Building Wealth

For the first 30 or so years of working, saving and investing, you’ll be first in the mode of getting out of the hole (paying down debt), and then building your net worth (that’s wealth accumulation.). But don’t forget, wealth accumulation isn’t the ultimate goal. Decumulation is! (a separate category here at the Hub).

Rattled by the “Correction?” Diversification keeps your nest egg on the rails

“I know not what the future holds, but I know who holds the future.”

We are all aware that portfolio winners rotate position from time to time. Leaders have a habit of becoming laggards. “Must own” darlings become “forgotten” names. Winners vacate the “winner’s circle.” As the timeless saying preaches, don’t put all your eggs in the same basket. Hopefully, this classic advice is being followed.

“Diversification strategies are essential, time-tested tools for every nest egg.”

The main goal of investment diversification is to contain the damages of market volatility from being inflicted on the nest egg. The importance of this is fundamental and always in fashion. I highlight some key observations on portfolio diversification:

  • Investment portfolios suffer from inadequate diversification.
  • Mutual funds we own often have the same, or similar, stocks.
  • Investors are not aware that they lack diversification.

Diversification strategies are essential, time-tested tools for every nest egg. They improve your chances of achieving better consistency of long-term returns. It’s a focus for every investor to prioritize.

Basic diversification involves spreading your risks across different sectors of the economy. All within the asset allocation targets set by your investment plan of action. Make sure that you are comfortable with the approach so that you don’t have to dwell on regrets. Portfolios I review range from too concentrated to well over diversified.

Overall, diversification is a necessary safeguard. You don’t want problems arising in any asset class to ruin your well-designed portfolio. Especially the one that delivers the family’s retirement cash flow.

Develop sound habits

Diversification increases the odds of you being right more often than wrong. When some selections are suffering, others can step up and help cushion the rest of the portfolio.

Make it your habit to keep your nest egg from slipping off the rails. I summarize my top ways to achieve necessary portfolio diversification:

  • Asset Classes: Choosing different asset classes for the game plan is a sensible and prudent step. Stocks, bonds, cash, commodities and real estate are common picks.
  • Economic Regions: Portfolios may include selections from Canada and other regions around the world. Like the USA, Europe, Far East and emerging countries.
  • Time to Maturity: A portion of the portfolio could have a range of investment maturities. From as short as 30 days to as long as 30 years.
  • Foreign Currencies: Investment selections can be purchased in currencies other than Canadian funds. Such as US dollars, the Euro or hedged to our Loonie.
  • Investment Quality: High investment quality trumps reaching out for questionable yield. Trading quality for higher yields increases the potential to incur large losses.

Portfolios ought to contain a variety of investments that don’t all move in unison. However, seasoned investors know full well that is not always possible.

Broad brush

My table below is far from scientific. Look upon it as a broad brush view of portfolios that own Exchange Traded Funds (ETFs) and/or mutual funds as their primary investments in equities. Each investment selection is referenced as a “basket.” I divide the diversification landscape into three ballparks. Continue Reading…

Canadians think they need $756,000 to retire; failure to plan means most will fall short

My latest Financial Post column looks at a CIBC survey released Thursday that finds on average individual Canadians believe they’ll need $756,000 in order to retire.

Of course, most fall woefully short because they haven’t even crafted a financial plan to get there. And you know the old sayings, “Failing to plan is planning to fail,” or “If you don’t know where you’re going you’ll probably end up somewhere else.”

You can find the full column by clicking on the highlighted headline: The magic number for Retirement Savings is $756,000, according to poll of Canadians.

Considering that on average Canadians hope to retire by age 63, the fact that almost one in five haven’t even begun to even think about retirement suggests a bit of a disconnect. And women are consistently more behind in their retirement planning preparations than men. That’s a problem, considering that women have longer life expectancies and their money will therefore have to last longer.

Depending on aspirations, the “Number” can range from Zero to $2 million

\While the CIBC study looks at individuals rather than couples, the column quotes regular Hub guest blogger Marie Engen, who described three levels of retirement — basic, average and deluxe — in this 2016 blog: How much do you REALLY need to retire?  (The original blog ran on the Boomer & Echo site late in 2015.) Some with modest needs can save nothing and subsist on the $38,000 senior couples can get from CPP and OAS. Continue Reading…

Investing in fads like Bitcoin or Marijuana stocks: Quack like a duck and you may get plucked

By Steve Lowrie
Special to the Financial Independence Hub


It’s now been nearly a decade since investors have had to face down a bad bear market.  Long enough, apparently, that many have forgotten how painful that can be.  Maybe that’s why I’ve been witnessing what seems like an uptick of speculative excess lately – aka, fad-chasing.

For example, there’s been performance chasing in real estate, and continued stockpiling of high-dividend stocks.  At least these qualify as legitimate asset classes if they’re sensibly incorporated.  In an increasing bid to turn up the heat, I’ve also been seeing investors bedazzled by far riskier ventures ranging from cryptocurrency to cannabis. This, despite decades of evidence suggesting what the future has in store for financial fads.  A few lucky players make a fortune, but the vast majority who pile in after the run-up is noticeable are far more likely to be left holding the bag.

When the ducks quack, feed them

Everyone seems to have forgotten how risky a hot hand can be.  Everyone, that is, except the Bay Street and Wall Street denizens who have a saying for these sorts of speculative runs:  When the ducks quack, feed them.  Meaning, as one source has described, “when investors want to buy something … that something is offered for sale.  It doesn’t make any difference if Wall Street knows in its heart of hearts that that something (such as an IPO) is overpriced.”

Make no mistake.  The typical Wall Street brokers and Bay Street bankers are no fools; they are opportunistic.   If they see a chance to make easy money on a hot-hand trading frenzy, they’re happy to help you get in on the action.  Whether you win or lose on your trades, they come out ahead on the transaction fees involved.

Likewise, the popular financial press makes its money by capturing your interest; not by advising you according to your highest interest.  Case in point:  As I write this post, the Yahoo Finance feed is prominently displaying Bitcoin pricing ahead of the Cdn/US dollar exchange rate and major international market returns.  It’s also awash with ads promoting Bitcoin and other cryptocurrency for sale.  So much for objective reporting.

As Reformed Broker Josh Brown once said: “The more you read about Wall Street history, the more you recognize it as the world’s most elaborate petting zoo – lambs, ducks, goats, cows and pigs herded into pens so that bankers and brokers can feed them pellets right from their hands.  We are fed until the bursting point, we almost never walk away on our own.”

So before you decide to buy cryptocurrency, cannabis, or whatever is the next craze to come, here’s what I would suggest you do first:  Think it over while taking a good long walk – most likely in the direction of “away.”
Continue Reading…

Worst day ever for stocks?

Will Monday February 5th go down as the worst day ever for stocks? On this day the Dow Jones industrial average lost more than 1,175 points:  the worst single-day point drop in its history. But was it really the worst day ever? Investors need some context.

The 1,175 point drop was indeed the biggest single-day point loss the Dow has ever sustained. But let’s remember the Dow has been soaring almost uninterrupted since March 2009 when it bottomed-out at 6,627 points during the global financial crisis. By the end of January 2018 it had reached a record 26,616 points.

Related: Have we reached peak stock market?

Better to forget about points and focus instead on percentage gains and losses. Taken in this context the headline reads a bit different. The Dow plunged 4.6 per cent: its worst day since August 2011. It doesn’t sound nearly as gloomy.

Another way to frame this day is that the stock market has erased its gains from the start of the year. But 2018 is just one month old.

Where does this day rank in terms of largest one-day percentage drops in history? Will it live on in infamy like Black Monday, Black Tuesday, the Flash Crash, or the aftermath of the September 11th attacks?

Nope, not even close.

If you were thinking Monday’s 4.6 percent drop was a bloodbath then how would you have reacted to one of the top 20 largest daily losses of all time? This wasn’t even a blip on the radar.

Related: What can you do about the upcoming stock market crash?

Continue Reading…

Turning Financial Planning upside down

Doug Dahmer, CEO and founder of has been a regular guest contributor to the Hub since its inception in November 2014. His focus is on Canada Pension Plan optimization, avoidance of retirement tax traps, and the creation of drawdown strategies during the decumulation side of financial planning. Some of these ideas have been used (with proper attribution) in various columns I’ve written in other media outlets, generally summarized here at the Hub.

However, Dahmer has been noticeably quiet lately. This blog explains why.

As the headline says and the adjacent image suggests, Doug is about to turn financial planning on its head. How? By democratizing access to financial planning, in the same way that Robo-Advisors democratized investing. This disruption of the planning industry is built upon a new planning platform called Better Money Choices.

Asked what motivated him to launch this venture Dahmer said more than 70% of Canadians say their greatest worries in life are centred around their financial futures. “Yet at the same time it is estimated that fewer than 15% of Canadians have a formal financial plan in place.”

As he talked to clients about this disconnect — why they resisted the idea of financial planning as an Rx to their financial stress — he discovered most people have no idea what true financial planning looks like.

Doug Dahmer, creator of

“The financial services industry has twisted the planning process into a tedious, time-consuming, onerous task that’s heavily biased toward the sale of financial products. What they hated most about planning, is that, more often than not, the conclusion to the process was always the same: spend less, save more, work longer, work harder. These recommendations were made while providing little in the way of  understanding of the specific rewards these sacrifices would deliver.”

In short, Planning did not relieve their level of stress, it actually increased it!

Money doesn’t buy stuff, it buys choices

True planning was never meant to promote the sale of financial products. It’s supposed to be a process that allows you to explore the lifestyle choices you are thinking about, so you can discover their future financial implications before you need to commit to them. “Armed with this insight, you can then decide whether you’re willing to make the necessary sacrifices to bring them to fruition.”

Your most valuable asset isn’t money. It’s Time — and how you choose to spend it

Dahmer’s financial planning philosophy  is based on the belief our lives are defined by the choices we make: the more good choices we make, the better our lives will be.  His new site,, lets people quickly, easily and securely explore their lifestyle choices so they can better determine what outcomes they should focus on.

Everyone’s personal resources – time, money, energy, relationships and talents – are limited in some way. That forces each of us to make choices to accept less of one thing in order to obtain more of the things that are most important to us. However, seldom is “more money” what we are seeking.

It’s time the financial planning sector evolved with the times

Dahmer says technology has given us many low cost/no-cost, self-serve tools that make almost all aspects of our lives easier, but not yet financial planning. “My mission is to change this. By putting the focus on how you want to live your life instead of how much money you can accumulate, and making it easy for you to determine which set of choices will bring you closer to what you value most, the technology behind the Better Money Choices process will revolutionize planning.”

His goal is to make it a quick, easy and engaging process to determine the trajectory our lives are tracking. “I want to convert the misnomers that planning is an event that translates into an exact science to the reality that planning is an ongoing, never ending process of making a set of best guesses – projecting those best guesses into the future – then re-engaging with life to learn more.”

Such a process requires frequently returning to our ever-living planning platform to check our progress and improve upon our guesses. “Once people understand what true planning looks like and the huge benefits that can accrue by adopting this approach for directing them to better choices, their disdain for planning will finally disappear and they will rely on their planning tools with the same natural inclination they reach for their google maps when it comes time to choose how best to arrive at their desired destination.”

Exact pricing has yet to be determined, but Dahmer’s goal is to have a monthly subscription that is comparable to Netflix or Spotify.

Beta Testing

Dahmer is currently running a beta test to get user feedback, prior to it being released publicly (currently scheduled for April 1st, 2018, coincidentally a week before I myself turn 65).

Doug has asked me to participate as one of the early beta testers and I have agreed to do so. In the past week, I have been “playing” with the software with our own personal data and I can tell you already it’s an eye opener. Over the next few weeks on the Hub, I’ll report back to you on my experiences with the software and the impact this novel approach to planning has had on my own plans for the second half of my life.

After all, I’m hardly unique in turning 65 this year: some 1,100 other Canadians now do so each day. (Incidentally, I’ll be collecting my first Old Age Security cheque late in May but, as per the guidance of Doug and his new software, I’ve elected to wait until age 70 to collect the Canada Pension Plan. This too has been reported in my columns in the country’s two major daily newspapers or )

If you’d like to be one of the first to know when the site officially launches, you can sign up at