Investing, Financial Independence and Retire Early (FIRE)
When it comes to managing our investment portfolios, there are definitely some mistakes that are easy to make, and ones that a lot of Canadian investors tend to do.
In this episode, we have Peter McMurtry on the show who is going to take us through what the common mistakes are that Canadian investors tend to do, as well as the best practices that he's noticed from his 30+ years in the investing industry.
One of the things Peter does is portfolio reviews for his clients, so I wanted to pick his brain on the common mistakes that he sees investors make when he reviews their portfolios so that you and I can be sure to avoid those mistakes in our own portfolio.
On the flip side, he’s also worked with clients that are successful investors, and after doing this for 30+ years, one begins to notice certain patterns about what the successful investors do, that the unsuccessful don’t. We go into these best practices that he’s noticed over the years from these successful investors, so that we can apply these lessons ourselves.
Enjoy the show, and you can get the show notes and resources over at BuildWealthCanada.ca
Wishing you all the best,
Kornel
With inflation slowing down here in Canada, we are starting to hear talks about the Bank of Canada no longer planning to increase our interest rates, or maybe even lowering them.
This can have an impact on your investment portfolio, particularly if you hold bonds, because remember there is that inverse relationship between interest rates and bonds, where increases in the interest rate tend to lower the value of the bonds that you hold in your portfolio. On the flip side, if the Bank of Canada lowers our rates, you can expect your bonds to increase in value.
Apart from your investments, the interest rate can of course have a substantial impact on your month-to-month cashflow, when it comes to things like mortgages as well as the real estate market in general.
So, with Spring just around the corner and the real estate buying and selling season about to kick-off, I thought it would be great to have our Resident Mortgage Expert, Sean Cooper back on the show to discuss:
-What Canadians should be thinking about when it comes to their mortgages right now.
-Should you do a fixed rate or variable rate mortgage if you’re buying a home or have a mortgage coming up for renewal?
-What if you’re considering locking in your mortgage to a fixed rate?
The optimum answer for all of this can change for you depending on what is happening in the market right now and your own situation, so Sean takes us through the different things you should consider.
You’ll also learn, what your options are if you find a better mortgage than what you have right now. What if the rates do drop and you’re now able to get a less expensive mortgage? Can you switch? What can the penalties be? And, can it be worth it to pay those penalties if you find a better mortgage?
About Our Expert Guest:
In case this is your first time hearing Sean on the show, he is the show’s Resident Mortgage Expert and who I go to and who I send friends and family to for any mortgage related questions.
Sean is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians.
He is also an independent mortgage broker and has made himself available to help answer mortgage related questions to listeners of the Build Wealth Canada Show.
If you have any questions, or are just looking to get a shortlist of the best mortgages that he’s been able to find in Canada (since he’s constantly on the lookout for the best mortgages), you can reach out to him over at buildwealthcanada.ca/sean.
And now, let’s get into the interview.
Today, we’re going to cover what you need to know from a tax, investing, and financial planning perspective as we head into this new year.
As you know, the government makes changes every year in these areas and the implications of these changes can have a pretty substantial impact on how much you pay in taxes, your net worth, what government benefits you are eligible to get, and how much you get.
These can easily affect your net worth in the thousands of dollars every single year, so it’s definitely in your and my best interest to know about these changes and get a bit of a refresher, so that we can all better prepare, and also take advantage of any opportunities that arise.
About our guests:To help me with this, I have Certified Financial Planners Jason Heath, and Hannah McVean on the show. Jason is a popular returning guest on the show, definitely one of the more well known and respected financial planners, here in Canada.
Hannah and Jason are both fee-only financial planners, which means they don’t sell any investments so there isn’t that potential conflict-of-interest that you see a lot of here in Canada where someone calls themselves a financial planner or a financial advisor, you think you’re getting a good financial plan and that they have your best interests at heart, but really they are just trying to get you to buy the investments that their firm sells so that they can earn a hefty commission.
None of that here, we’re going for purely unbiased financial education with Hannah and Jason.
A quick little bio on these experts:
Jason has been providing fee-only, advice-only financial planning since 2002 (for well over a decade). He is also a personal finance columnist for the Financial Post, MoneySense, and Canadian MoneySaver. He has a Bachelor of Economics degree from York University and holds the Certified Financial Planner designation.
Hannah is also a Certified Financial Planner and a Chartered Investment Manager. She has experience working in the wealth management industry managing investments and filing taxes. She is now on the fee-only, advice-only financial planning side of things, and if you want to speak Jason, Hannah or someone from their team, you can reach them at BuildWealthCanada.ca/jason.
Resources Mentioned:You can book a free introductory meeting with Jason and his team at buildwealthcanada.ca/jason. As a Build Wealth Canada listener, you'll get 10% off if you end up working with them. You'll also be entered into the giveaway to win a free financial plan. The discount and giveaway are for a limited time, and you can sign up for free here.
Questions Covered:We’ve all heard of high interest savings accounts that we can open up at our bank. But is that always our one and only best option when it comes to where we keep our short term cash?
What about for things like our emergency fund, or when we are saving for something expensive like a car and we want that money to be available immediately when we need it, and not be subject to the sometimes large day-to-day fluctuations that we see in the stock market?
In this episode, you are going to learn what your options are, here in Canada, when it comes to that short term cash that you want to be readily available, without you having to worry about incurring any massive day-to-day fluctuations that you would typically see in the stock portion of your investment portfolio.
Today’s guest, Matt Montemurro is going to take us through the different options that we have, as Canadians, and he’s going to take us through the pros and cons of each of these options so that you can make your own educated decision on which option is the best one for you, based on your situation and risk tolerance.
Spoiler alert: The best solution isn’t always the traditional high interest savings account at your bank.
Make sure you stick around because there are actually some regulatory changes happening here in Canada, which are going to be impacting high interest savings ETFs.
A lot of Canadians have been investing pretty heavily in these, and now it’s gotten to the point where the regulators have started to take notice, and they are about to implement some pretty significant rule changes that can negatively impact some of your investments, if you purchase or are considering purchasing high interest savings ETFs.
A bit of a background about our guest:
Matt is a specialist when it comes to fixed income. He is currently the team lead for all fixed income portfolios managed by BMO ETFs, which is the largest Canadian ETF provider.
In his role as portfolio manager and trader, Matt and his team are responsible for all segments of the fixed income market, both in Canada and internationally. He has over a decade of experience in this field and holds an HBA and MBA from the Richard Ivey School of Business at the University of Western Ontario and is a CFA Charter holder (definitely a very difficult designation to get).
I’m thrilled to have him on the show, and I must say, speaking with him during this interview actually made me re-evaluate where I keep my short term cash.
I really wish we were all taught this back in school, as it’s important for us to know what our options are here in Canada, along with the pros and cons of each, instead of just always automatically defaulting to a regular high interest savings account at our bank.
Enjoy the interview, I learned an absolute ton, and I’m sure you will too. Let’s get into it.
Questions Covered:
3. For those of us that do invest in high interest savings ETFs, can we expect a drop in those ETFs coming Jan 2024 because of a potential sell off?
Follow up: If not, how do sell-offs work when it comes to ETFs? For example, when there is a sell-off of a specific stock, we know that the price of the stock will plummet. But does it work differently with ETFs because ETFs consist of many different underlying assets?
4. How is a high interest savings ETF different from a money market ETF? Can you take us through the pros and cons?
5. How does using something like a high interest savings account compare to using something like a money market ETF instead (i.e. what are the pros and cons)? And for anybody not familiar, can you define what it means when an ETF is considered to be a “money market” ETF
6. For something like a money market ETF like ZMMK or a high interest savings ETF, would you expect the capital gain to be $0, because everything from that investment is coming in as income in the form of interest?
8. While we are on the subject of ETFs that we can use for that relatively safe portion of our portfolio, can you speak to using ultra short-term bond ETFs instead of a money market ETF, like the ZMMK that we just talked about. What are these ultra short-term bond ETFs, and what are the pros and cons of using those, vs something like a money market ETF or even instead of just using a high interest savings account at our current bank.
9. When it comes to bond ETFs like ZST for example, can you teach us how they can have some tax advantages, in certain scenarios, over something like a high interest savings account?
10. Alright Matt, thanks so much for training us on all of this today. For everybody that wants to learn more, what’s the best place for them to go?
In this episode, you’re going to learn:
How to deal with the volatility of the stock market, once you are financially independent and are living off your investments: There are many schools of thought and structures when it comes to dealing with this challenge here in Canada. Retirement expert, Kyle Prevost takes us through his research on the top recommended and respected structures that he has uncovered for us Canadians.
We also go through Kyle’s research on the optimum location for the fixed income portion of your portfolio. Traditionally the advice has been to keep fixed income like bonds in our RRSP. But does that still apply considering these higher interest rates that we are now experiencing here in Canada? And what about GICs? How do they fit into all of this? Should we be using those instead?
Last but not least, after taking into account all the research that he’s done on investing and financial planning for over a decade, Kyle shares what types of investments he buys for his own investment portfolio, and what accounts he puts his own investments in for the greatest tax savings and efficiency.
Questions in this Episode:Once someone has hit their financial independence number here in Canada and wants to start living off their portfolio, what have you found to be the top recommended structures to deal with the volatility of the market? For example, having a rule for how big the cash cushion should be, using GIC ladders, etc.
What investments do you buy for your own portfolio, and what accounts do you put your own investments in?
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In this episode, our guest Kyle Prevost is going to take us through how much we need to retire, as Canadians, and how much can we sustainably withdraw from our portfolio to not run out of money once we retire.
If you are a long-time listener of the show, then by now you would have definitely heard of the 4% rule, which helps answer these two questions. But, the 4% rule was created by Americans, for Americans, so how do all those findings and statistics apply to us Canadians?
(If you are new to the show, then don’t worry, we’ll go through what the 4% rule is, and the many caveats that exist with it, that we should keep in mind as Canadians.)
You’re also going to learn:
Kyle is founder of the Canadian Financial Summit and he and I have been co-hosting the summit together for the past 2 years. He is also a longtime personal finance columnist and you’ve probably seen a lot of his work over at MoneySense, and he’s been in the National Post, CBC News, The Globe and Mail, and many others. Most recently he is also the creator of 4 Steps to a Worry-Free Retirement - the first online course for Canadian retirement planning.
Questions Covered:When it comes to figuring out how much we need to retire, we often hear about the 4% Rule. Yet, a lot of the research out there on the 4% Rule was created by Americans, for Americans. In the research and interviews that you’ve done, how well have you found the 4% Rule to apply to Canadians? (and please briefly define the 4% Rule for anybody that is new to all this). Follow-up question: Are there any caveats that you’ve found in your research that are different for Canadians using the 4% Rule vs the Americans using it?
If somebody decides to use the 4% Rule, one of the rules/guides that they are supposed to follow is to increase the amount of money that they withdraw every year by inflation. For us Canadians, where have you found to be the best place to get that number?
For those that don’t like how rigid the 4% Rule is and would rather adjust their spending year-to-year depending on how the markets perform, what sort of structures have you found to work well for that? (ex. variable percentage withdrawal rules)
With the multiple interest rate hikes that we’ve been experiencing here in Canada, many Canadians have seen their monthly cashflow take a hit, whether it’s because you have a variable rate mortgage, a line of credit, or other forms of debt.
So what are your options if you’re paying more than you’d like on your interest payments, or maybe you have that mortgage coming up for renewal and you’re going to have to make that multi-thousand dollar decision on how you’re going to proceed?
Should you go with a fixed or variable rate mortgage when interest rates are high like they are right now?
Keep in mind too that if you have a mortgage coming up for renewal, then you won’t be able to get as good of an interest rate upon renewal, as you did when you first got that mortgage years ago, due to all these massive interest rate hikes that we’ve been experiencing.
To tackle all of this, I’ve brought on an expert that deals with these types of interest and mortgage related questions every day, and that is the show’s resident mortgage expert, Sean Cooper. Sean is who I go to and who I send friends and family to for any mortgage related questions. He is the bestselling author of the book Burn Your Mortgage, and he is an independent mortgage broker so he’s not tied to any one particular lender which gives him access to the top mortgages available in Canada.
Sean has also been kind enough to answer for free, any questions that you, the Build Wealth Canada listeners have. I’ve set up a special page for him so all you have to do is go to buildwealthcanada.ca/sean, and there you can send him a message with your questions, or, if you prefer, you can even pick a time on his calendar on that page for a phone or video call to get your questions answered with him live, for free.
Sean is a licensed mortgage broker too, so I definitely also encourage you to reach out to him if you’re looking to get a new mortgage or if your mortgage is coming up for renewal, as at the very least he’ll be able to provide you with a short list of the best mortgages that he’s been able to find across all of Canada from the 60+ lenders that he monitors.
None of this costs you anything, and there’s no obligation to get your mortgage through him or use any of those suggested mortgages.
That link again to get in touch with Sean to get your questions answered, and get his research on the best mortgages that he’s been able to find in Canada is over at buildwealthcanada.ca/sean.
Enjoy the episode. :)
Questions Covered:
Today we have Canadian author and speaker Fred Masters on the show. Fred has been a professional financial educator for decades here in Canada. He speaks at different universities to students and alumni, teaching financial wellness. In this episode, he’s going to share his findings on:
What he’s found to be the main problem areas that tend to prevent us Canadians from reaching financial independence years earlier.
What type of investing he has found to be the most effective in helping us achieve early retirement as quickly as possible here in Canada.
Fred is also the author of the book “Lessons on Mastering Money” where he identifies six key pillars that can really move the needle for us, when it comes to our finances. We cover those, and much more in the interview. Enjoy!
Get show notes and more free educational resources over at BuildWealthCanada.ca
Today, you’re going to learn how you can save money on your investments, by having the right investments, in the right accounts so that you pay as little tax as possible here in Canada.
For example, if you hold Canadian stocks, or ETFs that hold Canadian stocks, should you put those in your RRSP? Your TFSA? Or your taxable account? Which one of those is the most tax efficient?
What about your US and other international ETFs and stocks? What accounts should they go into so that you pay the least foreign tax on those investments?
For us Canadians, different investments are taxed differently depending on what those investments include, and what investment accounts you put them in.
It’s essentially an optimization puzzle that you can solve, by putting the right investments in the right accounts to pay the least Canadian and foreign tax, on those investments.
If you choose to optimize to this extent like I do, you can essentially reap the benefits of these tax savings for the rest of your life, since those savings will compound over your investment lifetime, and can accelerate your net worth, since every dollar saved in taxes on your investments, is a dollar that stays invested, and continues to grow and compound for you.
Resources mentioned in the episode:
Today, you are going to learn about how much you can save in fees and taxes on your investments, depending on how much time you want to spend optimizing your investment portfolio.
In Canada, there are inexpensive options that make things extremely easy and automated for you, but they are slightly more expensive and slightly less tax efficient.
On the other end of the spectrum, there are other investments available to Canadians that are as optimized as you can get in terms of keeping your fees low, and saving you money on both Canadian and international taxes. The trade-off though, is that these optimizations take a fair bit of work on your end to learn and implement.
So how big are these optimization benefits to you?
How much are you really saving by going with a fully optimized approach vs. a semi-optimized approach?
How big should your investment portfolio be before you start optimizing? or should you start optimizing right away?
We also cover where to go to check what fees you’re currently paying on your investments, so that you can have a nice apples-to-apples comparison when you are debating what fund or ETF to buy, or to check whether you are currently overpaying on your investments.
We cover all this and more on this episode.
This week’s episode is a little different since I optimize my investments to this highest level (in terms of paying the lowest fees and lowest taxes), and my guest also does the same. And so, in this episode, instead of the guest doing 90% of the talking, we instead each talk about how we both tackle these questions and I figure this way you are getting two educated perspectives, from two different people, in Canada, who have already been doing this for years.
I think ultimately this approach to the episode will help you make an educated decision on what level of optimization you want to pursue in your own portfolio.
Enjoy the episode. :)
Kornel
Today I’m going to be answering your questions, to help you out as much as I can in the world of personal finance and investing, here in Canada.
We’re going to focus on actionable, practical advice, specifically for Canadians while taking into account the investment options that we have here in Canada, factoring in our Canadian taxes to make sure that we’re not overpaying, and much more.
In today’s Q&A session, I’m going to be answering questions around:
1. How to determine if you should sell a particular investment that you own.
2. How to evaluate whether your investment returns should be higher.
3. What rate of return should you expect on your investments?
4. Where can you go to check your “total return” on your investments (growth + dividends) and not just the increase in price.
5. And much more.
If you would like to submit a question, the easiest way is to sign up anywhere for free over at buildwealthcanada.ca. When you do that you’ll get taken to a page where you can leave a comment with your question. Also, when you do that, I’ll email you my guide on the “Top Personal Finance and Investing Tools” that I personally use. Enjoy the episode :)
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