I write a lot about seeking financial independence rather than early retirement. That’s intentional. I don’t necessarily want to retire – not anytime soon – but what fires me up is the idea of working on my own terms.

My goal is to be financially free by age 45. That means I’d be free to ditch my day job and pursue my passion of helping people with their finances (through educational writing, financial planning, and hosting seminars or workshops). I wouldn’t be retired, since I’d still derive an income from these activities.

Many FIRE bloggers have the same idea – work hard, save a large percentage of their salary, and eventually ditch the cubicle life. The dream is to retire early, but more often than not their “work” turns into blogging, book writing, and speaking about early retirement.

Ironically, selling the dream of early retirement tends to be another full time pursuit. Just look at one of the original FIRE personalities, Canada’s self-professed youngest retiree Derek Foster. He’s written six books and runs a website where he sells his “portfolio picks”. He says “retired”, I say “quit his job to become a writer.”

To be clear, there’s nothing wrong with pursuing financial independence or wanting to retire early. Any movement that helps people spend less, save more, and strive for a happier life is to be celebrated.

The safe withdrawal math is easily ignored when the income needed to live is actually earned through blog revenue. The dirty secret of the FIRE blogger movement is they dont have to touch their investments while they’re out there selling the dream.

— Boomer and Echo (@BoomerandEcho) August 4, 2019

My caution to regular FIRE seeking folks is that if you intend to retire full-stop in your 30s or 40s you’ll need to have a massive amount of savings, an extremely conservative withdrawal rate, a commitment to lifelong frugality, and a plan ‘b’, ‘c’, and ‘d’ for when life throws its eventual curveballs.

Unlike your favourite FIRE blogger, you won’t have the luxury of supplementing your cash-flow with income earned online selling the dream.

I’m still striving for the FIRE blogger dream of quitting my job to blog part-time and pursue other activities. But when I do, I’ll call a spade a spade and not declare myself retired. How does FIE sound? Financially Independent Entrepreneur.

This Week’s Recap:

I managed just one post here this week, with a look at why actual investor returns are making GICs look good.

Over on Rewards Cards Canada I compared my accommodation experiences with Airbnb vs. Hotels.

And on Young & Thrifty I wrote about finding the best online mortgage lenders.

On another note, this blog is officially nine years old today!

Promo of the Week:

Speaking of Airbnb, the company has an awesome referral program that’s worth checking out. When you sign up for Airbnb with a referral link, you’ll get up to $62 off your first trip. How it works is you’ll get $45 off your home booking, and then another $17 to use towards an Airbnb experience worth $63 or more. An “experience” is an activity hosted be a local expert.

We’ve been using Airbnb since 2013. We love that we can get an entire place to ourselves for (typically) less than the cost of a hotel room.

Since we travel with kids, we often prefer to upgrade to a suite or adjoining rooms at a hotel – which can be costly. With an Airbnb, everyone gets their own bedroom, plus a living room, kitchen, and often more than one bathroom. For our upcoming trip to Italy, we rented an apartment in downtown Rome for $180/night, compared to the $350/night (starting at) rates at most decent hotel chains.

If you haven’t used Airbnb yet I highly recommend signing up and giving it a try for your next holiday or weekend away.

Weekend Reading:

My Own Advisor Mark Seed is on the same page as me when it comes to FIRE. He prefers, Financial Independence Work On Own Terms.

Martin Dasko at Studenomics started his own Airbnb “coffee crawl” experience in Toronto. Martin’s endeavours prove just how easy it is to make money online.

U.S. banking giant Chase made a brief appearance in Canada, handling the Sears portfolio of credit cards and introducing the first Amazon.ca Rewards Visa. Chase shut down its Canadian operations in 2017, but cardholders with outstanding balances continued to make payments. That is, until this week when Chase informed its remaining Canadian customers that it will wipe out any outstanding card debt.

Dale Roberts reports that Vanguard’s asset allocation ETFs have already gathered $1 billion in assets.

PWL Capital’s Justin Bender looks into the expected returns for the Vanguard asset allocation ETFs:

“In the face of eternal uncertainty about what the future has in store, the wise investor builds an efficient, globally diversified portfolio that reflects their personal long-term goals and reasonable expectations about what markets have to offer. Then they sit tight for the ride.”

Million Dollar Journey blogger Frugal Trader asks, can you have too much RRSP?

Finally, Ben Carlson at A Wealth of Common Sense says that victim blaming (the idea that your money woes are all self-inflicted) is the biggest lie in personal finance.

Have a great weekend, everyone!

The research firm DALBAR has been studying the behaviour of mutual fund investors for 25 years. Each year the firm reports how poorly investors fared relative to their benchmark index over time. What the data repeatedly shows is a ‘behaviour gap‘ that leads to significant investor underperformance.

It suggests that investors lack the patience to stay invested in any one fund for longer than four years. Furthermore, investors make ill-timed choices, invariably chasing last year’s winners while dumping what they perceive to be underperforming funds.

Why are investment returns so bad?

The chart below shows the annualized returns for equity mutual fund investors compared to the S&P 500 over 1, 10, and 30 year periods.

Now, I’m the first to rail against the mutual fund industry for charging high fees and failing to protect investors from unscrupulous advisors. Those practices do lead to poorer returns and do nothing to help investors achieve better outcomes. But studies like this show that investors are mostly their own worst enemy.

I also thought the panacea for investors was indexing. Just dump your high-fee mutual funds and switch to a low fee, globally diversified portfolio of index funds or ETFs. Make regular contributions, but otherwise leave it alone for your entire investing horizon. Problem solved.

But clearly that’s not working, either. Investors, even passive ones, are constantly looking to fine-tune their portfolio and tinker with what should be a good-enough solution.

We have access to more information than ever before, including the ability to trade on that information. What we really need is the ability to lock up our long-term investments in a way that prevents us from doing something we’ll regret.

Intuitively, DALBAR suggested that the much maligned variable rate annuity (a high-fee insurance product sold in the U.S.) acted in such a way that investors in variable annuities outperformed mutual fund investors, despite the higher fees.

An all GIC solution?

DALBAR’s odd solution reminded me of an article I wrote more than six years ago about using an all GIC portfolio. This controversial savings strategy was popularized by accountant and author David Trahair.

He suggested that most Canadians were better off forgoing any investing until their mortgage was paid off. Once mortgage-free, Trahair says to ramp up your savings rate but avoid the market and stick to ultra-safe GICs.

The downside of an all GIC approach is inflation – if you’re just treading water at 2-3 percent then you’re going to need to save a lot more money than if you were potentially earning 6-8 percent in the market.

The idea seems counterintuitive until you look at the data. Actual investor returns underperform so badly that some of us would be better off avoiding market and behaviour risk altogether and opting for the guaranteed return.

It’s a strange concept, especially for readers of this blog. After all, my own portfolio is made up of 100 percent equities and I preach staying the course with a long-term index investing strategy.

But is it that strange for the vast majority of investors? You know, the ones making these egregious behavioural errors and constantly shooting themselves in the foot? How many are actually making themselves poorer simply by trying to invest?

A behavioural problem

I often write about credit card rewards and the first rule of earning rewards is that you pay off your balance on time and in full, without fail. It’s such obvious advice that it often goes unsaid. It’s foolish to try to earn 2 percent back on your spending if you’re paying 19 percent interest on an unpaid balance.

Yet Canadians carry an average credit card balance of $4,154. We’re obviously not getting the message when it comes to controlling our behaviour.

Investing seems to be no different. We all know to buy low and sell high. Yet the studies show we’re doing the opposite. We all know to ignore the pundits and headlines – it’s the long-term that matters most. But, again, we can’t help checking our portfolio balance during a market meltdown. Worse, we make changes to a perfectly sensible portfolio based on useless economic predictions that rarely come to pass.

Final thoughts

So, what to do when investments returns are so bad they make GIC returns look good? Switch to an all GIC portfolio? Nah. Not for intelligent blog readers like yourselves.

Reports like this are a good reminder to make sure you have an investment policy statement – the ten commandments, if you will, that guide your future investment behaviour. A few, thou shall nots, should suffice.

As perverted as it sounds, the mutual fund industry will use this study to preach the benefits of deferred sales charge (DSC) mutual funds that lock-in investors for a period of 5-7 years with high redemption penalties. I don’t buy it.

My takeaway from the DALBAR report is that advisors need to focus less on selling investments and spend more time on financial planning. Investors with an appropriate portfolio don’t need to hear about the latest hot sector or region in which to invest. The very idea is counter to a long-term, globally diversified approach.

Accept market returns, minus a small fee, and get to work on improving other aspects of your finances, such as retirement planning, estate planning, assessing your insurance needs, and increasing your savings rate.

You’ll improve your investment returns simply by leaving your portfolio alone.

“Shipping and delivery comes to $160? Forget it!” That was my reaction to the idea of placing an online order for Ikea furniture to be delivered to our home in Lethbridge. Besides the high price tag, the items would also take weeks to arrive. I had to find another option. You see, we don’t have a truck, and the Billy bookshelves we wanted to order for our daughters’ rooms were too long to fit in our Sante Fe.

I thought I had a better idea. Rent a truck for the day, drive up to Calgary, pick up the bookshelves from Ikea (along with some other items while we’re at it), and come home to assemble the goods. The truck rental cost $94.95 and included unlimited miles. With gas I figured it would cost $145 altogether. Not much of a money saver, but we’d get the items faster and have a chance to look around the store.

Big mistake! I showed up at the rental car office and was told they didn’t have a truck for me. After waiting around for 30 minutes they managed to find a different truck – a comically large Dodge Ram 2500.

I did the walk-through, signed the paperwork (waiving the collision and damage coverage), and grabbed the keys. Vehicles were jam-packed in their parking lot, and the way the sales associate had parked the monstrosity I had to do an Austin Powers three-point turn to manoeuvre out of the lot.

I managed to get out of the lot and onto the road, but 10 minutes later the rental car office called and said I had damaged a vehicle in their lot. Apparently the back end of this tank had rubbed against the front bumper of a Ford Taurus, leaving behind some paint and causing slight damage to the bumper. $#@!

I checked the Dodge Ram for any signs of damage. Not a scratch. So we continued on with our trip and I would deal with the car damage and an insurance claim when I returned the truck the next morning.

Then we got to Ikea, which is busy enough on a Saturday, let alone the Saturday of a long weekend. Insane. Our plan was to drop the kids off at their play area, but the sheriff at the entrance refused to let my oldest daughter in because her hairline barely grazed the “you’re too tall for this place” measurement. Not wanting to leave her little sister alone, we lugged the kids around the store with us for two hours.

The next bit of trouble came after the check-out, when we discovered two items we grabbed from a $9.99 bin got charged at $34.99. We spent another 45 minutes standing at the returns counter while a team of disempowered associates stared at each other in disbelief that the items were even in the $9.99 bin in the first place.

When I finally got the price refunded we headed back to Lethbridge to assemble our furniture and await the next steps from the rental car fiasco.

I called American Express, who put me through to their insurance partner. After explaining the situation I discovered that the card’s rental car coverage excludes trucks and vans (!), and does not include damage to other property. So, essentially useless.

Now I need to open a claim with my own insurance provider to cover the damage to the Taurus. The estimated damage is unknown at this point, but I’m bracing for the worst and having to pay my deductible.

So much for a money saving trip to Ikea! Next time I’ll pay for shipping…

This Week’s Recap:

Here on Boomer & Echo this week I wrote about why we should stop asking $3 questions and start asking $30,000 questions.

Over on Rewards Cards Canada I explained how to level up your credit card rewards game with a few strategic new sign-ups each year.

In my Smart Money column at the Toronto Star I shared why TFSAs are an ideal way to save for the long term.

Finally, on the Young & Thrifty blog I looked at ESG, SRI, and impact investing and how they differ.

Promo of the Week:

Since I’ll be doing more online shopping in the future I thought I’d highlight two cash back websites that help me save on my online purchases. Whether it’s Amazon, Lululemon, or eBay, we always first check the cash back rebate available through one of these portals.

Become a member of Great Canadian Rebates and take advantage of online coupons and earn cash back rewards. GCR features over 400 merchants to satisfy all your shopping needs.

Ebates.ca pays you cash back every time you shop online, and it’s FREE to join. Sign up now and when you spend $25 you’ll earn a $5 cash back bonus.

Weekend Reading:

First, a huge shout-out to Ellen Roseman who wrote her final column for the Toronto Star last week. Ellen has been advocating for consumers for the past 20 years and her work has made a big impact on this financial blogger. Thanks Ellen, for standing up for consumer rights and holding companies accountable for their service.

Speaking of holding companies accountable, Capital One is the latest “victim” of data hacking with a breach that compromised more than 6 million people in Canada. Unfortunately the real victims will likely get several years of free credit monitoring and not much else for their loss of privacy.

A hedge fund manager pleaded guilty to securities fraud, lost his freedom, and found religion. He also found federal prison more forgiving than Connecticut high society.

This post in a site called The Outline asks, is it time to get rid of the lottery?

Michael James shares a painful lesson in cutting your losses short.

Stop me if you’ve heard this one before. New reports say Canada is set for a big drop in home prices:

“Canada is highly susceptible to a housing price correction in the near, but unknown future. This is due to the high price-income ratio and abnormal price-rent ratios having been a hard reality for some time now.”

The antidote to endless, thoughtless consumption? The life-changing magic of making do.

In his latest Common Sense Investing video, PWL Capital’s Ben Felix explains whether investing in the S&P 500 is a good idea:

And here’s Dan Bortolotti answering a reader question about whether Millennial couch potatoes should consider an all-equity portfolio.

Behavioural finance professor Lisa Kramer writes that financial advisors are just as susceptible to behavioural biases as investors.

A guest post on the Cut the Crap Investing blog looks at the three most common mistakes Canadian investors make.

Should you cut stocks, or add to them? Morningstar looks at this key dilemma for your retirement plan.

How to place buy and sell orders for your ETFs? Dale Roberts has you covered.

Just how different are Millennials, Gen Xers, and Baby Boomers at work? Despite our typical stereotypes, this Harvard Business Review article says the difference are smaller than you think.

Finally, Refinery29 brings its popular and often controversial Money Diaries to Canada, where its first profile features a week in Toronto on a $40,000 salary.

Enjoy what’s left of the long weekend, everyone!