Weekend Reading: Million Dollar Bet Edition

It’s over. Mercy rule in effect. The losing side took their ball and went home. At the end of 2007, investing legend Warren Buffett famously made a million dollar bet with hedge fund manager Ted Seides of Protégé Partners. Buffett wagered that a low-cost S&P 500 index fund would perform better than a group of Protégé’s hedge funds over the next 10 years.

Buffett’s index investment bet is so far ahead that Seides conceded the match, even though it doesn’t officially end until the end of the year. The group of hedge funds so far has managed to gain 2.2 percent a year since 2008, while the S&P 500 index fund posted gains in excess of 7 percent a year.

Buffett wins $1 million bet

“In conceding defeat, Seides said the high investor fees charged by hedge funds was a critical factor. Hedge funds tend to be a good deal for the people who run the funds, who pass on big bills to the investors.”

The $1 million will go to a Buffett charity, Girls Inc. of Omaha.

This Week’s Recap:

On Monday I wrote about five financial traps seniors fall into and how to avoid them.

Many thanks to Rob Carrick for featuring that post in his Carrick on Money newsletter on Friday.

On Wednesday Marie listed 10 things she’d consider buying used (plus five things she’d never buy used).

Weekend Reading:

While the debate over banning embedded commissions on mutual funds rages on with no end in sight, Ontario Securities Commission CEO Maureen Jensen says the status quo is not an option. The core issue, she says, is the conflict of interest where advisors may be incented to recommend products that maximize their own compensation over the interests of their clients.

Is diversification overrated? Not a chance, says long-time investment writer Jason Zweig.

Another investing legend – Jack Bogle – has a great piece of advice when it comes to investing:

“My rule — and it’s good only about 99% of the time, so I have to be careful here — when these crises come along, the best rule you can possible follow is not ‘Don’t stand there, do something,’ but ‘Don’t do something, stand there!’”

From good advice to the downright shameful. A Dominion Lending agent from Langley, BC, bizarrely claims that a second mortgage might fix your marriage and your money. Still shaking my head.

A good piece by Kate Smalley on the rise of home equity lines of credit in U.S. homes in the 1980s after Ronald Reagan made mortgage interest tax deductible:

“The change eroded the social norm that home equity was sacrosanct.” 

No surprise here. CBC Marketplace exposes how some car dealerships sell unnecessary service and push maintenance much sooner than the manufacturer recommends.

John Heinzl helps you decide.whether to invest in individual stocks or ETFs. Like most of these types of questions, the answer is, ‘it depends’.

Here’s another one: Can you afford that luxury thing? Des Odjick breaks down the decision.

Rob Carrick with the latest retirement obstacle: Even thirtysomethings are still living at home.

“Parents, themselves, may also be part of the story. What they see as neediness on the part of their adult children may actually be an example of financial helicopter parenting. For example, the answer to expensive houses may just be for your adult kids to rent or live in a condo or townhouse, not get a down payment from mom and dad.”

Retirement expert Fred Vettese has another suggestion to improve tax fairness. Convert the Public Service Pension Plan from a defined-benefit pension to a target-benefit plan.

Jason Heath answers what happens to a RRSP / LIRA / RRIF when you die.

Patrick Sojka from Rewards Canada explains why, despite all the negative press surrounding the Aeroplan program, he’s still invested in collecting Aeroplan rewards.

Finally, Million Dollar Journey blogger Frugal Trader lists his favourite three electric vehicles for 2017.

Have a great weekend, everyone!

10 Items To Consider Buying Used (Plus 5 Things I’d Never Buy Used)

Buying used items can be one of the biggest ways to save money. A report by Kijiji states that the average Canadian family of four saves about $1,150 each year buying second-hand items.

If you want to try your hand at golf, or need a bicycle, exercise equipment, or a TV stand, why not look to see if you can find them used for a fraction of the price of what you’d pay for new – saving tax as well.

Thrift shops, and garage/yard sales are great sources of savings, and buying used is now easier than ever with internet and classified websites like Facebook, Kijiji, Craigslist, eBay, Etsy and Castanets. With these websites, look for sellers in your area so there’s no need to pay for shipping. You can often get high quality used products for less than the mediocre new items made overseas for discount retailers.

Many used items are in like-new condition, or can easily be cleaned or refurbished. Of course, you must still use your due diligence and examine the product – or get a professional to check it over for you.

Often when you’re done with the items you can resell them, sometimes for more than you paid.

10 Items To Consider Buying Used (Plus 5 Things I'd Never Buy Used)

10 items to consider buying used

  1. Books. Good sources besides used book stores and online are thrift stores and library sales. Secondary students are often forced to spend hundreds of dollars on required textbooks. I went to a local used book store for school books, but textbook websites like the one at Amazon.ca might work out better. Resell them when your classes are done.
  2. CDs, DVDs and video games.
  3. Jewelry. The industry likes to claim that gold and silver and precious stones like diamonds increase in value, but really, they have a dismal resale value. I found this out when trying to sell my late mother-in-law’s (really nice) wedding ring set. Make sure you buy from a reputable dealer, though. Costume jewelry styles often go through cycles and can be picked up for next to nothing at thrift stores.
  4. Clothing and fashion accessories. Check thrift stores, consignment stores for name brands, and vintage stores for unique items, especially for clothing for special occasions. One of my neighbours needed a suit for her young son for an event and didn’t want to spend a bundle on something he would never wear again. For just a couple of dollars she bought one at Goodwill (it was brand new, the pants weren’t even hemmed). Children and especially infants grow out of their clothing so fast they’re hardly worn and usually in good condition, or may have never been worn. Maternity wear is only used for a few months.
  5. Exercise and sports equipment. Someone else’s failed exercise resolution can score you a great deal. You can also save if you or your children are trying out a new sport, or you need to buy gear annually (hockey and skiing come to mind).
  6. Musical instruments. If you’re a beginner, or you’re not sure if you (or you child) will stick with it, buying a used instrument is the way to go. Search pawn shops and music stores.
  7. Furniture and housewares. There are plenty of high quality items that can be purchased for very little. Even Ikea-type knock-down furniture can be useful, especially if you have pets and/or young kids who can be hard on furniture. And they’re great for university students. If it’s not exactly to your taste you can paint, refinish, or reupholster it.
  8. Tools and garden supplies. Yard and garage sales are great for this. (My husband was in tears when all his tools went for next to nothing when we were downsizing.) A hammer is a hammer, right? Tools can be easily cleaned with some CLR, just make sure handles are secure.
  9. Cars. Save thousands of dollars in depreciation. According to Consumer Reports, a 3-year-old used car is the sweet spot. Ditto for recreational vehicles – boats, RVs, motorcycles.
  10. Home. There’s nothing like a brand-new residence where you have chosen all the fixtures yourself to reflect your taste. But, a pre-owned home is more likely to have a finished basement, landscaping, and upgrades. It will be in a developed community with shopping, mail delivery and, hopefully, schools close by.

5 things I would never buy used

  1. Children’s cribs and car seats. Back when my children were small, these were common to pass along, but now there are so many safety regulations and recalls it’s best to be safe and not put your children at risk.
  2. Bicycle, hockey, and ski helmets. Damage is not always visible.
  3. Mattresses. Just the thought of bodily fluids soaked into the mattress grosses me out. And, even really good mattresses don’t last for more than 10 years.
  4. Electronics. Laptops, plasma TVs, digital and video cameras are often expensive to repair. I would rather buy these from a dealer who provides warranties and tech support for their refurbished electronics.
  5. Swimsuits and undergarments. These are worn too close to someone else’s body for me to even consider. All I can say is Uggh!

Final thoughts

To be honest, I usually buy new rather than used. But, I am an “under-buyer”. I rarely buy anything unless I absolutely need it, so I don’t spend much anyway. In fact, I still own – and use – some items we received as wedding presents forty plus years ago. I dislike shopping, and scouring websites and thrift stores for great buys just seems tedious to me.

Related: Flipp vs. Checkout 51 – A Grocery App Comparison

But, that’s me. You can save hundreds – if not thousands – of dollars buying used, creating a budget surplus that can be used for saving, or indulging in some worthwhile purchase. Many people look at buying used as a matter of course.

Are you one of them?

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