@Ray – I’m not positive about the RRSP question, since I haven’t tried putting them in my RRSP. As for TD honoring the discount, I believe they would on the reinvested portions (someone correct me if I’m wrong) – again, I’m not at the point yet where I’m pseudo-dripping certain stocks at the big brokers.

The three main characteristics of those who are able to achieve financial success are that they believe they control their own destiny, they are able to overcome their fear of change and make changes that improve their financial situation, and they are open to new ideas and constantly keep learning.

Faith will only get you so far. It’s these other things combined with actual initiative and perseverance that foster success in life.

Also, we have a garden, which we can veggies and fruit in the fall. All we normally by is side dished and canned goods.

Where I disagree with you Ed, is on your generalization about “performance maniacs.” There are plenty of nervous investors who do themselves more harm than good trying to time everything. But there are also a lot of smart, thoughtful investors who make solid, data-driven decisions to move in and out of investments for good reasons. If you have the expertise, and the time/resources to do it right, you can achieve greater returns. Professionals do it every day.

As for the NON-deductable investment loan…As you know from your time working as TDMP rep., it MAY only become non-deducatable once the mortgage is paid off (some 14 yrs from now ).

At that point, I have 2 options…

Pay off the investment LOC attached to the morgage by cashing in the investment portfolio that has been generated over that 14 yrs from taking the equity out monthy and investing it … this option leaves me with no mortgage, no outstanding LOC and little to no wealth portfolio but the mortgage is payed off 16 yrs early leaving me with what was the full mortgage payment amount monthly for investing…I win

OR

Continue the process of funneling the full amount that WAS the mortgage payment through the account thus keeping it as a deductable investment loan and increase my wealth portfolio until it is well in excess of the amount I owe on the LOC.
At this point, I sell off a portion of the wealth portfolio, pay off the LOC and am left with no mortgage, no LOC and a significant amount left in the wealth portfolio…I win again

As for who is doing my tax return…are you offering??….I’m open to your involvement and input.

Dan

I see what you were striving for – the word faith can mean so many things to different people, and it also has a very strong emotional response – it’s a tricky word to use. I actually like “conviction” better – and it didn’t immediately bring up the image of orange jumpsuits for me ;-).

Looking forward to parts two and three….

Alexandra.

Maybe I should clarify, I think that everyone should have a financial planner in their life. (Their spouse at the very least :)

And I think your quote above is really zooms in on why people don’t plan and don’t want a planner.

It starts with admitting that all we want from life is just to keep living our current lifestyle. It’s really hard to admit when you’re 25 or even 35, that “yeah, this is pretty much all I want to do”. Even when your lifestyle demonstrates that “this” is all you’ve done for the last decade, this truth can be hard to accept.

It’s hard to sit around at 30 and imagine that in 20 years you’ll be watching Super Bowl LX with your adult children in the same house you bought last year doing the same job you did last Friday.

And of course if you’re OK with the notion that that’s what you’ll be doing, then, hey, who needs a planner for that? I’m already doing that, what could possibly go wrong?

So if planners really want financial planning to be a wide-spread activity, then the public needs to be convinced of two things:
- That it’s not shameful to want what you already have. Nor is it shameful to want a little more. You don’t have to retire rich, but you do need enough money to get to the end.
- That good time with a paid financial planner will help give you the stability and growth that you desire. (people resist change, and we really don’t like going backwards, but we’re OK with growth)

This was a great No Fee card…I wouldn’t be with MBNA otherwise…their credit card information was compromised last year as well when a new card was issued to me. Is this a regular occurrence at MBNA?

The new Card needs to be NO FEE. For the love of God, do not make it an Amex…other than Costco who in the hell accepts American Express??

If the new Starwood Credit card is Amex or has a hefty fee, I’m considering the Marriot Rewards Visa. I haven’t run the numbers yet, but I have enjoyed my Marriot stays and the rewards are easy to redeem and tie in with the places we visit. Thanks for this blog – I’ll keep watching for updates… I hope those idiots at MBNA and SPG read these posts. I’m sure the Hyatt Gold and Marriott folks are happy.

What are you going to do with the NON-deductible investment loan that results from taking the payments out of the leveraged investments?

Once your mortgage is paid off, are you planning to start paying that off? Or will you convert that into a new mortgage and start converting that amount?

Who is going to do your tax return?

Ed

That is a very insightful comment. Most people do tend to wander through life. When we ask people how they ended up in the job they are in, the answer usually just that events led them there. Few people chose the road they are on.

However, with financial planning, most people have no grand plan for retirement and just want to maintain their current lifestyle, less the mortgage and the cost of the kids, plus some money for entertainment and travel.

That may not sound like much, but without a plan, few people will build up the nest egg they need to a maintain their lifestyle.

Even though most people don’t plan their lives, they still need to plan their finances just so they will be able to afford to keep doing what they are doing.

Ed

They are rolling 10-year periods ending at the end of each year – not rolling decades. That is why there are 129 periods since 1871.

Ed

Do you focus on Canadian dividends (for the preferred tax treatment), or the best companies anywhere in terms of yield and dividend growth?

What do you do to avoid looking like a TSX index fund?

Ed

I had the same issues with the word “faith”. It has other connotations and can imply blind faith. However, it is the best word I could come up with (and the one Nick Murray uses).

I thought of using “conviction”, which may be more accurate in describing conviction in your investment philosophy, but it does not really include general faith in the markets (and it sounds like a prison word :) ).

However, we have seen this faith to be extremely important. It’s not that 100% of investors with faith are successful or that 100% of those without faith are not, but we have found it to be the single biggest difference between successful and unsuccessful investors.

Ed

Okay, I’ll take Crosby, Malkin, Thornton, Lidstrom, Pronger & Luongo, and you can take an index of the average of all hockey players. How much would you like to bet?

How many levels of successful choices did that take?

Oh, I love a good debate about the efficiency of the market, Aolis.

Most people have no trouble believing they can recognize superior talent in sports players and that these superior sports players will likely continue to be superior. Why is it hard to assume the same thing with super-investors?

Buffett’s answer to you was specifically assuming you would not have time to invest and following your question ending with requests about which “specific sectors and percentages.” Could he have just been saying that you should buy a broad-based investment and “get back to work”?

If Buffett actually thought that, then why does he not buy index funds? He really believes in the “Super-investors of Graham-and-Doddsville”. As he said in his debate at Columbia: “I think that you will find that a disproportionate number of successful coin-flippers in the investment world came from a very small village that could be called Graham-and-Doddsville.”

You are right that one outlier does not prove anything, but it is faulty logic to assume that just because luck could explain someone’s success, it proves that all are luck.

What about all the other investors in Buffett’s classic article that all massacred the index over long periods of time? Note that the ones that are still active continued to massacre the market since the article was published. What would possibly make you think they would suddenly lose it?

Tell me, would you really prefer an index fund to having Warren Buffett himself manage your money?

Ed

Till then,

Jean

I just noticed your post. You need 20% down to be able to get any of the readvanceable mortgages. So, FT is right that I would suggest to try to pay your mortgage down that far.

You may be able to finance this in a different way, such as with an unsecured credit line or some creative strategy to get a much larger tax refund to pay down your mortgage (such as a larger RRSP loan). If you have no other debt and 2 good jobs, you should qualify for a good sized unsecured credit line.

I would recommend to stick with a 1-year mortgage – whether or not you can get 20% down by January. We call 5-year mortgages the “5-year fixed mortgage trap”. Rates are almost always much higher. Based on a study, taking five 1-year mortgages instead of one 5-year mortgage would have saved you money 100% of the time since 1950. This has held true whether rates are rising or falling.

We are getting 2.05% on a 1-year fixed now. If you take a 5-year fixed at 3.75%, then you would be paying more unless 1-year rates average 4.3% or more for years 2-5, which is quite unlikely.

Staying short has added advantages, especially for people doing the SM, since it allows you to restructure your mortgage every year if anything changes in your life. This also allows you to negotiate extra goodies every year – free appraisal, unsecured credit line, etc.

Since you are both teachers, the SM may be particularly well suited, because you get hardly any RRSP room. The SM gives you an alternative way of getting tax deductions and investing.

Ed

I just noticed your post. Yes, it is the tax refund from the investment loan that reduces your mortgage amortization.

Your mortgage may be gone in 5.25 years, but you have a NON-deductible investment loan at B2B at a higher rate than your mortgage. What do you plan to do with that?

I would suggest that whatever your strategy, if you reinvest the distributions instead of paying them out, then your expected benefit is higher – and you can avoid all the “4 Meaningless Transactions”.

Ed