Weekend Reading – Index Cards, ETFs, funds to avoid, mortgages and credit card myths

Welcome to some fresh Weekend Reading friends…I hope you had a good week.  We’ve been on vacation and we’re back to the grind on Monday.  I’ll have a future post about our recent travels featuring how we we save so we can splurge during vacation.

I managed to post one article over the last week – here it is – what I believe is the best budgeting rule of thumb.  Do this from the start and you can pretty much live your life without worrying about spending needs or wants.

Have a great weekend and see you here next week.

Holy Potato reviewed The Index Card and liked the concept.  Here are some things I’d put on our personal finance and investing index card:

Freedom Thirty Five Blog says he’ll never be debt-free.

Here are seven ETFs for young investors.

A Wealth of Common Sense wrote about the greatest bubble of all time.

My friend Rob McLister believes now could be the time to lock-in your variable rate mortgage.  Our mortgage rate is 1.95% so it would likely take at least a 50-basis point rise in lending rates for us to lose out over the next four years to a fixed rate mortgage.  I understand where he is coming from but we’ll keep our variable rate for now.

Thanks to RateHub for including my take, along with other top bloggers, busting a number of credit card myths.

For the most Canadiana article of this week, a deer crashed through the window of a Kitchener-Waterloo Tim Hortons.  It is unclear whether the deer left with a double-double coffee or not.

I was forwarded this old link – Warren Buffett on risk and volatility.  Within the article there was another good reminder about the relative safety of equity investing over time; Buffett:  “The unconventional, but inescapable, conclusion to be drawn from the past fifty years is that it has been far safer to invest in a diversified collection of American businesses than to invest in securities — Treasuries, for example — whose values have been tied to American currency.”  The takeaway for you is:  don’t confuse volatility as a proxy for investing risk – it’s not the same thing.  Here’s my take on risk and volatility.

Investor advocate Ken Kivenko recently forwarded me the stats for this mutual fund – a mutual fund to avoid:  IG Canadian Balanced Fund Series A.  The stats?  I think they’re rather ugly.  As of June 2016:  a person who invested $1,000 in this fund about 10 years ago would have $1,188 as of May 31, 2016. This is equal to an annual compounded return of approximately 1.7%.  By comparison, the established Mawer Balanced Fund produced a 10-year rate of return of 7.9%.  Ouch.

Boomer and Echo has some advice for Millennial investing.

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9 Responses to "Weekend Reading – Index Cards, ETFs, funds to avoid, mortgages and credit card myths"

  1. Speaking of ETF’s John Bogle has an interesting take on Expected Future Market Returns: http://awealthofcommonsense.com/2016/09/the-john-bogle-expected-return-formula/
    Future Market Returns = Dividend Yield + Earnings Growth +/- Change in P/E Ratio

    Of course his dividend yield is the average of the S&P, but if you’ve got a select group of DG stocks with an average dividend yield, say 4% and you add dividend growth +/- an evaluation change, your return should be higher than the expected market returns.

    Reply
  2. Hope you had a great vacation. I might be heading to Maui later this year. 🙂 Aloha! If more people used your The 50/30/20 ruled, they would have the resources to enjoy more holidays too. 🙂 Thanks for the mention.

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  3. re: Index Card
    I read someone else mention a PF index card idea on this site. Seems to be gaining traction. 😉

    re: Credit Card Myth Busting
    These aren’t so much myths — widely held but false beliefs — as much as they are misinformation (and inaccurate/uninformed ideas).

    “Myth #1: Having a credit card means you are financially irresponsible.”
    I guess not irresponsible (yet) to your immediate person, but definitely very irresponsible to the economy and society at large. Unfortunately, most card users don’t have a clue, nor do not want a clue, about the terminal effects of credit cards. And most credit card users will fall to financial irresponsibility.

    “Myth #2: Getting a credit card will hurt your credit score.
    The exact opposite is actually true here. The best way to establish credit is to start by getting a credit card.”
    This fact is chilling, or at least should be, to the holistic thinker. How did people create a credit history before the widespread advent of credit cards? Why is that historical practice no longer acceptable? Why/how has this vital piece of the economy been wholly assimilated and monopolized by basically two companies? Why has ‘easy’ subjugated ‘diligence’ in the realm of lending (new is not always better)?

    “Myth #3: Credit card rewards encourages people to spend and get into debt.”
    This is reality, supported by various studies and research and data, both financial and psychological.
    This actually happens — a lot (see Myth #1).

    “Myth #5: All you have to do is pay the monthly minimum on your credit card.”
    Why is this not a myth? Even the previous commentator, Liquid, recently stated on his own PF website that paying only the interest-covering minimum, and not a penny more, on your card is very acceptable, even desirable: “that money could have been used for a wonderful vacation to Maui instead of paying back the loan”. Who are we to argue with a young debt-based millionaire?

    “The moral of the story here is not to believe everything that you hear. A mix of your own research and advice from knowledgable friends or family can go a long way.”
    Problem with this is that proper research requires work and thinking, taking advice does not. The average human will almost always choose the route of less work and less thinking. As well, who’s to say your friends and family/internet person have done the proper research and analysis of the information they pass along (hint: most advice is mere regurgitation of previously forwarded advice)?

    Myth Bonus: Your life will suffer greatly if you do not use credit cards.

    Enjoy the first weekend of Fall!

    Reply
    1. I had an idea for that a long time ago…and The Index Card idea was also mentioned a few times by other readers. I guess I lost my chance at fame. I’ll have to stick with the blog for now 🙂

      I have no problems with credit cards, in general, although they do skew things. It’s commonplace to have a credit card – and as long you spend within reason and pay off your monthly balance – it’s not very much different than cash.

      “How did people create a credit history before the widespread advent of credit cards?” Other than bank loans or other loans, they didn’t to my knowledge.

      I totally agree with you – people will undoubtedly take the path of least resistance.

      I will – playing golf soon. Enjoy as well.

      Reply
      1. Myth: “It’s commonplace to have a credit card – and as long you spend within reason and pay off your monthly balance…”

        No, it’s commonplace to have MULTIPLE credit cards. What I fail to understand is that if you spend within reason and pay off your monthly balance, why would you require more than a single credit card or even a limit greater than say $5,000? Again, commonplace does not equate well-being: speeding, divorce, obesity, and reality teevee are also commonplace.

        Myth: “…as long you spend within reason and pay off your monthly balance – it’s not very much different than cash.”
        (where’s the ‘disbelief’ emoticon??)

        Ask yourself why, in countries such as America, there are different retail prices for cash and credit card payment; and why, in countries such as Canada, there is one static retail price. Cash is the exact antithesis of a credit card, they are indeed very much different.

        You should know by now that an additional 2-4% of annual cost applied over the course of a lifetime is a bundle of money. Those who use credit cards to lift their own specific situation are sinking those in a different situation (note that there is a chasm of difference between credit obtained from a bank loan and credit obtained from a credit card). Creating a better world for yourself doesn’t necessarily mean creating a better world.

        If you are at all concerned with wealth/social inequality but at the same time utilize a credit card, then you are part of the problem. I guess that’s the cognitive dissonant price we pay for living in a capitalist/semi-socialist country like Canada — we don’t know whether to give or take (our cousins to the South, with their two-tier price system, have no problem making that decision).

        But, hey…POINTS!, right? 😉

        Reply

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