Category Archives: Personal Finance

Frugality lessons learned from a billionaire, Mr Kamprad, the deceased founder of Ikea

Two days ago I found out that the founder of IKEA, Mr. Ingvar Kamprad died.

I have been going to IKEA for about 20 years.  Since the first time I have always been delighted with the price, the style, and the variety of the furniture; and infuriated because once I am inside of a store, I feel like I am in a labyrinth where it’s impossible to get out.

Rest in peace Mr. Kamprad

Mr. Ingvar Kamprad, founder of IKEA died this January 27, 2018, at the age of 91. His Wealth was estimated to be 73.8 Billion.  The money will not go to his heirs. Instead, almost all his money will go to charity (Wow, I hate to imagine what his kids thought about that).

There are many lessons of frugality and entrepreneurship that we can learn from Mr. Kamprad’s life.


With my friends before acting in “A Closer Look”

I have nothing but admiration for Mr. Kamprad. He was an entrepreneur since he was a little boy. He discovered that if he bought things in bulk (at a discount) and sold them by the unit (at regular price), he could make a nice profit.

His first business was to buy matches in bulk and sell them by the box. Then, at age 10 he repeated the same business technique by selling pens.

He started IKEA at age 17.

Since the beginning, his strategy was to sell furniture at a lower price than his competitors, without compromising quality. His obsessions were: higher efficiency in the production line, higher quality, and lower cost. His formula allowed him to undercut all his competitors. At the beginning he was met with lots of resistance, some of his competitors even tried to sabotage his business, but at the end, Mr. Kamprad won by being unique and resilient.


Mr. Kamprad was an extremely frugal person. In spite of his billions,  His motto was: “Having lots of money is no reason to waste it.”

  • He avoided traveling first class
  • He bought his clothes in flea markets ( I buy my clothes at Walmart and at second-hand stores)
  • He drove a Volvo until it fell apart ( I have driven cars until they went to the scrap yard)
  • He used to cut his hair in poor countries to spend less money (I cut my own hair to spend nothing)
  • His house had no luxuries (my apartment neither)
  • He worked until his eighties ( I am looking forward to not having to work)

Mr. Kamprad’s impact on Society

Mr. Kamprad did to the furniture business what Mr. Ford did to the automobile business. He made it accessible to millions of people.

His focus was on cutting cost but not at the expense of quality. He wanted to offer a good quality product at an affordable price.

Before IKEA, furniture used to be heavy and expensive. Young couples had to depend on hand me downs. Out of town students had to sleep on second-hand mattresses. All that changed with IKEA. Now modern, stylish furniture is within the reach of almost every one.

Mr. Kamprad came to this world and made it better. I don’t know of any person who doesn’t have a piece of IKEA furniture in their house. As an Airbnb host, I have been at the Montreal store many times and I have memorized the maze. I can now get in and out in record time. I know where to find what I am looking for and I have learned to put together IKEA furniture faster than anyone I know.

What can we learn from Mr.Kamprad

Most of the time, success in business doesn’t come from a fantastic idea. Success comes from execution. There is nothing new about selling furniture. But if you focus on being more efficient than your competitors you will have an opportunity to beat them.

As far as frugality. We all can learn a lot from Mr. Kamprad. We can learn not to waste our money on things that don’t add much value to our lives.

  • We don’t have to buy a new car every 4 years ( I am talking to you, mother).
  • We don’t have to buy the latest electronic gadget. (My friend Raja tells me to buy a new laptop. I say “why? the old one is still working fine.”)
  • We don’t have to pay $60 for a haircut.
  • We don’t have to buy new clothes every year.
  • We don’t need to buy a house (or rent an apartment) bigger than we need.

The secret to wealth is still the same: Spend less than you earn and invest the rest.

Mr. Kamprad was a master in personal finance:

  • He earned millions of dollars
  • He spent very little, and
  • He was a great investor, he invested in his company.

Thank you, Mr. Kamprad.

Hire me 🙂

I am a money coach, I can help you get out of debt,  earn more money, and make better investment decisions.

I want to be with you after your graduation, when you get your first job, when you decide to get married. I want to help buy your first house. I want to make sure you are on track for a worry-free retirement.

Get in touch with me to book an appointment.

It’s Time to get rid of your financial advisor

We all know that investing in the stock market is one of the most efficient ways to invest your money. The idea is to put your money in the market and let it grow and work for you.

But how do you decide in which stock, mutual fund or ETF to invest?

Most people use the help of a financial adviser. They get an appointment. They show up at the office. The adviser gets a piece of paper to assess their risk profile and he sells them an investment vehicle (most of the time a mutual fund) full of high management fees and high commissions. It’s funny, they will not give you a bill. That’s because they make their money from commissions. Most people don’t know how much they are paying their advisers. This is NOT your best option. Over the history of your investment, you will pay a very high fee for that “free” service.

What are your options?

The investment world has evolved a lot. There are thousands of ETF and Index mutual funds and other low-cost products from where to choose. The problem is that there are so many that once again, you don’t know what to choose. When do you buy? When do you sell? How do you rebalance? It’s overwhelming.

Here comes technology to help us.

There are so many tools now that are available to you. These tools help you build your portfolio, they search for the lowest price products, they help you with the diversification of the portfolio, so on and so forth. Also, as you age, you need to rebalance your portfolio. You need to hold less of the more volatile assets (such as stocks) and more of the less volatile assets (such as bonds). One of the best know tools is called M1 finance.  But there are many others. They help you with the asset allocation and keeping the cost low.

I believe this is the way of the future

In the past, financial advisers would meet with you to sell you the funds they were selling. I know, I was a financial adviser once. Then, they will never get in touch with you again. All they care about is their continuous trailer fees of 1% to 1.5%. Life is sweet. The more accounts the adviser has, the more money he earns from those trailer fees, even if he never sees you again. As long as your account is open, he continues to get rich.

What the client needs is to own low-cost investment vehicle and pay low or zero management fees. This is all becoming possible now.

Recent experience

I met a couple a few weeks ago. Their financial adviser purchased only Canadian banks for them. Canada is only 2% of the global economy and this couple had all their money in Canadian banks. There was no global diversification, there was not industry diversification, there was none of that, they had all their money in Canadian banks. And of course, they were getting charged 1.5% for this poor service. In addition, their money was not invested in the most tax-efficient way.


The secret to financial success is to invest in low-cost financial products and have proper diversification. To reduce your risk over time, you can rebalance your portfolio at the end of the year and just sit there and watch your money grow.

Note: This a collaborative post.


The Stock Market Decline

During the past year, a few of my friends have asked me about investing in the stock market. After the recent stock market decline, the calls have intensified.

My view of the stock market has evolved over time

Our perception of the stock market is faulty. The media have created an illusion that people can pick stocks that go up 100% every year. Most of us believe it because we don’t know any better, and then we discover the sad reality, that the stock market has big losers as well, that the stock market is a long-term strategy rather than a short-term game.

To improve the chance of winning in the stock market we should

My friend Vitaly and I
  • Invest in broad-based ETFs
  • Have a diversified portfolio of 1/3 Canadian stocks, 1/3 US, and 1/3 International
  • Don’t watch the news
  • Don’t do any trading

Their responses have been:

  • What about Bitcoin?
  • What about the latest marijuana stocks?
  • What about Tesla?
  • What about options?

Generally, they have told me that they want to make some real money. They don’t want to make any of that 8% stuff. They want to make the real stuff, 40% and up.

A person called me to express her disappointment that the Index ETF was only up 10% while her Alibaba stock was up 40%.

Another friend was encouraging me not to ignore the opportunity to buy Bitcoin at $19,000.

Bitcoin is going to $60,000; then I will get out.

He told me full of confidence. Today Bitcoin is about $8,000.

Another friend told me:

Dude I invest in options, that’s where the money is.

The truth is that for almost 10 years all those gambles have paid out handsomely. The US stock market has gone up, uninterrupted. It’s easy to be overconfident, even a bit cocky when you don’t remember when was the last time there was a down month.

But another truth is that the market doesn’t go up forever. The market goes up and the market goes down. That’s how it works. In the long run, you can expect to have a positive return, but in the short run (short run is defined as anything less than 5 years) you can expect a lot of volatility.

Stock Markets also go down

Since the start of 2018

  • The Toronto Stock Exchange is down 7.80%
  • The S&P 500 is down 2.02%
  • and Bitcoin is down 65%

If we look at Chipotle stock price , we will see a drop of 66% from Oct 2015 to May 2018. These market dips are normal. They are healthy. They should be part of the game-plan of every investor.

To recall a bit of history, the Dow Jones has undergone 9 drops larger than 40%. During the time period of 1930-1932, the Dow dropped over 85%.

What a regular investor can do when the market goes down.

  1. Don’t panic. Realize that it’s normal. The stock market goes up and it goes down. It’s part of the game.
  2. Don’t own individual stocks, not even for fun, not even with your play money. There is a high degree of probability that your stock will go down to zero, while there is almost zero probability that the Dow Jones or the Toronto Stock Exchange will go down to zero.
  3. Don’t own assets which don’t produce a return. This includes gold, Bitcoin (Blog post from Mr. Money Moustache about Bitcoin), collectibles, etc. These are not investments; these are speculations. You are buying it with the hope that someone else will buy it at a higher price. To give you an example, I could buy a real estate property and collect rent for the rest of my life. I don’t have to sell it to make money. If I buy a bar of gold or a Bitcoin, the only way I can make money is if there is another person willing to pay a higher price.
  4. Don’t own Mutual funds, Index Funds, or ETFs that have an expense ratio of over 0.5%.
  5. Don’t play around with options, commodities, futures, etc.
  6. Don’t invest in the stock market if you cannot withstand a decline of 50%.
  7. Have a diversified portfolio. For Canadians, I suggest 1/3 Canadian, 1/3 US, and 1/3 International.

One last piece of advice

Don’t invest in the stock market unless you can stay invested for more than 5 years.

Here is a graph of the Dow Jones Industrial Average for the past 10 years. As you can see, it has gone up more than 175%. That’s 17% per year. All a person has to do is nothing. Just let it sit there and enjoy the ride.

10 years graph of the Dow Jones Industrial Average
10-year graph of the Dow Jones Industrial Average

Hire me 🙂

I am a money coach, I can help you get out of debt,  earn more money, and make better investment decisions.

I want to be with you after your graduation, when you get your first job, when you decide to get married. I want to help buy your first house. I want to make sure you are on track for a worry-free retirement.

Get in touch with me to book an appointment.

You, Incorporated

What are the traits of successful corporations that can be applied to your life?

Imagine that you are a corporation. What will you do if you want to be a successful?

Who are your clients?

Putting makeup before going acting.

There are corporations that have many clients, this kind of corporation can afford to lose one or two clients and still thrive. There are other corporations that only have one client and if they lose that one client they go out of business.

Many of us, we  have one client only, our employer, the one who gives us a paycheck at the end of every month. If we lose that one client, by losing our jobs, our lives are completely destabilized.

Smart corporations have income coming from many clients. You too, you could develop several streams of income. Your regular job, a side gig, your investments in the stock market, your real estate.

Research and Development

Almost all successful companies have a research and development department. They continue to learn, develop, try new things. Those corporations that become complacent, they eventually die.

Us too, we should have a research and development department. We should be constantly learning. Take a dance class, a drawing class, become a member of a toastmasters club, read a book, take an online course. Avoid watching TV, avoid Facebook.

Every week I go to a toastmasters meeting to become a better speaker, a better leader. I read books about building websites, I read books about photography, I read many books about self-improvement and entrepreneurship. I try things, I fail, I try more things, I succeed.

Marketing Department

Most corporations promote themselves. We all have heard about Coca-Cola, McDonalds, Apple, etc.

At the very least we should have an updated LinkedIn profile. You can go as far as having a personal blog where you tell people about what you do. If you have some special talent, use it, and let other people know about it. Don’t be shy about the things you do well.

Finance Department

A corporation often needs money to finance many different projects, but also a corporation pays dividends to its owners when it has too much cash.

We can finance our many activities (going to school, buying a house, etc) with loans or with the money we earn from our labor. When we accumulate some cash, we can invest it in the stock market. At one time in the future, we will withdraw that money to pay for our retirement. That’s the equivalent of paying ourselves some dividends. Read Stages of Asset accumulation and asset decumulation.

Create a board of directors

A board of directors is a group of people who oversee the activities of the corporation. The board of directors sets the strategic vision of the corporation.

For many of us, our board of directors are our life partners, in some cases our family members, in other cases our friends.

Try to assemble a group of people who cares about your future and assign them that role. Go to a friend and say: “Friend, could you become a member of the board of directors of my life,” and explain to them how they can help you, how they can keep you accountable. Make sure you have regular meetings to discuss your progress.

I do a mastermind meeting the last Sunday of the month with some friends. I find that we  share our goals and ambitions and I get some honest feedback, I feel more motivated to take action to improve my life.

Human Resources

Many corporations have a Human Resource department. It tries to get good employees and avoid bad ones.

You too, you can have a Human Resource department. You should seek the company of friends who will have a positive impact in your life and give a pink slip to the friends who are constantly bringing you down.

For example, I have found many good friends at my toastmasters club, I have also found some good friends as a dance teacher. I have kept those friends and they are very valuable to me. I have let go of the ones who don’t make a positive contribution in my life.

Corporation goals, your goals

Every corporation has some kind of goal. Most of the goals are revenue related, but it could also be territorial. A common corporation goal could be: “We want to increase sales by X percentage.”

Your goals don’t have to be monetary. You might want to be a better parent, a better dancer, a better speaker. Or maybe you have a financial goal. You might want to buy a house or go on a vacation. Make sure your goals have a positive effect on your life and on the lives of others.

My goal for 2018 is to write more blog posts, to create more YouTube videos, to create a podcast, and become a better writer and speaker.


For a corporation, the stake holders are the clients, the employees, the suppliers, the creditors, the investors, the government, etc. Everyone who can be affected by the success or failure of the business.

In your life, your stake holders are your family, your friends, your employer, your clients, the government. The actions you take could affect any one of your stake holders. You have to try the balancing act of doing what is best for you and best for the people around you.

Some corporations are good global citizens and some are not. You can be one of those corporations who thrives with love of its employees, with care for its clients and with a fair profit for its owners.

Be kind and helpful to the people around you, constantly learn something new and share your knowledge. Spend your time with positive people and avoid those who are negative. Finally create savings which will ensure a healthy retirement life.

Hire me 🙂

I am a money coach, if you would like to talk about your financial life, if you need help, write me a message….

Financial habits for life

One of my life habits it to go with Toastmasters meetings with friends. With William, Johnny, and Daniel.

Many of us made new year’s resolution on January 1st. A few of us have already abandoned some of those resolutions. I already gave up on one but I am putting extra effort on others.

How are you doing with your new year’s resolutions? Which ones are you keeping? Which ones are you abandoning?

There are things in my life which are not resolution, they are long-term habits. I want to share some of them and hopefully I will inspire you to pick some of those habits as well.

Financial Habits

1. Track your net worth

At the end of every month, I add all my assets, I add all my liabilities, I subtract the liabilities from my assets and I have my net worth.

Here is the formula:

Assets – Liabilities = Net worth.

I find this exercise motivating and illuminating. I calculate my net worth every month and then I pluck the number on a Google Spreadsheet and create a graph.

When I meet a client, this is the first thing I ask them to do. We take a look at their net worth and from there on I can measure their progress.

2. Pay yourself first

As a self-employed person, this represents a bit of a challenge because I don’t have a regular paycheck, but I do have a buffer account. From this account I take a set amount and I put it in my Tax Free Savings Account and I put another little chunk for my traveling expenses and whatever is left, that’s the money I can spend.

In Canada, for 2018 we can deposit up to $5,500 in out Tax Free Savings Account, that’s $458.33/month. And I save for my annual one-week  vacation $1,000. That’s $83.33/month. That’s a total of $541.66. So I try to pay myself about $550 every month.

Do you pay yourself first? if so, how much? Which ones are your priorities? Do you spend first and save later or do you save first and spend the rest?

3. Automatize everything

Remember those days (before the internet) when you had to sit at your desk, with your paper invoices, your checkbook, a bunch of envelopes and stamps to write checks to all your debtors? Those days are gone.

Now, you don’t get paper invoices, maybe you get an email. If you automatize your savings and the paying of your bills, you can save a lot of money in late fee payments and save a lot of time by not having to think about whether you paid a bill or not.

I have gone to all my debtors (internet, cell phone, electricity, mortgage, ect…) and I have given them permission to withdraw the amount I owe them, from my credit card or directly from my bank account. By doing this, I save a lot of time and money. I set it and forget it.

4. Having a buffer zone

Life is full of little surprises. I deal with those surprises by having a buffer zone in my bank account. I always try to keep about $5,000. Money comes in, money comes out. Sometimes I dip below my buffer zone, some times I am way above.

Please note. Don’t confuse a buffer zone with an emergency fund. If I am truly in an emergency I can use my line of credit or sell some of my stocks (all of them are a high profit right now).

Having a buffer zone will give you piece of mind. When you have automatized the paying of your bills, if something goes wrong, you are ready for it.

Related articles:

Share your Financial Habits

  • What do you do to stay financially fit?
  • Do you have some of the same habits?
  • Are there other habits you would like to incorporate into your life?
  • Are there some habits you would like to get rid of?
  • Can you suggest some habits for other readers?

My services

I am a money coach, if you would like to have a conversation about your personal finance, send me a message.

Financial improvements, from Home Depot to Uber

I heard this line so many times:

“Walmart is evil! it pays very little to its employees and discourage unions.”

I am so tired of the victim mentality. We have won the geographical lottery, we live in a place where there is law and order, yet… we want the government to pamper us, we want all the opportunities to be thrown at our feet.

Sure, Walmart and other retailers pay little salaries, but those positions are not meant to be life-long careers. If your salary as a retailer cashier is low, be grateful for the opportunity to be a cashier while you look for something more rewarding. If 5 years later, you are still a cashier, then you need to look at yourself in the mirror and ask your self this question:

Why haven’t I invested in myself

This is me back stage with belly dancers

I interviewed my friend Daniel Davies, a fellow toastmaster member and an immigrant who is searching to improve his life.

Daniel arrived at Canada and he fond a job working at Winners, a clothing boutique in Montreal. At this place he was earning $11/h. After one year he left and started working for Home Depot for $12/h.  He worked at Home Depot for another year before he realized that was not the life he was hopping for when he came to Canada. He wanted more.

Presently Daniel is working for Uber. He finds that he has more time flexibility, and he earns more. Now his gross revenue is $4,000 to $4,500 per month. His expenses are about $1,000 per month. So his net income is more that $3,000 per month or about $36,000 per year.

Daniel is not going to become millionaire working for Uber, but he took a small step to improve his life and now he’s reaping the benefits. He has more time independence and more money.  In addition, he’s taking steps further improve his life. He continues to study, to read, to listen to podcasts, and he’s experimenting with other platforms such as Airbnb.  He also started to invest in the stock market.

When I ask Daniel, what is holding other people back. He answered: “fear!”

People get comfortable in their routines and are afraid to lose what they already have. They become paralyzed and they stay working at the retail place one more month, one more year, one more decade. They see life passing by, other people passing them by then they say:

Life is unfair, the system is staked against us the poor.

We live in a world with so many opportunities. We have FREE high schools, subsidized universities, free (Internet) university classes from world-renowned universities (such as Harvard and Standford). In short, the opportunities have never been greater, yet we take everything for granted and become paralyzed.

People have never had so much access to information and so many platforms where to voice their opinions. We have all the social medias and we can build a WordPress website within minutes.

Daniel and million of others are taking little steps to improve their lives. You can too.

When I asked Daniel to recommend one of his favorite books, he recommended Total Recall by Arnold Schwarzenegger.

Thank you Daniel for doing that interview with me.

I am a money coach… If you would like to have some one-on-one money/life coaching send me a message.

There is no place for commodities in your portfolio

In the balcony with friends

Commodities make me sick

I get sick to my stomach every time I hear an investment expert saying that we should own commodities in our portfolios.

The purpose of investing is to get a return for your money

The purpose of investing is to get a return on your money. You buy a financial product and you get a higher value when you sell, you get a dividend, you get an interest payment, you  get royalties, you get paid rent, and so on…

I am appalled when I hear financial experts suggesting that we should invest in gold and other commodities.

I wrote a blog called “Why investing in gold is a dumb idea.” The same principles apply to other commodities.

What are commodities

Let’s begin by describing what commodities are. Commodities are standardized goods and services, most of them are traded in an open market. It’s easy to explain commodities by giving you an example:

  • Agricultural products such as wheat and corn
  • Metals such as gold and silver
  • Energy such as oil and coal

These products are actively traded in the commodity market and they might have a lot of volatility.

The people who make money in the commodities market are the broker houses that facilitates all the transactions. During the The California Gold Rush (1848–1855) the people who became millionaires where the ones selling the pick and shovels, not the miners. It’s the same in the commodity market, the people who get rich are the ones who sell the dream of commodities as an investment.

Commodities don’t make babies

The truth is that when you put two bushels of corn in a barn, they don’t have sex and produce a baby bushel. They just sit there, do nothing and you have to pay insurance and storage. Commodities are  non producing assets, they are no different from any household item in your house, like a chair or a table, therefore they are not investments.

Anyone who insist that commodities are investment class, they want to sound smart, they want to make you feel as if you need their services and they are direct beneficiary of the service they are selling you.

Supply and demand

In the long run commodity prices increase at the rate of inflation. In the short run, commodity prices are influenced by the laws of supply and demand.

If there is higher demand than supply the prices go up. When prices go up consumer buy less and producers produce more, bringing the price to some equilibrium.

If there is higher supply than demand the prices go down, consumers start buying more, producers produce less and the price comes back to equilibrium.

Here is a graph of the Commodity index ETF for the past 5 years. As we have become more efficient producing commodities, supply have increase, the prices have gone down and if you were a believer of commodities as an investment, you have lost 50% of your money during the past 5 years. Show that to the person who recommended commodities for your portfolio.

Governments stop subsidizing commodities

While I am on the subject. I want to express that I dislike it when governments get involved in commodity markets. It costs million of dollars to taxpayers and to consumers. Governments all over the world subsidize all kind of agriculture products. This subsidy comes out of tax payers pockets. This is the subject for another blog.

Hire me 🙂

I am a money coach, if you would like to talk about your financial life, if you need help, write me a message….

My Favorite Canadian ETFs

There are hundreds of ETFs in Canada. Which ones are my favorites?

The evolution from Mutual Funds to ETFs

Painting an apartment with friends.

First of all, what is an ETF? ETF stands for Exchange Traded Fund. Many investors are familiarized with the term “Mutual Fund,” whereas many investors pool their money, give it to a mutual fund manager and that mutual fund manager would buy and sell stocks according to his investment style.

Mutual funds were the favorite investment vehicle for many small investors. With a small amount of money, they bought instant diversification. Imagine that your capital is only $10,000. By giving this amount to a mutual fund manager, the manager takes your money, along with the money of hundred of other investors and he buys and sells hundreds of different stocks during they year.

Other advantages of mutual fund was to have a professional making those decisions on your behalf.

The disadvantage of Mutual Funds were many. The number one was the cost. Most Canadian Mutual funds charge 2.5% to 3% management fees. This is fine if the end result is great performance, but the problem is that investors were not receiving great performance, they were receiving less than mediocre performance. When compared to a benchmark, let’s say the average return for Canadian stocks, they were under performing.

Another disadvantage of mutual funds is the compensation for financial advisors. Financial advisors would have a conflict of interest. They would feel tempted to recommend to their clients the funds which would give them the biggest commission. If there was a fund which didn’t offer a commission, the advisor simply didn’t recommend it, even if it was the best fund for their clients interest.

Index funds

And so the Index fund was invented. The index fund simply buys all the stock that have similar characteristics, lest say: All Canadian Big Companies, or All Canadian Banks, or All Canadian Oil. The index buys all those stocks, without doing any individual stock research, picking and choosing. It so happens that when you pool all those stocks together, and charge small managing fees (because you have no research staff, nor experts choosing and picking) the returns are consistently higher than the returns of managed mutual funds.

The problem with Mutual Funds and Index Funds is that you have to buy them directly from the mutual funds company. This only happened at the closing at the market.

The birth of ETFs

And so, the ETF was invented. The ETF is the same index fund, but now it can trade freely in the stock market as if it was a regular stock. This means that the process to buy an ETF which represents the whole Canadian economy is no different from buying a regular stock. You can log into your trading account and just buy it.

Another great advantage of ETF is their low management cost. Generally, a good ETF had management cost of less than 0.5%. When you compare that with the cost of Mutual Fund with a cost of 3%, the decision is a no-brainer.

This brought me to one of my most important investment philosophies: Invest in low-cost ETF costing no more than 0.5%.

 Which ones are my favorites ETFs and from which Suppliers?

I will not include bonds in this list and will not include a whole bunch of new ETFs called Smart Beta nor Sector investing. I will only include plain vanilla ETFs.


My favorite ETF supplier is Vanguard. Vanguard has built a reputation of low-cost ETFs and it has transformed the industry. The lowering of ETFs prices has been called “The Vanguard Effect.” Vanguard has done for the personal finance industry what had done to the retailing industry. It offers great products at very low prices. Either way these are my favorite funds.

  • TSXVCN – Vanguard FTSE Canada All Cap Index ETF
  • TSXVDY – Vanguard FTSE Canadian High Dividend Yield Index ETF
  • TSXVRE – Vanguard FTSE Canadian Capped REIT Index ETF
  • TSXVUN – Vanguard U.S. Total Market Index ETF
  • TSXVFV – Vanguard S&P 500 Index
  • TSXVXC – Vanguard FTSE All-World ex Canada Index ETF
  • TSXVDU – Vanguard FTSE Developed ex North America Index ETF
  • TSXVE – Vanguard FTSE Developed Europe Index ETF
  • TSXVA – Vanguard FTSE Asia Pacific Index ETF
  • TSXVEE – Vanguard FTSE Emerging Markets Index ETF

BackRock Inc.

This is the largest ETF provider in Canada.

  • TSXXIU – tracks the S&P/TSX 60 Total Return Index
  • TSXXIC – tracks the S&P/TSX Capped Composite Index
  • TSXXMD – tracks the S&P/TSX MidCap Index
  • TSXXCS – tracks the S&P/TSX SmallCap Index
  • TSXXEG – tracks the S&P/TSX Capped Energy Index
  • TSXXIT – tracks the S&P/TSX Capped Information Technology Index
  • TSXXGD – tracks the S&P/TSX Capped Gold Index
  • TSXXFN – tracks the S&P/TSX Capped Financials Index
  • TSXXMA – tracks the S&P/TSX Capped Materials Index
  • TSXXRE – tracks the S&P/TSX Capped Real Estate Investment Trust Index
  • TSXXTR – tracks the S&P/TSX Income Trust Index
  • TSXXDV – tracks the Dow Jones Canada Select Dividend Index
  • TSXXCG – tracks the Dow Jones Canada Select Growth Index
  • TSXXCV – tracks the Dow Jones Canada Select Value Index
  • TSXXEN – tracks the Jantzi Social Index
  • TSXXSP – tracks the S&P 500 Index (currency hedged)
  • TSXXSU – tracks the Russell 2000 Index (currency hedged)
  • TSXXIN – tracks the MSCI EAFE 100% Hedged to CAD Dollars Index (currency hedged)
  • TSXXEM – tracks the MSCI Emerging Markets Index Fund Index
  • TSXXWD – tracks the MSCI World Index Fund Index

All the other Canadian ETF companies

There are many other ETF providers, but they are either too expensive, or have little liquidity, or are not a great product for investors.

Stages of Asset accumulation and asset decumulation

How we get into investments
Going out to a concert with friends. 🙂

Most people have little interest in personal finance and investments. It’s hard to believe that one day your money could earn more money than you earn yourself, so the idea of living out of your investments is in the same area of your brain as winning the lottery.

Then, as we get a job, we start seeing advertisement about investments about Retirement Savings Plans promoted by many banks and employers. Canadians see these savings plans as a way to reduce their tax bill.

Little by little we start getting bank statement and we discover that in fact our investments are making money. Our investments go up and down in value but on the long run, we should see the balance of our account steadily increasing.

How we optimize our investments

It is at this period that many of us become interested on how to optimize our investments. Maybe we make the following discoveries:

  1. We discover that most actively managed funds under perform Index funds.
  2. We discover that most fund companies have high management fees 2.5% to 3%, these high management fees rob us of a big chunk of our investments.
  3. We discover that it is better to own Index Funds and ETFs than individual stocks. The average return is the same but the risk is much lower.
  4. We also discover that Canada is only a small part of the global economy and that we will be missing out by staying invested in Canada and ignoring the rest of the world.
  5. We discover that bonds under perform stock and unless we have hit our wealth number, we should continue preferring stocks over bonds
  6. We discover that investing in gold, does not produce higher return nor more security. Instead it adds a lot of risk to our portfolio.
  7. We discover that commission based advisers have a conflict of interest. Would they recommend the best investment for us even if it didn’t pay them any commission? I doubt it.

The process of learning all these lessons is long and many times painful. It could take many years to discover that you are overpaying for actively managed funds. It could take years to diversify out of Canada. It could take years to stop believing in having gold as a fundamental part of your portfolio.

Winning the lottery and investments

Other investors get seduced into investments by the big technology companies. The Googles, Apples, Amazons of the world. They say: “If I would have invested $10,000 in Amazon 10 years ago, I would be a gazillionaire by now.” These investors might jump into a stock just based on the mass enthusiasm of the moment and many time they could win but also, the probabilities are high that they lose. “When to get in and when to get out” remains the most important question. After getting burn a few times, these investors (like me) might look for more conservative/predictable approaches or might pull out of investments all together.

On the long run, who are the winners?

The people I have seen succeeding over time, are the people who year after year make small improvements to their portfolio without increasing their risk. They find a better way diversify, to cut unnecessary cost, to get rid of expensive commission. After 10, 20, 30 or 40 years, they see that their asses have grown substantially and now they have reached the second stage of their financial life, the decumulation stage.

The decumulation stage

At this stage of their life there are many questions which come up:

  1. Will I have enough to retire?
  2. Will I outlive my money?
  3. Will I have some money left over to leave to my heirs?
  4. How much can I safely withdraw each year?
  5. Will I invest my money any differently?
  6. What it the correct asset allocation?
  7. From which account should I withdraw first.
  8. What are the tax implications when I start withdrawing my money.
  9. How much should I rely on my Canadian/Quebec pension plan.

All these are difficult questions to answer. Investors find bits and pieces throughout the years. Many times the information is not complete or many times there is too much information.

Filling the information gap

There are two alternative to fill the information gap.

  1. To educate yourself and buy books on how to approach asset decumualtion
  2. To hire a fee only financial expert for a second opinion. Please don’t consider talking at a commission based adviser. There will always be a conflict of interest.

I will do my best to continue writing blog post to narrow the gap between not enough information and too much information.

Looking for Fat Profit Margins

Birthday party with friends

Imagine that you want to invest in a business. If your objective is to maximize profit, your main question should be: How much money do I get to keep? What’s my profit margin?

The new trend in investing is to just put all your money in broad based ETFs, set and forget it. And I must admit that since I have been reading about personal finance, this is the best deal in the market for the little guy and for many big guys as well.

This new approach is effective because of its simplicity. If we can just manage to find the low cost ETF provider (avoid actively managed funds) then success is the most likely outcome.

However, A few of us would like to squeeze a little bit more profit out of our invested dollars. To do so we have to look a little bit deeper into the numbers.

Business comparison

Let’s imagine your are considering buying two different business.

  • One is a grocery store: After you finish paying for all the merchandise, rent, salaries and taxes, you are left with a net profit of 3%.
  • The other business does computer programming. After you pay the rent and all your programmers, you are left with a net profit of 20%

Which one of these two seem to be the better investment? I would say the computer programming business sounds better to me.

How about if we apply the same logic to the stock market. How about if we look for companies with fat profit margins.

The S&P 500 is divided into 10 different industries. As a whole, the profit margin of the S&P 500 is about 9%. But of course, there are some companies that have a fatter profit margins than others. Let’s figure it out.

Here we have the profit margins of the S&P 500 and all of its individual sectors for the 3rd quarter of 2017. The data comes from this research:

Energy 3.4%
Consumer staple 6.6%
Consumer discretionary 7.5%
Industrial 8.7%
Healthcare 8.6%
Materials 9.2
Telecommunications 10%
Utilities 10.2 %
Financials 13.6%
Information technology 19.2%

But does profit margins returns actually translate into stock market gains?

Here is my research as of November 15 2017

5 year returns

Technology 116%
Consumer staple 104%
Consumer discretionary 100%

2 year returns

Technology 42%
Consumer staple 30%
Utilities 26%

1 year returns

Technology 35%
Consumer discretionary 20%
Healthcare 17%

In short, the profit margins of 20% and the stock return of the technology sector of 35% for the last 12 months can lead us to believe that there is a correlation between fat profit margins and stock returns. But there is no such correlation when we look at the other profit margins and compare it to their stock returns.

Conclusion: Maybe the implied relationship between profit margins and stock returns is not as strong as I believed to be true.