STAR WARS ADVICE: "STAY ON TARGET"

STAR WARS ADVICE: “STAY ON TARGET”

Some weeks can be brutal for world stock markets. Recently, the Chinese stock market dropped over 7% on both a Monday and a Thursday. It probably would have fallen more but these drops triggered some sort of market unplug that stopped trading. The Chinese government then forces market participants to buy shares or does not allow them to sell shares hoping to stabilize things, for a while at least.

In North America, it’s not unheard of for the New York and Toronto Stock Indexes to drop almost 6% in a week.

These kinds of weeks are not that uncommon. The best advice in these situations is to ignore what’s happening and stay on target with your strategy to save 6-10% of your income and invest it three ways; Canadian stock index funds, international stock index funds, and Canadian bonds.

Stop watching BNN (Business News Network) or CNBC or Fox Business and go on with your life. These television stations are all about entertaining and creating drama. They are always trying to convince you to take some action, or invest in some new product or person.

Remember, television stations are looking for audience, primarily to sell advertising. To keep their audience, they need to sell the false dream that anyone can beat the market if they watch and learn from the self proclaimed “experts” who know exactly what stocks to buy to make a killing.

Try this experiment next time you are tempted to follow the advice of one of these superstar investors that you see on BNN. Go online and try to find out how the superstar’s fund has performed over the past year, 3 years, 5 years, etc.

Chances are you won’t be able to find that information. More and more of these fund people are hiding their past performance because it is so rare to beat the market. Or, they may boast about beating the market in the past year, but do not mention their performance over the past 5 or 10 years.

If you find yourself constantly questioning our simple investing strategy because of what you see on BNN, then resolve to stop watching. It’s hard to not do something, especially when it appears that everyone else is doing it. That’s how we get stock market bubbles and crashes.

STAR WARS ADVICE: "STAY ON TARGET"

STAR WARS ADVICE: "STAY ON TARGET"


Some weeks can be brutal for world stock markets. Recently, the Chinese stock market dropped over 7% on both a Monday and a Thursday. It probably would have fallen more but these drops triggered some sort of market unplug that stopped trading. The Chinese government then forces market participants to buy shares or does not allow them to sell shares hoping to stabilize things, for a while at least.

In North America, it's not unheard of for the New York and Toronto Stock Indexes to drop almost 6% in a week.

These kinds of weeks are not that uncommon. The best advice in these situations is to ignore what’s happening and stay on target with your strategy to save 6-10% of your income and invest it three ways; Canadian stock index funds, international stock index funds, and Canadian bonds.

Stop watching BNN (Business News Network) or CNBC or Fox Business and go on with your life. These television stations are all about entertaining and creating drama. They are always trying to convince you to take some action, or invest in some new product or person.

Remember, television stations are looking for audience, primarily to sell advertising. To keep their audience, they need to sell the false dream that anyone can beat the market if they watch and learn from the self proclaimed “experts” who know exactly what stocks to buy to make a killing.

Try this experiment next time you are tempted to follow the advice of one of these superstar investors that you see on BNN. Go online and try to find out how the superstar’s fund has performed over the past year, 3 years, 5 years, etc.

Chances are you won’t be able to find that information. More and more of these fund people are hiding their past performance because it is so rare to beat the market. Or, they may boast about beating the market in the past year, but do not mention their performance over the past 5 or 10 years.

If you find yourself constantly questioning our simple investing strategy because of what you see on BNN, then resolve to stop watching. It’s hard to not do something, especially when it appears that everyone else is doing it. That’s how we get stock market bubbles and crashes.

RUNNING OUT OF MONEY: HOW TO HANDLE THE RISK

RUNNING OUT OF MONEY: HOW TO HANDLE THE RISK



The financial industry likes to scare people into saving more money than necessary. The pitch goes something like this: If you don’t save 15% of your working income, you may run out of money before you have the good sense to die. They do this because every dollar you save, they shave off 2 or 3 percent for themselves. It’s not wrong to encourage people to save more, but as we’ve talked about on this blog it means you will have to make real sacrifices when you are younger and raising a family.

There are ways to reduce people’s fear of running out of money and still not over save for retirement. You probably won’t hear any of these recommendations from banks and mutual fund salespeople.

1. Buy your home and have the mortgage fully paid off before you retire. In a pinch, the equity in the home can be converted to income.

2. Keep your investing costs low. Instead of purchasing high cost mutual funds that rarely beat the market, purchase low cost index funds instead. The cost differential is huge and can mean tens and possibly hundreds of thousands of dollars more for you when you retire.

3. Keep your employment skills sharp. If you stay valuable to your employer, you significantly reduce the risk of being forced out of a job before age 65.

4. Start collecting your Canada Pension Plan later in life. 65 years old is the standard age when most start collecting CPP. Each year you delay CPP, your payment increases 8.4%. So if you wait until age 70 to collect, your monthly payment will be 42% higher. Remember CPP is guaranteed for life and fully indexed for inflation.

5. Start collection Old Age Security later. Instead of starting to collect at age 65, wait until age 70 and your monthly payment increases by 21.6%.

6. Consider part time work or small business after age 65. Many people find full time retirement less fulfilling than expected. You could find part time work in a field that you find interesting. Even earning $11 or $12 an hour part time can add up to $12,000/year.

"SET IT AND FORGET IT"

“SET IT AND FORGET IT”

If you are of a certain age, you will probably remember late night commercials for the Showtime Rotisserie that encouraged TV watchers to “set it and forget it”. The Showtime Rotisserie sold millions of units and made its owner and main pitchman Ron Popeil very rich.

I never succumbed to the temptation to buy a Showtime Rotisserie but I do think Ron`s pitch to “set it and forget it” makes a lot of sense when it comes to saving for retirement. A lot of research shows that investors who buy and sell frequently end up making a lot less money than others who leave their investments (preferably low cost index funds) untouched for years and even decades.

Altogether too much time and energy is spent trying to guess which way the “market” will go. This is unknowable and the events of the last few years clearly proves this. Very few highly paid market analysts predicted the crash of 2009. So instead of spending time trying to predict the unpredictable, follow the common sense, less stress method for investing explained in this blog.

The key to successful retirement saving is consistency over many years – 40 years in fact. Making sure you remain a valuable employee or a successful business owner over your working career is a lot more valuable than spending time guessing what will happen to interest rates or oil prices.

If you continue to earn and continue to invest your set percentage in low cost index funds for 40 years, you will be prepared financially for retirement. If you have some free time along the way, focus on other predictors of retirement happiness – physical fitness, healthy diet and maintaining social relationships.

"SET IT AND FORGET IT"

"SET IT AND FORGET IT"



If you are of a certain age, you will probably remember late night commercials for the Showtime Rotisserie that encouraged TV watchers to “set it and forget it”. The Showtime Rotisserie sold millions of units and made its owner and main pitchman Ron Popeil very rich.

I never succumbed to the temptation to buy a Showtime Rotisserie but I do think Ron`s pitch to “set it and forget it” makes a lot of sense when it comes to saving for retirement. A lot of research shows that investors who buy and sell frequently end up making a lot less money than others who leave their investments (preferably low cost index funds) untouched for years and even decades.

Altogether too much time and energy is spent trying to guess which way the “market” will go. This is unknowable and the events of the last few years clearly proves this. Very few highly paid market analysts predicted the crash of 2009. So instead of spending time trying to predict the unpredictable, follow the common sense, less stress method for investing explained in this blog.

The key to successful retirement saving is consistency over many years – 40 years in fact. Making sure you remain a valuable employee or a successful business owner over your working career is a lot more valuable than spending time guessing what will happen to interest rates or oil prices.

If you continue to earn and continue to invest your set percentage in low cost index funds for 40 years, you will be prepared financially for retirement. If you have some free time along the way, focus on other predictors of retirement happiness – physical fitness, healthy diet and maintaining social relationships.