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Retired Money: A new DIY financial literacy course for aspiring Retirees

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Kyle Prevost: https://worryfreeretire.com/

My latest MoneySense Retired Money looks at a new Canadian DIY financial course created by MoneySense Making Sense of the Markets columnist Kyle Prevost [pictured above].

For the full column, click on the highlighted text: How to plan for retirement for Canadians: A review of Four Steps to a Worry-Free Retirement course.

November is of course Financial Literacy Month in Canada. And Kyle Prevost is well qualified to help Canadians boost their financial literacy, especially as it relates to Retirement.

In addition to being a subject matter expert in Canadian personal finance, Prevost is also a life-long teacher, which makes him doubly qualified to create this course, which he describes as a first in Canada.

And the combination shows: it’s a slick multi-media package that features snazzy graphics with voice-overs by Kyle himself, plus more in-depth PDF backgrounders and videos with various experts gathered through one of Prevost’s other projects: the annual Virtual Financial Summit (for which I have often been interviewed.)

Entitled 4 Steps to a Worry-Free Environment in Canada, the multi-media course is targeted to those thinking seriously of retiring from the workforce in the next decade or two, and even semi-retirees or those who have already reached that milestone but who want to finetune their retirement income strategy.

An ongoing theme throughout the course and related materials is “No one will care about your retirement as much as you do.” That’s a variant of the oft-used phrase “No one cares about your money more than you do.”

From CPP/OAS to Working for a Playcheck

You can find the course at this site: https://worryfreeretire.com/. You can get a flavor of what’s included before committing to payment by clicking on the “Tell me more” button. If you’re ready for the full enchilada, click on the “Get Started” button. There are various payment options, including major credit cards.

At C$499, the course does represent a major investment but the outlay could be considered a bargain if it helps some DIY retirees escape the clutches of a conflicted securities salesperson who cares more about their own retirement than that of their clients. Continue Reading…

Why would anyone own bonds now?

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By Mark Seed, myownadvisor

Special to Financial Independence Hub 

“Many investors have been saying for years that rates can only go up from here, rates can only go one direction, rates will eventually go up. Will they?” – My Own Advisor, September 2021.

My, how things can and do change.

In today’s post, I look back at what I wrote in September 2021 to determine if I still feel that way for our portfolio.

Why would anyone own bonds now?

Why own bonds?

For years, decades, generations in fact, bonds have made sense for a diversified, balanced portfolio.

The main reason is this: bonds can reduce volatility due to their low or negative correlation with stocks. The more that investors learn about diversification, the more likely they are to add bonds to their portfolios.

That said, they don’t always make sense for everyone, all the time, always.

I’ll take a page from someone who was much smarter than I am on this subject:

Ben Graham on 100% stocks and cash

Ben Graham, on stocks, bonds and cash. Source: The Intelligent Investor.

Another key takeaway from this specific chapter of The Intelligent Investor is the 75/25 rule. This implies more conservative investors that don’t meet Ben Graham’s criteria above could consider splitting your portfolio between 75% stocks and 25% bonds. This specific split allows an investor to capture some upside by investing in mostly stocks while also protecting your investments with bonds.

Because stocks offer more potential upside, there is higher risk. Bonds offer more stability, so they come with lower returns than stocks in the long run.

As a DIY investor, this just makes so much sense since I’ve seen this playout in my/our own portfolio when it comes to our 15+ years of DIY investment returns. Our long-term returns exceed the returns I would have had with any balanced 60/40 stock/bond portfolio over the same period.

There is absolutely nothing wrong with a 60/40 balanced portfolio held over decades, of course.

From Russell Investments earlier this year:

“Fixed income has historically been considered the ballast in a portfolio, offering stability and diversification against equity market fluctuations. Over the last 40 years, a balanced portfolio of 60% Canadian equities and 40% Canadian bonds would have returned 8.5% annualized with standard deviation of 9.3%. While a portfolio consisting solely of fixed income would have had lower return with lower risk, a portfolio consisting solely of equities would have had only slightly higher return but substantially higher risk.”

Source: https://russellinvestments.com/ca/blog/the-60-40-portfolio

1/1983 – 12/2022 Canada Equities Canada Bonds Balanced Portfolio 
Annualized Return 8.8% 7.2%  8.5%
Annualized Volatility 14.4% 5.3%  9.3%

Pretty darn good from 60/40.

So, while I continue to believe the main role of bonds in your portfolio is essentially safety – not investment returns – we can see above that bonds when mixed with stocks can be enablers/stabilizers and deliver meaningful returns over long investment periods as well.

As Andrew Hallam, a Millionaire Teacher has so kindly put it over the years, including some moments on this site to me:

… when stocks fall hard, bonds act like parachutes for your portfolio. Bonds might not always rise when the equity markets drop. But broad bond market indexes don’t crash like stocks do …

Is that enough to own bonds in your portfolio?

Maybe.

Here are a few reasons to own bonds, in no particular order: Continue Reading…

Bestselling Beat the Bank celebrates its 5th anniversary

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By Larry Bates

Special to Financial Independence Hub

 

My book, Beat the ​Bank: The Canadian Guide to Simply Successful Investing, was published in September 2018. Five years later it continues to be a best seller among Canadian business/investing books.

The book, along with my website and various articles I’ve written have helped many Canadians learn to invest smarter and build (and maintain) larger retirement nest eggs.

Most Canadians continue to be directed by their banks and other advisors to invest through mutual funds. The vast majority of these mutual funds extract annual​ fees ranging from 1.5% to 2.5% from the value of the investment.

Not only are most Canadians unaware of these fees​, very few investors understand the compound damage these fees do over time. Over a lifetime of investing, these fees can reduce retirement nest eggs by 50% or more.

At the same time, the investment industry, including the same banks that sell high-cost mutual funds, offer very low cost, very efficient investment funds (ETFs) that track market indexes​. (There are many other types of ETFs as well. In my view most investors would be well served by sticking to simple index tracking ETFs).

Smarter investing means getting out of high-cost mutual funds and getting into low-cost investment products and services like index ETFs through do-it-yourself investing, using robo-advisors or finding lower cost traditional advisors.

A lot has happened in the world since​ Beat the ​Bank was published five years ago​. Covid-19 did a lot of damage and led to a great deal of unanticipated change. Inflation spiked dramatically causing central banks to raise interest rates. The full impact of higher rates is yet to be fully felt, especially by homeowners whose mortgages will be renewing in the next year or two.

The good news for investors is that bonds and GICs are finally offering decent returns although we will have to wait and see whether earning 5% interest will outpace inflation. And, despite all the uncertainty and chaos over the past five years, the total return of S&P 500 was a pleasing 70% while the total return of the S&P/TSX was 42%.

What hasn’t changed?

  • Markets continue to be uncertain​ (this never changes!)
  • The majority of “advisors” are under no legal obligation to act in their client’s best interest
  • The majority of “advisors” put millions of Canadians into high-cost mutual funds
  • Many prominent mutual funds have not reduced their fees (Why would they lower fees when investors are unaware of the impact of fees?)
  • Mutual funds continue to underperform simple index ETFs
  • Regulators have made some progress but many critical investor protection measures have yet to be implemented

​The ​Beat the ​Bank project, which was sparked​ 7 years ago by my sister’s experience with mutual funds, has been a ​gratifying experience​. I have received hundreds of messages from readers over the past five years, the great majority with positive feedback.

You can get a sense of reader response by checking out Amazon reviews. I certainly have had negative reaction from some advisors and industry people generally, but most professionals recognize the shortcomings of the industry and want to see investors achieve better outcomes with simpler, more efficient investment products and services.

DIY investing not for everyone

Do-it-yourself investing it’s not for everyone. But if you are considering switching to DIY investing, whether you check out my book​ or other independent ​sources​ (books, blogs, podcasts, etc.), I strongly encourage you to take some time to learn investment basics.

Here are just a few tips from Beat the Bank readers for those considering making the move:

“I have found that ETF equity investing is better for me than buying individual stocks.” Continue Reading…

Playing Defence on the Gaza conflict with the All-Weather Portfolio

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By Dale Roberts

Special to Financial Independence Hub

There is no avoiding the crisis and tragedy of the Israel-Hamas war. While nothing can begin to match the humanitarian concerns, we will address the financial, economic and global risks. Preparing for war is preparing for risk and uncertainty whether that be a humanitarian crisis or a financial calamity. The risks and events can commingle and merge together as well. In the past this blog has looked at the global war on COVID-19, the invasion of and ongoing war in Ukraine and now the war in the Middle East. To no surprise the risk management answers are quite similar.

It was a week Saturday that we woke up to the tragedy in Israel. A declaration of war soon followed. The potential of escalation and economic shocks is real. Of course we pray for the most peaceful outcome as is possible. As of this writing, that peace appears to be a distant hope.

While stock markets mostly took the events in stride, risk-off assets certainly did respond. Gold, bonds and energy moved higher.

The memory of oil shocks

A headline on Seeking Alpha offered that – Oil prices rise as investors fear a wider war with Israel’s advance into Gaza. From that post …

Energy stocks enjoyed their best week since June, with the S&P 500 Energy Index +4.5%, as oil prices surged ahead of Israel’s imminent advance into Gaza that could cause violence to spill over into other parts of the Middle East, potentially causing disruptions to oil production and shipments.

And this is surprising, from that same Seeking Alpha post …

A less publicized factor also affected oil prices: The Biden administration for the first time began enforcing Russian oil sanctions announced last year, penalizing two tankers for carrying Russian crude oil above the West’s $60/bbl price cap.

Oil is up over 7%, while gold is up 5.5% over the last several days. Don’t forget to rebalance when risk-off assets move in violent fashion. We can see how gold moved up considerably in 2020 with the invasion of Ukraine. It then settled into a range as the world ‘got used’ to the ongoing conflict. Gold price …

Of course, no one knows how events in the Middle East will evolve, and how far the conflict might spread around the globe. Let’s not forget that it was the oil shock that ignited the stagflation period of the 1970’s.

The Purpose Real Asset ETF PRA/TSX was up 2.5% over the week ended October 13.

Even bonds caught a bid as a defensive asset with the Canadian bond market (XBB/TSX) up 1.6% and longer term U.S. treasuries up 2.5%.

Defense stocks for defense

And it should be no surprise that defense stocks are on the move as the world powers militarize to face the mounting threats in the Middle East, Europe and Asia. Northrop Grumman Corporation (NOC/NYSE) is up over 14% over the last several days and Raytheon (RTX/NYSE) is up over 6%. We hold Raytheon in one account. It was a spin-off from United Technologies. Continue Reading…

5 Ways to Increase the Value of your Business before Selling

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If you want to pass along your highly valuable company to a new owner, here are five ways to increase the value of your business before selling.

Image Adobe/PeopleImages.com

By Dan Coconate

Special to Financial Independence Hub

As retirement looms on the horizon, you are probably thinking about taking the next steps in your journey. If you are a business owner, one of these steps may include selling your business. When placing your business on the market, it is important to protect your financial well-being by getting the highest sale price possible. Here are five ways to increase the value of your business before selling.

Strengthen your Financial Records

Your financial records are the heart of your business. Potential buyers will scrutinize them to gauge the health and potential of your enterprise. To increase the value of your business before selling, ensure your financial statements are in order, transparent, and show consistent growth. Sound financial statements will build trust and make your business a lucrative investment.

Build a Strong Management Team

A strong and cohesive management team is the backbone of any successful business, and a significant selling point for many potential buyers. These buyers often assess the depth and breadth of leadership skills present within the team. They need confidence that the business will continue to thrive and adapt in a dynamic market environment, especially if the original owner is no longer at the helm. Continue Reading…