When I got an activity tracker several years ago I was horrified to learn just how sedentary my lifestyle had become. I’d drive to work, park my butt at a desk for eight hours, drive home, park my butt on the couch for a few more hours, and go to bed. It was mindless laziness.
I fit right in with the average North American, who walks an average of 3,000 to 4,000 steps per day.
Steps to improve my steps
My activity tracker suggested a goal of 10,000 steps per day. I was motivated by the step counter and helpful nudges to get myself moving. I started parking in a free lot about 1 kilometre away from work, adding an extra 3,000 steps to my day (and saving $50 per month in parking fees!).
My new walking routine got me up to an average of 7,000 steps per day, but still not close to my goal. Then, following my wife’s lead, I got into running three to four times per week. The extra activity helped me reach my goal – not every day, but on average throughout the week. Funny enough, I still find motivation from my activity tracker as it nudges me to reach and surpass my daily move goals.
The hyper-attention and daily nudges helped me get my butt in gear and become a healthier person.
Curbing my Screen Time
Similarly, Apple sends iPhone users a new weekly report called Screen Time that shows how much time you spend on your phone. You’ll see which apps you use most often, how many times per day you pick up your phone, how many notifications you receive per day and from which application.
The report can be an eye opener if you’re into mindless scrolling through social networking sites like Facebook, Twitter, and Instagram. Twitter is the biggest attention sucker for me. Hey, it’s where I get my news!
I also get a lot of notifications and can conclude from the report that I receive about 30-40 emails per day from work. Not cool. Because of those notifications I tend to pick up my phone 65-70 times per day to either check my email, respond to a text, or check Twitter.
The week the Screen Time report first came out I spent six hours per day on my phone. I’ve got that down to less than four hours per day and try to design rules around curbing my screen time. That means turning off unnecessary notifications and keeping my phone in another room when I go to bed.
Again, these nudges had a positive effect on drawing my attention to a negative behaviour and making a conscious effort to curb it.
Negative Stock Market Attention
Back when I was a stock-picker I obsessively checked my portfolio and read every market headline. I scoured the internet for news about my individual stock holdings and searched for analyst opinions (only the ones that confirmed my own opinion, of course).
But just like in the previous two examples, all this attention and information made me want to act. My oil stocks were getting killed and I wanted to get out. Sobeys made a mess of its Safeway acquisition and I wanted to get out. The general market would fall by 5-10 percent and I felt like I needed to do something – like contribute more money than I had planned, or hold off on adding new money until things “settled down.”
Nudges worked against me. I’d get email alerts when Fortis or Great West Life missed their earnings targets. What should I do with this information?
The Globe and Mail app would send helpful push notifications like, “markets plunge on European/China/Russia fears,” or, “Dow posts worst day ever.” A smart investor is supposed to act on this, right? Shift their portfolio to safer assets? Buy gold?!?
Don’t just do something, stand there!
I switched to indexing four years ago with a simple two-ETF portfolio of global and domestic stocks. Now that I own thousands of companies I no longer pay attention to the fortunes of one or two. I find myself paying less attention to market headlines in general.
I make my monthly contributions automatic and only check my portfolio when the cash balance is large enough to make a trade. I figured instead of tinkering with my portfolio daily and reacting to news I’d be better off taking a two-decade nap and letting compounding do its thing.
Related: How and when to rebalance your portfolio
Your long term investing plan has no time for daily market noise. Yes, we may be entering a bear market. Or it’s just a run-of-the-mill market correction. Nobody knows for sure.
We do know that yesterday the Dow and S&P 500 had historic gains. If you happened to act on your fears and exit the market, thinking it was on its way to a 40-50 percent meltdown, you missed out on that important rally. In fact, many of the largest one-day gains occur during down markets.
Final thoughts
Technology can help bring attention to a negative behaviour and turn it into a positive outcome. But those nudges and alerts can also work against you.
When it comes to investing often the best course of action is to do nothing and stick to your plan. Daily gyrations smooth out over a period of several months, and over several years the trajectory of the stock market tends to point up and to the right.
Many so-called experts question the value of robo-advisors during a downturn such as this, saying that investors would be better off with a human advisor. But from what I’ve heard during tumultuous times, the robos send helpful nudges via text and email explaining what is happening and why fluctuations in the market are part of a normal investing experience.
For investors that can be calming reassurance in the face of negative headlines screaming for your attention.
What’s the difference between a run of the mill stock market correction and a blood in the streets bear market? By definition a market correction is a loss of around 10 percent over a short period of about two months or less. A bear market is a loss of 20 percent or more and typically lasts longer than three months.
So where does that put us today? It’s hard to tell. Using my globally diversified investment portfolio (VCN and VXC) as a benchmark it is down 12 percent since September 24. That puts this downturn squarely in market correction territory but the continued losses entering a third month has us trending towards a bear market.
All I know is these are times when investors tend to panic and abandon long-term plans for short-term “safe-havens”. What that does, unfortunately, is lock in losses today and ensure these investors will miss out when stocks inevitably rise again.
You are only allowed to be concerned about the markets right now if you are:
1) Retired
2) Spending from your portfolio
3) Have a financial plan that assumes zero bear markets during your lifetime.— James Osborne, CFP® (@BasonAsset) December 21, 2018
Part of the problem with our stock market expectations is we think in terms of straight line growth. I’m guilty of this myself. I have a financial freedom plan that includes expected annual portfolio returns of 8 percent. Well, barring a major Santa Claus rally next week, my portfolio will close the year down 7 percent.
While this is a problem for me when it comes to hitting my net worth target this year, it should not impact any of my long-term planning. In fact, a market correction or bear market lasting through the first quarter of 2019 will give me a chance to make major RRSP and TFSA contributions at a discount – which will only help my long-term goals.
As investing blogger Nick Maggiulli demonstrates here, it’s all about stock market expectations versus reality. If you’re planning a land journey across Antarctica, you’d better account for some unexpected variables along the way.
For investors, sure it’s reasonable to expect 8 percent growth annually over an investor’s lifetime. But the annual variations are going to be roller-coaster like in nature and you’d better be prepared to handle that volatility.
This Week’s Recap:
On Monday I wrote about budgeting basics for your financial plan, perfect for those just starting out to the soon-to-be or newly retired.
On Thursday I shared 11 worthwhile fees to pay.
Over on the CoPower blog I was asked to explain the inverted yield curve and what it means for investors. Here’s a snippet of advice:
“Those close to or in retirement may want to rethink their asset allocation and shift to safer investments with the portion of their portfolio they’ll need to access in the immediate future for retirement income,” said Robb. “But investors with a long time horizon should probably ignore any speculation around economic trends and just stick with their regular contributions and asset allocation,” he continued.
Have you joined my growing list of 10,000+ email subscribers? I’ll share new posts along with special offers from time-to-time.
You can also follow Boomer & Echo on Facebook, Twitter, and Instagram. Flipboard is where I save all of the best personal finance and investing articles that I read each week and curate the content for my weekend reading posts. You can follow me there, too.
Website traffic doubled in 2018 to more than two million page views – which is pretty amazing and humbling. Many thanks to all of you for reading, following, and sharing my posts this year. It means a lot.
Weekend Reading:
Only Morgan Housel could use a story about a guy who won the Nobel Prize for infecting syphilis patients with malaria to explain why it’s okay to make irrational investment decisions.
Housel also shares some investing ideas that changed his life. My favourite:
“Keeping money is harder than making money, because you can get rich by luck, but staying rich is almost always due to a series of good, hard decisions.”
No one is happy with the amount of money they have. Josh Brown shares three reasons why you’re never satisfied.
A great post by Mark Seed at My Own Advisor, who shares 10 ways to master your money in 2019.
Lisa Kramer, a professor of finance at the University of Toronto, explains why robo-advisors are shaking up the Canadian investment landscape – in a good way.
Ben Felix wants to talk to you about owning individual stocks, and no, he’s not going to tell you how to do it successfully. This is not that kind of channel:
Jonathan Chevreau explains what retirees need to know if they plan to defer Old Age Security benefits until 70.
Here’s Jason Heath on why retirement planning needs to be a major political issue in 2019 and beyond.
The Fat Tailed and Happy blog explains (with charts!) why $1 million isn’t enough – a direct shot at the FIRE crowd who assumes anyone can retire on $1 million even as early as age 35.
Meet XGRO and XBAL, iShares newly formed competitors to Vanguard’s all-in-one balanced ETFs, VGRO and VBAL. The competition is heating up in this space, driving down costs and making investing more simple for Canadian investors. Great news!
Dale Roberts shares a detailed review of Retirement Income for Life, the excellent retirement handbook by Fred Vettese.
Finally, for the holidays, Tim Cestnick shares five financial lessons for 2019 from Christmas movie characters.
Merry Christmas, everyone! Wishing you all the best this holiday season!
There are some fees we just love to hate and so we try to avoid them at all costs. Whether it’s bank fees, credit card annual fees, or late fees at the library, the idea of voluntarily paying a fee is anathema to anyone with a frugal mind.
But some fees can be worthwhile if they can save you time and money in the end.
What makes a fee worth paying? To start, we want to get good value for our money, but that’s just marketing talk if the value can’t be measured in dollars saved. We might pay more for peace of mind, but it’s hard to put a price tag on how well we sleep at night.
Convenience comes into play – if you value your time then you’ll pay a little more to save it. There are also tangible benefits to getting impartial, unbiased advice before you make a major purchase or life decision, but that advice won’t come free.
Worthwhile Fees to Pay
When it comes to worthwhile fees, look no further than the legions of loyal shoppers who pay for the privilege to shop at Costco. More than 10 million Canadians hand over $60 per year to shop at the popular wholesale club and take advantage of bulk pricing and several products unique to the store. Is it worth the money? The company says nearly 90 percent of its members renew each year.
Related: Is the Costco Executive Membership Worth It?
Another prime example comes from Amazon. For just $79 annually, Amazon Prime members get free two-day shipping, plus access to Prime Video and Prime Music. Prime members also get exclusive discounts, and there’s a 30-day free trial to test it out for yourself.
Annual fee credit cards can be worth the money if you earn enough rewards to offset the fees and then some. A comparison website like CreditCardGenius.ca shows that when your monthly credit card spend totals $2,000, including $600 on groceries and $200 on gas, you’ll earn up to $250 more cash back rewards using the Scotia Momentum Visa Infinite than you would using the top no-fee cash back credit card, and that’s even after subtracting the Scotia card’s $99 annual fee.
What about peace of mind? More than six million people carry a CAA membership and for a $70 annual fee they can get immediate roadside assistance anywhere in North America.
Travel insurance is also a must if you visit the United States or abroad. You can get emergency medical coverage for as little as $25, which is a drop in the bucket compared to a hospital visit while you’re on vacation.
Frequent travellers to the U.S. might appreciate a way to expedite lengthy airport line-ups. A NEXUS pass might just be the ticket. The program allows members to conveniently bypass pre-border security screening at major airports by going through a designated security line. The NEXUS fee is just $50, and is valid for five years.
Sticker shock might be the appropriate term when you first see the fees charged for professional services, such as for tax advice, drafting a will, or creating a financial plan. These broader services can cost upwards of $1,000 or more to obtain, but you’ll be in good hands with the right professional help.
Paying upfront for financial advice seems odd at first blush, but more and more Canadians are turning to fee-only planners to get unbiased advice, not just about their investments but about their overall financial health. You might pay $150 to $250 per hour, but you’ll get a comprehensive and unbiased financial plan without the pushy product sales.
It can also make sense to pay a fee for unbiased advice before you buy an expensive product. A CARFAX report, for example, gives you detailed information about a vehicles history that can help you when deciding to buy a used car. One report costs $39.95, but the information it provides could save you from buying a lemon.
Consumer Reports is a non-profit organization and another good source of information for saving money and protecting consumers. A subscription to the magazine costs just $30 per year, and for $55 per year you get full access to the website, www.consumerreports.org.
Streaming music through apps like Spotify, Apple Music, or Google Play will cost $9.99 per month. The upside is an exhaustive catalogue of music to be enjoyed wherever you are, from any of your devices.
Finally, a list of worthwhile fees wouldn’t be complete without a shout out to Netflix. More than 13.3 million Canadians subscribed to Netflix in 2018. Its standard plan now costs $13.99 per month, but by investing heavily in content, including originals such as The Crown and Stranger Things, Netflix keeps its members coming back often to binge on the next new series.
Final thoughts
Some fees just can’t be avoided, but that doesn’t mean every fee is designed to rip you off. You can feel good about paying fees when they provide enough benefit to justify the cost.
Whether it saves you time, gives you peace of mind, or actually saves you money in the long run – in some cases you’re better off handing over the money.