Reviews

We review books that deal with everything from financial independence topics to politics, and anything in between. We may sometimes stray into films and music if there is a “Findependence” angle.

An outline of the various types of life insurance policies

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By Lorne Marr, CFP

Special to the Financial Independence Hub

There are a variety of life insurance policies available in Canada: the best type of plan depends on the insured’s needs and budget. The following is only a snapshot of the different types of plans.

In general, life insurance policies are classified according to two criteria:

  • By length of coverage
  • By medical exam requirements

Let’s look at each of this classification in detail.

Types of life insurance based on coverage length

Life insurance in Canada is generally grouped into two major types, if it is about coverage length: temporary insurance and permanent insurance.

Here is a breakdown of these insurance types and below you will find a detailed description of each type:

Term life insurance type

Term life insurance policies cover short-term needs. Term coverage is the simplest form of life insurance. It provides the largest benefit for the minimum amount of premium. The insured can use the benefits offered by this coverage to pay off debt or to fulfill any other need. The premiums on these policies start off low, but increase as the insured gets older. Term policies can typically last for 10 years, 20 years or 30 years, but Industrial Alliance offers a Pick-a-Term policy: the insured can pick his/her Term from ten to 40 years.

If you are interested in Term Life Insurance, click here to get a Term Life Insurance quote.

Permanent life insurance type

This type of life insurance provides insurance protection till the policy matures, as long as the insured pays the premiums on time. The four major types of permanent insurance are Whole Life, Universal Life,  Limited-Pay, and Term 100. Continue Reading…

My Review of “A Warning” by Anonymous

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Based on the arrival of my library copy of “A Warning” this weekend, it’s clear that the controversial book about Donald Trump written by “Anonymous” is now in wide circulation, and hence there will soon be a new wave of reviews.

Recall that what amounted to a sneak preview of the book came late in 2018 after the New York Times departed from normal practice and published an opinion piece credited only to “A Senior Trump administration official” that gave an inside look at what those unfortunate enough to be subordinate to Trump have to endure on an almost daily basis. Talk about the worst job in the world!

At 250 pages it’s a quick read. At one level, and as a friend of mine who also got an early copy remarked, there’s not that much new to anyone who has been following this train wreck of a presidency on CNN or MSNBC.

Indeed, many of the early reviews based on pre-release copies gave us a good flavour of what you can expect in this book. My favourite passage in the book used not the imagery of a train wreck but an even more dramatic one of air traffic control. To wit:

‘The day-to-day management of the executive branch was falling apart before our eyes. Trump was all over the place. He was like a twelve-year old in an air traffic control tower, pushing the buttons of government indiscriminately, indifferent to the planes skidding across the runway and the flights frantically diverting away from the airport.’

The book includes eight chapters, beginning with the collapse of the steady state (you remember the “grownups” who were supposed to act as guard rails, many now since departed), moves on to Trump’s numerous defects in character, his Fake Views, his Assault on Democracy, his weakness for Strongmen, and a chapter on how he has divided America with a “New Mason-Dixon Line.” Then he surveys the apologists and his enablers who put ambition and fear over service to country, and ends with an appeal to the Electorate.

Surprisingly, the author isn’t that keen on the prospect of impeachment: even though the book is current enough to include the early innings of the Ukraine scandal. Instead, and perhaps sensibly, the appeal is to American voters to come to their collective senses and vote him out in the 2020 election.

Three years too late?

A cynic might quip that the very title “A Warning” comes at least three years too late. But for anyone who believes another four years of this madness will all but destroy American democracy, the title is apt if understated. Perhaps a Trumpian superlative would be an improvement: something like “An Urgent Warning.” Continue Reading…

VBAL vs. Mawer Balanced Fund for One-stop investing

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Investors could have done a lot worse over the past 30 years than investing in the Mawer Balanced Fund. Mawer, which epitomizes the art of boring investing, has been nothing short of consistently brilliant: with annual returns of 8.5 per cent since the fund’s inception in 1988.

Investment giant Vanguard doesn’t have the same longevity or track record here in Canada, but its launch of the Vanguard Balanced ETF portfolio (VBAL) gives investors another one-stop investing option.

This post will go under the hood and compare VBAL to the Mawer Balanced Fund for investors looking for a one-stop investing solution for the next two to three decades.

About Vanguard

Vanguard is legendary in the United States and is largely credited for pioneering low-cost index investing. It came to Canada in December, 2011 and now offers nearly 40 ETFs and four mutual funds to Canadian investors with a total of $17 billion in assets under management (Dec 2018).

VBAL was introduced by Vanguard Canada in January, 2018 as part of a new suite of asset allocation ETFs (including VGRO and later VEQT). These funds have proven popular among Canadian investors and have collectively gathered more than $1 billion in assets.

Before their introduction, investors did not have access to a one-stop ETF solution. Instead, they’d have to build multi-ETF portfolios to get exposure to Canadian, U.S., and International equities, plus another ETF or two for fixed income.

Vanguard turned that around with what I’ve called a game-changing investing solution. VBAL represents the classic 60/40 portfolio.

Vanguard Balanced ETF (VBAL)

VBAL is a fund of funds. That means its underlying holdings are made up of other Vanguard funds. So rather than seeing a bunch of individual stocks and bonds in VBAL’s holdings, you’ll instead see these seven products:

  • Vanguard US Total Market Index ETF
  • Vanguard Canadian Aggregate Bond Index ETF
  • Vanguard FTSE Canada All Cap Index ETF
  • Vanguard FTSE Developed All Cap ex North America Index ETF
  • Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged
  • Vanguard US Aggregate Bond Index ETF CAD-hedged
  • Vanguard FTSE Emerging Markets All Cap Index ETF

The fund’s mandate is to maintain a long-term strategic asset allocation of equity (approximately 60%) and fixed income (approximately 40%) securities. It’s as diversified, globally, as you can get: with a whopping 12,318 stocks and 15,412 bonds wrapped up inside this one-stop balanced ETF.

VBAL Holdings

VBAL has net assets of $675 million (June 30, 2019). Its distribution or dividend yield is 2.58 per cent (dividends paid quarterly). Its management expense ratio or MER is 0.25 per cent.

Investors can purchase VBAL through a discount brokerage account and it is an eligible investment inside an RRSP, RRIF, RESP, TFSA, DPSP, RDSP, or non-registered account.

VBAL’s performance data only goes back to its inception date of January 24, 2018. It has returned 4.05 per cent annualized since that time, and 10.44 per cent year-to-date (July 30, 2019).

Justin Bender, a portfolio manager at PWL Capital, has simulated the returns as if the fund did exist for the past 20 years and found the following annualized returns (as of June 30, 2019):

  • 1-year return – 5.09%
  • 3-year return – 7.22%
  • 5-year return – 6.62%
  • 10-year return – 7.95%
  • 20-year return – 5.34%

You can read more about VBAL and its fact sheet and prospectus here.

About Mawer

If Vanguard is legendary for pioneering low cost investing, Mawer has achieved cult-like status among active investors for an incredible track record of outperforming its benchmarks. Mawer was founded in 1974. It’s a privately owned, independent investment firm, managing over $55 billion in assets. Mawer has locations in Toronto, Calgary, and Singapore.

While its philosophy is ‘be boring,’ Mawer’s performance is anything but. Of its 13 mutual funds, eight have beaten their benchmark index since inception: including the Mawer Balanced Fund, which trounced its benchmark over the last decade (9.9 per cent to 7.8 per cent). Continue Reading…

Theranos’ Elizabeth Holmes and Wolff’s new Trump book: parallel cautionary tales?

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Theranos founder Elizabeth Holmes and the book exposing the scam

Being a frugal kind of guy in Semi-Retirement, whenever possible I like to get books out from the library, whether old-fashioned physical books, e books or audio books. The main problem with this, however, is that you usually have to wait several weeks or even months to get to the head of the line for the latest bestsellers.

On a recent long weekend (the one before this one!) two bestsellers arrived the same day, which meant the pressure was on to read them in the three weeks allotted. Neither was likely to qualify for renewal, since there was a long queue of other readers waiting for their return.

The first, which arrived in e-book format, was Bad Blood, a book I had ordered several weeks earlier and has only recently slipped off the bestseller list. The other one was brand new: Michael Wolff’s followup book on Donald Trump, entitled Siege: Trump under Fire. On this one, I got really lucky, just happening to be in the library a day or two after the local branch’s local copy went on display.

Still, suddenly I had two books to read at once, which meant that anything else I either owned or was more likely to be renewable had to be put aside. No one said being frugal was easy!

I ended up reading both books over a long three-day weekend by adopting a strategy of reading a chapter in one, then switching to the next chapter in the other. Which is how I realized there were some fascinating parallels between the two books. It was something of a surreal experience, as I’m sure no one else on the planet would have read these two books simultaneously in this fashion.

Billionaires, or Thousandaires?

Both involve supposed American billionaires, although this point is debatable about both subjects. Trump’s billions are often supposed to be fanciful, which is why one New York Times columnist once earned Trump’s ire by dubbing him a “thousandaire.”

The other was a billionaire for awhile, at least on paper but these days she may not even be a thousandaire. I’m referring to Elizabeth Holmes, a young Stanford dropout who hero-worshipped Apple’s Steve Jobs and started a blood-testing company in California called Theranos.

The only problem, as Bad Blood recounts at length, is that apparently Theranos supposed ground-breaking technology didn’t work. Google Elizabeth Holmes and you can find a bunch of short videos that describe the sordid tale if you missed it the first time around and don’t wish to join the library queue for the book.

Blinded by ambition and the quest for fame and wealth, it appears Holmes and her much older partner/lover (Ramesh “Sunny” Balwani), cut numerous corners and forgot the first rule of health care is to first do no harm. They raised billions from investors, in the process fooling such retail giants as Walgreens and Safeway. Holmes had founded the firm in her early 20s and used her influential rolodex to suck in many investors who should have known better.  She also was famous for emulating Jobs and his attire of a black turtleneck sweater. And finally, as any number of Google searches will demonstrate, she pitched her voice a few octaves lower so as to impress prospects and investors with a deep baritone she must have felt would allow her to be taken more seriously.

Will Trump’s reign also end in tears?

Wolff’s Siege was released just a year after his previous Trump bestseller, Fire & Fury, and relies just as much on input from Steve Bannon. As I read and alternated chapters between the two books, it was fascinating to watch the unravelling of Holmes and to wonder whether Wolff was describing a similar unravelling of the Trump presidency. Certainly, Wolff depicts an isolated and desperate president and has predicted it will all end in tears: not necessarily ours but of Trump’s. Continue Reading…

Retired Money: Time for retail investors to STANDUP to the financial services industry?

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My latest MoneySense Retired Money column is a review of advisor John De Goey’s new book: STANDUP to the Financial Services Industry. Click on the highlighted headline for the full column: Fight for your right to low fees.

Obviously a retrofitted acronym, STANDUP stands for Scientific Testing and Necessary Disintermediation Underpin Professionalism. STANDUP was an undercurrent in the four editions of De Goey’s previous book, The Professional Financial Advisor. There he argued that while most advisors hold themselves out to be professionals like doctors, lawyers or accountants, the primary function of most advisors is “to sell products.” STANDUP Advisors are the good guys and gals: the “self-aware and knowledgeable advisors” his new book aims to help readers find. His personal website is www.STANDUP.today.

Bad advice they believe is good

Right from the get-go, De Goey is pretty harsh on many members of his profession. Much of what advisors believe is “demonstrably wrong” he declares right on page 2 of his introduction: “People who give advice for a living routinely give bad advice while honestly believing that the advice they are giving is, in fact, good. That’s a huge problem.”

He puts much of the blame on the managers of retail advisors, chiefly the senior members of Canadian mutual fund companies. He hauls out the old Upton Sinclair quote to illustrate the gap between doing what’s good for investors and what’s profitable for the financial industry itself: “It is difficult to get a man to understand something when his salary depends upon his not understanding it.” Continue Reading…