Here are my posts for the past two weeks: From Here to Financial Happiness Reader Question: Should I Draw Down My RRIF? Here are some short takes and some weekend reading: Canadian Couch Potato does a deep dive into how ETFs work in possibly his last podcast. He also defended cap-weighted index investing against a flawed argument and cleared up a misconception about the fees in asset-allocation ETFs. Unfortunately, he undermined his credibility somewhat with a reference to DALBAR’s nonsensical calculation of investor underperformance. DALBAR likes to say they just have a minor disagreement with their critics about the minutiae of their calculation methodology. The truth is that if you buy some units of a 10-year old mutual fund, DALBAR docks your performance for having missed out on the previous decade of returns. John Robertson reports that changes are coming to TD’s e-series index mutual funds. I’m wondering whether this change will generate any capital gains for non-...

Long-time reader, AT, asked the following question (edited to remove personal details): I’m a single 67-year old living in Alberta. A CGA friend suggests I start drawing extra lump sums from my RRIF to reduce the amount of tax my estate will pay when I die. I'd like a second opinion before I start the withdrawals. Here are the relevant financial details: RRIF/LIF total assets of about $800,000 with total regular monthly withdrawals of $3780 (before tax) Total of CPP and OAS is $1641 per month (before tax) Part-time work brings in $10,000 to $15,000 annually (assume $12,500 in this analysis) Only $8000 in TFSAs (lots of remaining room) To start with, I’m not a CGA, and I may be missing pertinent details about AT’s situation. So, the following is for information purposes only. It’s not advice. AT’s total income works out to $77,552. Coincidentally, this is just slightly below the 2019 OAS clawback threshold of $77,580. So, any extra RRIF withdrawal larger than $2...

Reading Jonathan Clements’ book From Here to Financial Happiness is like having a chat with a wise financial advisor. He covers 77 personal finance topics, most in just a page or two. While it’s aimed at Americans, almost all its lessons are relevant to Canadians. Much of what matters in personal finance is making decisions that help you get what you want out of life. Clements covers these topics as well as the usual advice to spend less than you earn and avoid debt. One example is the third lesson where he asks the reader to “dream a little” and list the things you’d do if money were no object. Later the reader is led through the steps to make some of these dreams a reality. It isn’t until the end of the book that we get into picking investments. This book is wide-ranging and resists any further attempt to summarize it. So, I’ll use the rest of this review to point out a few parts that caught my attention; they aren’t meant to be a representative sample of the contents. ...

I managed only one post in the past two weeks: Irrational Exuberance (https://www.michaeljamesonmoney.com/2019/08/irrational-exuberance.html) Here are some short takes and some weekend reading: Cameron Passmore and Benjamin Felix discuss mortgage rates, REITs, and investor performance in mutual funds and variable annuities. Their podcasts are consistently entertaining and informative. In this podcast, it was the discussion of DALBAR’s studies that caught my attention. DALBAR regularly reports that individual investors underperform the mutual funds they invest in by wide margins because of behavioural errors. The gaps are usually so wide as to make them unbelievable. It turns out that their figures are nonsense, but few people in financial advisory positions seem to examine them closely, presumably because the message that people need help with their investments is welcome. I’ve discussed the problem with DALBAR’s “methodology” in detail before. Here is an attempt at a brie...

It’s been 19 years since Robert Shiller wrote Irrational Exuberance at the peak of the dot-com stock boom. I decided to give it a read to see if it teaches any enduring lessons. Don’t be fooled by the title into thinking this is a book full of entertaining stories about investor excesses. It’s largely an academic work that lulled me to sleep more than once. It takes a deep look at what defines a stock market bubble and what factors led to the then current high stock price levels. As an example of the author’s “playfulness,” he described Dilbert as a comic strip “which dwells on petty labor-management conflicts in the new era economy.” The discussion throughout the book is very thoughtful and thorough, but like much of macroeconomics, it’s hard to say anything definitive. If we raise interest rates, it might help, or might hurt; it’s hard to tell. A few of the book’s details caught my attention. At the time, inflation-indexed bonds paid 4% above inflation. I’d love to be...

Here are my posts for the past two weeks: How High are Rents Today? Canadian ETFs vs. U.S. ETFs Trusts, Whether You Want Them or Not Cut Your Losses Short Here are some short takes and some weekend reading: Preet Banerjee says that taking advantage of employer matching in savings plans is free money and deserves to be in the list of personal financial commandments such as avoid credit card debt. I agree, but it pays to look at the difference between costs in the employer savings plan and the costs in your personal portfolio (https://www.michaeljamesonmoney.com/2013/12/employer-matching-in-group-rrsps.html). In extreme cases where employer plans have very high costs, the employer match can get eaten up in fees over time. Robb Engen at Boomer and Echo says we should stop asking $3 questions and start asking $30,000 questions. By this he means focusing your attempts to build wealth on the big dollar amounts in your life. Robb is in the camp who says to go ahead and buy...

Common advice for stock pickers is to “ cut your losses short .” Investors have a tendency to hang onto loser stocks hoping to get their money back, but the experts say that’s a mistake. I have an example from my stock-picking days to illustrate this idea. I bought shares in some sort of fruit company and ended up losing money. Back in October 2000, I bought 3000 shares at US$20.54. They went down initially, and then bounced around in a range. I didn’t want to sell for a loss and held them. By July 2003, I’d had enough and sold them for US$19.51 each, a loss of just over US$3000. The problem isn’t just the lost money; I also lost time. If I’d sold this turkey sooner, I could have found a better stock to put my money in. Thankfully, I didn’t keep holding to lose even more money and time. What if I were still holding this stock? A quick search tells me this stock now sells for ... wait ... that can’t be right. There were stock splits too. Those shares would now be worth ...