Index Investing: Beyond the Three Options

October 29th, 2014 by Potato

I provided a table of three great options for index investing in The Value of Simple (excerpt in the last blog post). Why those three? Quite simply because they represent the best options available in the market, at various points of trading off cost and simplicity. Aside from paying an advisor to do it for you, nothing gets simpler than Tangerine’s single fund and super-simple website and tablet app. You don’t even have to call someone to set up a preauthorized purchase plan. Many fund companies have regular (no-load) mutual funds that track the main indexes, which will let you set up a good index portfolio with ~4 funds. However, rebalancing 4 funds is the level of difficultly that TD e-series sits at, and nothing is as cheap as that in the mutual fund game. Beyond mutual funds there are ETFs, which is where it gets as cheap as it possibly can, but at a significant step up in terms of difficultly. Questrade offers no-commission purchases, low commissions for sales, and accounts only have to have $5000 to avoid maintenance/inactivity fees.

Here’s a list of the other options, and why they didn’t make the book:

  • BMO: Though BMO offers low-cost index funds traded on the stock exchange (ETFs), and in a quasi-Vanguard manner allows its mutual fund investors to invest in the same indexes, it does not manage to make the offering very attractive. Though you can buy in with as little as $50, the MER on their Canadian equity fund is 1.05% — barely a hair below Tangerine.
  • CIBC: Index funds have high minimum purchase ($500) and high MERs — at 1.14% it’s higher than Tangerine’s.
  • National Bank: Their index funds are moderately competitive, with MERs of just 0.66%. The funds are a little less diverse than I would like — the Canadian index tracks the TSX 60 rather than the full composite, and the US index tracks the Dow (30) rather than one of the larger indexes like the S&P500. The minimum initial investment is $500.
  • PC Financial: It looks like PCF has recently updated their offerings to get closer to Tangerine. Their portfolios are marginally more expensive, and include more asset classes. Their “Balanced” fund, for example, has 50% fixed income, of which 5% (of the total fund) is in international bonds. The international equity component is split with separate European and Asia-Pacific indexes. Each fund “portfolio” has a slightly different MER; the balanced fund is 1.09%. Like their CIBC parent, they require $500 to invest at a time. PCF offers a 0.1% discount to the CIBC MER (it’s not clear from their website whether this is included in the MER listed), but this discount is distributed quarterly as extra units — a nightmare for bookkeeping in a non-registered account.
  • RBC: Their index funds are not outrageous with MERs between TD’s e-series and Tangerine — but at 0.72% it’s still beaten by TD’s e-series.
  • Scotiabank: The mutual funds arm of Scotia has high initial investment requirements ($1000) and with an MER of 1.00% on their Canadian Index fund they are not competitive with TD — it’s barely better than the simpler Tangerine.
  • Scotia iTrade: Scotia’s discount brokerage arm was one of the first to come out with commission-free ETFs (mere weeks after the release of the first book, I might add). However, only a select list of ETFs are available, and none of them are the mainline ultra-low-cost broad indexes. You can build a decent portfolio from their offerings (e.g. to follow the broad TSX composite you would buy both HTX for the TSX 60, and XMD to cover the rest), but the average MER will be closer to ~0.3%, at which point TD’s e-series don’t look so bad, or for large accounts even paying the commission for XIC will put you ahead of using the list of free-to-purchase ETFs.
  • QTrade: (Different from Questrade) has some commission-free ETFs; basically the same list as Scotia iTrade.
  • Virtual Brokers: Very competitive with no-commission ETF purchases, but require $15,000 minimum account to avoid fees. This was basically a coin-flip as to whether I wanted to include it or not, and in the end I didn’t see anything from VB that Questrade wasn’t already offering, so I kept the line-up as simple as I could.

I was a little hesitant at first to recommend specific companies, but the fact is that they offer indisputable advantages for the reader, and giving detailed step-by-step instructions is only feasible with a few definite options.

For the average investor, a low-cost index investing approach is the easiest and simplest method available, and also provides the highest chances of long-term success. While there is a lot of material available on why investors should choose passive approaches over high-fee active mutual funds and what passive investing products exist, the average investor is at a loss on how to implement a passive index investing plan. The Value of Simple: A Practical Guide to Taking the Complexity Out of Investing provides a plain-language explanation of how Canadians can implement a low-cost index investing strategy, with step-by-step instructions and a focus on developing good investing processes. Coming December 1st.

The Value of Simple - Three Index Investing Options

October 26th, 2014 by Potato

This is a brief excerpt from my upcoming book The Value of Simple: A Practical Guide to Taking the Complexity Out of Investing. It has been edited to stand alone.

After you’ve done your planning and are ready to invest you have to set up an account somewhere and implement your plan. For most people passive investing through index funds is the best way to go, but even within that strategy there are many options out there. Two key considerations are the cost of investing and the complexity of the system, which may become a balancing act between the two. Don’t underestimate the value of simple — an easy-to-follow investment plan will pay in the long-term if you’re more likely to stick to it. Though nearly every bank and brokerage provider will have some form of account and fund for you to invest in, three excellent options using low-cost index mutual funds or exchange-traded funds (ETFs) are at Tangerine, TD Direct Investing, and Questrade. Each one provides greater cost savings at the trade-off of increased complexity.

In my opinion, TD Direct Investing and their e-series index mutual funds represents the best balance between cost savings and effort required. This is not because I receive any kind of compensation from TD, but rather because I truly believe that the e-series index funds are the hands-down winner for investors starting out. They offer the ability to invest in passive stock and bond indexes, in non-registered, TFSA, RESP, and RRSP accounts, with low MERs on the funds and (if you satisfy certain conditions) no other annual fees. Then they are not much more expensive for ETFs when your account grows larger and you’ll already be familiar with the platform.

Tangerine (formerly ING Direct) is a good option for people with smaller accounts. Things are even easier than TD with their investment funds: all you have to do is pick from one of four basic asset allocations, and they will take care of the rebalancing — and they will even help you decide on your asset allocation through a questionnaire. Just make your regular contributions to the fund you’ve chosen, which you can easily automate with a pre-authorized payment plan. There are no extraneous fees beyond the MER. Tangerine is, simply put, as easy as investing gets without paying a commission to have a salesperson do it for you. The simplicity is great, but the MER of the Tangerine funds is more than double that of the TD e-series funds (yet still half that of typical funds). As your assets grow, this cost difference will become more noticeable. At the hundreds-of-thousands level, you’d be able to go with a fee-based advisor who would use index products for you for a similar fee.

For the absolute cheapest option, commission-free ETFs at Questrade can’t be beat. You pay nearly nothing to buy, and a small commission to sell (about $5-10 per trade, depending on how much you’re selling). And the on-going MER of the ETFs is as low as you can possibly get for investments. However, the order-entry process is a fair bit more complex than with the mutual funds for Tangerine and TD, and you have to deal with rounding off to whole units rather than just investing a given dollar amount.

Three Investing Options — Effort vs. Cost
A comparison of 3 ideal investing options, trading off simplicity for cost

There are many other options available: every major bank has an associated discount brokerage arm where you can buy the same ETFs available at Questrade or TD Direct Investing; some banks and mutual fund companies offer relatively low-cost funds that are competitive with Tangerine’s. These three options, however, are the archetypical combinations of low fees and convenience at various points along the trade-off. I will provide step-by-steps for using each, along with general information for buying ETFs at brokerages other than Questrade.

Footnote from the table: 40. Assuming 25% in each of a bond fund, Canadian, US, and International equities. For dollar comparisons, assumes $10 in commissions per year. If you decide to shift to ETFs and want to stay with TD Direct Investing, assume that you will have about $40/yr in additional commissions over Questrade. Rounded to 3 significant figures.

This has been an excerpt from The Value of Simple, a how-to guide to index investing for Canadians coming out December 1, 2014.

If you’re interested in opening a Tangerine or Questrade account, I have referral codes in the sidebar which will provide both of us with a bonus.

On Pricing and Breaking Conventions

October 19th, 2014 by Potato

A little while ago I discussed pricing for the book. I wanted to grow up and move away from the *.99 type pricing to a scheme that would give an even amount after tax, for the few people that might be paying in cash.

Since then I’ve had a little bit of time to very superficially skim the literature on pricing and it looks like yes, people are used to prices set just below a dollar break point, and if you ask them they will rationally round up: show them a book at $16.95 and they’ll say “yes, that’s a $17 book.” No one is fooled by this pricing. But studies also show that despite knowing that, people will still be more likely to buy an item at $16.99 than at $17.00.

On top of that, even if it doesn’t work, that’s the way everyone else does it. So sure, I’d like to move to more rational pre-tax (and thus after-tax) pricing, but Wayfare had a good point: for a book that isn’t going to fly off the shelves no matter the price, why take the risk of setting a price that looks weird? Even though I have full control over my pricing and could set it up to fit my idea of how things should be, it doesn’t make sense for me to try to tilt at that windmill now. The risk of someone going “What’s with that price? This guy must be some crazy self-publisher, I’m out.” are far greater than the chances of someone going “What a novel idea! This book must be even more fantastic!” So when the book comes out, you’ll see the price ends in .95.

Similarly, all-in pricing would make sense. Right now if you pre-order the book from my e-store the special pre-order price is all-inclusive: when you get to PayPal for the final checkout step the price you saw on the front page is the price you’ll pay, no extra taxes or shipping. But again, as Wayfare says, no other store works this way. Sure, Amazon and Chapters will offer free shipping, but only if you order multiple books. Yes, I hate added fees and taxes calculated later — and it makes setting up the e-commerce software much simpler on the back-end — but everyone is just used to those things, and seeing a higher up-front headline price may scare people away. So when the special pre-order discounts go away you may actually see the headline price on my storefront decrease while the all-in price increases as I add a shipping & handling fee on the back-end.

Of course on the flip side, extra shipping costs are the main reason people abandon their shopping carts, so I’ll try to head that off by noting the flat-rate Canada Post shipping in the product description on my page. And all this hand-wringing may not matter past the pre-order period as once the book is listed in Amazon most people will likely follow that link rather than the one to my own store.

The Shopkeep Model of Investing

October 8th, 2014 by Potato

One of the challenges I think people have with investing is that the actual purchasing part is quite unlike other aspects of our daily lives. We use metaphors like “fruits and baskets”, describing different accounts (RRSP, TFSA, etc.) as baskets where you place investments (cash, stocks, bonds, funds thereof) — but you can’t go down to your local general store and ask the shopkeep for a half dozen index funds off the back shelf to stick in your basket.

A shopkeep from Oregon Trail sells oxen and other goods to eager travellers, but not many mutual funds.

Even after you decide that you want to keep things simple and use a straightforward indexing approach, and you have to figured out what to buy to fit that plan, you have to figure out how to buy those investment products. The big barrier can come when you have to go and “buy an XIC.” There’s no counter you can walk up to and make that happen.

The investment industry is either full-service (with associated fees) or a completely do-it-yourself “wholesale/auction” experience. The high fees attached to many products are built in assuming that you will pay for planning, stock-picking, and other help even if you never get it and you’re only after someone to help you make the transaction. Many people are disappointed with the depth and quality of the advice they receive in a bank branch, and are surprised to find that the staff are in fact in a sales role. Whether satisfied with the advice or not (and in many cases one needs more background knowledge to know that they should be dissatisfied), I think many Canadians are shocked at the fees when put in context.

I think some Canadians do go into the bank not looking for advice, but for a shopkeep. So they’re not dissatisfied with advice because they never really expected any — they were just looking for help making a transaction. But again, the fees for that level of service are shocking.

I would have thought that with TD’s e-series there was enough of a MER there to let the branch staff help with placing orders — even if they were not allowed to spend time on e-series clients — but instead the e-series are completely off-limits to branch staff. There is no minimal-cost “purchase assistance” type service. The closest equivalent is Tangerine, which packages everything together for you so you just need to throw money at the account — it’s the closest implementation I’ve seen to how many people talk about “buying an RRSP.”

And that’s just mutual funds: with ETFs there are added levels of confusion for people expecting the shopkeep model. It is not at all like going in and picking up a cool book that your friend recommended from the shelf — it’s more like buying livestock at auction crossed with a old-time bazaar where everyone is selling everything to everyone else and the prices change by the second.

It would be interesting if someone could take a one-time commission (not an ongoing trailer fee forever and ever amen) to make that a more pleasant retail experience. Put up a list of prices that stay where you put them, and the shopkeep eats the fluctuations; or to make buying ETFs more like buying mutual funds where the division from the money you have to throw at the asset class happens automatically, and where no one gets burned by limit orders or the lack thereof. Getting back to reality, there’s no getting around having to learn this somewhat different (but once you get it, not difficult) way of purchasing investments.

Of course, to help people navigate on their own when there is no clerk to guide them is why I wrote The Value of Simple, and that implementation part forms the meaty middle of the book. Maybe one day more banks and fund companies will drop the pretense of offering high-cost advice and stock picking to every customer, and instead offer transaction assistance for low-cost index funds. Until that day comes, sign up below to receive updates on the book.

Announcing The Value of Simple

September 28th, 2014 by Potato

By now you all know that I’ve been working on an investing book. I’m pleased to announce that the title is The Value of Simple: A Practical Guide to Taking the Complexity Out of Investing.

I’m aiming for a December 1 release and I’m really excited about it. I’ve put a lot of work into refining the book and testing it out with readers (novices and experts) to make sure it works. I even like love the title.

Briefly, The Value of Simple: A Practical Guide to Taking the Complexity Out of Investing is a plain-language guide to implementing an index investing strategy for Canadians. With a focus on developing good processes to minimize the room for human error and step-by-step instructions, the book walks investors through the elements of managing their finances for the long term: how they can determine an appropriate asset allocation, devise a savings plan, stick to it through automation, track their investments, and deal with the inevitable issue of taxation. It provides tools and templates, along with default suggestions and rules-of-thumb to help prevent analysis paralysis and get investors started as soon as possible. Moreover, it directs the reader to focus on what can be controlled, to minimize effort and complexity.

For the average investor, a low-cost index investing approach is the easiest and simplest method available, and also provides the highest chances of long-term success. While there is a lot of material available on why investors should choose passive approaches over high-fee active mutual funds and what passive investing products exist, the average investor is at a loss on how to implement a passive index investing plan.

Investing doesn’t have to be complex to be successful. Indeed, simple solutions are valuable and are more likely to succeed in the long term. This book will guide you through implementing those simple solutions.

There is a separate webpage for the book (click here!) where you can find more details and pre-order it (and soon, purchase it). You can also sign up for email updates below (and I promise to only send a few):

I Am Not Good At Marketing

September 26th, 2014 by Potato

The book is very nearly done. The text is all in there and has had multiple runs of editing. Now it’s down to formatting all the little things, remastering a few images for print, getting the cataloging-in-publication data, the cover art, etc.

I’m proud of it — I think it will truly help people get started at investing, and covers a lot of important elements that are not covered by the books that are currently out there. While I usually have a lot of problems with self-promotion, I can think of the book as being separate from me, as a thing I can promote and herald without it being self-promotion in my damaged mind. But I’m still not particularly talented at it.

I can do the Fermi estimation and figure that there are millions of Canadians out there between 24 and 60 who could really benefit from this book. Yes, many won’t need it; others won’t invest on their own no matter how helpful the book; some are in debt and in no position to use it. Even if just 5-10% of them need it and would use it though, that’s a big market.

And I have no idea how to reach it. The simple fact is that I am not good at marketing. I can maybe write decent copy if I focus on not letting the loquacity run away from me and give it a few revisions. But that depends on having people actually there reading something, and I don’t know how to get to those people in the first place.

My big hope is that everyone who reads it will love it as much as my beta readers did. That they will recommend it to their friends, family, and frenemies. Sadly, people don’t talk about personal finance and investing. Even if I put a copy into someone’s hands and they adored it, to the extent of writing me a little email about how it totally opened their eyes to investing fees and changed their life, the odds are that they will not tell anyone else about it*. For whatever reason, vampire bondage erotica is a more acceptable dinner table, coffee with friends, or book club topic than personal finance. So I can’t rely on word-of-mouth to spread the news of how awesome and helpful the book is.

But beyond word-of-mouth, what have I got? I tried contacting some people in the media. I’ve had online interactions with Rob Carrick, Ellen Roseman, and Melissa Leong in the past when I wasn’t trying to sell them anything (not necessarily deep ones — moreso with Ellen and Rob than Melissa), so I started by contacting them. They were polite, but it wasn’t very promising. There are other people I can try to contact, but those would be completely cold calls. Somewhere I saw a suggestion to get some freelance articles in the paper or a magazine to build name recognition before a book release, which sounds like suggesting that to successfully sell your book, you start with having a past bestseller first — the book started because Adam Mayers didn’t want my how-to articles for the Star! So the media’s a bust.

Advertising? I got a free credit for Google AdWords a few years ago and I tried advertising for the predecessor book. The ads were a complete waste. Maybe subway posters would have a better ROI, but I suspect not.

Last time around I was really bad with social networking: the timing really worked against me, releasing right into my PhD defense, and then having Blueberry. This time I will try to distribute sample chapters and deeper discussions as guest posts on other blogs (if they’ll have me). Of course the problem there is that I might be hitting the wrong audience: it’s the people who aren’t reading personal finance/investing blogs who need the book the most. Good reviews on Amazon help, and I will plead with people to fill those out (their honest opinions — I’m not down for astroturfing). But if readers who liked it are already not telling their friends, going to the effort of writing a review may be out of the question.

So I have to admit it: I am not good at marketing. I have no idea what else to do. Suggestions, blogosphere?

Help me Obi-Wan Kenobi, you’re my only hope.

* — True story, nearly no hyperbole (at least, not in the retelling).

To Put It Another Way

September 25th, 2014 by Potato

Once again I saw the “but if I buy a house I get something back. If I rent I get nothing back. Even a small return is better than zero…” trope about renting vs. buying. This time I answered it slightly differently, and maybe this explanation will stick:

You have to look at the whole picture.

Give me $10. I will buy you a bag of chips and give you $2 back. Hey, a small return and a bag of chips, that’s good, right? But if you can just buy the bag of chips for $5 you’re better off — you can hold on to $5 out of your $10, rather than just $2. There’s no “return” in the second case, but you put out less to begin with. In both cases you get delicious chips.

So it is with housing. The key thing to appreciate is that all discussions of “building equity” and what-not are distractions: at the end of the day, living somewhere is going to cost you money. This is where the details matter: how much money for each option? If the total cost of owning (interest/opportunity cost, transaction costs, upkeep, insurance, property taxes) is more than the total cost of renting (rent, tenant’s insurance) for the same place and you invest the difference, you’ll do better renting.

Cover Design Update

September 24th, 2014 by Potato

I had originally scheduled a minor reveal post today where I was going to tell you all the amazing title of my amazing new book and provide an amazing (-ly short, for me) synopsis, to start building something I’m told is called “buzz.” Big with bees, I hear. Anyway, in talking with some people about that the point was raised that maybe I should keep totally silent until the book is actually available for pre-order (rather than the pre-pre-order state it’s in now where you email me and I add a mark to my tally to guess how big to make the initial print run). I think I will explode if I wait that long, so I’ll probably just end up publishing that reveal post tomorrow anyway.

I got the first drafts of the cover concepts back from my artist today and I’m quite impressed. There was a concept that some people liked because it really said “this book is about doing stuff with money.” But it was the first one I threw out because it was so generic. The one I immediately decided was the one is a bit different, which I hope means that it will stand out on the shelf and make people pick it up. Hopefully only another week or so then until I can swap out the teaser image on the right with the actual cover (unless I listen to reason and wait until pre-orders open).

I still haven’t set a firm date to take PSGtDIYI out of publication yet. Expect that it will happen suddenly on the same day that (firm) pre-orders open for the new book.

I’ve had to enter pricing information to get my ISBN* and UPC code, which means I had to decide on pricing without having a proper public hand-wringing about it. I can still change it, but I think I’ve settled on going a little bit cheaper than most of the books out there (which have a list price of $19.95 but actually sell in the mid-high teens). I went with what looks like an odd price, so that with HST (5% on books) it will come out to an even dollar amount if you’re paying cash. I don’t really know how much something like that might phase people (or please them). I also don’t know whether being a few dollars under the $19.95 cluster is attractive or gives off a “stinky kind of cheap” aura.

* I have an ISBN assigned. Several, actually! Squee!

We Have TFSAs Now: Lose the HBP

September 18th, 2014 by Potato

A little while ago Rob Carrick idly wondered on his facebook page/discussion group if the home buyer’s plan (HBP) was a good idea. In case you’re not aware, the HBP is one of the few ways you can take money out of your RRSP without paying tax on it: you can pull up to $25,000 out as a first-time buyer, and repay it over the next 15 years. The HBP primarily accomplishes two things.

1. It lets people contribute to their long-term (retirement) savings with an “out” to use those funds for a down payment on a house/condo. This way they can save for the future without having to plan what will be house funds and what will be retirement funds.

2. It lets people get a tax refund on their down payment that they can also use on the house right away, effectively borrowing from their future selves. In the short term, it’s an incentive to buy.

On top of this, it has a psychological effect: home ownership and post-secondary education are the only sanctioned reasons for borrowing from your RRSP. Add how irrational people can be about taxes and tax deductions, and it’s a bit of a sacred cow. In the right light (octarine?) it looks like the government encouraging buyers to reach for as much real estate as they can, using everything at their disposal (including their RRSP).

With TFSAs in place now though the first point is well taken care of by that tax shelter: you can easily throw all your long-term savings in there as a young person, and if you need to raid them for a down payment (or whatever) then you can, even in excess of $25,000. Plus it’s already set up to be indexed to inflation so we won’t have to worry about future whining that the HBP isn’t big enough. As for point two, I really don’t think we need any more tax incentives or holiness attached to housing, so doing away with the HBP in favour of encouraging TFSA use would suit my politics just fine.

To be fair, this may need a few years for transition, and would present a bit of a savings conundrum to people who get employer RRSP top-ups, but I find it hard to feel that’s a major flaw in my plan. Let’s simplify the RRSP that one extra step, and phase out the HBP.

Potato’s Third Law (of Finance)

September 18th, 2014 by Potato

Clarke’s third law:

Any sufficiently advanced technology is indistinguishable from magic.

Potato’s Third Law (of Finance):

Any sufficiently complicated analysis is indistinguishable from magic.

A few months ago, Brad Lamb posted this inane thing, suggesting that buying real estate in a highly leveraged way beat out investing in any kind of normal way because, with an average 5.5% return over 30 years and lots of leverage, you’d make scads and scads of money. Of course, that’s clearly a biased and overly simplistic analysis from a source that is, well, you get it. For instance, one important consideration in using massive amounts of leverage (95% in his example) is the cost to borrow. And if you look it up, over those same years the (simple) average mortgage rate was 9% — blowing the 5.5% appreciation out of the water.

Obviously there are lot more factors at play than just appreciation, but many people will have trouble following the red lady as these condo kings play their three-card Monte.

Similarly, Melissa Leong recently wrote about Sean Cooper’s quest to save at an incredible rate and pay off his mortgage crazy early. While her article was very fair and level-headed, someone at the National Post decided to put this sensationalist caption to the preview: “Sean Cooper’s secret: He rents main floor of his house, while living in the basement and bikes and uses TTC instead of a car.” [emphasis mine]. While only part of the numbers are shown, if you work the math and make reasonable assumptions you get a fairly unsurprising result: he ends up paying about $800-1000/mo to live in the basement of his house. Which is what a basement apartment including utilities costs in that part of Toronto. Renting out the main floor of his house is no secret at all — the progress he’s making is solely due to the other insanely frugal and hard-working things he does, like biking everywhere and avoiding taxis or car ownership, working multiple jobs 7 days a week, and reusing everything to the maximum. The fact that he’s renting out part of his house is pretty much irrelevant to the story, but it looks like magic because it’s complicated and because for some reason being a landlord is high-status. Indeed, given the timeframes he’s been working under, he would have done much better doing all the hard working and frugal things he’s doing but plowing his money into index funds.

When there are a lot of factors in the analysis people just don’t want to deal with it. It all bleeds together and acts just like magic, so it becomes hard to critically assess what’s being presented. This happens a bit with a few topics in finance like investing, but it seems to be most prevalent — and most exploited — in real estate.

Take for example the terrible condo ads around Toronto that should be banned for what they try to get away with in the condos=magic department. Here’s a recent collection tweeted by Ben Rabidoux:

To pick one, the Thompson Residences in case you can’t read the image, it claims an 18.6% return on investment (such precision!) with no attempt to back it up (the fine text the asterisk leads you towards just says something about the parties not warranting or representing any of the figures). Another (Axiom) also claims 18.6% returns (they must have done some market research to show that this completely made-up number has some truthiness and feels more correct and gets people to buy than some other random number), this time on the unlevered condo. Of course they don’t provide the full details, just assuming that you’ll rent the place for $2355/mo (such precision — also that gets you a 3-bedroom detached house in many parts of Toronto, but sure, let’s just go along and assume a 1-bedroom downtown-ish is worth that because… George Brown?), and somehow make $685 in positive cashflow and $607 in principal repayment. So after interest (at just 3%) you’ll only have $227/mo for tax, maintenance, insurance, and condo fees (yes, that’s totally reasonable — oh wait, no maintenance fees for a year, of course that’s a representative calculation then). But then you take those phoney rent profits and add it to their phoney price gains ($58,993 — yes, also down to the dollar) and you know what you get? 17.8%. Not 18.6% like they say.

Clearly these ads are not targeted at the careful, numerate buyer — they can’t even be bothered to make their fake numbers internally consistent.

Where was I? Right, magic. Well, there’s clearly some smoke and mirrors going on in those ads.