Benjamin Felix

MBA, CFA, CFP, Associate Portfolio Manager

Born and raised on Vancouver Island, BC, Benjamin completed a degree in mechanical engineering before pursuing a career in financial services via the MBA program at Carleton University’s Sprott School of Business.
Born and raised on Vancouver Island, BC, Benjamin completed a degree in mechanical engineering before pursuing a career in financial services via the MBA program at Carleton University’s Sprott School of Business.
Behavioural Finance
Retired Couple

The Rational Reminder Podcast Ep. 30 – The Authority Speaks: A Complete Guide to Investing and Retirement with Larry Swedroe

Today we are joined by a friend, hero, and a legend in the field fact based investing. Larry Swedroe is here to discuss his latest book, some of the timeless concepts he has been espousing for many years, and to give out a few golden nuggets of advice for your finances and retirement.

Market Research
2018 & 2017 Signage With Arrow Table

2018 Portfolio Returns

Another year under the belt. 2018 seemed to mirror 2017 in the news headlines. Trump, Bitcoin, and marijuana stocks were top of mind for much of the year, with the addition of trade agreements (or a lack thereof), and a dash of market volatility that had been missing in 2017.

DIY Investing
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Devilish Details Can Derail Your Small-Cap Stock Funds

Most investors accept that small-cap stocks have outperformed large-cap stocks over the long-term. This “size effect” was the first market anomaly to challenge the single-factor, capital asset pricing model. Unfortunately, as I’ll explain in this post, I’m unaware of any funds currently available to a DIY investor that DO properly apply the small-cap effect.

Behavioural Finance
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The Rational Reminder Podcast Episode 27 – Evidence Based Investing: Changing the Minds of Advisors and Investors with Robin Powell

In the first episode of the Rational Reminder Podcast for 2019, we welcome Robin Powell. Robin is a journalist and content creator who has dedicated the more recent part of his career to helping spread the word on research backed investing and turning the tide on the history of investment advice.

Behavioural Finance
Minds

The Rational Reminder Podcast Ep. 27 – Evidence Based Investing: Changing the Minds of Advisors and Investors with Robin Powell

In this episode of the Rational Reminder Podcast we welcome Robin Powell. Robin is a journalist and content creator who has dedicated the more recent part of his career to helping spread the word on research backed investing and turning the tide on the history of investment advice.

Starting Out
Young Men Board Presenting Stats Graph

What’s a Normal Stock Return?

Here’s are two trick questions: Are you normal? Am I normal? Common sense tells us it’s impossible to answer either without also asking: Compared to what? For example, check out this image of the Passmore & Felix team on our newly updated website.

Personal Wealth
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Life Insurance: Who Needs It?

Do you really need life insurance? If you struggle with this question, you’re in good company. It doesn’t help that insurance agents are often perceived as pushy sales people who stand to make larger commissions if they sell more expensive products.

Advanced Investing
Person Writing Notes Infront Computer Drinking Coffee

Fundamental Indexing

Rob Arnott, the founder of Research Affiliates, was on the Masters in Business podcast a while back. He said something that, to me, was fascinating. He criticized Dimensional Fund Advisors for starting with market cap weights to build their products.

Personal Wealth
Money Rolls Currency International

Money you can afford to lose

If you go to any online community related to money you will find people talking about their desire to learn about investing by researching and selecting individual stocks. They understand that this is risky, they will say, but they will only try it out with money that they can afford to lose.

Advanced Investing
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Figuring Out Factor Investing

Everyone likes to believe they’re smart consumers. That’s probably why the term “smart beta,” also known as “factor investing,” is so hot right now. “Stupid beta” probably wouldn’t attract many takers. So what is factor investing, and are you smart to use it? That’s what today’s post and related video are all about.

Market Research
Two People Racing One Person Winning Finish Line

When GICs beat bonds

The fixed income component of the Dimensional Fund Advisors global portfolios has been low to-date in 2018, and also for the past 12 months. It is down 0.51% year-to-date at July 2018, and down 0.27% for the 12 months ending July 2018.

Market Research
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All time highs are normal

We may have just witnessed the longest bull market in US market history. There is some disagreement on the definition of a bull market, but no matter how it is defined it is clear that the S&P 500 has been rising without too much interruption for a long time.

Market Research
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Then, and now

Charley Ellis was on the Capital Allocators podcast with Ted Seides last week. Charley has been in the investment management business since the early 1960s. Today he is one of the most vocal proponents of index funds as the most sensible investment for most people. I write often about why index investing makes sense.

Market Research
Child Blue Clothes Sitting Floor Playing with a Globe

Foreign Withholding Tax

First things first: If your long-term investments are not yet globally diversified, they almost certainly should be. Robust evidence and common sense alike support the wisdom of managing your risks and expected sources of return by investing in both Canadian and international markets.

Market Research
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In these uncertain times

I am far from being a long-tenured veteran of the financial services industry. In 2007, when the last big drop in financial markets began, I was studying mechanical engineering on a full athletic scholarship. I have no recollection of worrying about the market; all of my expenses were covered as long as I met my athletic and academic obligations (which I did).

Market Research
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What are Normal Stock Returns?

2018 has seen modest returns for Canadian and International stocks, both coming in a bit under 2% in CAD at the end of June. US stocks have seen stronger returns, a little over 7% in CAD, driven mostly by currency. These numbers might seem low after years of double digit returns.

Advanced Investing
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Don’t cry over underperforming US value stocks

Value stocks in the US have not fared well for the last decade. The value premium, or the performance difference between value and growth stocks, has been about 3.5% in the US going back to 1928. More recently the value premium has been negative for 7 out of the past 10 years in the US. We are currently living through 1 of 13 10-year periods going back to 1928 where value has underperformed growth.

Behavioural Finance
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The Four Stages of an Index Investor

Investing in index funds is obvious once you subscribe to the idea, but getting there is not always easy. The majority of Canadians still invest their money in actively managed mutual funds. From what I have seen, the acceptance of index investing typically follows four stages.

Personal Wealth
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The Case for Renting a Home – Part 2

In my last video, I gave you several solid reasons why home ownership may not be all it’s cracked up to be, at least from a financial perspective. Still not convinced? I’ll show you some actual numbers, so you can see for yourself how an “investment” in home ownership might compare to cozying up to some decent index funds instead.

Personal Wealth
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The Map is Not the Territory

In 1931, Alfred Korzybski, an engineer, philosopher, and mathematician, presented a paper to the American Association for the Advancement of Science. In the paper, he introduced the idea that the map is not the territory. In other words, a model of a thing is not the thing itself.

Personal Wealth
Young Male Packing Pillow Cardboard Boxes

The Case for Renting a Home – Part 1

Heads or tails? Chocolate or vanilla? Rent or own? While the first choice is literally a coin toss and the second is personal preference, you may be surprised to learn that whether it’s better to rent or own your home is not the foregone conclusion most people assume.

Personal Wealth
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Debunking Canadian Dividends for Taxable Investors

Canadian eligible dividends are tax efficient for taxable Canadian investors. This is one of the reasons that the mystical dividend investing strategy continues to have a cult-like following. As attractive as the tax rates on dividends are, dividends do still produce taxable income. A dividend-focused strategy will likely have most of its return coming from dividends.

Personal Wealth
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Not All Index Funds Are Created Equal

Do you remember the tech craze of the 1990s, when it seemed as if every dot.com start-up was a sure bet? A few of them, like eBay, are still with us today. But hindsight has made it crystal clear that not every e-flash in the pan was built to last. Investors who loaded their life’s savings into the run-up learned this lesson the hard way.

Personal Wealth
Television Set Camera Filming News Interview

Newsflash: Market Gurus Are Guessing

It doesn’t take an expert to tell you the flip of a fair coin gives you 50/50 odds, heads or tails. What if I told you most market gurus fare even worse than a coin flip when it comes to making accurate financial forecasts? Would you continue to pay attention to their “expert” calls?

Personal Wealth
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Should you buy bitcoin?

Remember that bridge your mother warned you about – the one everyone else was jumping off of? If you ask me, it’s an adage worth its weight in gold, especially as it applies to the current bitcoin craze.

Personal Wealth
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OMG, what is bitcoin?

Do you remember the first time someone used “text” as a verb, as in: “Why don’t you text me?” It’s amazing how recently that was, and yet how rapidly it’s gone global.

Similarly, most of us had never heard of bitcoins, blockchains and cryptocurrency until 2017. Today, it seems like it’s all anyone ever TMs about. Unfortunately, the splashy, overnight success stories have been rushing far ahead of any sensible understanding of the subject. Let’s fix that today.

Personal Wealth
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2017 Portfolio Returns

2017 flew by. Headlines continued to be dominated by Trump, Bitcoin, and marijuana stocks, while the market as a whole steadily chugged along. Steadily enough for the S&P 500 to post a perfect year – a full year with not a single negative month (in USD). Canadian and International indexes did post some negative months, but completed a great year overall. Even bonds pulled their weight despite ever present concerns about rising interest rates.

Advanced Investing

Why I prefer to avoid preferred shares (Alternative Investments, Part 2)

When you fly, it’s nice to enjoy the perks that come from a preferred status – cushy seats, exclusive lounges, tasty treats … or so I hear. It’s only natural to assume that “preferred shares” would likewise enhance your investment experience. But have they actually delivered as the name suggests? The short answer is: Not so much. Their inherent structure tends to create far more potential risks than expected rewards.

Desk old wood calculator and typewriter

Asset Location & Uncertainty

Asset allocation requires investors to determine the appropriate allocation of each asset class – Canadian equities, US equities, International equities, fixed income – in their portfolio.

Advanced Investing
Hedging Currencies

Should You Currency Hedge Your Portfolio?

If you’re worried that currency fluctuations might hurt your returns, then hedging can seem like a pretty good idea. It’s a shame that there is no evidence to back that idea up. Time and again it has been shown that currency hedging does not have a material impact on the long-term risk and return characteristics of an equity portfolio. So – should you hedge?

Personal Wealth
Crowd

Are too many people investing in index funds?

I almost feel sorry for them: Active managers warning us that we’re going to break the market if too many of us stop playing their beat-the-market games, and embrace common-sense, index-fund investing instead. To be honest, their warnings strike me as an act of desperation, like the cry of the horse & buggy industry when Henry Ford came along.

Office Coworkers Discussing Room

A Taxing Decision (2017)

This paper offers analysis to compare the efficacy of an incorporated individual paying personal tax on salary and dividends in order to utilize their RRSP and TFSA as opposed to retaining earnings in their corporation for investment.

Personal Wealth
Man Looking For Money Wallet

Do I need downside protection?

There’s no doubt about it: Losing money hurts. Even the fear of losing money is unpleasant. The financial industry is well aware of this, and sends out its sales force to peddle a comforting idea. It’s called “downside protection.” It’s supposed to allow you to continue enjoying the market’s expected returns while simultaneously dodging its correlated risks.

The Case for Renting

This paper explores Canada’s culture of home ownership, and offers financial analysis to support renting a place to live as a viable alternative for building long-term wealth.

Personal Wealth
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Why Is It So Hard To Beat the Market?

The data is in and, for fund managers who are still trying to “beat” the market, the numbers are still not on their side. As talented as active players often are at slicing and dicing the data, and as mightily as they may try, there’s considerable evidence that passive players continue to have the last laugh. Why is that? As usual, it has a lot to do with common sense.

Personal Wealth
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Why Aren’t More Canadians Switching to Index Funds?

First, the good news: At the end of 2016, 11.3% of Canadians’ investment fund assets were held in index funds and similar passively managed products. That’s a start. But compared to our U.S. neighbors at 34% of the same, we’re slow on moving away from over-priced, underperforming actively managed funds and into index funds.

Personal Wealth
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Introducing: Common-Sense Investing with Ben Felix, MBA, CFA

The truth is easier to keep track of than a pack of lies. That’s just common sense. So is most of investing, even though many in the financial industry would have you believe otherwise. To help you separate financial facts from sales-oriented fiction – and then invest accordingly – I am pleased to host PWL Capital’s newest YouTube series: Common-Sense Investing.

Personal Wealth
Two People Racing One Person Winning Finish Line

When Active Managers Win

Fidelity has a massive billboard up in Toronto to promote one of their portfolio managers, Will Danoff. Danoff has managed the U.S. based Fidelity Contrafund since 1990; it is the largest actively managed fund in the world managed by a single person. The Contrafund has performed well – well enough to beat its benchmark, the S&P 500. Benchmark beating performance attracts assets. It also gives Fidelity the opportunity to advertise to the world how great their star manager is. The problem for investors is that an active manager posting strong performance numbers, even over long periods of time, does nothing to indicate for how long that performance will persist.

Personal Wealth
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Canadian Fund Fees Lead to Poor Performance

Canadian mutual funds have performed poorly over the last ten years, according to a new report from Standard and Poor’s. The data shows that most equity funds in Canada have failed to match the performance of their benchmark index. In 2015, Canada was found to have the highest mutual fund fees in the world. It should come as no surprise, then, that more Canadian funds have trailed their benchmarks than comparable funds in other developed countries. Domestic Equity and US Equity funds in Canada fared far worse than funds in those same categories in the U.K., Japan, Australia, and the U.S.

91.11% of Canadian Equity Funds Underperform Over 10-Years

A staggering majority of Canadian mutual funds have underperformed the index over the past decade. This data comes at a time when U.S. investors are pulling billions of dollars out of active funds managed by stock pickers, instead favouring low-cost passive index funds. Canadians are not following this trend, adding roughly equal amounts to both active and passive funds in 2016.

The Bank May Not Be Your Best Bet For Investing

The big Canadian banks have come under fire recently for their aggressive tactics and, in some cases, claims of unlawful behaviour by stressed employees chasing sales targets. Most of the media attention has focused on customers being pushed to increase credit limits and overdraft protection, or apply for a more expensive credit card. But there is another product that banks have been aggressively selling for years while only attracting a bit of attention: High-fee mutual funds.

Smart investment decisions are simpler than you think

Do you ever wonder what it’s like to be a smart investor? Chances are that you do; most Canadians own investments that underperform the market. If a financial advisor says that they know when to buy gold, they may be perceived as smart, and their clients will likely listen to them. The ability to predict is associated with investing intelligence. This approach to investing is known as active management – figuring out which stocks or assets will do well, or knowing when to get in and out of the market. As intelligent as it may seem, there is no evidence to support its efficacy.

2016 Portfolio Returns

The beginning of 2016 had most people thinking that we were in for a rough one. There were some negative months to start things off, and a few more throughout the year, but all things considered 2016 was a great year to be in the market. That is not the story that you may have heard from the media, who were warning us to sell everything back in January. Despite Brexit and Trump, US and International markets continued to climb through December, and the Canadian market hit its highest 1-year return since 2009. Even bonds pulled their weight with a modest but respectable return.

The perfect investment strategy

Academia points to some ways of investing that are likely to have better outcomes than others. The idea that value stocks will outperform growth stocks over the long-term is generally accepted by researchers and practitioners. The same is true for small stocks outperforming large stocks.

It’s not your fund manager, it’s you.

Actively managed investment strategies are not inherently bad, they just introduce a different kind of risk to the investment experience. A well-diversified passive investor chooses to own the market as a whole, taking on market risk. An active manager is making a promise to not own the market as a whole, but to instead select a subset of securities within the market that they believe will perform better than the market. The additional risk added by not owning the market as a whole is called active risk.

Personal Wealth

Expecting an investment outcome is as important as the outcome itself

The investment product landscape is a mine field. The most dangerous products on the market are the ones designed to appeal to the fear and apprehension of investors; active management promises higher than market returns and lower volatility, segregated funds come with various guarantees, and principal protected notes are pitched as offering upside potential with no downside risk. In reality, all of these products enable financial companies to charge additional fees for a sense of security.

Tracking error is not a risk, you are

Research has shown that small cap, value, and high profitability stocks have higher expected returns than the market. They also exhibit imperfect correlation with the market. Building a portfolio that tracks the market, and then increasing the portfolio weight of small cap, value, and high profitability stocks increases the expected return and diversification of that portfolio. From a human investor’s perspective, the problem with higher expected returns is that they are expected, not guaranteed. And that imperfect correlation?

Should you make RRSP withdrawals in a no-income year to contribute to your TFSA?

This common question usually arises when one spouse has retired while the other is still working. The spouse that has retired has no income, and they see these years as a good opportunity to make RRSP withdrawals before CPP income and RRIF minimums bump them up into a higher tax bracket. Knowing that you can earn up to $11,474 of income without paying Federal tax, it seems like an obvious decision. Take $11,474 out of the RRSP at a 0% tax rate, contribute it to your TFSA, and when you take it back out of the TFSA in the future, you won’t pay any tax. Seemingly the perfect move.

Spotting subtle conflicts of interest with your financial advisor

In Canada, it is currently up to the investor to ensure that their interests are truly being put first when they are receiving investment advice. Most Canadian financial advisors are held to a suitability standard, rather than a best interest standard – meaning that as long as their advice is suitable, it does not have to be in the best interest of the client. Conflicts of interest are generally subtle, and they are ingrained in the way that many Canadian financial advisors do business.

Personal Wealth
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The TFSA is not a Toy

It may be a flaw in the name. The government-intended use of the registered retirement savings plan is clear, retirement, but the tax free savings account is less commonly viewed as a long-term savings vehicle. I often meet investors who are using their TFSA to trade individual securities; the TFSA is their ‘play’ account. They are likely acting under the influence of their own overconfidence bias, imagining the large tax-free profits that they are going to make when their bet on a stock pays off, and not considering the significant negative consequences of taking unrecoverable losses within the TFSA. An unrecoverable loss occurs when a security loses its value and never recovers, something that can easily happen when trading individual securities.

Personal Wealth
Basketball Skills

Luck vs. Skill

On March 2nd, 1962, Wilt Chamberlain scored 100 points for the Philadelphia Warriors in a 169 – 147 win over the New York Knicks. This set the NBA single-game scoring record which still stands today. The game was not televised, in fact, no video footage of the game has ever been located. The stadium was only half full, and no members of the New York press were present. Audio recordings do exist, but only of the fourth quarter.

Getting carried away with the RRSP deduction

It is common for Canadians to make last minute RRSP contributions in order to claim the deduction and receive an immediate tax refund. While satisfying, using the RRSP deduction in the same year that a contribution is made can be suboptimal if a person’s tax rate is increasing from one year to the next. This can be illustrated with two cases.

Don’t follow the crowd into cash

It’s easy to imagine that when markets are declining everyone is selling their stocks and hiding cash under their mattresses. Sensationalist news reports will often reference increasing cash balances as nervous investors rush for the exits. While this perception is common, it misses half of the story; for every seller there must be a buyer. Cash isn’t piling up everywhere while everyone waits on the sidelines. For each nervous seller running for the hills, there is a level-headed buyer capturing the equity premium.

Canadian investors are slow to adopt evidence-based investing

It is becoming common knowledge that Canadians pay the highest mutual fund fees in the world, and are often receiving advice from commissioned sales people selling expensive actively managed mutual funds rather than fiduciary financial advisors acting in their best interest. Index funds and passive investing have gone mainstream on Canadian personal finance blogs and media outlets, giving the impression that we are becoming sensible investors. The data tells a different story.

Personal Wealth
Advisor Analyzing Graph Data Computer

What if investing right before a market crash isn’t that bad?

Imagine having $1,500,000 of cash. With a long time horizon, and no immediate needs, you decide to invest $500,000 in a globally diversified portfolio* consisting of 80% stocks, and 20% bonds. It is March 1, 2000. Within days, the dot com bubble bursts, followed by the terror attacks of September 11, 2001. By the end of September, 2002, your invested portfolio has dropped from $500,000 to $480,724.

Personal Wealth
Mature Man Calculating Calculators Numbers Desk

Expected returns vs. hoped for returns

Expected returns stem from the idea that investors need to be paid a return for taking on the risk of owning securities. No investor would own securities without having the expectation of returns, and as the securities being owned get riskier, the investor will expect increasingly higher returns.

Personal Wealth
Female Jogging Attire Looking Up Stairs

If you think you need an options strategy, a hedge fund, or an active fund manager, you probably just need to revisit your time horizon

I often hear the phrase protect your downside. It’s the sales pitch that a large part of the investment management industry thrives on, and it plays to the myopic loss aversion that most investors exhibit. Myopic loss aversion is the tendency of investors to evaluate their portfolios frequently with greater sensitivity to losses than gains, causing them to act as if their time horizon is much shorter than it actually is.

Advanced Investing

Ignoring the Shiller P/E

Back in August of 2014, I wrote a post titled Is it time to get out of the market? At that time, the Shiller Cyclically Adjusted Price Earnings Ratio, or Shiller P/E, a price earnings ratio based on the average inflation adjusted earnings from the previous ten years, stood at a level of 25.09 (vs. a long-term mean at that time of 16.54).

Personal Wealth
PWL Offices

The Journey to PWL

When the average Canadian sets out to find a financial advisor, a firm like PWL is probably not what they have in mind. This should not come as a surprise. With the vast majority of Canadians’ invested assets continuing to be invested in expensive actively managed mutual funds, it is clear that we have not collectively caught up with the evidence.

Personal Wealth
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Excited about your tax return?

A large refund from the CRA is not as exciting as it may seem when you receive the cheque; it is a sign of poor tax planning. People earning a salary have tax withheld from their pay throughout the year, and if the amount of tax withheld ends up being greater than the actual tax owed at the time of filing, a refund from CRA is the result. How can this be a bad thing if you’re getting the money back in your pocket when you file your return?

Jim Cramer converts to index investing

In an unexpected but welcome turn of events, Jim Cramer has announced that he will give up on claims that he is able to predict the future to produce market-beating returns, and move all of his money into low-cost index funds. After years of preaching individual stock selection as the smartest approach for every investor with enough time to do the research, Cramer has said that he became curious about the consistent inflows into index funds. Taking a brief pause from his Bloomberg terminal to pick up some peer-reviewed academic journals, he was quickly overwhelmed by the amount of evidence in favour of index investing.

U.S. firms don’t put their money where their mouth is

The large brokerage firms in the United States have had their blunders, most notably the 2008 financial crisis that almost crippled the world economy. These firms have massive conflicts of interest with their clients, and they put forth great effort to cover this up through advertising.

Observing DFA Canada’s Five Year Performance

In a recent (subscription only) article for the Globe and Mail, Andrew Hallam discussed his observations on DFA Canada’s performance. He noted that while DFA’s U.S. domiciled funds tend to beat the market, most of DFA Canada’s funds have underperformed comparable ETFs over a trailing five year period.

After tax returns of DFA Five-Year Global Fixed Income

The notion that premium bonds are highly tax inefficient has been written about extensively by Justin Bender and Dan Bortolotti. In a recent blog post, Justin used his after tax rate of return calculator to demonstrate the tax efficiency of the First Asset strip bond ETF (BXF). BXF was in a league of its own in 2014 with a tax cost ratio 33bps lower than its closest peer – the tax cost ratio can be thought of as an additional MER that the investor pays in taxes. Justin compared ten short term bond ETFs, and BXF had the highest before and after tax returns of the set. The DFA Five-Year Global Fixed Income Fund (DFA231) was not included in Justin’s ETF comparison.

Evidence of Good Financial Advice

Dimensional Fund Advisors is a little known fund company that has gained notoriety over the past few years, but is still far from being a household name. This is by their own design; they do not market their products, and they are very selective when it comes to allowing advisors to use their funds. The advisors that do successfully go through Dimensional’s training and commit to their strategy are submitting to the idea that nobody can predict the future, so investors are best served when they focus on what they can control.

Principal Protected Notes vs. a Balanced Portfolio

Principal Protected Notes are investment vehicles governed by complex contracts that are not regulated or reviewed by any securities commission. In most cases, the contract offers investors the opportunity to participate in a percentage of the price increase of an underlying group of assets (stocks, bonds, an index) over a set period of time while being guaranteed to receive their initial investment back at the maturity date. The pitch is that this is an opportunity for investors to participate in the potential upside of some assets, with none of the downside. This is a great story. It’s so good, in fact, that Tony Robbins advised his millions of readers around the world to take advantage of this type of investment vehicle.

Structured Notes are Behaviourally Satisfying and Rationally Harmful

A structured note/structured product/equity-linked note is a financial derivative with a return at maturity that is linked to some underlying asset or group of assets. The linked asset tends to be some stocks or a stock market index. Structured products are popular because they play to investors’ behavioural biases, and they are profitable for financial institutions. These products are notoriously complex.

Preferred Shares: Not worth the risk in non-taxable accounts

Investors looking for yield in a low-interest rate environment will often turn to preferred shares. Preferred shares can be a good tool for taxable investors due to the Canadian Dividend Tax Credit, but for non-taxable investors they are significantly less attractive. In situations where tax efficiency is not a benefit, preferred shares pose risks that are not worth taking.

What Investors Need to Know About Managing Risk

“Investors love risk when stocks skyrocket, and hate it when they tank.” It is commonly accepted that there is risk involved in investing, but investors do not always know how to define it. In a recent white paper, PWL’s Raymond Kerzerho and Dan Bortolotti set out to help investors understand what risk is, and how it can be managed through a disciplined approach. In reality, the vast majority of investors choose to take risk management shortcuts like principal protected notes, hedge funds and guaranteed income products. These products “are often guilty of implying that you can achieve equity-like returns with bond or GIC-like risk,” which can be harmful to the long-term success of an investor.

An Open Letter to Active Fund Managers

Dear Active Fund Managers: Please do not give up!

We know that 2014 was an especially difficult year for you, and though it was not the first difficult year that you have endured, it was surely the most public. Do not allow yourselves to feel discouraged from headlines like “The Decline and Fall of Fund Managers” and “The Triumph of Index Funds”; maybe your bets and predictions will be more accurate in 2015.

Is 2015 the year to fire your financial advisor?

2014 was a strong year for financial markets, capping off a six-year-long bull market that could make anyone look like a star investment manager. As an investor, there are important areas to evaluate beyond positive investment performance to determine the worth of a relationship with a professional financial advisor.

Leveraged ETFs: Not Appropriate for Long-Term Investors

If an investor believes in the long-term performance of equity markets, why would they not use leverage to invest in equities, amplifying their long-term returns?

Ideally, a leveraged ETF gives investors the opportunity to participate in amplified gains and losses as compared to the market.

The Next Big Call

Kyle Bass became instantly finance famous when he called the sub-prime mortgage crisis and made a handsome profit for the clients of Hayman Capital Management […]

Stories over Science – Tony Robbins’ Financial Advice

Tony Robbins’ new book, MONEY Master the Game: 7 Simple Steps to Financial Freedom, is full of great stories, knowledge, and ideas that can help people kick-start their financial future. He discusses disciplined saving, and debunks the financial services industry for the average person.

The RDSP after age 19

RDSP accounts are eligible to receive funds from the Government of Canada to assist disabled persons in long-term saving. Both a contribution matching grant and an income tested bond can be paid to an RDSP, based on the beneficiary’s family income.

Managing risk in retirement income

With the ever-declining number of defined benefit pension plans in North America, the ultimate goal for most investors is a well funded retirement. The idea that a lifetime of disciplined saving and investing leads to a comfortable retirement is generally accepted, and the accumulation of a significant nest-egg should be viewed as an achievement.

Some perspective on market volatility

Markets, especially Canadian markets, took a tumble through September. The S&P/TSX was down 11.2% from September 3rd to October 15th, prompting Canadian news headlines like Forty-Day Freefall, and Market mayhem: what’s driving the global economic breakdown.

Sorry, we aren’t selling

Jason Zweig once wrote that “good advice rarely changes, while markets change constantly. The temptation to pander is almost irresistible. And while people need good advice, what they want is advice that sounds good.” This statement is true in practice.

Is it time to get out of the market?

We are in the midst of a long Bull Market. Robert Shiller popularized the idea of Irrational Exuberance when he explained that people get overly excited about stocks when stocks are doing well, bidding prices up to an unsustainable level.

The hunt for returns

Buy low, sell high; it would be an easy path to investing success if people knew how to control their own behaviour. Investors may know that they want to buy low, but there is no way to determine when low has happened.

The shift to F Class does not mean lower fees

Financial advisors throughout Canada are terrified. The Client Relationship Model (CRM2) is coming quickly, and it means that advisors will be obliged to disclose their fees and charges to clients. The non-disclosure of fees has been a quiet issue for years in the Canadian financial services industry.

A tale of two advisors

This is the story of two financial advisors, Brian and Adrian. They both took different paths to enter their career, and they are motivated by different things.

How do you invest?

What’s the first thing that comes to mind when you think about an investment professional? They must be able to pick the best stocks, the best industries, and the best geographies to invest in over a given time period.

Beating the spread

If a bookie presented you with the opportunity to bet on a basketball game between the Raptors with a 5-0 record and the Bobcats with a 0-5 record, which team would you bet on?

The risk story behind expected profitability

Investors demand higher returns for taking on more risk. Small stocks and value stocks have exhibited performance that exceeds that of the broad market over the long term which can be explained by the increased riskiness of these asset classes above and beyond the risk of the market.

High Frequency Trading

The promotion of Michael Lewis’ new book has caused a significant amount of discussion in the media around whether or not High Frequency Trading (HFT) causes harm to the integrity of financial markets.

Advanced Investing

Looking for yield in all the wrong places

The current low-yield environment has made it very easy for investors to question the value of holding bonds in their portfolios.  With interest rates staying low as long as they have, concerns have surfaced around frustratingly low yields, and the fear of rising interest rates decimating the value of bonds.

Risks Worth Taking

Wealth creation takes place when cash flow is steady, there is time to recover losses, and risk is tolerable.​ It’s not uncommon for the ability […]

Scale and Skill in Active Management

In a recent academic paper written by Lubos Pastor (Booth School of Business) Robert F. Stambaugh (The Wharton School) and  Lucian A. Taylor (The Wharton School), the size of actively managed mutual funds, the size of the actively managed mutual fund industry, and the skill of active mutual fund managers were studied to determine how they affect the performance of actively managed funds.