Tag Archives: investing

What women want – and how to get it

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By Ed Rempel, CMA, Fee-for-Service Planner

Special to the Financial Independence Hub

There was a gasp from the audience, when this photo of a homeless woman was shown at a talk I recently attended.

A new survey shows that almost half of women fear they will become a “bag lady” someday. They fear being financially desperate and living on the street.

No job. No income. No partner. That is the fear.

 

I have asked thousands of people: “What’s important about money to you?” The #1 answer for women is security.1

What does “security” mean? It’s surprising how often the “bag lady fear” comes up. The #1 explanation is similar, but less severe:

Security: “Having enough so I never have to worry about money.”

Women want to know there will always be enough income for their family, for emergencies, and for the things that are important to their lifestyle. They want to focus on their life, their family and their friends and not have to constantly worry about whether they can afford it.

What does that look like and how do you get there? The answer might surprise you.

First, three questions:

1.) Jennifer has $2 million in stock market investments. This is:

A. Very risky.

B. Financial security.

 

2.) Financial security is:

A. No debt and safe investments.

B. Large diversified portfolio.

 

3.) Who is more secure?

A. Mary has no debt.

B. Andrea has a $200,000 mortgage and $1 million in investments.

 

Whether you ever become financially secure depends a lot on your picture of financial security.

Most people who want security do exactly the opposite of what they need to do to get it. The biggest mistake most people make is to think they can be financially secure by paying off all debt and having safe investments, instead of investing wisely for long-term growth.

I call this the “Zero Plan.” You retire with zero debt, zero investments (nearly), and zero income (except a bit from the government). People who do this are actually making it hard for themselves to have the nest egg they will need to be secure.

The truth is, investing very little money and buying low-return investments means you will never build up much of a nest egg.

What does financial security look like? What I have learned from experience helping thousands of people become financially secure is this:

Real security comes from having a huge nest egg.

A large portfolio of equities (stock market investments) is financial security. That’s what security looks like. Continue Reading…

8 habits that are killing your Retirement dreams

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A growing number of Canadians plan on working longer because they haven’t saved enough for retirement. We see it at a macro-level; Canadian households owe a record $1.69 in debt for every dollar of disposable income, meanwhile the personal savings rate in Canada stands at a paltry 3.4 per cent.

There are plenty of reasons why we owe too much and save too little. The economy stinks, people get laid off, and salary increases are few and far between.

That said we’re often our own worst enemy when it comes to taking care of our finances. Here are eight bad habits that are killing your retirement dreams:

1.) You don’t watch your spending

It’s tough to stop a money leak when you have no clue where your money is going. Small daily purchases do add up (latte factor, anyone?), but these spending categories can bust your budget much faster – big grocery bills, dining out too frequently, filling your closet full of new clothes, one-click online shopping, and expensive hobbies, to name a few.

The solution: Write down everything you spend for three months. I guarantee you’ll have an ‘a-ha’ moment at best, and at worst discover something useful about your spending habits that you’d be willing to change.

The goal of course is to spend less than you earn. It’s one of the major tenets of personal finance.

2.) You want the newest ‘everything’

Fashion and décor trends change, technology constantly evolves. Staying ahead of the curve means shelling out big bucks for the latest and greatest products. The problem is your capacity to buy new things will never keep up with the pace of innovation and change. It’s an endless cycle.

The solution: Wait. Early adopters pay a hefty premium to be first. Look no further than televisions, where the latest innovations can initially go for between $5,000 and $10,000: 10 times what they’ll cost in a year or two.

The bigger issue is the psychological need to always have the latest gadget or be at the cutting edge. Ask yourself whom are you trying to impress.

3.) You have the constant need to upgrade

Fewer than half of all iPhone users hang onto their smartphones until they stop working or become obsolete. Most want to upgrade as soon as their provider allows it: usually every two years. A small percentage upgrades every year whenever a new model is released.

While spending a few hundred dollars on a new phone every other year might not hinder your retirement plans, it could be a symptom of a bigger problem. The constant need to upgrade your technology, your car, and even your home can be a big drain on your finances.

Nearly three in 10 homeowners get the urge to move every five years, and 14 per cent actually want to move every year.

The solution: The same buy-and-hold approach that you take with your investments can also apply to your major purchases. The Globe and Mail’s Rob Carrick suggests a 10-year rule for homeowners to combat the odds of a housing crash and to save on transaction fees. Continue Reading…

If you have no faith in the future, should you invest?

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By Billy Kaderli

Special to the Financial Independence Hub

As many know, I am more than willing to offer financial advice in order to help others to become financially independent (aka “findependent.”) The sooner the better” that’s good for everyone, right?

I met a lady at a recent event that Akaisha and I attended, and in our visiting together I steered the conversation towards finances. Knowing that she lived in Hawaii and seeing that she was probably in her 40s, I falsely assumed she had some knowledge of money and how it works.

I was wrong.

After I shared with her that we retired at the age of 38, I asked what her financial plan for retirement was. She told me that she did not have much faith in the future, therefore she had no plan.

I asked her, “What if you are wrong?”

Her response was “I do not think I am wrong”

The Dollar is going to collapse

I have been hearing of the impending collapse of the Dollar for the last forty years.

First it was going to be replaced with the German Mark, then the Swiss Franc, then the Russian Ruble, Chinese Yuan, and now Bitcoin. Maybe someday they will be right, but so far, betting against the Dollar has been a costly investment.

I like to tell people that the Dollar is the cleanest shirt in the dirty laundry bin. Maybe you have some special inside trading information, but for me, I’ll stick with the U.S. currency.

Various apocalyptic scenarios

Maybe it’s part of being human, but it seems that society creates ominous future scenarios of various sorts to scare the living bejesus out of everyone. Continue Reading…

Which Robo Advisor differs from the other?

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By Dale Roberts

Special to the Financial Independence Hub

I recently penned the blog What and who are the Canadian Robo Advisors? That blog outlined how, true to the moniker, a robo advisor is an online financial advisor without the human.

Well, let’s say that at times there is no human present. In actuality the robo advisors are all quite human and they all have a unique personality. Think Star Wars and the loveable tin cans known as R2-D2 and C-3PO. They are very different in voice and personality.

Above left is R2 …

And to the right is my robo mascot …

The answer to the question posed in the headline is that all of the robo advisors are different, at times very different from one another. That’s why it’s important to know and understand these differences so that you might be able to find the robo that’s right for you. Getting in the ‘right robo’ might make a difference of thousands to tens of thousands of dollars or more over an investment lifetime.

The ‘robots’ don’t think in a pure sense. In most cases, this is not artificial intelligence at work. The process involves investment concepts and approach(es) and then mountains of computer programming applied so that the robo platforms can follow the direction of the human financial gurus who set the course for each robo advisor.

The Chief Investment Officers and their teams can and do also make adjustments on the fly. Some may react to market conditions. That may seem ironic given that the robo advisors will mostly embrace and use mostly passive Exchange Traded Funds, but they will then get a little more active with regards to asset allocation and types of funds used based on changing market conditions. All said, that will be one of the factors that I track moving forward as we compare the performance of the Canadian robos.

Robos can be passive or active

Some robos are more passive, some robos are very active.

One of the robo advisors, responsive, is considered AI-based as the platform will automatically change the asset allocation (mix of stocks and bonds) based on many market and economic indicators. Continue Reading…

What and Who are the Canadian Robo Advisors?

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By Dale Roberts

Special to the Financial Independence Hub

Most investors want or need investment advice. I learned after many decades in and around the industry, including over 5 years as an advisor on lower-fee index-based portfolios, that Canadians are not all that interested in their investments. We’d call that a low interest category.

Nope, folks are more interested in making money and well, living. So most need, or seek advice. Now unfortunately most Canadians by force of habit simply line up at their big bank or mutual fund sales office and sign up to pay some of the highest investment fees in the world. Those fees are crippling, I know, I saw the results when Canadians showed me how they were invested.

But just because you might need an advisor does not mean you have to pay some of the highest investment fees in the world. And yes the fees are important. We know that the fees typically and greatly impact the returns. From Justwealth the chart at the top is a comparison of the potential portfolio returns impact over longer periods, based on an initial $100,000 investment.

We can see that the effect of high fees paid can become exaggerated over time. Remember you pay investment fees every year, throughout the year, and as your portfolio grows over time you pay more in fees as the fees are based on your portfolio value. That’s a nasty kind of negative compounding.

So just what is a robo advisor?

Yup, just as per the image, a robo advisor is an investment advisor that’s well, not human. But don’t be scared. If you want to talk to a human the companies that offer robo advisory services can also put you in touch with real flesh and blood advisor types.

So if a robo advisor is not human, just what is “it”? A robo advisor is simply an online platform that asks you questions to help you get into the right investment portfolio. A robo advisor will ask the same type of questions as would a human advisor. Based on your answers the robo advisor will put you in the appropriate portfolio.

So what type of questions will the robo advisor ask you?

The robo advisor platform may try and gauge your investment knowledge. There may be questions on your net worth and salary and employment status, basic personal details. Each robo advisor offering has its own nuances and I will dig deeper into that in future articles. But most importantly a robo advisor wants to know …

  1. Your time horizon for the monies that you are about to invest.
  2. Your tolerance for risk (the amount or percentage that the portfolio could decline).
  3. Your objectives for the investment, whether you’re looking for more growth, a more balanced approach or a very conservative approach that might include a lot of bonds and fixed income.

And once again, each robo advisor will have its own methods (robo personality?) for asking those questions and discovering your investment personality and needs. If you want to ‘play around’ with a basic robo question and answer process have a look at Tangerine Investments’ Portfolio Selector Tool. Continue Reading…