Here are my posts for the past two weeks: Compensating for Your Money Personality Padding Retirement Savings Here are some short takes and some weekend reading: Ryan Krueger wrote a very entertaining piece drawing analogies between stock analytics and basketball analytics. He then draws the nonsensical parallel between NBA players shooting more 2-pointers and investors taking concentrated positions in a few dividend stocks. The article may not make much sense, but it’s so well written it’s worth a read. John Robertson discusses the swipe at swap-based ETFs in the latest federal budget. I agree with his take that these swap arrangements that turned different types of income into capital gains always seemed too good to be true. The party appears to be over. Big Cajun Man explains some positive changes to RDSPs in the latest federal government budget. Canadian Mortgage Trends reports that the mortgage industry is unhappy with the latest federal budget. I take this a...

When my wife and I were young, we were very frugal. I recall walking around for over a month with the same ten-dollar bill in my pocket. We’re less frugal now but still having a hard time transitioning from workers who save to retirees who spend. Fortunately, we’ve found some ways to compensate for the aspects of our money personalities that aren’t helping us any more. In my case, I fuss over spreadsheets that show we consistently underspend our safe monthly allowance. This gives me constant reminders that I’m no longer an 18-year old kid who doesn’t have enough money to eat lunch. In my wife’s case, she feels the pain of every expenditure. This is particularly true if the expense seems extravagant, like eating out. To compensate for this, I pay in almost all situations where we’re together. This wasn’t a revelation of mine; my wife knows herself well enough that she’s the one who wants me to pay. In fact, I might not even have noticed this pattern if she hadn’t pointed it...

In the nearly two years since I retired, I’ve been asked a few times why I didn’t work longer to build a bigger nest egg so that my wife and I could live a better lifestyle in retirement. After all, I did walk away from a good salary and generous variable pay. The truth is that we’re not very interested in living lavishly, but I decided to take a look at what I passed up. It’s not hard to see how much more money we could have had in our accounts, but this doesn’t tell us directly what kind of lifestyle we could afford. What matters is how working longer would have translated into extra spending per month during retirement. Fortunately, I have a spreadsheet that takes all our account balances and computes the amount we can safely spend per month (after taxes), rising with inflation, until we’re 100 years old. This spreadsheet makes a number of fairly conservative assumptions about investment returns and takes into account CPP, OAS, interest, dividends, capital gains, and income ...

Here are my posts for the past two weeks: Is FIRE Impossible for Reasonable People? Private Equity Returns are Overstated Here are some short takes and some weekend reading: Robb Engen at Boomer and Echo looks for a simple way to reduce the growing home bias in his stock portfolio. This is a thoughtful post that respects the importance of keeping investments simple. Robb seeks a lower home bias than I’ve chosen. I have my reasons for maintaining a bias for countries where I expect to be spending money, but I can’t say my level of home bias is better than Robb’s plan for a lower level. Nick Maggiulli shows how hedge funds quickly shift client assets into their own coffers. It has nothing to do with the returns they generate and everything to do with their fee structure. Dan Bortolotti discusses smart beta, stock return dispersion and what that means for silly pronouncements that we’re in a stock-pickers’ market, and John Bogle’s gift to investors. Michael Batnick h...

Many people believe that the rich and powerful have access to exclusive investments that earn higher returns than average people can get. One such category of investments that sounds impressive is private equity. However, the severe restrictions placed on private equity investors make the returns much lower than they appear. A private equity investor is asked to commit a certain amount of money over a long period, such as seven years. However, the private equity funds don’t have to take all the money at once. The funds can demand the money on their own schedule. They also get to give the money back on their own schedule, possibly later than the seven year period. The funds get to calculate their returns on the money they’ve collected, not the total commitment from the investor. So, as an investor, you have to keep some of your committed cash on the sidelines, or risk a demand for cash at a bad time, say 2008 or 2009 when stocks had tanked. Personally, I would consider my re...

“Whether you think you can, or you think you can't―you're right.” ― Henry Ford Retiring in your 30s or 40s seems like an impossible dream for most people. But the FIRE (Financial Independence Retire Early) movement is filled with people whose goal is to retire well before the usual retirement age. Critics say these FIRE penny-pinchers deprive themselves of any joy in their lives, and that FIRE is impossible for reasonable people. There is some truth to this, but not much. The truth is that most adults have created a life for themselves that makes FIRE impossible without huge changes. They bought a big house far from where they work and own cars for commuting. They’ve committed almost all their income for the foreseeable future to a lifestyle they’ve chosen. No amount of eating in or other penny-pinching will make a big enough change to make FIRE possible. That isn’t to say that smaller changes don’t help. Cutting out small amounts of spending here and there can i...

Here are my posts for the past two weeks: Your Complete Guide to a Successful and Secure Retirement Warren Buffett on Debt Here are some short takes and some weekend reading: Cameron Passmore and Benjamin Felix interview Rick Ferri who explains why we don’t need to get too caught up in factor-based investing. Boomer and Echo offer three reasons to take CPP at age 70. John Robertson works out an RRSP meltdown scenario for someone destined to collect the GIS. These calculations are always tricky. The main message is that if your income is low, TFSAs and non-registered accounts are usually better than RRSPs. Big Cajun Man explains when it makes sense to get a payday loan. The Blunt Bean Counter discusses how to bridge the financial literacy gap with a spouse who has little interest in finances.