The Value of Simple is a Success!

April 10th, 2018 by Potato

Way back when I was getting ready to launch The Value of Simple, I set some definitions for success. I hit “not-failure” pretty quickly, but have only just reached “success”: I’ve made minimum wage (at least, a rounded-down amount that approximates what minimum wage was back in 2014 and ignoring all post-publication effort) on the time taken to write it!

Now, it’s felt like a success for far longer than that. Seeing that it’s actually helped people invest, is getting good reviews, and seeing people wholeheartedly recommend it to their friends made the whole endeavour feel worthwhile. But I still had that first monetary definition in the back of my mind… so hitting it still feels like an added accomplishment.

I had also said that that was about the point at which I might consider doing the whole grind again. As it happens, I do actually have an idea for another book that I might do next…

…But I don’t think I will go anywhere with it, at least not in the near term.

Getting VoS done was a personal triumph in working hard/side hustling/project management/etc., and a personal best for productivity. But burnout is a thing. These days my inbox and to-do lists are filled with small side projects that I can’t get around to completing on time (that tax video doesn’t look like it’s going to happen before taxes are due, for example) — I’m not in a hurry to dive into a major one.

Anyway, a big thanks to everyone that helped make this a success: people who bought copies, recommended it to their friends, took the time to write reviews, read beta versions, and more that I’m sure I’m forgetting!

Vanguard’s New All-in-One ETFs

April 1st, 2018 by Potato

Lots of people have been talking about Vanguard’s all-in-one ETFs that launched fairly recently. Dan @CCP talked about them in the back half of this podcast (and the first half is with me if you missed it :), and has a whole separate post on them, and likely will have another in the future as they’re generating a lot of discussion and questions.

In general, I like them: for a modestly higher MER, you get a one-stop investment portfolio.

One point I really like about them that hasn’t been talked about much is the fact that there is only one thing to look at for your portfolio. We talk a lot about the importance of having balance and diversification — so much in bonds, for example, to limit the losses you might experience in a market crash. However, in the moment people rarely look at their overall portfolio and say “Well, I’m only down X%, which I was prepared for, and my bond allocation is doing its job so all is good.” No, instead we tend to focus on the biggest, reddest number on the screen — and of course in a 3 or 4 fund portfolio, you’ll see each position individually, and have to do some math to see the portfolio as a whole.

With an all-in-one fund, you will only ever see the portfolio as a whole. You won’t second-guess your international fund during Brexit, your bond fund when interest rates are hiked, or your Canadian index fund when oil tanks. And there is a lot of investor behaviour management in the simple fact that in a diversified portfolio there is always at least one thing that is disappointing (under-performing the rest if not actually down). Not to mention in a crash — it’s hard to tear your eyes off the big red number on your losing-est fund and feel like the world is ending when that’s all that’s in the news, even if the rest of your portfolio is holding things together reasonably well. These funds will help avoid all that, and that’s the main reason I’m a big fan — all-in-one funds are best positioned to help actually match up that notion of risk tolerance for your overall portfolio and what you really see when you check in on your portfolio.

Now, these new funds do not mean that these ETFs are making Tangerine, TD e-series, or robo-advsiors obsolete. They do make investing in ETFs easier: just one thing to purchase, and no rebalancing. But you still have to deal with buying ETFs, which can’t be automated like Tangerine or TD e-series mutual funds can be. It does slightly complicate the nice one-dimensional relationship between cost and complexity that was the choice between Tangerine/robo-advisors/e-series/ETFs before. One-fund ETFs will be cheaper with automatic rebalancing, while e-series will have manual rebalancing but the ability to set up automatic purchases, and avoids the more complicated order entry of ETFs (rounding down to whole units, limit orders and bid/ask prices, worrying about market hours, etc.). I still think that overall I’d put one-fund ETFs to the right (i.e. more complex overall) than TD e-series — while rebalancing can be a pain and a bit confusing, you don’t have to do it often, while making regular purchases as easy as possible is more important to long-term success.

And if you are interested in these ETFs, you have to let the simplicity work. I mean, that’s what you’re paying extra for. I’ve seen hundreds of questions and thoughts since these launched in various blog comments and forums where people are trying to tweak the allocation to what they really want: buying VGRO and a bond fund for example, or buying both VGRO and VBAL to get an intermediate bond allocation. Just like with Tangerine’s funds a key point is to just round your desired allocation off to the nearest 20% or so to fall in to one of the choices on offer rather than trying to get lost in the details. Once you try to add more funds into the mix to get what you really want, you lose the whole benefit of the one-fund simplicity: buying more than one fund means it won’t automatically rebalance any more, and at that point you might as well buy a third (or fourth) fund and save the extra cost on bundling it up.

Never Weight – Q1-18 Update

April 1st, 2018 by Potato

This year I’m trying to make that health improvement thing real. As announced last quarter, I’m cutting the price of the course until I get my weight under control. In a quick update a few weeks ago, I mentioned that I lost a bunch of weight while I was sick with the flu. And as I suspected, I gained most of it back. However, I managed to keep off over 2 pounds (but not quite 3) in the quarter. That’s not the pace I’m aiming for, but at least it’s moving in the right direction and it’s a big enough weight loss that it should be real (and not just measurement noise). I’m looking on the bright side, here.

I was just a half a pound shy of hitting the first threshold to bump up the price of the book and course, so the price stays the same through the spring. It’s hard to exactly quantify how much revenue I’ve lost because it’s impossible to know the price elasticity — how many people would still have paid the higher price — but for the sake of motivation I’m assuming it’s nearly everyone and that junk food and laziness is costing me a new computer at this point.

DIY Root Canal vs DIY Tax Stuff

March 19th, 2018 by Potato

Jason Heath pulled out a version of a quote I hate in this Ask MoneySense article on OAS clawbacks:

“Few people would think to Google how to perform a root canal, let alone try it themselves. But lots of people try DIY tax and financial advice.”

Now, it’s hyperbole, and I’m going to rant about it, but I don’t disagree with the main thrust of the article or the next part of that quote: “If you don’t have an accountant, contact one and buy an hour of their time. Bring a list of questions or send them beforehand, so you can get an income tax “check-up.” It may be well worth it even if you only do it once in your life or at least once in a while…” The last half of that paragraph, getting a check-up to have some common questions answered, is entirely reasonable and a good suggestion.

There is definitely a place for professional advice — both planners and accountants. But there’s also a place for DIY-ing things.

The tired root canal analogy makes it sound like you have to be crazy to approach your taxes on your own. But just like with dentistry or medicine, there are lots of things that are totally reasonable to DIY (or Google-then-DIY). You would not go to your dentist every time you had to brush your teeth or floss, and you shouldn’t clog up your doctor’s office with every minor cold or papercut you get, even if you would go for a root canal or surgery. If you have a canker sore it’s totally reasonable to hit Google and gargle some warm salt water. Not everything is a root canal, not everything needs a professional to manage. And especially when it comes to taxes, there are too many people in the world who shrug and say “get an accountant” rather than helping people learn to DIY (which may be related to regulations and the fear of being sued).

This particular article also really highlights an important aspect of the issue: when we’re talking about mouths, people generally have enough background information to know what is at the totally-DIY-able level (like daily brushing) and what is at the I-need-a-professional level (like fixing a cavity or getting a root canal). When it comes to finances, lots of people don’t have the basic literacy to find the answers they need or use them appropriately. Here, finding the OAS clawback threshold is pretty easy, and planning around that is a decent edge case where it’s not unreasonable to do some DIY around it, but also not exploitative to suggest it’s worth getting a professional’s input. However, the person asking the question doesn’t seem to know that the threshold is about clawbacks, not reporting — you have to report everything. So they couldn’t find the answer because they didn’t know how to ask the question (or interpret the answers they likely did turn up). There’s some essential background knowledge missing that’s going to make DIY a challenge here — indeed, to know what can be done on your own.

What then is the answer? I really don’t like a blanket “this is like a root canal and you shouldn’t do it yourself” type approach — as someone who makes tools to help people DIY stuff, that is anathema. People shouldn’t be dependent on professionals; DIYing many things shouldn’t be construed as an impossible, whack-a-doodle notion. But at the same time, there is a financial literacy gap that makes it easy to point out the challenges in implementing DIY approaches. And people shouldn’t be afraid to get some help and pay appropriately.

“Adulting” help is becoming more important and more available. Indeed, the suggestion Jason makes after the hyperbole that I took so much issue with is good — I really like the suggestion to get a few hours of a pro’s time to get questions answered well. Not “get an accountant to manage all your money stuff because you’re hopeless” but “get a block of time and ask some questions to figure this out properly.”

Of course, the analogy to medicine or dentistry really breaks down in personal finance, because our own gaps in knowledge and ability vary. It’s not as clear-cut as this thing is only for professionals, while you’re out of luck if you need help with this basic everyday thing. Especially as paying by the hour for advice is a model that’s becoming more available: no longer is it that investing is the thing you need a pro for, in part because selling an investing product is the only way for them to get paid. Now money coaches and people like Chris are there to help with things like understanding your money and building a budget, while rarefied applications like investing are completely accessible to DIY-ers.

Tater’s Takes: The Flu, Back Pain

March 13th, 2018 by Potato

The flu swept through town here (word from the school is that Toronto Public Health confirmed it was a flu outbreak that hit Blueberry’s class) and I had a rough week there — high fever, chills, aches, as well as a bit of a cough. Though it wasn’t a bad cough in the sense of coughing non-stop, I did get hit hard by the coughs when they came, and now a week and a half later I still can’t talk right and can barely move, because I seem to have thrown my back out and damaged my vocal cords coughing. My back was just starting to seem a bit better today (I could bend over and reach all the way to my knees! I could sit in a chair and type!) when I did something that seemed totally innocuous but put it out again today.

So that sucks. Also makes me feel really old to be shuffling around the house, doing awkward things with my knees and hips to try to reach things without actually flexing my back.

Yesterday was my first day back at work, and it was hard, especially the part where I couldn’t take a nap partway through the day. The flu’s a hell of a virus.

Behind the scenes, the blog is still very quiet. I do have thoughts on the new Vanguard all-in-one funds, and they are positive ones. I’ve also been trying to do a little video to accompany the guide to Canadian taxes for freelancers, but can’t really record anything other than a throat cancer awareness ad at the moment. I figure it could wait until April, however, I’ve seen a fair number of people inpatient for various tax slips so they could go ahead and file, and I’m like man, it’s still early March. I know as someone with a non-registered account I can’t file until April because of T3’s, but even then, don’t most people wait until close to the deadline anyway? Isn’t that what deadlines are for?

One good thing about getting really sick is just shedding the pounds — though I suspect I’ll gain much of that back before the next official weigh-in (and by definition, that’s not healthy weight loss).

Since I’ve got nothing else for you to read, why not check out Sandi’s reads, or Dan’s take on the new one-fund solution. I noticed a lot of people talking about burnout — here’s one from Des at Half-Banked as an example — around the turn of the new year. Definitely been feeling a touch crispy round the edges here, but don’t have articulate thoughts yet on the topic — though many of you have likely noticed the lack of posting frequency, or the number of emails and side projects that get a “that’s nifty, but let’s just park that for a few months until I can properly think about it or really anything.”

I had a few people ask me about dollar-cost averaging late last year, and was going to bring the threads together into a post, but then Dan hit all the points in this post and podcast.

Speaking of podcasts, there are just a whole bunch of episodes of Because Money out now in case you somehow feel the need to make up for the lack of activity on the blog.