Monthly Archives: March 2016

FWB TV: Your Biases — YOU present the greatest risk to your portfolio

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Tim Richards, Psy-Fi Blog

The latest Evidence-based Investor Video  is now available at FWB TV: Your Biases: YOU present the greatest risk to your portfolio.

Markets may be efficient; In 2013, Eugene Fama received a Nobel prize in economics for proving this theory. Yet investors continue to fear the markets when in fact the greatest danger to their portfolio is themselves.

In this four-minute video Tim Richards of the Psy-Fi Blog (pictured) says most investors behave irrationally and that if they insist on trying to buy and sell stocks on their own, they will predictably lose money because of ill-timed decisions. He estimates that such investors can lose between 3% to 4% per year because of poor buy and sell decisions.

Blind spot bias

Many investors suffer from the so-called “blind spot” bias, meaning that while they may be aware of biases (like confirmation bias) exhibited by OTHER people, they’re unaware of the biases they themselves may suffer from when investing.

Richards says the best defence to loss-generating biases is passive investing: using broadly diversified index mutual funds or exchange-traded funds (ETFs) and holding on for the long run.  Only a small minority of investors who are able to disregard their emotions should attempt active trading of securities, and even then Richards is skeptical that such an approach will consistently beat passive investing strategies.

While even passive investors are not immune from irrational behaviour like selling everything during a downturn, their odds are improved by being aware of their biases and better yet by using a financial advisor who is acquainted with the topic of behavioural finance.

After watching the video if you want to learn more, download the free guide, 12 Essential Ideas For Building Wealth.

Are you cut out to be a landlord?

Tenancy agreement, key and pen with symbolic miniature houseBy Marie Engen, Boomer & Echo

Special to the Financial Independence Hub

Buying an investment property is a popular option for many people looking for different ways to invest their money. Rental properties can provide you with steady monthly income and could appreciate in value over the years. But are you cut out to be a landlord?

Finding the right property

Finding the right property as an income producing investment is important. Do your homework. You want your rental to be attractively priced for your local market, and in a quality neighbourhood.

Related: How to invest in real estate

Consider a property that allows for multi-revenue, such as renting out the top floor and basement to different tenants.

If you’re handy you might consider a fixer-upper close to your home to renovate and maybe add a basement apartment.

Buying a property

To get approved for a mortgage you must put down 20% of the purchase price. Your mortgage lender will consider your credit score, income sources and market value of the property, just as with a personal mortgage. However, the key factor will be whether you can generate enough cash flow from the rental payments.

Continue Reading…

20 different ways to use your tax refund

Tax refund ahead clock

By Adrian Mastracci, KCM Wealth

Special to the Financial Independence Hub

Let’s examine some wise ways to apply your tax refund in 2016. There are no shortages of sound possibilities for the personal finances.

Everyone can reap value from these practices. For example, refunds can be spent, saved and invested.

First park the refund into a saving account to resist impulse, say for 30 days.It gives you time to reflect and evaluate your needs and options. Try your best to get lasting value from this worthy source of cash. Many of the allocations you make are typically not reversible.

Here are 20 sensible ideas dealing with your tax refund: Continue Reading…

How to put together a stock portfolio that will carry you comfortably into retirement.  

Pat McKeough

By Patrick McKeough,

Special to the Financial Independence Hub

During your working years, you put yourself on an investing regimen. Each year, you set aside a fixed sum to invest. It’s important to continue investing the same sum (or raise it) through good years and bad. The same sum buys more shares in “bad” years, when prices are low. It buys fewer shares in good years, when prices are high. This cuts your long-term average cost per share.

The process reverses in retirement

In retirement, you reverse the process. You sell enough stock every year to raise the cash you wish to extract from your portfolio. You may sell more stock in years when you feel prices are high. You should sell less when prices are low. But either way, you should aim to sell in a way that leaves you with a stronger portfolio that is better suited to your goals and temperaments.

To practice the Successful Investor method, you need to get acquainted with a number of well-established stocks with a history of earnings and, in most cases, dividends. You choose your yearly purchases from this list, based on their fundamental appeal.

Spread money across five main economic sectors

You also take care to spread your money out across most if not all of the five main economic sectors: Manufacturing, Resources, Consumer, Finance and Utilities.

Some of your selections will seem particularly attractive in light of the value they offer, based on earnings and balance sheet information. Other selections will cost more in relation to these measures, but will make up for it with better growth potential. So, rather than aim for a value or growth focus in your portfolio, you’ll have some of each.

You also take care to downplay or avoid stocks that are in the broker/media limelight. Some stocks work their way into the limelight because they are profiting from an investment fad. Some get there through stock promotion.

No need to worry about how much money to spend or when to buy

Some stocks in the limelight are good businesses that deserve attention. But the limelight blows their appeal out of proportion. This builds up investor expectations for these stocks, often to unsustainable levels. Some limelight stocks live up to these heightened expectations, or even exceed them. But most limelight stocks eventually stumble. When the inevitable disappointments emerge, stock price downturns can be sudden and brutal. Some are permanent. That’s why these stocks should make up at most a modest part of your portfolio.

Note that you don’t need to spend time thinking about how much money to invest. You invest the same amount every year. Of course, you will occasionally raise or lower your yearly commitment for an indefinite period, because of changes in your income or expenses.

You also don’t spend time worrying about when to buy. You buy every year. It’s best to do your buying as early as possible in each New Year.

That’s how we invest for our wealth management clients, to the extent that this is possible for each client, in light of his or her temperament and circumstances. Instead of agonizing over how much to invest or when to buy, we invest each client’s funds as soon as they become available. Rather than depend on predictions, we focus on investment quality, and portfolio balance and diversification.

That’s where we can create the most value, so that’s where we spend most of our time and effort.



Pat McKeough has been one of Canada’s most respected investment advisors for over three decades. He is the founder and senior editor of TSI Network and the founder of Successful Investor Wealth Management. He is also the author of several acclaimed investment books.

How to eat Healthily without Breaking the Bank

By Sandy Cardy

Special to the Financial Independence Hub

The price of groceries is on the rise again. However, there are ways you can limit the amount of money you spend when it comes time to grocery shop.

During the holiday season, I wrote an article about over-consumption – the gist being that the over-consumption of credit can leave us with debt troubles and how over-consumption of the wrong foods can leave us with harmful health debt.

There’s a general consensus that it costs too much money to eat healthily all the time. While it’s true that natural food products can be quite expensive, especially if you eat gluten-free or vegan packaged foods, there are ways to stretch your dollar at the grocery store.

The rising cost of groceries has made headlines again; in 2015 the average Canadian household spent about $325 more on food and is expected to spend an extra $345 in 2016, according to the University of Guelph’s Food Institute.

Meat and produce are expected to see the biggest price jump, with meat seeing a 4.5 per cent increase and fruits and vegetables rising between 4 and 4.5 per cent this year.

There’s good news though! Eating healthy doesn’t have to come with a hefty price tag. By stocking up your pantry on a variety of everyday superfoods and pairing them with fresh ingredients, dinners to feed the family can cost you less.

Stock Your Pantry Continue Reading…