Weekend Reading: Stock Market Volatility Edition

The month of October was not kind to investors. A volatile stock market erased all of 2018’s gains and then some. My own portfolio plunged 5.72 percent in October after being up 4.73 percent from January to September. Time to panic? Not a chance.

In yet another example of why it’s best to ignore the headlines and stick with your plan (or why I say investors would be better off taking a Rip Van Winkle like 20 year nap) the market quickly returned all of those losses in just eight trading days.Stock market returns November

Investors who panicked at the bottom of that dip locked in losses of nearly six percent, while investors who rode out the stock market volatility saw their portfolios get back to even.

A chart showing market returns over a few days, weeks, or even months can look like a stomach-churning rollercoaster. But as the months turn to years, and the years turn to decades, those returns smooth out and trend upwards. Yesterday’s headlines become ancient history, and ‘worst days ever‘ for the stock market become tiny blips on the radar over the long term.

Long term stock returns

The point is not to panic when markets get rocky. If your investing plan has a long term focus then it’s best to ignore the daily headlines and stick to your plan.

This Week’s Recap:

On Wednesday I wrote about why past performance is not a good predictor of future investment returns. In fact, costs are a better predictor of returns.

In light of CBC’s recent coverage of the pitfalls of credit card insurance I looked at four big rip-offs that consumers should avoid.

Promo of the Week:

Scotia Momentum Visa Infinite
I’ve highlighted this before but if you have some upcoming spend planned for the holidays then this is an excellent opportunity to earn up to $200 cash back on your holiday spending.

That’s right, when you apply and get approved for the Scotia Momentum Visa Infinite Card you’ll earn an incredible 10 percent back on everyday purchases for the first three months, up to $2,000 in total purchases. Plus, your first-year annual fee is waived. This is a limited time offer so make sure to take advantage of it soon.

Weekend Reading:

The surprising retirement goal that 41 percent of Americans have? It’s to own a vacation home.

Will baby boomers destroy the stock market as they retire en masse? Ben Carlson examines some interesting trends and time lapses.

How Shane Parrish, a former Canadian spy, helps Wall Street mavens think smarter:

“Every world-class investor is questioning right now how they can improve,” he said. “So, in a machine-driven age where everything is driven by speed, perhaps the edge is judgment, time and perspective.”

Jonathan Chevreau highlights three online programs to help plan out your finances in retirement.

Personal finance 101: Some Canadian universities are offering practical personal finance courses.

Studies show that as we age, our brain becomes less able to detect fraud. Here’s a thoughtful post on how to safeguard your finances and protect your retirement savings.

Jason Heath explains how to avoid RRSP tax on your estate when you die.

Michael James has an excellent post explaining the value of delaying CPP and OAS until age 70. More people need to hear this message.

Last week I shared the “new rules” of personal finance. Million Dollar Journey blogger Frugal Trader looks at how these rules apply to his thinking on personal finance matters.

Dale Roberts explains the many lessons learned from a chart detailing the returns history of Tangerine’s five investment portfolios.

Finally, here’s Michael James again on whether it makes sense to hold U.S.-listed ETFs to save on MER and foreign withholding taxes. I’ve been thinking a lot about this lately and how it applies to my own two-ETF portfolio, in which I’ve chosen simplicity over cost savings. I’ll soon be at the point where the pendulum will swing towards cost savings.

Have a great weekend, everyone!

4 Big Rip-Offs To Avoid

I’ve made my share of bad financial decisions over the years, but nothing feels worse than when a salesperson convinces you to buy something that’s not in your best interest. These kinds of rip-offs usually occur when one party has more or better information than the other.

Think about the first time you bought a car or the first time you went to the bank to sign your mortgage documents. Who controlled the conversation? If you were like me, you probably deferred to the “expert” sitting across the desk and happily signed everything they put in front of you.

Related: 10 Fees To Avoid Paying

What you might not have known at the time is that some of the extras, such as extended warranty coverage or balance protection insurance, were completely optional and most likely a giant waste of money.

Here are four big rip-offs to avoid:

4 Big Rip-Offs To Avoid

Mortgage life insurance

If you own your home, chances are you were offered mortgage life insurance from your bank. This type of insurance is not a requirement to qualify for a mortgage, but it’s made to look that way by many lenders who suggest it at a time when you’re vulnerable and haven’t shopped around. You’ll even have to sign a waiver form to decline the coverage.

The reality is that it’s generally not a good idea to buy mortgage life insurance from your bank. It’s the one financial product that goes down in value as you continue to pay – also known as a declining benefit. Term life insurance is much cheaper and offers greater protection.

Extended warranty coverage

It’s almost guaranteed that you’ll be asked to buy an extended warranty the next time you purchase an appliance or any high-end piece of electronics. The reason for the hard sell is that retailers have big profit margins on these contracts. Stores keep 50 percent or more of what you pay for extended warranties or service plans, according to Consumer Reports research.

Consumer Reports recommends against buying extended warranty coverage. One reason is that most repairs may be covered by the manufacturer’s warranty, which should last at least 90 days or longer. Their research suggests that if a product doesn’t break while the manufacturer’s warranty is in effect, it probably won’t during the service-plan period.

Related: Gadget Insurance – Is It Worthwhile?

Many credit cards will double the manufacturer’s warranty when you use the card to make the purchase and register the product.

Balance protection insurance

One common telemarketing pitch from banks and credit card lenders is for balance protection insurance.

For a cost of about 99 cents per $100 of the average daily balance (about 1 percent per month) you can protect your credit rating against unexpected job loss or disability.

Customers might agree to add this protection to their credit card thinking that because they pay off the balance in full each month they’ll avoid the fee. Not so. The fee is based on the amount owing on your statement due date, or on your average daily balance, depending on the card issuer.

Not only that, the “protection” is riddled with exclusions, making it difficult to make a claim should you become ill or lose your job.

Balance protection insurance is aggressively marketed to unsuspecting customers and should be avoided like the plague. You’re much better off protecting yourself with a small emergency fund, proper term life insurance and disability insurance.

Door-to-door sales pitches

It may be tempting to sign up for a home security system, or switch to a new energy supplier to save a few bucks. But always be cautious about door-to-door sales pitches. They may use deceptive pitches or questionable tactics and sell substandard, but expensive products or service contracts.

Related: City Councils, Please Ban Door-to-Door Sales

A reputable business shouldn’t require your signature at the door. Take your time and read the documentation at your leisure. If the sales pitch has a limited time offer attached to it, ask the salesperson to leave immediately and close your door.

Shop around for competitive quotes from businesses offering similar services. Contact the Better Business Bureau to investigate the company or to get a list of businesses offering similar service.

Before you sign any contract, take the time to read the fine print. Don’t get pressured into signing a contract on the spot.

Final thoughts

I’ve fallen for the extended warranty pitch a few times before and I’m guilty of signing up for mortgage life insurance on my first mortgage term. These days I’m a lot more cautious and borderline skeptical of any sales pitch that comes my way. I can spot a rip-off or a scam a mile away.

Related: Why Do People Fall For Telemarketing Scams?

What other rip-offs should you watch out for?

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