Another Potential Win for Canadian Investors

Was happy to notice a wee blurb in Monday May 2 ,2016's Globe and Mail
entitled "The investment industry's growing unrest over hidden fees" by Clare O'Hara.( section B--pages 1 and 7)

There is more hope on the horizon for those Canucks who still insist on purchasing mutual funds. The
"hidden" commissions that "financial advisors" earn for the period of time that a consumer holds units of a certain mutual fund will, Clare asserts, in the near future become more restricted, AND/OR much more transparent.

After all, why should there be so much murkiness in the "investment product" industry?
Since when are investments now known as mere "products "??

Since when are "investors" merely treated as "financial product" consumers?

It used to be....or at least it "felt" more that way when I was young, that investments were something
that held "unlimited " potential. The mystery and the myriad of ways in which a potential financial investment could grow or morph or produce multiple income streams was a beautiful and alluring "unknown".

Now it seems that banks and financial investment companies are determined to
"capture and control" every single aspect of an "investment". No more surprises....only more legaleze, and more ways for the investment industry to make money off the backs of hard working and naive "investors".....They don't even call us "investors" any more. We are merely "consumers" who are being sold "products".

By the way, we prefer to be called "investors"....no matter what the amount we are able or willing to "invest".

Anyway, pardon the rant..... This post is intended to be positive.
If even the investment industry is ready and willing to admit that there needs to be changes that "help" individual investors, then we are indeed poised for greater gain.

Tony Robbins,through his book  "Money, Master the Game" , exposed much of the murkiness in the USA's mutual fund industry and explained how so many many fees and hidden costs are bound up in the American mutual fund industry. The fees and extra charges are so complex, hard to find, and so "murky" that few, if any, invididual investors even know how much in fees that their investments are actually costing them at the end of their investing life. Those hidden fund fees and charges can eat up the majority of any potential profit that an individual investor may earn over their lifetime by holding mutual fund units."Mutual Fund Buyers beware"......was Tony's timely advice.

Yes, Tony's book was written for the States. But maybe Canada listened in on the conversation and has begun to take some preventative measures.
If Canada's mutual fund industry is willing to play a little more fair and transparently, then maybe, just maybe, you won't have to run and hide from mutual funds any more and stop picking stocks for yourself. Maybe.... just maybe.. maple syrup toting DIY investors might start trusting the advice of the "professionals" again.

Clare's article sheds a few good Canadian rays of light on the matter.
Happy investing, friends,
May you live long and prosper.

C.
Tweet

Is your DEBT Compounding FASTER than your INVESTMENTS?

I'm sure most of you already know what "compounding" interest means right?

Basically, just in case you need a bit of a reminder, it's the way in which, if a chunk of money that earns a certain percentage of interest is left alone for several years to compound.....it will gain great value over a lengthy period of time. Every year the interest is not only earned on the original principal amount but also on the interest paid out for the previous year(s). So let's say you invest $500 at 5% interest and leave it alone for 5 years, you won't just have $25 in interest earned at the end of the five year term. You will have much more than than because each year you will have earned "interest on your interest".

So the miracle of compounding is pretty awesome in the world of investing, especially if you have the fiscal discipline to leave your investment money alone before trying to withdraw any of it to spend.
Those who love the stock market and utilize dividend re-investment plans also use a similar concept of compounding in order to build up the value of their portfolios by simply "not touching" the dividends that their equities produce and allowing the plan to use the cash dividends to purchase even more stocks.

The scary part of compounding is that it can also seriously apply to instruments of DEBT. Therefore, if you have a debt owing of $500 dollars and you are paying 12% in interest yearly to the creditor....and you allow that debt to remain unpaid for five years, then after the FIVE years of compounding you won't just owe the company the original $500 plus a simple 12% interest payment....but you'll ALSO owe the creditor
"interest on the interest". That's why and how consumer debt gets way out of control so quickly. Many folks forget that DEBT also compounds when it is not quickly paid off in full. A small debt of only a couple thousand dollars can quickly balloon into hundreds of thousands of dollars in debt obligations if the debt is never paid off in full.

Remember that interest rates REALLY MATTER. One credit card might charge you 12% yearly in interest. Another credit card might charge you 28% in yearly interest. That is a HUGE difference and it will make a HUGE difference in the amount of money you are paying in interest to your creditor.

Today I just wanted to mention that when you are trying to get a healthy perspective on your financial situation you may want to dumb it down to this simple question..."
"Is my debt increasing FASTER than my investments?"
Is my debt costing me a higher interest rate than my the rate at which my investments are growing? It is a simple but very powerful tool to use to get us all to think about our finances in new and empowering ways.


For example, a simple equity portfolio might earn an average of 5% compounded annually. But what is your consumer debt costing you to carry it? 28% on a credit card is not uncommon for many department store credit cards. Therefore, if your investments are only GROWING at 5% and the consumer debt that you are carrying is ballooning in size at 28%.....something is not good. Ideally, we all want our investments to grow FASTER than our consumer debt. Then we will all stay ahead of the game and have something to retire on in the long run.

Think about it.

Peaceful productivity,
Carla

DISCLAIMER: Note the above blog post is not intended as professional financial advice and the owner/publisher of this blog does not accept any liability for the ideas discussed in this post. Professional financial advice should be obtained from a licensed professional.

ARE You Ready for An Increase?

So  many folks whine and complain and moan and groan that they have been waiting so long for their proverbial "ship" to come in. They have visions of vacations in hot countries and luxurious designer clothes and a fancy new car.

But I wonder sometimes, if many of the folks who feel this way, would really be able to handle it if  and when their situation suddenly changed...
What would you do? If your blog views suddenly explode and your ads started earning hundreds or thousands of dollars every month? Are you ready for such an increase? Do you have a bookkeeper and/or tax advisor to help guide you through times of increase?

Maybe you are an artist and have a profile with Patreon, hoping that someone will have a soft spot in their heart and want to sponsor your artistic creations. But my question today is this....is your heart and mind and emotions ready for your increase?

Do you have a plan for the extra money when it comes in ? Do you know exactly what you are going to do with it? If you say that you are going to invest it....do you know exactly where and how you will invest?
If you say that you are going to get out of debt, do you know which debts you will pay off first?

Sometimes it bears repeating that we shouldn't just be prepared for the "bad times"...but also for the good times.

Write down a plan as to what you will do when you start getting more money into your life. Know where you will shop, what you will buy, and precisely what investments you will purchase. Know also where you will save your money, as to what account you will put the money in, and whether you will spread the money over several accounts. There will be research you will need to do to determine what your tax situation will be also when your "ship" comes in. Be prepared. Expect good things.

Peace.



Tweet