By Randy Cass

Special to the Financial Independence Hub

A lot of people have heard of exchange traded funds (ETFs), but don’t really understand what they are or what a great investment they can be.

ETFs are not a novel concept — in fact, they have been around for more than 20 years. Worldwide, there is currently $3.5 trillion invested in ETFs.

Interestingly enough, the average household income of investors in ETFs is $131,000, more than twice the median household income and about 30 per cent higher than the average income of households that own plain mutual funds, according to the Investment Company Institute.

But what is an ETF, you say? ETFs are funds, which means that for all practical purposes, each one includes dozens, hundreds or even thousands of stocks or bonds. Most ETFs track broad, well-established indices like the S&P 500 or the TSX.

Large institutional investors typically use ETFs to cheaply and efficiently gain exposure to a variety of asset classes, including bonds, stocks and real estate. When compared to mutual funds, a significant difference is that ETFs usually have much lower fees and can be bought and sold throughout the day.

So, how do you pick the right ETFs? Here are the criteria I use:

Look for low costs

Continue Reading…

By Adrian Mastracci, KCM Wealth

Special to the Financial Independence Hub

“Many portfolios are overloaded with same or similar investments. Few investors know about overlap.”

A frequent investing theme is owning more than 15 different mutual funds:
purchased over the years with little thought as to how the collection fits together, if at all.

Owning several funds can create a significant “overlap” of securities.
That is, individual holdings within the mutual funds are often the same, or very similar.

While fund names may differ, their holdings do not.
For example, mutual funds buy from a short list of Canadian stocks, like banks.

Having several accounts can also have you owning many of the same stocks in each.
This may tilt your portfolio in one or more asset type or sector. However, you hardly see anything written about portfolio overlap. Most investors have little or no knowledge of the implications of overlap, such as:

• Owning a collection of funds heavy on overlap reduces your portfolio diversification.
• Overlap increases if you choose funds from similar investing styles and sectors.
•  Portfolios that overindulge on overlap can also be affected in their long-term results.

Some portfolios have more than 40% overlap.
Problems can arise with as little as 10% overlap. Continue Reading…

By Doug Dahmer, Emeritus Retirement Solutions

Special to the Financial Independence Hub

Canadians from across the country are starting to look at their Canada Pension Plan with the respect it deserves.

The reaction to our CPP Optimizer research report has been overwhelming. In a nutshell, the CPP benefit for a couple can be in excess of $700,000 over their lifetime and the study demonstrates that the difference between starting your benefit at the least beneficial date and starting at the best date is more than $300,000.

Taking benefits too early can be costly

Unfortunately, not everyone knows these statistics. From comments in social media, I can see that many people are trapped in the old school, conventional wisdom that you should take your benefit as soon as you retire. “A bird in the hand …” is a common thread of discussion. For some people, this choice will be a mistake of enormous proportions. Continue Reading…

By Patrick McKeough, TSInetwork.ca

Special to the Financial Independence Hub

Investors sometimes ask us how to select the best investments for young children. If children are under the age of 18, they cannot yet invest as adults. However, there are a couple of savings and investment options available.

The first option is for you (or the child) to open a bank account in the child’s name. Interest paid on small balances may range from zero to, say, 1.05% annually, paid monthly. All of the major banks have special bank accounts for children, usually without service fees on basic transactions. However, once the child has accumulated $500, he or she could move the money into an interest-paying guaranteed investment certificate (GIC).

In-trust accounts offer low cost, flexibility

If you want to build up an investment portfolio for a child, then an informal in-trust account is a low-cost and flexible option. Continue Reading…

by Marie Engen, Boomer & Echo

Special to the Financial Independence Hub

This is the time of year when people take stock of their lives and vow to start the new year with a change of habits: stop smoking, exercise, eat better, take care of finances. And yet the majority will fail to keep up with the changes within the first month. Bad habits have both a financial cost and a personal cost, but they also have personal benefits that make them so hard to change.

Being Overweight

Obesity is becoming the norm in North America. It’s partially the result of bad eating habits aided and abetted by fast food supersizes and the cheapness of the least healthy grocery choices. Yes, it’s easy to turn into the fast-food drive-thru when you’re stressed, busy and haven’t taken out anything for supper. Continue Reading…