the market than possibly any of the prior rule changes.” Good. I’d be horrified to...

Over the past two weeks I managed only one post on the difficult subject of how to determine the best way to invest your savings during retirement: Prime Harvesting in Retirement Here are some short takes and some weekend reading: Lasse Heje Pedersen explains how passive investors are forced to do some trading due to various types of index changes, which creates an opportunity for active investors to outperform. Thus, active and passive investors can reasonably coexist when there are few enough active investors that they can recover their costs from out-trading passive investors. Despite the academic look of the SSRN page, the paper itself is fairly short and very readable. The Blunt Bean Counter brings in an expert to discuss the Registered Disability Savings Plan (RDSP). Big Cajun Man has more trouble depositing money into his son’s RDSP. His musing about how difficult it will be to get money out is definitely food for thought. Boomer and Echo tries to explain to t...

There are many theories about asset allocation in retirement. Some say that your bond percentage should be your age. Others say it should be your age minus 20. Some even say your stock percentage should rise as you age in retirement (a so-called “rising glide-path”). In his book Living Off Your Money , Michael H. McClung recommends a strategy called “Prime Harvesting” that I examine here. The book is very technical and covers many retirement topics, but I’m going to try to be as non-technical as possible in this article and discuss only Prime Harvesting. I’ve been thinking about the best way to handle a portfolio in retirement for some time, and this book promises new ideas and a strong evidence-based approach. First of all, “Prime Harvesting” is a great name. If you ever get into a discussion about this subject, you’ll sound like the smartest person in the room if you say, “Well, I use Prime Harvesting.” Fortunately, Prime Harvesting can be described with a few simple rule...

Here are my posts for the past two weeks: Shrinking Bonds Selling off the last of my individual stocks Here are some short takes and some weekend reading: Jason Zweig explains the dangers of becoming bored with investing. Canadian Couch Potato wraps up his series on smart beta with a discussion of the quality factor. When you first start digging into smart beta, it seems like minor tweaks to index investing. But as this explanation of the quality factor makes clear, you can find yourself almost all the way into the world of stock picking swimming with sharks. Preet Banerjee explains some of the scary aspects of group RESPs in one of his Drawing Conclusions videos. A Wealth of Common Sense says “good riddance” to financial advisors in the U.S. who are thinking of quitting because of new fiduciary rules. Boomer and Echo looks at different areas where we may not make rational financial decisions. No doubt this annoyed some readers; few people react well to being to...

I can’t be accused of being impulsive when it comes to investing. It took me about 7 years to slowly shift from stock picking to just this week fully embracing index investing. We’ve finally sold off the last of our Berkshire-Hathaway stock. We held on to the last shares for tax reasons, but we’ve finally now realized the last of my wife’s capital gain on Berkshire. Our portfolio now looks as I described it a couple of years ago . We now own only 4 different ETFs, and I have a spreadsheet that alerts me if I ever need to rebalance or invest new money. It feels good to have a simple plan that eliminates almost all aspects of my own day-to-day decision-making. I still have to make some final decision about investing during retirement, but that’s a long, slow process. The total costs for my portfolio come to a little less than 0.2% per year. This includes ETF MERs, ETF internal trading costs, trading commissions, bid-ask spreads on trades, and foreign withholding taxes. Over...