A common question I get revolves around when stock prices are going to fall or rise. “Should I be buying stocks now?” or “Are stocks in a bubble and if so when is it going to burst?”
Asset bubbles don’t necessarily need an “event” to pop. Asset bubbles can just pop for no identified reason and at any time.
Conventional wisdom says we need to find some kind of catalyst or crystalizing moment to occur. Things happen for a reason.
Rate rise as watershed?
Recently in economic circles, that watershed moment has been identified as when interest rates are going up. Many analysts have said the moment Central Banks like the Federal Reserve in the US start normalizing interest rates from near zero per cent that that will cause stock prices to plummet.
I am not alone. In 2011 I made a decision to move all our investments out of a mutual fund holder and into a discount brokerage in order to buy stocks.
I had begun to read books on the stock market: investing, history and psychology. It was a tremendous learning exercise.
Then one day during a conversation with a like minded friend he mentioned charts. I had read about charts; they seemed complicated but something struck a chord and I signed up for a stock charting service. The charting included with the discount brokerage I use is archaic and slow and I wasn’t learning anything from it. The charting service opened my eyes to a whole new world.
Why isn’t investing taught in the schools?
At the same time as I was learning I wondered why investing isn’t being taught in our schools. I wrote letters to several different ministers of education for the province of Ontario. All polite replies but nothing positive until one day I received a letter that referred me to two policy statements for the province for grades 4 to 8 and another for grades 9 to 12. “It’s all in there ,” was the reply. Continue Reading…
Do you remember Keyser Söze’s line in The Usual Suspects? “The greatest trick the Devil ever pulled was convincing the world he didn’t exist.”
There is a parallel in investing: The greatest trick the mutual fund industry ever did was convincing people they should pay a percentage of their assets to invest.
Among other flaws, the percentage trick makes the amount Canadians are paying opaque. Most people just don’t know how much they’re being charged to invest and a lot of people I talk to think they’re paying nothing at all.
Canadians paying highest fees in the world
The truth is they’re paying the highest fees in the world.
In the United States, the fee on the average mutual fund has fallen below 1%. In Canada, the average fee on an equity mutual fund is 2.42% a year. It might sound small but it takes a huge bite out of the money Canadians would otherwise be saving. Paying 2.42% a year means you could be giving up 40-50% of your lifetime growth in wealth. That could be as much as hundreds of thousands of dollars in money you would otherwise have. Continue Reading…
This blog is based on a talk prepared for the influential industry investment lobby, the Portfolio Management Association of Canada. It was delivered by Jack Mintz at the Fairmont Royal York, Tuesday, November 24, 2015, and reproduced with permission of the organizers.
Jack Mintz speaking today at PMAC
By Jack M. Mintz, President’s Fellow
School of Public Policy, University of Calgary
Special to the Financial Independence Hub
These days many governments, including the newly elected federal Liberal party, espouse the need for public policy to be evidence-based. I am sure everyone in this room would agree that evidence-based policy is far better than policy dependent on conjecture and the whims of a politician.
When it comes to pension reform, many politicians pushing for a much bigger public pension plan in Canada have based their policy prescriptions on an argument that Canadians do not save enough for retirement. The issue has been charged for almost a decade with some suggesting that Canada faces a pension crisis.
Four in five have adequate retirement income
In 2009, I was asked by the federal-provincial-territorial ministers of finance to be a research director of a project to determine whether there was evidence as to whether Canadians did not have adequate income for retirement. The overwhelming conclusion based on expert studies was that most Canadians – almost four-fifths – had adequate retirement income although a pocket of Canadians with modest incomes should be of concern.
The evidence developed at that time had a remarkable impact on the pension income debate. The words pension crisis disappeared and many experts understood that Canadians had many types of investment to ensure sufficient retirement wealth. This not only included CPP, QPP, registered pension plans, tax-free saving accounts and RRSPs but also home equity, which on an after-tax basis was more valuable than all other tax-favoured retirement accounts. With other financial and business assets, it was clear that most Canadians were doing just fine without expanding the Canada Pension Plan. Even our new Minister of Finance, Bill Morneau, concluded in a 2013 book with Fred Vettesse that the pension crisis was overblown although some issues needed to be addressed.
I’ve been advising clients the same thing for many years: “Wealth is built with returns over time.”
It’s sound, life-long, investment strategies that have the greatest impact on the financial health of your retirement.
All the while I was giving this advice, I’d thought of investing as being all about money, so my coaching involved objectives such as:
Minimizing income tax
Investing for children’s education
Investment planning and asset allocation
Tax-efficient earnings
Navigating government retirement and savings plans
Income splitting
Retirement needs analysis
Health should come before Wealth
All of these being quite essential to providing safeguards for when there won’t be any more paychecks. But all this while I had been focusing too narrowly! Sound investing is not just about money. It’s about more than that, and it begins with something else entirely: Health comes before wealth – or should.
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