Below is a link to my latest Financial Post blog, which tackles the financial implications of the annual spending orgy that starts with Black Friday tomorrow, builds steam with Cyber Monday, and on to Christmas itself. (Not to mention Boxing Day!)
While I didn’t have a chance to include it in the FP blog, BMO has released its annual Black Friday and Cyber Monday Report and finds Canadians plan to spend an average of $446 over both days: $300 on average on Black Friday and $229 on Cyber Monday. Continue Reading…
The following is an Open Letter addressed to the new Finance Minister, Bill Morneau. It is republished here with the permission of the writer, Gordon P. Johnson (coordinates below). It addresses a topic we’ve been looking at in depth ever since the election: the Liberal promise to cut the annual TFSA contribution almost in half, from $10,000 to $5,500. He points out that preserving the TFSA limit at the higher amount will benefit the very people the Liberal party has said it wishes to help: the middle class and seniors. Because this is an open letter, we have not edited the letter nor attempted to add subheadings to break up the text.
Dear Mr. Morneau,
Finance Minister Bill Morneau (Liberal Party of Canada)
First of all I wish to congratulate you on your recent Cabinet post.
Mr. Trudeau stated that should he form the next government of Canada he would reduce the recently increased TFSA limit from $10,000 to the previous level of $5,500.
His reasoning is that the $10,000 limit only benefits the wealthy and not the average middle class taxpayer. I contest that this declaration is a political move and not at all in the best interests of the average middle class person.
He spoke of reducing taxes both for the middle class and the senior population.
Let’s look at the TFSA account and how it potentially benefits the very people he claimed that he wished to help (middle class and seniors). Not only does it benefit through compounding tax free gains (both short term as well as long term) but it reduces the tax burden at retirement when needed the most.
Let’s assume that your average middle age, middle class taxpayer is earning $50,000 and struggling to save for retirement. He certainly isn’t contributing his maximum to a TFSA – most likely he isn’t contributing anything to his TFSA.
His/her parents, possibly seniors on a fixed income, have accumulated some savings and have a clear title home. Their savings are invested and the income is taxable. If the savings were placed into a TFSA that income would be tax free—a significant benefit to seniors trying to maximize their cash flow.
However, the real benefit to the middle age, middle class wage earner is the carry forward of unused TFSA contributions. Let’s say that upon his or her parents passing they inherit $250,000. These funds are after tax and there is no benefit to placing them in an RRSP. Continue Reading…
But it doesn’t look like this so-called “Financial Repression” is going to let up any time soon.
Organized by ETF Capital Management Inc., most of the speakers on the “Thriving” tour warned the audience (many of them near-retirees) to be prepared for 10 or even 20 years more of minuscule interest rates.
Near-zero interest rates are especially tough on savers and those in the Retirement Risk Zone. Either you settle on no real rate of return at all relative to inflation, or you find yourself taking more risk (i.e. through stocks) than you would prefer.
That’s the dilemma of being in the Retirement Risk Zone and it reflects the dilemma of central banks around the world. Like savers, they too are between a rock and a hard place.
The title of the segment is of course a famous phrase coined by Mark Twain, and is used to describe the persuasive power of numbers, particularly the use of statistics to bolster weak arguments.
When we look at the statistics of what percentage of actively managed funds underperform, they are even more dire when survivorship bias is taken into account — in other words, the industry often “shoots the wounded,” closing down poorly performing actively managed funds. This has the effect of removing them from overall performance statistics, leaving only the “survivors” or better-performing surviving funds, which naturally have better track records.
The segment features Craig Lazzara, Global Head of Index Investment Strategy for S&P Dow Jones Indices (pictured, right). Lazzara notes that the semi-annual “SPIVA” report cards in Europe show that 89% of actively managed global equity funds and 91% of US equity funds failed to beat the indexes over the last five years. And the 10-year performance numbers “are even worse.”
How widespread is survivorship bias? Well, among British small- and mid-cap funds, more than half were closed or merged over a ten-year period.
And of course, a week ago — as we mentioned in last Saturday’s Wrap — MoneySense.ca ran a series of blogs by me on “the mistakes you’re probably making” in various subsets of personal finance: saving, debt repayment, selling a home, investing and retirement.
I have no problem making mistakes, the key is to learn from them and try not to repeat them!
On Sunday, I’ll be speaking in Calgary, giving attendees at Larry Berman’s education event a sneak preview of the new book I’ve written with Hub blogger Michael Drak: Victory Lap Retirement. Continue Reading…
Posted By 
Below is a link to my latest Financial Post blog, which tackles the financial implications of the annual spending orgy that starts with Black Friday tomorrow, builds steam with Cyber Monday, and on to Christmas itself. (Not to mention Boxing Day!)
