Monthly Archives: September 2015

Stop Doing # 6: Stop Trying to Correct for Market Corrections

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Steve Lowrie

By Steve Lowrie, Lowrie Financial

Special to the Financial Independence Hub

Recently, the market has been playing right into an important addition to our financial “STOP Doing” list: Stop trying to correct for market corrections.

The subject is not a new one to us. In August 2014, we posted this Q&A: “Is there going to be a market correction (and, if yes, then what)? In light of current events, we’ve now updated that post with 2014 year-end information.

Just as it takes no special skill to predict some days of sub-zero temperatures this winter, we were not being prescient a year ago, when we said that we would probably experience a correction sooner or later. One need only consider abundantly available evidence to recognize that, viewed seasonally, the market frequently “corrects” itself, sometimes dramatically. It’s only when we take the long view that we can see the market’s overall upward movement through the years.

For example, consider the Dimensional Fund Advisors slide shown below, which depicts the U.S. stock market’s gains and losses over the past 35 years. Continue Reading…

Should we change the word “retirement”?

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Marion Humphries

By Marion Humphries

Special to the Financial Independence Hub 

Let’s start by defining the word retirement. A quick online search reveals that the literal meaning of the word retirement is: to withdraw, retreat; the time at which one withdraws from the workforce.

By definition, the act of retiring has a very passive connotation. No wonder there is apprehension by some to enter into this phase of life.   The word Retirement suggests inactivity, slowing down, isolation, loneliness, and withdrawal from society.

Perhaps we can gain a better understanding of why such a negative spin was placed on retirement by briefly examining its history. The concept of retirement was introduced in North America a little over 100 years ago when the industrial revolution was taking place.

It was thought that elderly workers would slow down production. Job opportunities were limited, and older workers were preventing younger workers, with families to support, from much needed employment.   Paying elderly workers to stop working seemed like a good idea.  Initially, the US government paid the matured workers to step aside and withdraw from the labour force.

Social Security, 1935

Eventually, in the United States, the Social Security Act was introduced in 1935, whereby workers would pay into the program throughout their employment and eventually fund their own retirement.

Continue Reading…

Business Owners Beware!

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Ian Campbell

By Ian R. Campbell, Business Transition Simplified

Special to the Financial Independence Hub

I recently read a headline that said Business Owners Need To Be Very Afraid. The first line or two of the article paraded a litany of things that were unlikely to frighten a business owner’s dog, let alone a business owner.

However, while the article content was uninspiring the article title was “on the money.” The heading I have chosen for this post likewise wouldn’t frighten a business owner’s dog – but only because dogs can’t read.

If you are a business owner or an advisor to business owners here is a list, with brief reasons, of six things you need to keep front of mind and continually update your opinion on.

Government debt

Debt is higher than it has ever been in most developed and developing countries at the municipal, provincial/state and federal levels. Governments at root are no different than individuals, households or companies – unless of course you are an American who thinks the U.S. Federal Government can print new fiat currency forever without consequence.

Eventually, Peter can no longer rob Paul and debt needs to be repaid. How: by levying multiple forms of taxes on those who can pay. Businesses almost certainly will see both direct and indirect taxes at all levels increase in coming years. This is but one factor that will negatively impact business after-tax free cash flows – and in the end it is current and prospective “after-tax free cash flow” that is the most important business value metric.

Industry consolidation

Continue Reading…

Lower trading fees aren’t an excuse to day-trade

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Stock Trader Overjoyed Looking At MonitorBy Robb Engen, Boomer & Echo

Special to the Financial Independence Hub

As a Canadian investor, I’ve been pleased to see that most of the big bank brokerages lowered their cost per trade from $29 to under $10. Previously, most investors needed a minimum of $50,000 in assets to qualify for lower trade commissions.  This has presumably levelled the playing field for small investors.

When I first opened a discount brokerage account with TD Waterhouse (now TD Direct Investing) back in 2009, high trading commissions were the norm. I chose TD because I had an existing banking relationship and my $25,000 investment met the threshold to waive the $100 annual admin fee.

At the time I wasn’t aware of online brokerages like Questrade – which offered trades for as low as $4.95 with no administration fees.

High costs for small investors

The costs added up over the years. From 2009 to 2011 I made 36 trades and paid a total of $1,044 in fees. Had I been with Questrade, I would have paid a fraction of that amount – just $178.20 in trading fees. Continue Reading…

Incorporated? Don’t overlook TFSAs & RRSPs if your time horizon is long enough

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Ben Felix

By Benjamin Felix, PWL Capital Inc.

Special to the Financial Independence Hub

When people have corporations it’s common for them to retain all earnings in excess of their living expenses inside of their corporations to avoid paying personal tax.

This seems logical. By leaving the money in the corporation there is more money to invest in the corporate investment account, and we know that about $50,000 of dividends can be taken out of a corporation nearly tax-free, making the idea of leaving everything in the corporation until it’s time to draw a conservative retirement income appear very attractive. This strategy may have also been motivated by the tax advantage that used to exist for taking a dividend-only income.

Shift to mix of salaries & dividends

Continue Reading…