The reason given for the slowdown is reduced growth in consumer spending and lower business investment in residential structures.

This will be my only post of the week, as I am currently on a family vacation in New York City. I spent today in the Financial District, approaching bankers and other well-dressed individuals on Wall Street and asking them if they had considered embracing a low-cost indexing strategy. Most ignored me. Some swore colourfully. My children were frightened.

During quieter moments, I’m rounding out my summer reading this week with John Bogle’s Enough: True Measures of Money, Business, and Life. Bogle, as long-time Couch Potatoes will know, is the founder of The Vanguard Group and the father of index investing. This book contains no practical advice for investors; rather, it’s a reflection on everything that has gone wrong in business and finance in recent years. In the world of investing, Bogle sums things up like this:

• Too much cost, not enough value
• Too much speculation, not enough investment
• Too much complexity, not enough simplicity

Amen to all three points. It’s hard to overstate the influence that Vanguard and Bogle himself have had on investing in the United States. Not only is Vanguard now the largest mutual fund company in the world, but the fact that investors have the option of choosing its funds, with their extraordinarily low costs, has changed the mutual fund landscape in that country. If a fund company tried to charge Canadian-style fees in the U.S., they would be run out of town by angry mobs with pitchforks. Rumours have floated around since last year that Vanguard may eventually come to Canada: that day can’t come soon enough.

One final note: Thanks to everyone who signed up to follow the blog on Twitter (@CdnCouchPotato). The winner of the Cutco potato masher is Tim, the blogger behind Canadian Dream: Free at 45.

See you next week. Until then, stay passive, my friends.

The Elements of Investing hacks away at all the overtrading and over thinking so predominant in the hyperactive thought patterns of the average investor. Malkiel and Ellis offer investors a set of simple but powerful thoughts on how to challenge Mr. Market at his own game, and win by not losing. All the need-to-know rules and investment principles can be found here.

* Contains sound investment advice and simple principles of investing from two of the most respected individuals in the investment world
* Burton G. Malkiel is the bestselling author of A Random Walk Down Wall Street and Charles D. Ellis is the bestselling author of Winning the Loser’s Game
* Shows how to deal with an investor’s own worst enemies: fear and greed

A disciplined approach to investing, complemented by conviction, is all you need to succeed. This timely guide will help you develop these skills and make the most of your time in today’s market.

Thanks to The Stingy Investor for posting the link.

Related Reading:

• Burton Malkiel and Charles Ellis Talk Investing
• Book Review: The Elements of Investing
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• Book Review: Winning the Loser’s Game

Free Download of The Elements of Investing is brought to you by Canadian Capitalist — Helping you to invest & prosper.

Two years ago, the McGregors’ (we’ve changed their names to protect their privacy) inability to enjoy spending began to take its toll. “I spent hours pouring over the flyers looking for bargains in the grocery stores and then Tony and I would split up and spend Saturday going from store to store, buying only what was on sale,” says Cecile, 59. “We never bought anything unless it was an absolute necessity because we’d feel foolish and afraid that our money would run out. To be honest, I couldn’t remember the last time I bought a new dress.”

You’d think they were struggling, but the couple was far from poor — they had close to $2 million, with no plans on how to spend it. Tired of their compulsive penny-pinching, they sought financial counselling in 2008 and started on the road to learning the joys of spending.

“They needed permission to spend,” says Vancouver money coach Sheila Walkington. “They got endless messages from childhood that it was bad to spend unless absolutely necessary, so they were ashamed to do so.”

So what’s the key to getting such extreme savers to spend happily? Financial experts say super-saver couples need to see the hard numbers crunched for their particular situation. They need to be reassured that they really do have enough money saved to last a lifetime. “People need to feel safe,” says Ruth Hayden, a financial educator and author based in St. Paul, Minn. She recommends a plan with several different types of savings, so extreme savers can let go of their fears. One strategy Hayden uses is to set up three “money pots” — one for savings, one for emergency cash (six months to one year’s worth) and a third pot for what Hayden calls “regret-free living.” “This is when we talk about their goals,” says Hayden. “If they were close to death, what would they wish they had done?”

Does the approach work? The McGregors say it does. Their “regret-free living” pot now holds $10,000 — enough for two wonderful Caribbean cruises a year. “We now spend happily on our vacations because we have a plan,” says Cecile. “Plus, we’re not spending our capital. Knowing that our main pot of money is safe means that we’re spending without stress for the first time in our lives. It took us almost a year to feel good about this, but now it gives us so much pleasure, our only regret is that we didn’t do it sooner.”

Rules come into effect in Canada on Wednesday that force credit card companies to provide a 21-day grace period from interest on new charges, even if the previous month’s balance wasn’t paid off in full. And when a payment is made, it must be applied to the portion of debt that is being charged the highest interest rate.

In the U.S., tougher regulations are resulting in higher credit card interest rates, and it looks like the same may happen in Canada, as companies try to recoup their losses.

The researchers found that advisors are more likely to make successful matches with older, more experienced, single, female investors rather than younger, inexperienced investors. They also found that advised clients get lower net returns and lower risk-adjusted net returns than they could have achieved on their own. In other words, on average the cost of financial advice exceeded the benefits that advisors can provide. And consistent with the incentive structure of advisors, the researchers found that advised accounts trade more and have higher turnover.

Since advisors are matched with richer, older and more experienced investors, the researchers liken them to babysitters:

In this respect, advisors are similar to babysitters: babysitters are matched with well-to-do households, they perform a service that parents themselves could do better, they charge for it, but observed child achievement is often better than what people without babysitters obtain, because other contributing factors are favorable.

The research paper is available here. A tip of the hat to Ken Kivenko of CanadianFundWatch.com for pointing to the research.

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Do Advisors Add Investment Value? is brought to you by Canadian Capitalist — Helping you to invest & prosper.

He also warns that digital books aren’t as cheap as they used to be, with prices hovering around $12.99. However lovers of classic books will do well, as those books are generally free.

And if you’re thinking of buying right away, you’re better off waiting. Competition is rapidly reducing the costs of Kindles and other e-readers.