TDB909 – Canadian Bonds – $2,633 (19.0%)
TDB900 – Canadian Equities – $2,890 (20.8%)
TDB902 – US Equities – $4,260 (30.7%)
TDB911 – International Equities – $4,094 (29.5%)
Total – $13,877
Total Invested – $13,000

We’ll add another $1,000 to the portfolio and rebalance it to the target asset allocation — 20% bonds, 20% Canadian stocks, 30% US stocks and 30% International stocks. I use this spreadsheet to divide up the new money between the portfolio components.

Transactions

TDB909 – TD Canadian Bond Index (e-Series) – Buy units for $328.18.
TDB900 – TD Canadian Index (e-Series) – Buy units for $100.00.
TDB902 – TD US Index (e-Series) – Buy units for $202.84.
TDB911 – TD International Index (e-Series) – Buy units for $454.48.

The Sleepy Mini Portfolio does not end up with a precise 20-20-30-30 asset allocation because the TDB900 requires a minimum investment of $100 but the amount to buy came out to $85.50. Therefore, I bumped up the Canadian stock allocation slightly at the expense of Canadian bonds.

A formulaic approach to investing such as this helps to mitigate much of the emotional traps that await investors. And you can get it done in less time than it takes to shop for a couple of Christmas gifts.

NB: I picked 5 entries at random for The MoneySense Guide to Retiring Wealthy giveaway. I haven’t heard back from two of the winners, Catherine and Stella. Can the winners please check their email accounts and send me a reply? If I don’t hear from you soon, I’ll be picking out two new winners. Thank you.

Related Reading:

• Sleepy Mini Portfolio Q2-2010 Update
• Sleepy Mini Portfolio Q3-2010 Update
• Sleepy Mini Portfolio Q1-2010 Update
• Sleepy Mini Portfolio Q3-2009 Update
• Sleepy Mini Portfolio Update

Sleepy Mini Portfolio Q4-2010 Update is brought to you by Canadian Capitalist — Helping you to invest & prosper.

When doing the calculations, we subtracted each card’s annual fees (if any), and added in any sign-up bonuses. In cases where you get extra rewards for spending on groceries or gas, we assumed you spend the average amount for Canadians on both (see the Methodology below for details).

As presented in the December/January 2011 issue of MoneySense, among those cards marketed primarily as cash-back cards, we found that the Capital One Cash Back Plus Platinum MasterCard came out on top for those spending $3,000 a month.

Since that magazine was published, however, an eagle-eyed reader has alerted us to the fact that even though it’s primarily a travel rewards card, not a cash-back card, Capital One’s new Aspire World MasterCard comes with a cash-back option that–thanks in part to a generous sign up bonus—-provides more cash back in the first year than any other card we looked at, regardless of whether you spent $1,000, $3,000 or $5,000 a month.

Note: Figures that appeared in the December/January 2011 MoneySense magazine for the BMO Premium Cash Back and MBNA Smart Cash Platinum Plus MasterCard were incorrect, and have been revised here. MoneySense apologizes for the errors.

We’ve ranked the cards below based on how much they pay back if you spend $3000 a month.

METHODOLOGY:

Annual fees, if any, were subtracted from the annual cash-back amount. Sign up bonuses were included when offered-this means that in subsequent years, the amount of cash back will be less.

*For the Capital One Aspire World MasterCard and MBNA Smart Cash Platinum Plus MasterCard, only the redeemable amount of the cash back that was available to the card holder that year was included. More cash back credit accrued in that year can be redeemed in the following year.

**For BMO Premium CashBack MasterCard, extra cash back was included for gas purchases at Shell, calculated based on spending $185 on gas a month; a roadside assistance bonus of $69 a year was also included.

***For the Canadian Tire card, we did not include extra cash back from purchases at Canadian Tire gas bars and Mark’s Work Warehouse in our calculations.

**** For the TD Gold Elite Visa, roadside assistance was included, valued at $79 a year.

***** For the BMO CashBack MasterCard, extra cash back for gas purchases at Shell was calculated based on spending $185 in gas a month.

You might be surprised to hear that you likely have easy access to not just the last sale price and assessment value for your house, but for any other house you’re curious about. You can even look up how many bedrooms and bathrooms your boss has. How much information is available varies depending on the jurisdiction, but in general, residents of large metropolitan areas — and residents anywhere in Ontario — have access to municipal databases that reveal a wealth of historic sale prices and current assessment values. (You can find a full list of municipal property database websites at the bottom of this article.)

Usually the searches are free, but some jurisdictions charge a fee (around $15) to access the service. You simply log on using your roll number and your password — information found on your municipal property assessment notice.

In Toronto, for example, homeowners can go to the Municipal Property Assessment Corporation (MPAC) website and scroll over an interactive map, which provides information on 200 nearby properties. You can get more detailed information on up to 24 of them, such as the current assessed value, the last sale price, the year the home was built, square footage and number of bedrooms and bathrooms.

The information is provided to ensure transparency in the property assessment process. “It gives homeowners tools to gauge their assessment and determine the accuracy of their home’s value,” says MPAC’s Carmelo Lipsi. So if after checking out your neighbours, you think your home has been over-assessed, you may decide to request an appeal. Who knows? A little curiosity could pay off with a much lower tax bill.

In your book, you point out that investors derive benefits from their portfolio other than mere utilitarian returns. Can you expand on what these benefits are?

The expressive and emotional benefits of a portfolio are many. For example, those who include in their portfolio derivatives express themselves as sophisticated. Those who pick stocks can express themselves as smarter than index-fund investors.

On the emotional side there is the pride of beating the market and the satisfaction in trading.

These emotional and expressive benefits of investments often detracts from utilitarian returns. But investors also derive enjoyment out of these benefits. How should investors balance the cost of these benefits against investment returns?

I think that investors should be aware of the costs and benefits and judge the tradeoff themselves. Is playing the game of beating the market enjoyable enough to justify the likely lag relative to the market? (Is hearing Placido Domingo in a concert hall worth the $100 price of the ticket?)

Even investors who are strictly seeking utilitarian benefits from their portfolio are often tempted by the emotional side. What can these investors do to keep their impulses in check?

Investors can keep their emotions from affecting their actions by setting rules – such as no trading. Or by appointing the spouse or advisor to prevent them from acting on emotions (as smokers who want to quit tell friends not to give them a cigarette even if they ask).

Related Reading:

• Insiders Enjoy Stock Market Edge
• The Growth Trap
• This and That: Buffett thanks Uncle Sam and more…
• Book Review: The Little Book That Beats the Market
• Doubts on Equity Risk Premium

Three Questions for Meir Statman is brought to you by Canadian Capitalist — Helping you to invest & prosper.

RBC Direct Investing recently became the first bank-owned brokerage to allow Canadians to hold US dollars in registered accounts, such as RRSPs and Tax-Free Savings accounts (TFSAs).

This is a welcome move, and we hope the other banks will follow suit. (Questrade and QTrade have allowed US dollars in RRSPs for some time.) The cost of converting loonies to greenbacks in an investment account is significant — indeed, it’s the main reason why Canadians are often reluctant to use low-fee ETFs from US providers.

But holding US dollars in a registered account also raises a number of practical questions. A reader, Graham R., emailed to ask how US-dollar transfers to RRSPs are treated with respect to contribution limits. For example, let’s say he moves $10,000 US into his retirement account today. Early in 2011, before tax time, the brokerage will send Graham a tax slip indicating the amount of his RRSP contributions. Will this amount be indicated in US or Canadian dollars?

I spoke to Michael MacDonald, head of business strategy at RBC Direct Investing, who clarified how this works. When you deposit US dollars into a registered account, the brokerage records the contribution in the equivalent amount of Canadian dollars. (They use the exchange rate set at the end of the previous day.) For example, if the US dollar is currently valued at $1.05 Canadian, then a $10,000 US deposit would count as an RRSP contribution of $10,500 CAD.

Watch out for overcontributions

Graham was concerned that confusion about these rules might cause investors to accidentally overcontribute to their RRSPs and incur a penalty. That risk seems small today with the US and Canadian dollars so close to par, but we’d be foolish to presume that our dollar is going to remain this strong forever. (Let’s not forget it was worth $0.77 US as recently as the spring of 2009.)

The good news is the CRA gives you a little breathing room: you’re allowed to exceed your RRSP contribution limit by $2,000 without penalty. (After that, overcontributions are taxed at 1% a month.) Note, however, that you can’t claim excess contributions on your tax return. If Graham’s RRSP limit this year is $10,000 and he makes a US-dollar contribution valued at $10,500 CAD, he won’t get penalized, but he can only claim a $10,000 income deduction.

As 70,000 investors learned last year, it can be just as costly to overcontribute to a Tax-Free Savings Account. The annual limits are low ($5,000, plus any amount carried over from previous years), and every excess dollar is taxed at 1% per month. If an unwitting investor transfers $5,000 US into her TFSA when the loonie is worth US$0.85, the overcontribution penalty would be more than $100.

Before you make the switch

Some other notes for investors who considering taking advantage of dual-currency accounts at RBC Direct Investing:

• The option is available for the whole range of retirement accounts, such as Registered Retirement Income Funds (RRIFs) and Locked-In Retirement Accounts (LIRAs). The one important exception is Registered Education Savings Plans (RESPs), which cannot hold US dollars.

• To move US dollars in and out of your RBC Direct Investing account, you’ll need to open a US-dollar bank account with RBC. You can’t use a US-dollar account from another bank.

• No US-dollar bank account? You might consider using Norbert’s gambit, a way of sidestepping currency conversion fees in an investment account. Let’s say you want to buy $10,000 worth of a Vanguard ETF. You could deposit this sum in Canadian dollars, convert it using the gambit, then buy the ETF in US dollars. (This technique can be complicated, so read up on it first and employ it at your own risk.) This would also eliminate any confusion about RRSP or TFSA contribution limits, since the initial deposit would be in Canadian dollars.

• US-listed ETFs are not eligible for dividend reinvestment plans through RBC — only individual stocks in the S&P 500 are eligible. But there’s still a benefit for investors who use US-listed funds: with a dual-currency account, you can receive dividends in US dollars and there’s no forced currency conversion. RRSP clients of all the other bank brokerages currently get dinged by foreign exchange fees of about 1.5% every time their ETFs pay a distribution.

The information in this post should not be construed as tax advice. Consult an accountant or other qualified advisor if you are unclear about any tax implications of using US dollars in a registered account.

1. Take Thursday or Friday or both days off.

2. Drive to the US border. Wait in line to clear US customs.

3. Spend money on gas, tolls (if any), lodging and meals.

4. Line up in the cold well before store opening to snag the best deals. Try and avoid any brawls that may break out.

5. Buy items on your list. Pay sales taxes (if applicable). If you are paying with a Canadian credit card, you’ll be charged a 2.5% fee on top of the applicable exchange rate.

6. Wait in line (again!) to pay taxes, duties (if applicable) at Canadian customs.

I hate shopping at Wal-Mart even on a regular weekend. For me, no TV is worth lining up for hours in the cold in front of a Wal-Mart.

Related Reading:

• Making Less Trips to the Grocery Store
• Bargain Hunting Across the Border
• Is a Costco membership worth it?
• Boxing Day Madness
• Comparing Bank Accounts and Credit Cards

Is Black Friday Worth the Hassle? is brought to you by Canadian Capitalist — Helping you to invest & prosper.

A Stockholm University study of more than 14,000 employees for France’s national grid shows that retiring at age 55 cuts stress and fatigue. Seems simple enough, except the link between work and overall health is unclear.

According to the lead researcher, the decrease in fatigue may be due to the removal of the source of the problem, or it could be that the lack of stress causes people to no longer notice when they are tired.

A study from 2009 showed that those who stop working completely at retirement age are at greater risk of heart attacks, cancer and other major diseases than those who ease their way into retirement by taking a part-time job.

Either way, the research raises questions about the link between work, health, retirement and how best to manage all three.
]]> http://www.moneysense.ca/2010/11/26/this-just-in-early-retirement-is-good-for-you-maybe/feed/ 73 http://www.moneysense.ca/2010/11/26/make-flying-fun-again/ http://www.moneysense.ca/2010/11/26/make-flying-fun-again/#comments Fri, 26 Nov 2010 15:45:07 +0000 Mark Anderson http://www.moneysense.ca/?p=8898 It’s no secret that flying post-9/11 has become both complicated and stressful. Factor in declining service levels as airlines struggle for profitability, and the once glamorous world of air travel can start to feel more like a Guantanamo water-boarding session than the luxury experience of yore.

Fortunately, there are steps travellers can take to ameliorate the pain and minimize the frustration associated with endless security checks, cramped seats and dismal meals. Here are a few of the best tips from people who fly for a living.

Select a decent carrier
It makes a difference. Really. “Most people go on-line and find the cheapest possible flight,” says Vancouver Island resident John Beaven, who, before his retirement, used to rack up between 250,000 and 300,000 air miles each year circling the globe as an account executive with Allied Signal. “But if you’ve flown as much as I have, you quickly realize that not all airlines are created equal. Not only do some have more comfortable seats and better air and ground service, but different airlines actually have their own, distinct, personalities. Some are super-friendly and relaxed, others are uptight and employ flight attendants who clearly hate their jobs.”

For the record, Skytrax, which bills itself as “the world’s largest airline and airport review website,” ranks Asiana Airlines as the best carrier in the world based on product and service offerings, followed by Singapore Airlines and Qatar Airways. Best economy-class seating goes to Qatar; best business class seating to Kingfisher Airlines; and Virgin Atlantic is ranked No. 1 in airport lounges. Perhaps unsurprisingly, North American carriers are conspicuously absent from virtually all of Skytrax’s Top 10 lists.

To check, or not to check
In a word, don’t. The array of mishaps, glitches and hidden costs associated with checked baggage is both long and scary. For starters, checked bags can get damaged—as evidenced by Halifax musician Dave Carroll’s smash YouTube hit United breaks guitars. Checked bags also get lost frequently. “Incidents of luggage getting lost or stolen have skyrocketed of late, because carriers are outsourcing luggage handling to companies that pay minimum wage,” says Lynn Jones, recently retired from a 30-year career as an Air Canada flight attendant. “If you feel you absolutely have to check bags, make sure your carry-on luggage contains at least a pair of pyjamas and full change of clothes, so you won’t be stuck if your checked bags don’t arrive.”

Jane Hutchings, another flight attendant with more than three decades service, says she avoids checking luggage at all costs. On a recent 16-day trip through Australia and New Zealand, Hutchings and her husband each made do with a single carry-on bag, then bought anything else they needed—extra clothing, shoes or outerwear—en route. Sure, they had to purchase extra bags to check in for the flight back to Canada, but checking luggage on return flights is less critical: “If it goes missing on the way back, who cares?” says Hutchings. “You’re home, so you’re not stuck without necessities.”

Travellers who need to check luggage should be aware of size and weight limits for bags, and the attendant costs for exceeding these limits. Air Canada, for example, permits economy class passengers to check two 50-lb bags. Bags exceeding 50 lbs are charged $100, and extra bags run as much as $250—each way! Moreover, the allowances and charges can change mid-journey, as travellers switch airlines on connecting flights, leading to some truly nasty surprises. “I know someone who was stuck paying $3,000 to get their luggage home after a lengthy cruise,” says Hutchings. “I know other people who’ve taken to shipping their luggage with FedEx or UPS rather than checking it. It can actually be cheaper in some cases, and they deliver it right to your door.”

Security
In the recent Hollywood film Up in the Air, uber-flyer Ryan Bingham (George Clooney) finesses security line-ups with a practiced—not to say jaded—eye. Old people are the worst, he opines, because they’re “full of metal bits and never seem to appreciate how little time they have left.” Asian travellers, on the other hand, are efficient and organized, and “have a thing for loafers, God bless them.”

It’s a throwaway line, but not without its kernel of truth: there are things travellers can do to get through security quickly, efficiently and with minimal stress. “Wear shoes without laces that you can kick off and put back on without bending down,” says Jones. “And wear socks. You don’t want to be standing on those filthy floors in bare feet.” Hutchings, meanwhile, advises travellers to leave loose change at home. “It’s heavy, and you can’t use it if you’re flying out of the country.” And pack liquids, gels, cosmetics and medication in see-through ziplock bags, “so security doesn’t have to rummage through your carry-on bag looking for this stuff.”

Seating
When booking flights, you might want to consider paying a bit extra—usually $30 to $60—to pre-select a seat. “The seats by the emergency exits are great because you get more leg room,” says Beaven. Conversely, the row immediately in front of the emergency exits is bad because the seats don’t recline fully; nor do the seats in last row at the back of the plane.

“Some people want to sit up at the front of the plane, because they think they can get on and off faster,” says Jones, “but what they don’t realize is that’s where the bassinets go, so they’ll often find themselves sitting next to screaming infants.”

Sleeping
If you’re lucky enough to be able to fly business class, check in advance to ensure your carrier’s seats recline completely flat. Flat-bed seats are “vastly superior” to so-called angled-flat seats when it comes to sleeping, says Jones. “That’s where you hear the snoring.”

Oh, and the pillows and blankets provided on overnight flights? “They’re used again and again,” says Jones. “They don’t change them unless they’re visibly dirty, so I advise women in particular to bring their own shawl or pashmina they can curl up under, together with a pair of comfy socks or slippers.”

“Eat lightly, and refrain from drinking alcohol,” adds Hutchings. “One drink in the sky equals two or more on the ground because of the difference in oxygen levels, and if you have a couple drinks before dinner and half-bottle of wine with your meal, you’ll feel like the cat’s breakfast by the time you arrive at your destination.”

Beaven says that on flights where he hopes to sleep he brings his own neck pillow and makes sure he gets window seating. “If you’re in the middle seat you wake up on another passenger’s shoulder, and with aisle seats you’re always getting bumped by the trolleys.” He also invested in a pair of noise-cancellation headphones. “They’re fantastic. Turn them on, and 90% of the engine and cabin noise disappears. They also make it a lot easier to hear the in-flight movies.”

How much you enjoy your flight often comes down to your level of preparedness, your attitude and your expectations, says Jones. “Flying isn’t what it was in the ‘70s, and there’s no point pretending it is. So, be positive. It’s so much easier to be nice than nasty.”