Building Wealth

For the first 30 or so years of working, saving and investing, you’ll be first in the mode of getting out of the hole (paying down debt), and then building your net worth (that’s wealth accumulation.). But don’t forget, wealth accumulation isn’t the ultimate goal. Decumulation is! (a separate category here at the Hub).

The case for dividend ETFs

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Money tree with coins. EPS8 vector.Here is my monthly ETF column for the Financial Post, titled Jonathan Chevreau: Why Dividend Funds are a smart financial move.

The piece mentions several dividend ETFs from manufacturers like BMO, Vanguard and iShares but also presents the views of a few ETF specialists who are not as enthusiastic about these products.

Well suited to TFSAs

Personally, I think Canadian dividend funds are particularly well suited to Tax-Free Savings Accounts: they’re diversified, provide dividend income, have reasonable fees and don’t result in any withholding of tax that may occur with foreign dividend ETFs. The latter are better held in RRSPs, in my view.

Of course, those who are cautious about the stock market will prefer to stuff registered plans with fixed-income vehicles like GICs and put their dividend ETFs into non-registered (taxable) accounts that let Canadians benefit from the dividend tax credit.

The case for being “an owner, not a loaner” was made by me in the fifth “Eternal Truth” of Personal Finance in the recent series that ran in the Post, both online and in the paper. You can find that piece as well as a short (1-minute) video under the headline Embrace Risk, Pay Less Tax. You can find the whole series here. Continue Reading…

Robo advisers here to stay: Dan Hallett

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Hallett
Dan Hallett (Twitter.com)

Good piece by High View Financial Group’s Dan Hallett in the Globe & Mail the past 24 hours.

In Why robo-advisers are here to stay, Hallett notes that the user-friendly online investment advisory firms removes the sometimes intimidating barrier of dealing with human advisors face-to-face: “Leveraging the power of user-friendly technology removes that barrier for the tech-savvy while creating a scalable platform for these firms. This keeps costs low; a key benefit of Robo-Advisors.

(Note on spelling: the G&M spells it robo-adviser in the headline but robo-advisor in the story itself. The Hub prefers robo-adviser but some guest bloggers spell it the other way.)

In any case, this is a nice example of a market “naturally establishing a pricing floor for basic investment advice,” Hallett writes, “i.e. 35 basis points (0.35%) per year of the value of client portfolios plus tax and product fees.”

Hallett predicts some traditional advisors could get pushed out of the business: every Robo-Advisory firm he’s looked at is a licensed portfolio manager and hence a legal fiduciary.

Some Drawbacks
Continue Reading…

Have advertisers put a spell on you?

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Teenage wizard girl with magic wand casting spells in a enchanted fantasy forest

By Michael Drak

Special to the Financial Independence Hub

“Advertising is the art of convincing people to spend money they don’t have on things they don’t need.”

— Will Rogers

Recently the Contessa (my wife) and I went to see the Bette Midler show and at the unbelievable age of 69 she put on one heck of a performance. She still has it and had us laughing when she was poking fun at herself singing I Look Good and I Still Have my Health.

This was followed by a standup comedy routine in which she threw her usual zingers into the crowd. “I still look good, but I don’t know what happened to some of you,” she teased. “It’s 50 shades of grey in this section right here. I don’t know whether to sing to you or tell you something about reverse mortgages.”

At one point in the performance she came out dressed as the witch character from her 1993 film Hocus Pocus and sang one of my favourite songs,  I Put a Spell on You.

Which brings me back to the subject of this article.

Honey, I think our computer is possessed!

Continue Reading…

Credit cards as “survival” tool? This is nuts!

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Attractive girls with bags and credit cards on a white background

By Jonathan Chevreau,

Financial Independence Hub

A disturbing survey was released today from Minneapolis-based Allianz Life Insurance Company of North America. Its press release about the Generations Apart survey led off with the statement that “Living with debt has become a way of life for both Generation X (Gen X) and baby boomers as the stigma of owing money is gradually disappearing.”

Here’s the bit that really got me: it found that 48% of both generations “agree that credit cards now function as a survival tool” and 43% agree that “lots of smart, hardworking people who are careful with spending also have a lot of credit-card debt.”

Allianz Life did note that this alarming “growing comfort with debt” may affect the retirement plans of Gen X: “Twice as many Gen Xers (27% versus 11% of boomers) say they are either unsure about when they plan to retire or don’t plan to retire at all.”

The 2,000 Americans surveyed include 1,000 boomers aged 49 to 67, and 1,000 Gen Xers aged 35 to 48. It found Gen Xers are carrying 38% more in mortgage debt (average of US$144,000 versus $90,000 for boomers) and 45% more in non-mortgage debt, comprised of student loan debt (average of US $12,000 versus $5,000 for boomers) and credit-card debt (average of US $8,000 versus $6,000 for boomers).

It suggested one reason Gen Xers have higher debt is there generally earlier use of credit cards – 76% of Gen Xers got their first credit card between the ages of 18 and 24 versus 68% of baby boomers.

Almost half of GenXers revolve their credit card balances

Continue Reading…

Weekly Wrap: Happy Financial Independence Day! Eternal Truth # 7 completes series

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Independence day conceptBy Jonathan Chevreau

Financial Independence Hub

To all our American readers, the Findependence Hub wishes a happy  Independence Day, or  as we like to say around here, Findependence Day.

Bloggers are fond of building posts around the July 4th celebration, and this year several are using the phrase Financial Independence Day. For instance, Forbes.com just published a blog titled Financial Independence Day for Millennials.

In fact, a year ago, Richard Eisenberg of Next Avenue and Forbes.com did just that, writing a similar piece entitled How to Declare Your Financial Independence. And he did make an explicit reference to Findependence Day, more on which below.

This weekend’s Motley Fool Money podcast is titled Declare Your Financial Independence.

And a few days ago, the Energy & Capital Site alos used the same phrase in an online commentary: Financial Independence Day. However, the piece merely outlines 55 trading rules and doesn’t get into the topic the way the Hub does.

The trend is clear and it seems from our vantage point that the next logical step is to use our contraction and call it Findependence Day!  It’s not exactly a new term any more: the original book bearing that name was published in 2008 (more about which  below).

So for those for whom the term may still be unfamiliar,what exactly is Findependence?

It’s simply a contraction for Financial Independence.

And Findependence Day? That’s the day you achieve Financial Independence. Continue Reading…