Investing

If you are looking for a foundational education about investing linked to tools and guidance to start DIY investing, I have created a DIY Investing Hub. Click the picture below to enter The Hub.

If you are looking for some other advanced topic, below that on this page is a collection of the articles I have written about investing topics. From basic concepts to the advanced to the totally looney. Much of it is under construction and re-organization at present.

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Saving & Investing Basics

Saving for the Near-Term: High-Interest Savings Accounts & Beyond

Money that you need in the next 3-5 years, without flexibility, should be saved. Not invested.

When you park that money, you want to earn as much interest as you can. That helps to ensure that not only will it be there when you need it, but that its purchasing power that is less eroded by inflation.

Learn about the differences between high-interest savings accounts, high-interest ETFs, money market funds, GICs, and short-term bonds.

Invest for Your Long-Term Security

Risk-averse people often express how they don’t want to invest because it is too risky. In the short term, that may be true. Time horizon matters.

However, not investing has risks to your long-term security. Some problems are guaranteed.

Others are likely, like when life doesn’t go as planned. If life goes better than planned, longevity risk comes into play.

Like investing, the risks of not investing compound over time.

Investing vs Gambling

Investing involves risk and reward. So does gambling.

Learn the difference to ensure that you invest for rather than gamble your future.

Investing may not be as exciting as gambling, but it is more fun than losing.

Don’t Turn Your Investing Into Gambling

What could be a good investment may turn out to be more of a gamble if you are not careful.

Time-frame is critical to investing. You can plan for the right timeframe, but still end up speculating if you don’t pay attention. Even with real estate.

Learn about five major mistakes that could turn a good investment into a speculative gamble and derail your investing success.

My Net Worth Dropped. My Financial Goals Were Met.

A glimpse into my financial performance in 2022 and the preceding 15 years of my investing. My portfolio shrank this year, but I still feel pretty pumped up.

See how my processed have evolved.

Learn more about how to set and modify financial goals to build wealth and improve your investing performance.

Why Bother Taking Any Risk Investing?

Can You Retire Without Investing? Maybe. It is risky.

Investing Risk Capacity & Risk Tolerance

What You Can Invest In

Diversification vs Specialization

Active Management vs Passive Index Investing

Accounts Types Where You Can Put Your Investments

Simple vs Complex: Balancing Optimization & Operationalization

Debt & Investing

Pay Off Debt or Invest More?

Most people face competing priorities for their income. One of the most common dilemmas is whether to more aggressively pay off debt vs invest more.

Debt interest and missed time in the market can both result in compounding losses over time. You need to make a deliberate plan and then execute it.

Pay Debt vs Invest in TFSA, RESP, or RRSP

When faced with the competing priorities of paying debt vs investing, many will choose a compromise and do a bit of both.

Once your debt is at a safe level, starting your investing journey can help you take advantage of a longer time horizon.

You can also build good investing habits right from the start.

Learn why the TFSA is excellent for this. Also, consider when an RESP or RRSP may be even better.

How To Squish The Tax-Person Using Your Home To Income Split

Using home equity to invest is leveraged investing. You use a mortgage or HELOC (debt) to invest and make money.

That has potential risks and benefits. Done properly, you could use the debt to not only invest but also to reduce taxes. That can help shift the risk-benefit equation.

How We Income-Split Using Home Equity For Leveraged Investing

One way to income-split is to help the lower-income spouse build a personal after-tax investment account. It can spin off passive income attributed and taxed to them.

Setting it up properly is critical.

That usually requires excess cash. In this post, I share how we used our home equity to invest and income split.

Financial Advisors & DIY Investing

Financial Advisor: Asset Enhancer or Waste of Money? Like Lingerie.

A financial advisor can be optional. When considering whether to hire one and what for, you need to understand where they provide the most value.

Many people choose a financial advisor thinking that they will achieve enhanced returns on investments. That is unlikely to work out. The most value of a financial advisor is in their financial planning advice and coaching.

Choosing A Financial Advisor Is Like Shopping For Lingerie.

How much you get & what you pay not be even closely related.

Learn what features to look for when shopping for a financial advisor.

Consider how you are paying and whether it is good value for money.

DIY Investing: Managing My Own Portfolio Is Better Than Dialysis

Dialysis is one of the best-paying things that I can do in my clinical practice. It still doesn’t pay nearly as well as managing my own investment portfolio.

Not even close. Even with all of the mistakes that I have made (and probably will make).

I share my thoughts and journey towards DIY investing. I did it.

DIY Investing: Lighten The Load In Your Back Pack

Many people think that they are getting free financial advice. You may even get a free backpack.

The cost is usually buried in the management fees of the mutual funds they are being sold through that advice.

However, the load in it will become heavy over time. I discuss why we put these packs on and are reluctant to take them off.

She Changed Up Her Fee-Laden Backpack

Shedding high-fee mutual funds makes sense.

Even when you have seen all of the evidence and understand this, it is still hard to do.

A brave colleague shares her decision and initial experience.

Risk Management

Reduce Investment Risk: Enter The Loonie Doctor Dojo

Investing is risky. Not investing is even riskier, since you will lose the power of your money to inflation.

The are many different attacks life can throw our way. Fortunately, we can learn to defend against them.

Start your training to grow your money while reducing investment risk through diversifying the tools in your portfolio.

Risk Tolerance Assessment & Asset Allocation Basics

Risk tolerance assessment is difficult, but essential to successful investing.

Learn about a multi-modality approach and some tools to help.

Get a high-level approach to a diverse asset allocation to manage risk.

Volatility & Its Risk To Your Portfolio – Part 1

Learn about what volatility is.

An introduction to the risks that volatility can pose to your investing.

Both along the journey and when you reach the destination. It is as common as potholes on Canadian roads.

Bad Investor Behaviour: Your Inner Hulk Investor

We all have an emotional beast inside of us. The beast causes us to behave poorly.

For the average investor, that behavioural gap is a 0.5-2%/yr drag on performance depending on how stimulating the portfolio. And how scary the time period.

Learn what provokes him/her.

Develop good investor habits to keep the beast quiescent.

Volatility & Risk Part 2: Sequence of Return Risk

Sequence of returns risk for investors is caused by cashflow and magnified by volatility.

Volatility and sequencing risk can change during different legs of your financial journey.

Learn what it is to be able to plan for it.

Asset Allocation Strategies To Attenuate Sequencing Risk

An unlucky sequence of returns can torpedo a retirement portfolio. One approach to the problem is to modify your asset allocation.

It becomes a balance between mitigating sequencing risk from volatility and getting the growth you need avoid outliving your money.

Cash Flow Strategies To Mitigate Sequence of Return Risk

Reduce SORR (sequencing risk) by having flexible cash flow when approaching retirement.

Learn a practical approach to the options.

It is all about creativity and flexibility.

Portfolio Construction & Management

Portfolio Building With Some Bonds For The Beast

When building a portfolio, we look to diversify with non-correlated assets.

They help to dampen the volatile swings in value that provoke bad investor behaviour.

This is the main role of bonds in a portfolio. How well do they fill this role?

Bonds & Volatility: Not All Bonds Are Equally Soothing

We use bonds in our portfolio to dampen volatility. That helps to sooth our inner investor beast & prevent them from getting riled up and misbehaving.

However, different kinds of bonds have different characteristics. Some are riskier and more volatile. Some are more counter-cycle to equities than others.

That makes some bonds better as a counter-balance to equities in our portfolio than others.

Portfolio Rebalancing: What Is It & Why Bother?

Portfolio rebalancing is buying and/or selling holdings to keep aligned to our planned asset allocation.

Learn the real reasons why portfolio rebalancing is an important part of being a successful DIY investor.

Will it enhance or blunt your returns?

When To Rebalance An Investment Portfolio.

Rebalancing helps us to control the risk in our portfolio. During volatile periods, it may even enhance your return.

How often should we rebalance?

What should trigger us to rebalance?

How precise do we need to be?

Exchange Traded Funds (ETFs)

Why Use Asset Allocation ETFs To Invest (Video)

Asset allocation exchange traded funds (ETFs) are an excellent option for DIY investing.

They provide an all-in-one investment solution for instant diversification and automatic rebalancing for risk management. All that for a low management fee, and either low or no cost to buy and sell.

Sound too good to be true? Learn about the evidence behind these products and some of the potential pros and cons compared to other approaches.

True ETF Liquidity

One of the most common questions we get from investors is, “If a certain ETF doesn’t trade often, or has low trading volume, will I be able to sell the ETF when I need to?” The quick answer is yes you can, and I’ll explain why.

The true liquidity of an ETF has three layers. These three layers are something investors can’t easily see. In fact, most volume data available to investors online is only showing the tip of the liquidity iceberg.

Tracking Error: Hidden Cost of ETF Investing or Nothing-Burger?

ETFs are meant to track their index. However, they do not do so precisely and the difference is tracking error.

ETFs should lag their index by roughly their costs. Some of that is the management expense ratio (MER). However, there are other potential costs and sources of revenue for ETFs. How does that work out for major ETFs?

The Sample ETFs Used In The Robocorp Portfolio Builders

ETFs are an easy way to invest in thousands of holdings to achieve diversification.

If attempting asset location optimization or trying to aggressively minimize fees and taxes, multiple ETFs would be used.

Learn about some commonly used ETFs and what role they could play in building a portfolio.

Discount Bonds: Bonds With Benefits.. For Managing Taxes

Bonds can play a vital part in managing risk in your portfolio. They may also produce income.

Unfortunately, that interest income may not be very tax efficient.

Discount bonds can provide risk management benefits while giving a more tax-friendly mix of capital gains and income.

SWAP & Corporate Class ETFs

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Corporate Class & Swap Structure

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The Magic Trick Of SWAP ETFs

Some boutique ETFs use a SWAP structure. That has benefits in terms of management costs for Canadian stocks and foreign withholding tax for international stocks.

A SWAP contract is a derivatives. Sounds scary and confusing. Well, it is definitely confusing. Learn how they work, with diagrams.

General Risks of SWAP ETFs

SWAP-based ETFs use a derivative structure to make them more cost and tax efficient.

That structure also comes with some special risks. You must understand these to weigh the risks against the potential benefits.

The Legislative Attack on SWAP ETFs

One of the most concerning risks of the SWAP-based Total Return Index ETFs was that the government would target them. A complex niche product that reduces taxes for high-income investors was a juicy target.

The fee-efficiency benefit of the SWAP structure for Canadian stocks remains. The alchemy of a SWAP changing income into capital gains was terminated.

SWAP ETF Evolution Into Corporate Class ETFs

Horizon merged their total return index ETFs into a corporate class structure. They paired them with some of their higher-expense ETFs used for trading.

Learn how this structure is much more robust. If managed well, it should translate into capital gains when you sell instead of less efficient taxable income along the way. Learn about the risks if it isn’t.

Trouble on the Horizon? Management Risk of Corporate Class Funds

Corporate class funds are very tax efficient as long as the income is managed well.

Learn more about the corporate class structure and how Horizon is doing with that after several years of real-world experience. Will they buck the trend through their innovative design? Or is there trouble on the horizon?

Tax Bergs: Risk for Corporate Class Funds

Like an iceberg, there is more lurking under the surface than you might expect. If a corporate class fund does experience net income, it can be taxed at a higher rate than normal.

How does that work, what could it look like, and how would that likely play out? Those are all important questions to consider if using these products.

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Horizons Corporate Class ETFs in Personal Taxable Accounts

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Horizons Corporate Class ETF Tax Berg Emergency Drills

Horizons corporate-class ETFs offer a strategy to functionally convert less tax-efficient income in an ETF to capital gains. That, with the diversification and simplicity of an ETF is attractive in taxable accounts. Particularly in high tax brackets.

However, if Horizons’ corporation generates net income, they could become tax inefficient. What could that look like for different ETFs in a personal taxable investment account?

HBB.TO Corporate Class Bond ETF Is Like “The Little Blue Pill” For Fixed Income In A Personal Taxable Account

Some people my have a high fixed-income asset allocation. Particularly, as the near retirement and their portfolio is large.

The resultant spillage of bonds into a taxable account could be tax inefficient. Using HBB instead of a conventional ETF could make the difference between growth and shrinkage. Of buying-power.

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Horizons Corporate Class ETFs in Private Corporation Accounts

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Corporate Class Bond ETF (HBB) in a Private Corporation

A corporate-class bond ETF functionally converts interest to an unrealized capital gain when functioning as intended. That seems like a silver bullet if you must hold bonds as part of your corporate investment portfolio. However, a discount bond ETF like ZDB partially converts the interest to capital gains without the corp class risks.

Is HBB a silver bullet? Or are you needlessly buying more expensive ammo to risk shooting yourself in the foot?

HXCN vs ZCN Tax Efficiency in a Private Corporation

This week, I will compare the fee and tax drag of the HXCN vs ZCN ETFs that cover Canadian equity markets. There are times when HXCN can be a silver bullet for the tax werewolf.

However, eligible dividend income can boost corporate tax deferral. So, if the tax werewolf never comes knocking, then you may actually shoot yourself in the foot.

HXS ETF vs Conventional S&P 500 ETFs in a Corporation

When functioning as intended, the HXS ETF’s corp class structure converts the income to capital gains. That bypasses those FWT and passive income issues.

However, it comes at the cost of a higher fee and some extra risks. Plus, more complexity than an asset allocation ETF. Would it be worth considering for your corporate investing? Learn more and decide for yourself.

HXDM ETF For International Exposure in a Corporate Account

Non-North American developed markets are an important part of a globally diversified portfolio. However, they also have high dividend yields. That could present a tax drag on investment growth in Canadian Controlled Private Corporations (CCPC).

Horizons’ HXDM ETF looks to bypass those tax issues with its swap-based corporate class structure. However, that comes with some other compromises. Do the tax savings justify them?

HXEM ETF for Emerging Market Coverage in a Corp Account

Investing in emerging markets (EMM) may add another layer of diversification to a global portfolio. If taking that approach, then ETFs, like HXEM, ZEM, and XEC make that easy. When working as intended HXEM avoids distributions and foreign withholding taxes, but has other risks.

Before venturing bravely to the fringes of the publicly investible markets, explore whether HXEM offers enough tax efficiency to make up for the added risk and complexity.

[Old Post] HBB Corp Class Bond ETF vs ZDB Discount Bond ETF in a Corporate Account

Learn how discount bonds are more tax-efficient. With the tax rules to discourage passive income in corporations, that is even more important.

HBB could take tax efficiency up another notch depending on your corporate income and payout.

Norbert’s Gambit To Exchange $USD & $CAD

Norbert’s Gambit Using Qtrade

Exchanging Canadian and US dollars can be very helpful, but expensive.

Norbert’s gambit is a planned maneuver that can enable cheap exchanges between $CAD and $USD.

With Qtrade, you can even do it all online without talking to humans. I’ll demonstrate how to do it. With screenshots.

Tax-Free Savings Account (TFSA)

Tax Free Savings Account Anatomy 101

The TFSA is one of our most powerful investment accounts to grow wealth.

Don’t squander it as a “savings account”.

Learn how it works and use it to its full tax-free income and growth potential.

Registered Retirement Savings Plan (RRSP)

RRSP Anatomy 101

RRSPs are a familiar investment vehicle to save for retirement.

Under the surface, there is much more to them. Learn the basics of how they work and their many uses.

Learn about the many possible benefits and a few potential pitfalls.

Spousal RRSPs For Income Splitting: From Diapers To Diapers

Learn how a spousal RRSP works. More than just tax-deferral.

A spousal RRSP can also reduce tax, if you have a lower-income spouse.

Avoid getting caught in the attribution rules and other hazards.

Learn different ways a spousal RRSP could be used for income splitting at different life stages. From parental leaves to pension-splitting.

RRSP Jedi Mind Trick: Using an RRSP To Power Up Your TFSA

A TFSA requires that you have after-tax money to put in it. That can be a challenge to come up with for some people.

Using an RRSP can help by providing a tax refund. If you don’t blow it, you can super-charge it with your TFSA.

RRSP Refund Tricks & Traps

An RRSP has 100% tax deferral. That could be a tax increase if you make the deduction from a low tax bracket and pay tax later in a high tax bracket.

This is important for those who have accrued a lot of RRSP unused contribution room or expect a rapid rise income in the near future. Like residents becoming attending physicians.

Registered Education Savings Plans (RESPs)

RESP Basics To Save For Mini-Me’s Evil Medical School Tuition

An RESP is not something you buy. Unfortunately, there are lots of sales-people pushing their group RESPs as a product. It is an investing account type.

Learn how an RESP works. You can open a self-directed RESP and take full advantage of this gift from the government. Without the fees, restrictions, and low returns of a group plan.

Get tax-sheltered growth, grants, and free kittens.

Optimizing Your RESP Contributions

How does an RESP fit into your overall financial life? How do you contribute in the tight-money years? How can you balance automation and cost?

Where do you prioritize directing money when you have to consider some mix of an RESP, RRSP, FHSA, TFSA, debts, and a corporation?

What if you have a big lump sum of money to invest?

I put it all here with a flow chart, explanations, and some Dad Jokes.

Optimizing a Lump Sum RESP Contribution Strategy

This is math-y. Defcon 4 level nerdiness.

The optimal lump sum contribution would lie somewhere above $16.5K. Some of the CESG would be foregone, but made up for by compound growth.

Learn about the many variables that could affect the optimal frontload amount. I also made an optimization simulator to automate the math.

Honestly, I think getting started is more important than getting it optimal.

RESPs For Corporate Kids – Part 1

RESPs are contributed to with after-tax money.

For incorporated parents, that means taking money out of a corporation and paying personal tax to contribute.

Does the CESG grant offset the tax hit? Does the tax-free growth justify taking out extra to contribute?

RESPs for Corporate Kids With Pugicorn Parents

Some incorporated parents may earn enough and or save enough in their corporations to make their corporations lose their tax efficiency.

They may not be releasing their RDTOH or they may run afoul of the passive income limits.

They may be rare as pugicorns, but how does it make sense for them to shunt money to an RESP?

RESP Withdrawal Strategies

Learn about the different pots you draw from when accessing money from your RESP.

Consider different strategies to take Education Assistant Payments to get the money out and using Return of Capital to keep taxes low.

Adapt that to your situation. I also made a calculator to help you plan.

Learn about the options there is unused money left in the RESP or if things don’t go as planned.

Investing Through A Canadian Controlled Private Corporation

Investing Using A Corporation

If you have retained earnings in your corporation, you can invest them to grow. That is the tax deferral advantage of a corporation.

How well that works depends on the type of investment income it produces and how well you flow money out of your corporation.

Learn about how corporate investment taxation works to keep the tax skeeters out of your corporate reservoir.

Investing Using A Corporation vs RRSP vs TFSA Simulator

Some will advise to only pay dividends from a corporation and keep all investments in the corp.

Others will advise to pay salary and use an RRSP plus the corp. Some even suggest a combination of salary and dividends and to use a corp, RRSP, and TFSA.

There are a number of variables that lead to this advice and they change as our corporation grows. This simulator compares these different strategies over time.

Explaining The Refundable Dividend Tax On Hand (RDTOH)

There are a number of tax rules to discourage using corporations for generating passive investment income. One of those is the RDTOH.

There were more changes in 2019 to make it even more awkward and complicated.

Like a Klingon mating ritual.

Corporation GRIP As A Tax Slashing Weapon

If you receive eligible dividend income from investing in Canadian equities, it generates GRIP in your corporation.

That can be used to give tax-favoured eligible dividends.

This has the potential for very tax-efficient money flow through a corporation. Or you could cut yourself.

Time For Capital Gains Harvesting From Your Corporation?

Generally, it is a good idea to defer realizing capital gains because that defers taxes. However, in a corporation, if you are sitting on large capital gains, it can sometimes makes sense to harvest them.

A capital gains harvest could be a tax efficient way to move money out of your corporation to fund a personal expense, top up your TFSA or RRSP, or invest via a personal account.