Are There Termites In Your Investments?

    Very hard to see, almost invisible, yet the damage termites can create can be very costly. Day one doesn’t hurt, neither does day 20 or 60, in fact you will never see the destruction until it’s too late. 

The fees for your mutual funds are much the same.

     90% of Canadian clients have their retirement money invested in mutual funds. Canadians pay among the highest fees in the developed world for these funds. But it’s not like you see them, the industry has been able to hide them. A little here, a little there. There are front end load, back end load, Segregated fund premiums, advisor fees, trailer fees, Management fees, Management expense Ratio’s, all confusing and some are hidden. You don’t write a cheque for any of the fees, it is deducted quarterly or annually from your investments, so you don’t feel the pain – until it’s too late.

     According to Morningstar research (one of Canada’s most respected investment rating agencies) Canadians pay an average of 2.35% yearly for investing in these funds. That means those investments you have at the big 5 banks, investment advisory firms, or insurance companies are being deducted from your future as we speak. If you are loosing 2.35% every year to fees, you are not only loosing that money unnecessarily, but you are loosing all the growth in future years. As Einstein once said,  “compound interest is the greatest force on earth”. Problem is, the investment firms know this all too well, and guess who is getting the benefit of the greatest force on earth? The investment industry.

    For example: if you had $100,000 invested over 10 years, returning 5% with fees of 2.3% will earn you $29,600. You will have lost $33,880 of gains due to fees. Yes the termites have slowly eaten more of your returns than you received.

like the termites, these fees are slowly eating more of your returns than you are making on your investments.

    There is a solution – REDUCE FEES. Over $1 trillion dollars have left these high cost funds and stampeded to low cost alternatives in the past 6 months.  Every month you continue to pay high fees, your hard earned money is being eaten away. 

Let us, at Middle Retirement coach you to reduce these fees and take control back of your hard earned money by simply understanding what you own.

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Would You Bet Against Warren Buffet?

         Considered by some to be the most successful investor in the world, most people would not choose to bet against Warren Buffet. In 2007, he publicly offered $500,000 to any investor who could select five actively managed funds that would outperform the S&P index fund. It’s no surprise that only one person, a Fund Manager, took that bet. Today, nine years in, the funds have averaged 2.2% return while the S&P index fund averaged 7.1%. In other words, if you had followed Buffet's advice and invested in the index fund you would have gained $427,000 and paid 0.05% in fees. 

        If you had chosen to go with the five actively managed funds, you would only be up $110,000 and paid on average 2.42% in fees.

       About 90% of all mutual funds sold in Canada are Actively managed and they underperform the market approximately 90% of the time and there is still a fee for this service. If you have a fund that returns 7% annually and you pay a 2% fee, you will lose 1/3 of your gains in 20 years.

        Below is a chart showing the difference between trying to outperform on the right hand side, and letting the market do its job on the left.

         The solution is to choose funds that are easily available to you and charge little to no fees, thus allowing for higher returns. By empowering yourself and staying involved with your money, you can watch your investments and retirement grow quicker through accelerated compound interest. A financial coach will help you to make these financial changes, putting your money back in your hands.

Call Middle Retirement to learn how to bypass the middleman.

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Would you buy an asset with a 3% expected return with a 50% chance of loss?

       That is exactly what Goldman Sachs is recommending. In their 2017 forecast they are advising clients to be OVERWEIGHT U.S. equities. They are forecasting a 3% return for a moderate risk portfolio. To arrive at this conclusion they state “valuations don’t mater”.

I have compiled 3 points to break it all down. Let’s look at these in a little more detail.

       1. Why are they recommending overweighting U.S. equities? They always do. They have to. Investment firm outlooks are part of their marketing toolbox. The majority of an investment firms earnings and bonuses come from corporate finance work. But, they need someone to buy the products – that’s you. How do I know this? I owned an investment firm. We would continue to find reasons to recommend buying even when the asset was overpriced. We needed to support our clients that paid us enormous amounts of money to do so. How could the corporate clients ever engage us if we did not publicly support them? Recommending selling is a suicide mission for investment firms.

         In early 2000, months prior to a 78% drop in the Nasdaq market there were virtually NO 'sell' recommendations by the major investment firms. June 2007 (prior to the financial crisis) with the S&P500 index at 1526, Goldman Sachs, Bank of America, J.P. Morgan, A.G. Edwards, and Merrill Lynch all had targets of between 1525 and 1675. Within 24 months the index was at 676, a decline of 55%. Yes markets do lose 50 plus percent when valuations are too high.

       Recommending the best performing historical asset (U.S. equities) also keeps clients calm, happy, and gives a safe feeling. These outlooks feed on human behavior – herd mentality. The investment firms have no risk in continuing to be positive, nor are they suggesting any downside potential. Recommending more reasonably valued assets in places like India, Japan, or emerging markets, although may make sense, is too risky, let alone will negatively affect their ability to receive income from their largest clients.

        2. “Valuations don’t matter”, Goldman states, that because of Trump’s vision of lowering taxes while reducing regulations, earnings will catch up to stock prices. This in fact could be true if a) Trump is able to execute all that he would like to, b) it is done quickly without congress or senate issues, c) if these changes enhance global trade, and d) there are absolutely no negatives to these plans. Goldman is betting on the fact that unemployment will decrease (from a very low level), rates will not move higher (which the FED says they will), that debt will not increase (which Trump says he will), wages will increase (without affecting corporate earnings), and global demand will increase (even if he implements tougher trade deals). Could there be ANY risk in this? Remember, investment firms and their advisors are always positive (even before a 78% or 55% loss).

“Valuations don’t matter”? Really. Really?

       In fact, there is nothing else that does matter when investing in assets long term other than its value. Ask Warren Buffett, “price is what you pay, value is what you get”. The cost (price) of the market or a stock is based on its current and future earnings.

The chart below is showing the long-term price to earnings. As of March 3rd we are equal to 1929. The prices that you are paying today for those company’s earnings are the second highest in history, followed only by the 1999 prior to the tech bubble and above 2008/09 crisis. Does valuation matter? It better, because that is why we invest, to benefit from higher earnings by purchasing assets at a reasonable price.


         3. Goldman is suggesting you stay invested in a risk asset like stocks for a forecasted 3% return. You can get a guaranteed 2% return through a GIC and have no risk. Could stocks go down 50%? Yes. If valuations were to trade at their average multiple over the past 120 years the market would be 53% lower (not to mention global tension, interest rate increases, possible decline in real estate prices, European issues, higher debt costs, or any Black Swan event).

        Since Goldman is forecasting a 3% return on a high-risk asset, and you could return 2% with no risk, you are staying in the market for a 1% premium return with a chance of a 50% loss. You should always look for positive risk/reward situations, not negative. If you have a chance to lose 50% you should be looking at a possible 100% return (positive 2:1). But today you are looking at a negative risk/reward scenario: 1% increase in return for a risk of losing 50%. That doesn’t make sense.

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The 6 best budget tips for students

As your kids return home for the summer from University or as they prepare for the upcoming year, it's important to talk to them about finances.

The following article discusses some great ways to help them in their new journey with money and debt.


How to stay financially stable while you study

Everyone needs a budget. But while making it — and sticking to it — may seem daunting, the process can actually be painless. There are dozens of ways to save a few dollars each day.

Here are six solid tips to get you started.

1.    Credit? Forget it

If you don’t have the cash for something, don’t buy it.

Sure, your credit card might seem like a life-saver and, yes, you might be able to put the bill out of your mind until the end of the month. But if you don’t pay it fully on its arrival, you’ll incur serious interest charges and your credit rating will suffer.

For more on the hazards of plastic, 

see “6 ways not to ruin your credit.”

2.    Choose your ATM wisely

In a city like Montreal, ATMs abound, but not all are created equal. Private terminals — the ones you’ll see in stores, restaurants and bars — will charge you exorbitant fees.

Make sure to open an account with a bank that has lots of cash machines in your neighobourhood; that way, you’ll have convenient, inexpensive access to cash. It’s not worth paying as much as $5 to take $20 out, is it?

3.    Letters to live by: BMW

If you own or have access to a car, you might feel tempted to drive it anywhere and everywhere. Don’t.

Considering the high costs of gas and parking, your best option is BMW — that is “bus,” “metro,” “walk.” If you really have to drive, consider carpooling. You’ll leave a smaller footprint on the environment, and you’ll save money (but real friends kick in for gas).

4.    Don’t let food eat your budget

There isn’t exactly a dearth of restaurants in the city. But while you might be inclined to eat out for every meal, at the end of the month, your wallet and stomach could both be empty.

It’s cool to pick up a quick bite every now and then — just watch how much you spend on those grab-and-go eats and drinks. When it comes to preparing food on your own, take advantage of grocery store specials. Another idea might be to set up a food co-op with some friends. Buying in bulk is usually a lot cheaper.

Just remember: never, ever go shopping when you’re hungry. You’ll be amazed at the ill-advised grocery orders you can end up walking out with when you’re buying on impulse.

5.    Cheap thrills

A night out with your friends doesn’t have to mean a hit to your wallet. Throw a dinner party, and share the expenses by shopping and cooking together. You may even discover new dishes that are tasty, inexpensive and healthy.

6.    Hit the books, but don’t break the bank

Textbooks are one of the biggest expenses you’ll face as a student. Fortunately, most are available second-hand, which means you can save a lot of money on them.

Just check the used books section at the university or student-run co-op bookstores — the former will even let you rent your books. And unless you’ll need your old textbooks for future reference, consider selling them and putting the cash they yield toward this year’s stack.

These tips were excerpted from “Money matters,” an article originally published in the August 2013 issue of

The Bridge Magazine

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Five Steps to Creating Luck

“The amount of good luck coming your way

depends on your willingness to act”

Barbra Sher

Are you lucky? Can you become lucky? Although no one knows exactly what luck is, there are four distinct beliefs on the subject. Some believe the world is random, some have religious views that prayer will effect outcomes, some believe in astronomy, while others believe they can predict the future through palm reading, tarot cards or glass balls. Whatever you believe, the odds of being lucky can be increased by your attitude and willingness. You have the ability to be lucky! 

Step 1. Increase the number of people you genuinely interact with in a positive way (Whether that’s the guy at the newsstand, neighbour, at work or at play: be interested in them, listen to them, care about them).

Step 2. Understand gut feel. Love at first sight is not a gut feel, it’s a hope (thinking you will win the lottery or a horse race is not based on any facts). When you explore an opportunity, or interact with someone your subconscious will notice more than your conscious. After a number of looks, listen to your gut. Allow time for your gut feel to develop.

Step 3. Be open to new opportunities. Be willing to spend time and explore options that may be presented to you

Step 4. Be courageous not careless. Look at the odds of success vs. failure . Do not jump in; evaluate the upside and downside. Be somewhat pessimistic when evaluating the odds, what could go wrong?Where would that put me?

Step 5. Be willing to be wrong. Be that the stock market, job choice or business decision, listen to yourself when you know it is wrong, cut your losses and get out.

If you want to be lucky with your investments, you have to follow the odds. Understand what you own, weigh the odds and you will succeed.

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Why Demographics Matter to Your Investments

“People do predictable things as they age”

Harry Dent

Do Demographics matter?

         Young people create growth and inflation. They spend money, they borrow, and they grow the economy. Older people hinder growth and cause deflation. They spend less, borrow less and downsize (sell). Why were private golf courses so expensive in the 80’s and 90’s, why were tennis clubs so exclusive? The largest population in history was turning 40…peak spending years. Why have these clubs become less exclusive and less expensive?  Why is the Fed keeping interest rates low to shore up the economy? Why are oil prices declining? The largest population in history is now in their 60’ and 70’s. They are spending less. What happens when there are more sellers than buyers? Prices decrease. For the first time in history a smaller generation is following a larger one. Baby boomers are selling. There is a predictable spending pattern we all adhere to.

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It's NOT too LATE..for your investments or retirement

Market Investments: What to do Next....

         I hope I haven't scared everyone too much with my doom and gloom regarding market predictions. Think of me as a meteorologist. I can see the storm coming and that it's going to be a big one, but I'm not sure if flooding will reach the second floor. You may have stayed home to ride out the storm in the past and that's what your friends and neighbours are doing so why not. My point is: why take the risk? 

         Investments in any form, from mutual funds to bonds and equities are all at risk from this storm. Currently, we are only seeing the outer bands, and yes a few days of sunshine, but my doppler is showing that the eye of this storm is yet to come.
The last seven years from bottom to top saw a 100+ % return in Toronto and a 300% return in the US markets.
         The TSX hit a high of 15,600 in April of 2015 and is currently down by 20% sitting at 12,300. Historically, the average economic upturn is 37 months, this one was a whopping 73 months; our 2nd longest economic upturn in history.

         We are seeing clear signs that the storm has begun and that the downturn is happening. This storm will not be over in a day, or a week, in fact an average downturn lasts about 18 months, we are now between 2-5 months into it. You are not too late.

         If you haven't already said thank you to the market and are sitting safe and in cash, there is still time to evacuate. If you are thinking this is over, I just want to continue to caution you. You can be sitting pretty in another location, safe and worry free or you can stay on watch hoping that you will continue to get those up days or bands of sunshine. I don't want to see you waiting on the top of the roof for help to come. 

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Its Time

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