Oct 152016
 

 

Be sure to read Part 1 before continuing

What to hold in a frozen investment account:

Remember that in your frozen account there is no rebalancing, no buying, no selling, no withdraw. You can take no action until you return to Canada and unfreeze. Good thing you are read this before you leave Canada and it’s not too late! Your ideal frozen funds should have these characteristics:

  • No dividends
  • No re-balancing required
  • Steady, reliable growth
  • Low fees
  • Allocations: 15% Canadian equity, 40% US equity,  25% International equity, and 20% bonds

If you are under thirty I’d normally suggest 10% in bonds, but since you can’t re-balance it’s best to give your slower growing bonds a head start. In a few years your entire portfolio will be higher(probably), but the bonds will have grown at a slower pace, reducing their share of the total. Ideally that 20% will be closer to 10% or 15% where it belongs. (and yes that will keep shrinking, but there’s really nothing we can do about it if your account is frozen for ten years or longer).

I’ve come up with two options: One single balanced fund, or a set of three or four stable ETFs. Amix of both will also work well:

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Sep 152016
 

So you’ve finally decided it’s too cold here, or you’re sick of Tim Hortons coffee, or some beautiful person has stolen your heart and keeping it hostage in another country. Whatever the circumstance you’re exiting Canada for an unspecified amount of time. But what do you do with your massive swollen nest egg all tucked away in the Toronto Stock Exchange?

Option 1: Don’t Change Anything, Freeze Your Account

If your brokerage allows it you can keep your investment accounts as-is after you leave and potentially avoid:

  • Transaction fees
  • Account closing fees
  • Wire transfer fees
  • Currency conversion fees
  • Realized gains/loses from selling your investments
  • Lost growth during the lag time between selling in Canada and re-investing in your new country

That’s a lot of fees that can be avoided. But they might be pennies compared to the financial disadvantages. Normally if you leave your account it will become FROZEN, meaning you can’t do anything except watch what happens. Some of the implications of a frozen account include:

  • No rebalancing
  • Dividends sit as cash
  • Complex cross-border taxes
  • No access to funds if they’re needed

What about selling everything and closing the account?

Option 2: Liquidate Accounts and Re-invest in Your New Country

Depending on your brokerage, selling might be your only option (Questrade, for example, does not allow non-residents to hold a margin account). Taking your money with you has some benefits:

  • Lower taxes (maybe)
  • Access to better investments
  • Simplified tax reporting
  • Avoidance of jail time and/or $10,000+ fines (your Canadian investments might be considered offshore tax evasion)

Of course the tax benefit won’t matter if Canada is still taxing your worldwide income, and that’s the first thing you need to check:

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Jun 192016
 

Before You Continue Reading – Are Mutual Funds For You?

Are you lacking time to learn basic investment skills? Do you trust other people managing your money? Are you okay with paying high fees for mediocre returns? Then mutual funds might be for you.

Or maybe you already have them, or maybe your employer’s group RRSP only offers mutual funds like mine does with RBC. However you ended up with mutual funds, don’t use ignorance as an excuse to keep them. Do your research on what they are and how they work and why you should avoid them:

Why You Should Avoid Mutual Funds

Unjustified high fees. When I say high fees I mean tens of thousands of dollars over your lifetime. You’ll never see a line item of FEES: $15,000, you’ll see MER: 3% which will equate to $15,000 PER YEAR on your nest egg of $500,000.

The truth is that passively managed index fund will nearly always give better returns over the long run. I go into more detail here and here.

Managed funds must consistently outperform the market by 2-3% for their 2-3% fees to be worthwhile. This almost never happens. Here is a comparison of an index fund and mutual fund from one of my previous posts:

VCN-IGI

You can see that the passively managed ETF VCN is basically 20% higher than the actively managed IGI489 after only 2 years!

Okay Whatever, I’m Still Buying Mutual Funds

So you’re still going for it despite the evidence. Ok then let’s get into it. For the analysis I’ve separated TD’s funds by colour according to their category:

TD Fund Legend

I’m reviewing them based on 3 criteria:

  1. Best Return Since Inception (long term gains)
  2. Best 5 Year Return (short term gains)
  3. Best Return During the 2008 Crash (options for conservative funds)

Now KEEP IN MIND that I’m analyzing past returns which are no guarantee of future returns. Who knows, maybe my #1 recommendation will lose 50% of it’s value the day you buy into it. Invest at your own risk.

CLICK HERE for an image of all funds for reference.

And awayyyyyyyyyy we go!

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May 242016
 

People (mostly bloggers) write and talk about how mutual funds are basically scams but they rarely show proof. Well I finally found some. I present to you the story of TD Global Asset Allocation Fund, TBD158.

Part 1 – Fund Inception

TD Global Asset Allocation Fund was created on January 13, 1998 as noted on this snapshot of the TD website from Nov 1, 2001. The fund’s objective was to maximize long term capital growth by actively trading futures contracts in the global market. If you wanted in on this groundbreaking fund you paid heavily with a MER of 2.95%. The fund also had the power to enter and exit geographic regions at the manager’s discretion, thereby giving him a lot of power over the $210 million worth of assets in the fund. That’s a lot control for one guy and clearly it didn’t go well in the early years:

1999 did okay, but massive losses followed in the two subsequent years. Blame the Y2K bug! Source

The managers blamed the latest losses partly on global uncertainty after the 9/11 terrorist attacks. That might explain losing 9% in 3 months but what about the other -7% that year? and -5% in 2000? Ok the dot com crash had started in 2001 but the fund was still below its benchmark.

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Apr 082016
 

Before upsetting anyone let’s define cheap:

CHEAP — Buying inexpensive or low quality despite being able to pay for the higher quality item.

Cheapness can be good or evil. The latter can damage reputations, friendships, the economy, and/or personal health. Good cheapness can lead to financial freedom.

Examples of evil cheapness:

  • Postponing preventative medical care
  • Eating low quality food
  • Wearing poor-fitting clothes
  • Bailing on social situations
  • Foregoing international travel

Examples of good cheapness:

  • Fixing things that break
  • Bringing bag lunches
  • Biking/walking instead of driving
  • Drinking water (instead of sugar drinks)
  • Using the library

You’ll notice that all the good cheapness examples have secondary benefits related mostly to health and/or personal satisfaction.  Now that we’ve defined cheapness let’s call it frugality. But why bother with it?

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Feb 062016
 

 

Ok this gravy train of travel posts is over. It’s back to money stuff! But before that lets tally up the cost of travelling through Asia for one month! First, here are the pre-departure expenses, as seen in my previous post.

 

Pre-departure Expense Cost (CAD)
Flight – Chicago to Istanbul $796
Flight – Istanbul to Bishkek $180
Flight – Bishkek to Urumqi $358
Flight – Beijing to Chicago $730
Hotel – Istanbul, 4 nights $80
Hostel deposits, Urumqi/Beijing $15
Train – Lanzhou to Beijing $73
Chinese Visa $106
Travel backpack $144
Travel clothing $265
TOTAL $2,891

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Jan 102016
 

I flew directly from to Urumqi from Kyrgyzstan and spent 11 days travelling Xinjiang and Gansu province in north west China. Xinjiang is known for being part of the silk road and nowadays it’s known mainly for natural resources and ethnic minorities.

Am I on Tatooine? Also, someone doesn’t know how to make a level foundation

Urumqi has 1.7 million people, of which 1.5 million are Han Chinese. The Uyghur people are the largest minority and a source of conflict in Xinjiang. Both the Uyghur and Han claim they got to Xinjiang first and are the indigenous people. The Uyghur have protested in the past over political injustices and a push for separation from China movements. In 2009 the protests turned violent and to this day Urumqi is full of riot vans and military! Continue reading »

Dec 102015
 

Kyrgyzstan

Kyrgyzstan is a country in central Asia formerly part of the USSR. The people are semi-nomadic and speak Russian and Kyrgyz. I speak neither of these languages.

In my six days I visited Bishkek, Cholpon Ata, and Ala Archa. I stayed with a Canadian friend (Lynelle) who is teaching at an international school.

Click to jump ahead:


Bishkek

The capital of Kyrgyzstan. The city itself is flat but it has mountains to the south. The people are predominantly Muslim, although the religious majority is less apparent compared to countries like Turkey.

A mosque with background mountains. Just like I said!

A mosque with some good looking background mountains.

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