Beat The Bank like Larry Bates
Embrace wealth builders: amount, time and rate of return. Added together, more money, more time to compound/grow and higher rates of return are ideal for investors.
Steer far away from wealth killers: fees, taxation and inflation. Any one or more of these things are wealth destroyers you will need to fight as you work through your investing journey.
That’s the simple but effective advice of Larry Bates in Beat The Bank.
In addition to embracing wealth builders and avoiding wealth killers, there are three alternative ways to Beat The Bank:
- Become a Do-It-Yourself (DIY) investor – via your own hand-picked mix of stocks, bonds and/or some ETFs.
- Follow Assemble-It-Yourself (AIY) investing – following a passive investing strategy using low-cost ETFs.
- Use a Robo-Advisor (robo-investing) – to support your low-cost investing plan.
…and banking veteran Larry Bates should know – he worked at various financial institutions over his successful career. Now, in his new book, Beat the Bank: The Canadian Guide to Simply Successful Investing, he shares his advice to potentially double your long-term investing returns.
Earlier this fall, I reviewed Larry’s book that included some copies to giveaway here. In reviewing Larry’s book though, I wanted to dig deeper and ask him some questions the book didn’t answer for me – such as what he thinks is a good savings rate these days, what his “enough number” is, and what he thinks about the mortgage paydown vs. investing debate.
Here is a brief bio about Larry:
- Age: 62
- Family status: Married with adult children
- Retired since: Not really! He left the financial biz 2 years ago but writing the book, and now marketing its message, keeps me busy
- Retirement plans: Chief Beat the Bank Evangelist!
Larry, welcome to the site. For folks that haven’t read your latest book yet – give it a plug. Why should folks read Beat The Bank?
Mark, millions of Canadians can build much larger retirement nest eggs by improving their “investment literacy”. Beat the Bank clearly shows how most Canadians are losing 50% of their lifetime investment gains to fees they don’t see or understand. More importantly, the book provides them with some step-by-step guides to using much more efficient, lower cost investment products to build a more prosperous future.
Prosperous future…I like it. Larry, you were a long-time banking executive. I’m curious, what was your savings rate during your career? I’ve argued the new savings rate for retirement by Gen X or Gen Y is at least 10% net income. Thoughts?
Early in my career I was able to direct around 20% of my after-tax income first to debt reduction, then building a down payment for a house and ultimately mortgage prepayments. Once the mortgage was reduced I started investing in blue chip stocks in my RRSP and my regular (taxable) account. As my career progressed I was fortunate enough to earn a much higher than average income and was able to save a larger percentage of my earnings.
Everyone’s circumstances are different. I recognize some Canadians aren’t in a position to save, but I agree that 10% is a good savings target for most middle-income earners. Savings should be directed towards permanent debt reduction or investments. Either one will put Canadians in a much better financial position.
Beat The Bank highlights three (better) ways to invest that could double Canadian’s long-term savings for retirement. How do you invest? Why do you invest that way?
Over the years I have built up a portfolio of blue-chip Canadian stocks including big banks, telecoms, utilities, railways, energy, etc. Wherever possible I take advantage of automatic dividend reinvestment programs. (I know you’re a fan of this as well Mark since you have a page dedicated to it here!) The majority of my U.S. investments are in low cost index Exchange Traded Funds (ETFs) like VFV and VUN with some added positions in tech stocks like GOOG and FB. The majority of my fixed income investments are in simple GICs. I trade a little bit around the edges but largely just buy and hold.
Index investing using low-cost Exchange Traded Funds (ETFs) seems to be a sensible way for many Canadians to invest. In your book you highlight some great selections for folks to consider including, in no particular order, ZSP, XIU, XUS, ZEA, VIU and XAW. What should folks look for in owning an ETF?
I recommend long term investments in simple, plain vanilla, low cost index ETFs. I don’t see any merit in paying much higher fees for whatever the flavour of the day, active management strategy might be. Make sure you have a mix between stocks and bonds that matches your objectives, timeframe and risk tolerance. Make sure your stock investments are diversified with a large portion directed to the U.S. market and potentially beyond. I feel this can easily be achieved with 1-4 simple, low cost ETFs.
Larry, you might already know I’m a hybrid investor: I invest in many individual dividend paying stocks and I use a few U.S. ETFs for extra diversification and long-term growth. What are your thoughts on my game plan?
Wow. That strategy sounds familiar. Please see above!! I think this is a very sensible way to invest so long as you understand the risks with individual stock selection, and, you diversify out of the Canadian market. Owning some U.S. ETFs are a great way to do that.
This was my initial thought process here on determining my “enough number” for retirement savings. I arrived at needing a $1 million portfolio, owning my workplace pension for about 20 years, and of course being debt free at time of retirement or even semi-retirement. How did you determine your “enough number” and how do you know it’s enough?
I didn’t approach it the same way. I simply tried to strike a reasonable balance between current spending and saving for the future. Having earned a top income for years, I have saved a good amount. But with that came a pretty good lifestyle. So, like most people, I have to be cautious about making sure we do not run out! All that said, life span, investment returns, inflation rates, tax rates, health, surprise costs and so many other factors cannot be accurately forecasted so I don’t believe in any one, correct, single “enough number” for anyone.
Finally Larry, there is lots of debate in the personal finance community on investing using the TFSA first vs. RRSP first vs. simply paying down your mortgage. What advice do you have for 30- or 40-somethings who are wrestling with investing vs. mortgage paydown decisions?
It is way more important to act on one of the three choices than to make the perfect choice. If the mortgage is uncomfortably high, pay it down. If it is at a more comfortable level, perhaps consider long term stock or ETF investing using TFSAs or RRSPs. I will say there isn’t much merit in bond investing while you still have a mortgage.
Thanks to Larry for his time on this site. Larry’s best-selling book on Amazon is now available in stores across Canada as well as in print and ebook editions – see those links above or click on the book image above to buy it! Also, check out www.larrybates.ca to sign up for his newsletter and to try out a unique tool which reveals how much investment fees really cost you.