Two Globe and Mail articles got my personal finance blood boiling this week. First up, a seemingly innocent article suggesting an advisor can help investors make sound decisions and stick to their plan. Nothing wrong with that. But read on and you’ll find this piece, which reads like a bad ad for money coaches, makes some baffling claims about passive investing:
— Boomer and Echo (@BoomerandEcho) January 10, 2017
The major flaw here, among many, is that somehow active management can offer investors downside protection during bear markets while also outperforming the index in good times. It ends with this gem:
Stay strong: Just because everyone else at your latest dinner party is jumping on the ETF and passive investing bandwagon, that doesn’t mean you have to follow suit. Particularly if your active plan is working and your manager is consistently beating the market, explains Ms. Cane. “Warren Buffet (sic), he’s a firm believer in managing your own, or active management. And I’ve got to say, I trust him.”
Huh? Buffett is an advocate for passive investing. He made that famous statement about what to do with his estate when he passes away (10% government bonds, 90% in a low-cost ETF), plus there’s the bet he made that the S&P 500 will beat a bunch of hedge funds over a 10-year period. And if ETFs are making it to your dinner party conversation then you need to find new friends.
Second, we have another ‘Financial Facelift’ featuring a clueless couple looking for some help with their money problems. Such problems include how these 40-something’s can get by making just $244,000 per year, and how they’ll comfortably retire with two defined benefit pension plans, $200,000 in the bank, and a net worth of nearly $3M. How on earth will they survive?
This Week’s Recap:
On Monday I posted my 2016 investment returns as well as the returns from the Canadian Couch Potato model portfolios. How did your investments stack up?
On Wednesday Marie listed seven money mistakes to avoid this year.
And on Friday we revealed our top credit card picks for 2017.
Our Facebook contest ended on Friday night and reader Jason St-Hilaire won a book from my own personal finance library. Congrats, Jason! Stay tuned for more book giveaways later in the year.
Take a look at this incredible graphic depicting the rise of Amazon as a retail power while simultaneously showing the rapid decline of iconic retailers like Sears and J.C. Penny:
The Canadian Couch Potato made some changes to its model portfolios for 2017. Don’t get too excited about saving 0.03% MER if you’ve already set up your own passive investing solution and are happy sticking to your plan. Hear that, Reddit PFC members?
It seems like a ban on embedded commissions is now a question of when, rather than if, the Canadian Securities Administrators finally end this practice and protect investors.
The CSA released a long-awaited report on mutual fund fee reform, outlining a host of potentially positive impacts including lower cost mutual funds.
Does the 4% rule work around the world? Retirement researcher Wade Pfau takes a look at safe withdrawal rates.
Tim Ferriss on the key to accomplishing all your tasks in 2017. Single-tasking.
Fed up with bad behaviour from your bank? Rob Carrick suggests trying one of their competitors, such as an online bank or local credit union.
What’s the best investment you can make in 2017? Des Odjick says to make an investment in yourself:
“Investing in myself” sounds like I just bought myself a bunch of massages because I deserve it (I do, my shoulders are terrible) but by “investing in myself,” I’m referring to the money I spent on growing my skills, growing my business and learning how to manage my money.
What do you have to show for your work? Michael James offers some advice to Millennials.
Barry Choi explains how to manage your money as a freelancer.
Boom, bust, and economic headaches. How the greying population means Canada’s economy is headed for a major shift.
Finally, the trouble with ignorance is that it feels so much like expertise. A leading researcher on the psychology of human wrongness sets us straight on why we are all confident idiots.