Enough Bull: How to Retire Well without the Stock Market, Mutual Funds, or Even an Investment Advisor PDF
Preview Enough Bull: How to Retire Well without the Stock Market, Mutual Funds, or Even an Investment Advisor
EN UGH BULL EN UGH BULL HOW TO RETIRE WELL WITHOUT THE STOCK MARKET, MUTUAL FUNDS OR EVEN AN INVESTMENT ADVISOR David Trahair, CA Author of the National Bestseller Smoke and Mirrors: Financial Myths That Will Ruin Your Retirement Dreams John Wiley & Sons Canada, Ltd. Copyright © 2009 by David Trahair, CA All rights reserved. No part of this work covered by the copy right herein may be reproduced or used in any form or by any means—graphic, electronic or mechanical without the prior written permission of the publisher. Any request for photocopying, record ing, taping or information storage and retrieval systems of any part of this book shall be directed in writing to The Canadian Copyright Licensing Agency (Access Copyright). For an Access Copyright license, visit www.accesscopyright.ca or call toll free 1-800-893-5777. Care has been taken to trace ownership of copyright material contained in this book. The publisher will gladly receive any information that will enable them to rectify any reference or credit line in subsequent editions. Library and Archives Canada Cataloguing in Publication Trahair, David Enough bull : how to retire well without the stock market, mutual funds, or even an investment advisor / David Trahair. ISBN 978-0-470-16127-2 1. Retirement income—Planning. 2. Finance, Personal. I. Title. HG179.T72 2009 332.024’014 C2009-902565-5 Production Credits Cover Design: Ian Koo Interior Design: Adrian So Typesetter: Thomson Digital Printer: Friesens Editorial Credits Executive Editor: Karen Milner Project Coordinator: Pauline Ricablanca John Wiley & Sons Canada, Ltd. 6045 Freemont Blvd. Mississauga, Ontario L5R 4J3 Printed in Canada 1 2 3 4 5 FP 13 12 11 10 09 TABLE OF CONTENTS Acknowledgements xi Introduction 1 The Fall of 2008 1 Angry Yet? 2 Why I Wrote This Book 3 Your Retirement Journey 3 Down the River 4 Uh-Oh, It’s the Niagara River 5 Retirement Journey: Plan B 6 Here’s What They Don’t Want You to Know 7 PART ONE: THE ANTIDOTE 9 The Antidote: A Six-Point Plan for Financial Freedom 9 1. Avoid Personal Financial Disasters 9 2. You Don’t Need the Stock Market or Mutual Funds 10 3. Buy a Home and Pay Off the Mortgage 10 4. Reducing Expenses Doesn’t Have to Be Painful 10 5. Forget RRSPs Until Your Debt Is Paid Off (the Opportunity Zone) 10 6. Ask Yourself if You Really Need an Investment Advisor 11 Chapter 1—Avoid Personal Financial Disasters 13 The Ponzi Scheme 14 –– vv –– TABLE OF CONTENTS Bernie Madoff 16 Our Very Own Canadian Fraud 18 What Did the “Average” Victim Look Like? 19 How Did Investors Become Involved in Eron? 20 What Steps Did Investors Take Before Investing? 20 Why Did They Invest? 21 Where Did They Get the Money? 21 The Lessons of Eron 21 Extraordinary Popular Delusions 22 Other Potential Disasters 23 Credit Card Disease 23 Taking Out a Mortgage on Your Home to Invest 24 The Latest Stock Chase 24 Trusting Your “Friends” 24 Mortgage Fraud 24 How to Prevent Personal Financial Disasters 24 Conclusion 25 Chapter 2—You Don’t Need the Stock Market or Mutual Funds 27 The Worldwide Economic Meltdown 27 What’s Next? 29 What Caused the Meltdown 29 The Vicious Spiral 31 Who Wants to Be Rich? 32 Why You Don’t Need Stocks 33 Why You Don’t Need Mutual Funds 35 Mutual Fund Risks 36 Those Darned Mutual Fund Fees! 40 1. Fees and Expenses Payable Directly by You 41 2. Fees and Expenses Payable by the Fund or Portfolio 42 The Puke Point 44 How to Get Rid of Your “Dog” Funds 45 A Word about Labour-Sponsored Investment Funds 46 We Won’t Get Screwed Again 47 The Canada Deposit Insurance Corporation 48 – vi – TABLE OF CONTENTS The Advantages of GICs 52 Easy to Understand 52 No Fees 52 Flexible 54 Insured 54 Why They Try to Make GICs Complicated 54 How and Why They Bash GICs 55 The Laddered GIC 56 Getting the Best GIC rates 59 Consider a Deposit Broker 60 Finds the Best Rates 61 Saves Time 61 Provides Advice 61 You Don’t Pay Fees 61 Who Regulates Deposit Brokers? 62 Fiscal Agents 63 GIC Rates of the Future 66 Chapter 3—Buy a Home and Pay Off the Mortgage 67 Ya Gotta Live Somewhere 67 Gains in Value Are Tax-Free 68 Source of Cash 68 Great Source of Retirement Funds 68 Should I Buy a House? 69 Can I Afford a House? 69 Gross Debt Service Ratio (GDS) 70 Total Debt Service Ratio (TDS) 70 Just How Much House Can I Afford? 70 Saving for the Down Payment 71 Buying with Less Than 20% Down 71 Pre-approved Mortgages 73 What If I Don’t Qualify? 74 Your Credit Report 75 What’s in a Credit Report 75 How to Get a Free Copy of Your Credit Report 77 Getting Your Credit Report Online 77 – vii – TABLE OF CONTENTS How to Improve Your Credit Score 78 Your Home as an Investment 79 “The Best Investment I Ever Made” 79 Conclusion 82 Chapter 4—Reducing Expenses Doesn’t Have to Be Painful 83 Reducing Interest 83 The Spending Years 84 Reducing the Amount of the Debt 84 Debt and the Economy 86 Reducing the Interest Rate on the Debt 87 Reducing Taxes 89 Pension Income Splitting 89 Spousal RRSPs: Still a Useful Tool 93 How to Calculate Your Tax Bill 96 Happy New Year—Here’s Your Reduced Paycheque 97 Marginal Tax Rates 100 Self-Employment—King of the Income Splitters 101 Conclusion 104 Chapter 5—Forget RRSPs Until Your Debt Is Paid Off (the Opportunity Zone) 105 Pretend that the Stock Market Does Not Exist 105 The RRSP Fallacy 106 Compound This 109 The Tax Turbo-Charged RRSP 109 A Word About Your RRSP Limit 109 Do You Trust the Stock Market? 110 Those Ugly Fees 111 Don’t Put All Your Eggs in One Basket 111 Conclusion 111 Chapter 6—You May Not Need an Investment Advisor 113 My Story 114 What I Did Next 116 What to Look For in an Investment Advisor 117 Do You Have a Lousy Advisor? 118 – viii –
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