Weekend Reading: Distracted Investors Edition

By Robb Engen | February 20, 2021 |
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Weekend Reading: Distracted Investors Edition

It’s easy for investors to get distracted away from their primary goals these days. Bitcoin is already up 94% year-to-date. The ARK Innovation ETF (NYSE: ARKK) has posted returns 19.45% so far this year. Meme-stock darling GameStop (NYSE: GME) is still up 133.68% on the year even after its historic rise and fall. Clean energy stocks and ETFs, while stumbling out of the gate in 2021, have soared year-over-year, including the Invesco Solar ETF (NYSE: TAN), which has eye-popping 1-year returns of 171.38%.

ETF providers are tripping over themselves to capitalize on the cryptocurrency, clean energy, and technology frenzy. Earlier this year, BMO launched a suite of ‘disruptive innovation’ ETFs to try to mimic ARK’s success. BMO, Horizons, and iShares have introduced more clean energy products to their line-ups. Finally, this week saw the emergence of Canada’s first (and second) Bitcoin ETFs from Purpose and Evolve.

It’s like the explosion of mutual funds all over again. Shiny new objects everywhere!

So, why not throw some play money into these sectors, as many of my readers and clients have done? 

Emotional robot investors like me aren’t swayed by shiny things. I’m fully invested in Vanguard’s VEQT across all accounts. Over the past year I’ve posted ho-hum returns of 18.31% in my TFSA and 14.32% in my RRSP.

Sure, those returns pale in comparison to some of these exciting new products and asset classes. But I’m not investing for the best 1-year returns. My low cost, broadly diversified portfolio is designed to give me the most reliable outcome over the long-term.

Besides, we know how this ends. A stock, ETF, or sector outperforms by a wide margin over a short period of time. Assets pile in as investors chase past performance. The stock, ETF, or sector then fails to continue the strong performance and reverts back to the mean. Rinse and repeat forever.

The last investors to get in typically get burned. We’ve seen this with oil & gas stocks, with cannabis stocks, with dot com stocks, with bio-tech and pharma stocks. It’s the same story.

Forget the notion of this time it’s different due to a technological revolution or paradigm shift. Railway mania was followed by a railway bust. The roaring 20s ended in the Great Depression. The infrastructure boom of the 1980s was followed by several busts. And the surge of IPOs in the internet bubble ended in a crash. This time isn’t different:

I don’t personally allocate ‘play money’ to my investments, but I understand why investors might want to. If you can’t resist the urge to play the markets, do yourself a favour and design some rules around this behaviour. Rules like allocating no more than 5% of your portfolio to play money. Have a “sell” target price to deal with your winners and losers so you know when to take profits and when to cut your losses.

I know it’s an exciting time to invest when seemingly everything is going up, including these shiny new products. You feel like an idiot holding a boring portfolio of index funds while investing newbies are striking it rich.

But ask yourself, do you want to be the greater fool who is willing to pay the highest price before a crash? We don’t know how long it takes for a bubble to burst, but we do know that it will burst eventually. Growth stocks fizzle out when earnings disappoint. Star fund managers fade when their assets become too large to maintain their advantage.

As for Bitcoin, well that story is still being written but the current price is more than 3 times higher than its last peak in 2017. That ended with a rapid 80% decline that took three years to recover. Maybe best to catch the next wave…

This Week’s Recap:

No new posts from me this week but I did want to share the winner of the Retirement Heaven or Hell book giveaway and the TurboTax free product code giveaway.

Congratulations to Dean, who commented on February 13th at 1:37 p.m. You’ve won a copy of Retirement Heaven or Hell.

And, congratulations to the following four readers who commented on my TurboTax Full Service Self Employed Review. You’ve won a free product code to try any of the three TurboTax Self-Employed products:

  • Braden Bulmer
  • Louie M
  • Bruce
  • Ashley

Thanks to everyone who entered to win these giveaways!

Weekend Reading:

Our friends at Credit Card Genius share the best instant approval credit cards in Canada – from no credit to excellent credit.

Here’s a great piece from Andrew Hallam about why he doesn’t include play money in his portfolio:

“If you want to play with money, spend it. Take a vacation. Buy something for a friend. Enjoy an activity you’ll never forget. That’s where “play money” should go.”

A Wealth of Common Sense blogger Ben Carlson shared 12 things he reminds himself of when markets go crazy.

Who really traded GameStop stock? And what happened to them? Wealthsimple digs into their own client data to find out how traders behaved.

Morningstar’s Ruth Saldanha with a great reminder to stay away from Group RESPs. I couldn’t agree more.

Most robo advisor platforms offer socially responsible investing options. The Corporate Knights blog looks at how green are your “responsible” robo advisors?

Are you sitting on a pile of travel rewards points? I know I am. Travel expert Barry Choi explains why cashing in your travel points now may not be the best deal.

I loved this post from Jesse Cramer of The Best Interest blog. He looks at something called bimodal spending, which asks you to say either “hell yes!” or “hell no!” to major expenses.

Speaking of spending, Michael James on Money looks at which accounts you should spend from first in retirement. His approach closely resembles what I recommend for my clients. Start with your non-registered money, but also spread out your RRSP withdrawals over a longer period of time (rather than waiting until age 72). TFSAs are last in line, and hopefully you’re still able to contribute to your TFSA to build up your tax free assets.

Here’s Ben Carlson again with the biggest difference between now and the dot com bubble.

And, here’s Andrew Hallam again on how wildly successful investments can also become a curse.

Finally, a spirited debate on advisor fees and whether a 1% assets-under-management fee is overcharging investors versus an hourly or pay-as-you-go fee:

The discussion came out of this new research from Michael Kitces on financial advisor fee trends.

Have a great weekend, everyone!

Weekend Reading: Retirement Heaven or Hell Edition

By Robb Engen | February 13, 2021 |
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Weekend Reading: Retirement Heaven or Hell Edition

Retirement isn’t just about the numbers (have I saved enough, how much can I spend). It’s a new chapter in your life that can last 30 years or more. You need to consider what you’re retiring to, not just what you’re retiring from. That’s exactly what author Mike Drak explores in his latest book, Retirement Heaven or Hell.

Mr. Drak was a self-proclaimed workaholic, winning sales contests and focused on his decades-long career in banking. Then he got packaged out and forced into early retirement. Mr. Drak discusses how he was on the path to retirement hell – unhealthy, overweight, and missing the purpose that drove him throughout his entire career.

Retirement Heaven or Hell draws on the author’s previous book – Victory Lap Retirement – that he co-authored with Jonathan Chevreau. The Victory Lap is a re-birth of sorts. Rather than a full-stop retirement, it’s about finding a new purpose or passion to fuel the next stage of your life. 

Mr. Drak found his Victory Lap in writing two books and a blog, plus holding retirement seminars to help new retirees unlock their own passion.

His new book identifies nine principles for designing your ideal post-career lifestyle:

  1. Nurture strong relationships
  2. Foster good health
  3. Achieve financial independence
  4. Reignite your sense of adventure
  5. Tap into your spirituality
  6. Find your tribes
  7. Make the most of your time
  8. Adopt the right attitude
  9. Discover your purpose

Throughout the book, Mr. Drak discusses retirement trends and research, shares his own experience transitioning from Retirement Hell, and offers some relevant lessons from the current pandemic.

The end of each chapter asks thoughtful questions for self-reflection, and readers will get the most out of this book if they play along and answer them.

My favourite part of the book was Chapter 17 – Retirement Lifestyle Design: Creating a Good Ending to Your Movie. This is where you really define who you are, what you want to do, and create meaningful goals for your retirement. The author emphasizes creating retirement goals, rather than retirement simply being “the goal”. Define your purpose.

There was one quote from the book that resonated with me:

“The three components of happiness are something to do, someone to love, and something to look forward to.” – Gordon Livingston

Retirement can be challenging for those who haven’t given much thought to how they plan to spend the next chapter of their lives. Spouses aren’t on the same page. Career-driven individuals lose their sense of purpose. Prolonged leisure time gets boring.

We need a book like Retirement Heaven or Hell to highlight these challenges and force us to think about how we want to spend our retirement years. That could mean becoming a ‘Retirement Rebel’ who plans to travel the world, climb mountains, run marathons, start a business, and never stop working. But it could also mean a more relaxing retirement surrounded by friends and family.

How do you plan to spend your retirement years? Are you and your partner on the same page? Leave a comment below for a chance to win a free copy of Retirement Heaven or Hell.

This Week’s Recap:

Check out this short interview I did on the Moolala podcast with host Bruce Sellery.

Last Friday I looked at your human capital versus your financial capital.

On Sunday I shared the beginner’s guide to RRSPs.

On Tuesday I reviewed the TurboTax Full Service Self-Employed software.

And on Thursday I featured Eirene Cremations, a new online funeral arrangement service.

A reminder to join our private Facebook group – Personal Finance Canada – where close to 1,000 members are having daily discussions about everything from saving, investing, and retirement planning. Get your burning questions answered by industry experts.

Promo of the Week:

CDIC is giving away $10,000 in prizes in this ‘Earn and Learn’ contest. My friend Barry Choi shared this with me and if you enter the code “BarryChoi” you’ll get an additional five entries.

This daily contest runs until March 22, 2021 and is offering 10 cash prizes ranging between $100 and $5,000 each.

Make sure to click ‘Login’ and then register an account before you start playing.

Weekend Reading:

Our friends at Credit Card Genius shared the best credit card offers, sign-up bonuses, and deals for February.

Global News reporter Erica Alini says Canadians opened 2.3 million DIY investing accounts in 2020.

On CBC Go Public, a class-action lawsuit against TD Bank alleges employees were pressured to drive up profits by selling customers services and products that were unsuitable or unnecessary.

With the recent rise and adoption of Bitcoin, central bankers around the world (including the Bank of Canada) are pushing to develop their own digital currencies.

Do you really want to be a landlord? Larry Swedroe shares a host of reasons why investing in individual real estate might not be the best idea:

“When you purchase a property, you become a landlord, with all the attendant headaches of property ownership. This is not a trivial issue. The “cost” of the time you would spend renting out and managing the property should be factored into the net returns expected.”

For dividend investors, here’s how the dividend snowball works.

The Canadian financial advice industry is a mess. That’s why young investors are turning to Reddit.

Millionaire Teacher Andrew Hallam explains why you shouldn’t turn your back on diversification now.

Here’s Squawkfox Kerry Taylor and Andrew Hallam on why material things won’t make you happy:

I loved this post by Of Dollars and Data blogger Nick Magguilli, who shares his 10 biggest money mistakes.

Michael James questions the research around spending naturally declining as we age. He suggests this is not a natural tendency but something forced upon us by spending too much early on and having to adjust spending. I can see both sides of this argument. No one is an average. I’d personally rather plan for ever-increasing (inflation-adjusted) spending as I get older rather than assuming my spending will decline in my 80s and beyond.

Jason Heath shares a thoughtful post on financial planning in your 70s.

Romana King explains everything you need to know about refinancing a mortgage.

Finally, Wealthsimple CEO Michael Katchen suggests that regulations around discount brokerage platforms offering advice to investors should evolve in the wake of the recent GameStop (and meme stock) frenzy. I disagree.

Have a great weekend, everyone!

Eirene Cremations: Shining a Light on the Cost of Dying

By Robb Engen | February 11, 2021 |
Posted in

Eirene Cremations: The Cost of Dying

Some industries are known for their lack of transparency – placing consumers at an incredible disadvantage. The cost of financial advice, a new vehicle, or a cell phone plan (to name a few) can vary widely and it’s not always clear if consumers are getting a fair deal.

Technology has helped balance the scales, offering real-time data and price comparisons to arm consumers with the knowledge they need to negotiate on a level playing field.

But one industry is still stuck in an outdated, predatory, and expensive model. It’s something we don’t talk about enough because the topic is taboo – the cost of dying.

Funeral expenses are the third largest expense in someone’s life, and the number one crowdfunding category. The average cost of a funeral in Canada is $10,000, a cost that is outpacing other consumer services by a landslide.

It needs to change, and consumers deserve transparency and better, more affordable options.

Eirene Cremations

That option is now here, thanks to a new online cremation service called Eirene. Co-founded by Mallory Greene, Eirene allows families to make a cremation arrangement entirely online — from the comfort of their own home.

There’s no shopping around, up-selling or in-person visits required. It’s the peace of mind that you’re receiving the best care for your loved one, with a focus on your experience during an incredibly difficult time.

Eirene currently operates in Southern Ontario, with a team of licensed funeral directors who are on call for you and your loved ones — whenever you need it. They are licensed and regulated by the Bereavement Authority of Ontario, and their industry partners are licensed and vetted to deliver the best service to you.

I had the chance to interview Ms. Greene about Eirene and how it’s disrupting the funeral industry.

Q1). Why did you decide to enter the business of arranging funerals?

MG: This is the first question I get when I share Eirene. Previously, I worked at Wealthsimple as part of their founding team. I worked on everything from marketing to HR to communications. I had an incredible experience there, learning how to build a business from the ground up and create something that could positively impact people’s lives.

But despite the fact that my background has been working in financial technology, I am the daughter of a funeral director. So, unlike most people, death and the conversation around end-of-life has been a massive part of my upbringing and identity. I felt that I was in a unique position to combine my love for technology with my knowledge in an industry that desperately needed transparency and education.

Surprisingly, there are many similarities between the funeral and the financial industry. When Wealthsimple first launched, talking about money was still relatively uncommon. Wealthsimple focused on the accessibility of their product, empowered people to take control of important decisions, and helped them plan for the future. And that’s exactly what I want to do at Eirene in the death-care space.

Q2). Arranging a funeral can be expensive and complicated. How does Eirene change this experience?

MG: At Eirene, we’re focused on providing a better experience to families during an incredibly difficult time.

The traditional process of arranging a funeral is time-consuming and overwhelming. Since many of us aren’t thinking or planning for end-of-life, when a death occurs, we are shocked by the price of funerals and the amount of paperwork. And, keep in mind, this is all while dealing with the death of a loved-one.

Eirene was many years in the making, and after a lot of in-depth research, we discovered that three critical factors needed to exist to create a better experience for families.

Simplicity: The arrangement process is made simple for families during a challenging time. You don’t have to walk into a funeral home and fill out endless paperwork. You can simply go online, enter the required details, and we will handle the rest.

Affordability: Pricing in the funeral industry is opaque, recently highlighted in the most recent Auditor General’s report. It can vary drastically between providers, and pricing that you see on a funeral website’s home page is often not what you end up paying. Eirene offers all-inclusive pricing to ensure that there are no surprise bills or hidden fees.

Transparency: Eirene was founded to bring transparency to the funeral industry and provide education to consumers. We know the importance of planning for major milestones, including end-of-life. We provide free tools and resources to families across Canada to make the best decisions for themselves and their families, whether they use our services or not.

Q3). What is the cost of a typical funeral, and how much does Eirene charge for a similar service?

MG: The average Canadian pays $5,000 for a cremation, with a traditional funeral costing upwards of $20,000. The cost can drastically range, because of the complexity of package pricing, so comparing funeral homes can be quite tricky.

Unfortunately, funeral costs are often a sticker shock to many, which is why funeral fundraising is the fastest-growing crowdfunding campaign category. Many people can simply not afford to die.

At Eirene, we believe that everyone should access affordable, dignified death care, no matter their financial circumstance. We have one cremation package price of $2,500 plus tax. This includes everything you would need to ensure the highest quality of care for the person you love without worrying about finances.

Our package includes the transfer, storage and cremation of your loved one, including hand-delivery of their remains. We also provide 24/7 support from our team of licensed funeral directors, help with all government-related paperwork, and give you access to estate administration tools to help you close accounts, notify the government and credit bureaus.

People often ask how we keep our costs low and wonder if it means their loved one will get a different level of care. The simple answer is that we do not carry the same overhead that a funeral home would because we are a technology business.

This means that we can pass on savings to the families who choose Eirene. It’s the same standard of care that you expect from a funeral home, but at an affordable cost to everyone.

Q4). You help clients plan a direct cremation online. More Canadians are choosing cremation versus a traditional burial. Can you talk about that growing trend and give some insight into why this might be happening?

MG: In the past few years, there have been significant shifts in how people think and plan for end-of-life. They’re creating more individualistic, less traditional ceremonies and seeking to commemorate people in unique ways.

It seems that more Canadians are moving towards cremation because of the price, flexibility and simplicity of the process. Some families have a limited budget that they cannot exceed. That, however, is not the case for everyone. For others, it’s about spending money in a way that makes sense to them. They would rather put the money towards a memorial service or find a beautiful way to memorialize their loved one.

Related: 4 end-of-life strategies your survivors will thank you for

Beyond price, the process of cremation is a straightforward task at the time of passing. There are fewer immediate decisions to make, which eases the process for grieving families. Often, they feel that there is more flexibility and time given to them. You can let remains go that day, or you can have them for six years, sixty years, or pass them on to future generations. You can host a memorial service a year later, scatter the remains at your favourite location or turn them into a diamond. The options are quite endless.

Q5). Your direct cremation service takes care of funeral arrangements from start to finish. Is there anything you can’t (or won’t) do?

MG: As mentioned above, our cremation package includes everything you would need to ensure that your loved one is taken care of and you receive support during a difficult time. We are hyper-focused on supporting families through the tasks that need to be completed immediately following a death. We don’t currently offer any burial or memorial services.

Beyond that, our resources and blog aim to help Canadians find the right providers and services based on their preferences. As we grow, we will expand our offerings and connect families to vetted partners to help them through various end-of-life stages.

We’re starting with a cremation package, as that’s what over 72% of Canadians choose today, but we know that there are many other options that families are seeking.

Q6). Eirene is currently serving Southern Ontario. What are your plans for expanding this service?

MG: We started in the Greater Toronto Area and recently expanded our offering to families across Southern Ontario. We see a real need for our business, and we hope to continue to grow throughout Canada.

Beyond our expansion news, we are launching a pre-need funeral insurance product very soon, an option for families to pre-pay for their funeral package at Eirene. It’s a way for families to put their funeral wishes in writing and alleviate the financial burden at the time of death.

You can sign up for the waitlist here.

Lastly, I’m inspired by the idea of introducing new methods of dispositions, especially those that are environmentally friendly. We are looking forward to expanding our offerings and helping families memorialize their loved ones in unique, new ways.

Final Thoughts

Technology is disrupting industries all around us. Robo advisors offer low cost, evidence-based investing on the cheap. Consumers have access to free credit scores and affordable borrowing options. Rate comparison sites can scan the market to tell us where to find the lowest mortgage rates, or the highest savings account rate. You can even create a Will online.

Yet here we are in 2021, still visiting a funeral home in-person, grieving and armed with practically zero knowledge about the cost of a cremation or burial.

Thankfully, a service like Eirene is now available to shine a light on the cost of dying and help Canadians plan and arrange an affordable cremation online.

Boomer & Echo readers can receive $250 off their package when planning a funeral arrangement online with Eirene.

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