As most readers know I’m pretty big on low cost investing – it’s one thing to talk about it – how about some actual suggestions on how to do it!!
Save on taxes – Investing in a taxable account when you have tax free retirement accounts available is costing you money. Max the rrsp/401(k)/roth accounts first!
Save on taxes part II – If you have both taxable accounts and non-taxable accounts then make sure you have the less tax efficient investments (ie bonds) in the non-taxable accounts.
Merge accounts – If you are paying annual account fees then it doesn’t make sense to have multiple accounts with the same account type (ie RRSP). Get organized and streamline. This also applies to bank accounts.
Buy ETFs and index funds instead of managed funds – They are much cheaper and do the job better. Do this at a discount broker.
Lower MERs are better – If you have to buy managed mutual funds then keep an eye on the costs and returns – lower costs are better. Monitor the returns – are the high-priced funds outperforming a passive alternative?
Pay the lowest trading fees possible – There is no benefit to paying higher costs.
Trade as little as possible – If you can’t conclusively show that your trading increases the return then don’t do it. Each trade costs money so less is better.
Don’t invest so much – the less investments you have, the less your costs will be – pay off debts instead. It also doesn’t hurt to live a little once in a while.
There you have it – follow some or all of those rules and you’ll be just fine! Do you have any suggestions to lower investment costs?? Can you come up with the 9th way to lower costs?
As I mentioned last week, RBC Direct has a promotion going on where they will pay anyone 1% of assets moved to RBC Direct from another broker. Since I am a huge fan of low-cost investing (and getting paid a rebate certainly lowers the costs!) I was pretty excited about this deal since it appears to be free money.
Will I save money by moving to RBC Direct?
At first, it seems obvious that getting a 1% rebate for moving to RBC should be quite profitable for anyone but the problem is that the trading fees are more expensive at RBC than at Questrade. Questrade charges $4.95 for all trades whereas RBC charges $28.95 per trade for investors with less than $100,000 in assets (calculated by household) and $9.95 per trade if the household assets are more than $100,000. Regardless of how much you have in assets, the difference from higher trading fees at RBC will reduce the benefit from the 1% rebate.
The factors to consider when thinking about this move are as follows:
How much moola do you have? There is a huge difference in the trading costs at RBC if you have more or less than $100k.
How long will you stay at RBC – if you have $100k and receive a rebate of $1,000 but you stay with RBC for the next 40 years then you have probably paid a lot more in trading costs.
How active a trader are you? If you don’t trade much then the different trading fees are not as relevant.
My analysis
I did some playing around on a spreadsheet to try to determine how much money you need to have to make the move to RBC worthwhile. Since most readers never look at the spreadsheets (I don’t blame you), I decided to put the detailed commentary in the spreadsheet itself and keep the general conclusions in the post.
My recommendations
I would recommend that you don’t move to RBC unless you have the $100k (or very close to it) necessary to qualify for the lower trade costs. As I’ve shown in the spreadsheet, it is very possible for someone with less than $100k to move to RBC, collect the rebate and then move to Questrade but the problem is that if you don’t move the account from RBC within a reasonable amount of time then the whole procedure will end up costing you money. If you are an active trader then even $100k won’t be enough – plug in your own number in my spreadsheet (or your own) to see if it is worthwhile.
My second recommendation is that if you do the move – once the rebate is paid then you should take a new look at your investing costs and act appropriately. If you are really happy with RBC then you might choose to stay there but if low costs are your primary concern (like me!) then you should consider moving to Questrade as soon as possible to get the lowest commissions.
And one more thing
Another thing to keep in mind is that RBC ran this promotion before in 2006. I can’t guarantee that they will do it again in a few years but it might be an idea to move the money from RBC after the rebate is paid in order to be eligible in case the 1% deal is offered again.
Money Grubbing Lawyer had a funny story about his laptop catching on fire. He also discusses online computer backups, which are something I’ve looked into as well.
Million Dollar Journey wrote about an email he received which criticized him for spending money on consumer goods at the same time as he was thinking about putting his kid in daycare. According to the emailer, MDJ should be focusing every bit of financial might towards having one parent (guess who?) stay home. To do otherwise would clearly indicate serious parenting deficiencies…anyways check it out (and the great comments) at The choice between daycare and staying at home.
Where Does All My Money Go talks about the Bernanke put and whether the inherent moral hazard is raising the risk level in the markets.
PFN Network
Squawkfox writes a lot of food articles so when she did a book review on “The Dip” by Seth Godin, I assumed it was some sort of sexy concoction of hummus, tomatoes and dried beans to dip your chips into. 🙂 Seriously though, after reading her review I’m planning to read the book as well.
Canadian Capitalist wrote about investment asset classes – is there such thing as too much of a good thing?
As some of you have already heard, Canadian Capitalist broke the news last week that RBC Direct discount brokerage (read a review of RBC Direct) is offering a 1% payment for any assets transferred from another investment institution. There are limits to the rebate but they are quite generous ($2500 per account type).
I’m a big fan of passive low-cost investing which is why I’ve been using Questrade discount brokerage – they have the lowest trading costs bar none. I’ve been happy with their service and trading platform and wouldn’t hesitate to recommend them. However, as my primary criteria for a discount brokerage is cost – the 1% rebate (non-taxable by the way) from RBC changes the equation dramatically so that it makes far more sense for me to switch to RBC and get the rebate than it is to stay with Questrade even though their trades are cheaper.
Should you switch to RBC as well?
I plan to address this question more definitely next Tuesday (so check back). There are a number of factors to consider – this RBC deal does not make sense for everyone. I’ll come up with some better guidelines next week but the short answer is that for most people, it is not worthwhile to switch to RBC unless you have total assets of $100k (by household) because the higher trading costs ($29 if your assets are less than $100k) will negate the rebate. If you are a frequent trader ie more than 50 trades per year then you might need even more than $100k to make it worthwhile. Another factor is how long you keep the money at RBC – if you plan to move to a cheaper broker once the rebate money is paid out (next June) then you don’t need as many assets to come out ahead.
The big question which I hope to try to answer is “Should I move to RBC Direct or should I move to Questrade” – right now, those two brokers are the best deal in town depending on your situation.
A very short link post this week because I am out of town and away from the internet this week!
Canadian Capitalist wrote about RBC Direct’s new offer – a bonus of 1% of your assets if you transfer from another brokerage. Like Kenny said – “It’s gold Jerry, gold!”. I’m jumping all over this giveaway – will be doing a post on the process involved.
Clever Dude laments the end of a dream – he sold his bass guitar. I guess the rock star career isn’t going to happen.. 🙂
Squawkfox came up with 50 ways to leave her lov… ooops, wrong title – 50 ways to save $1000. I think it would be quite a feat to accomplish all 50 in one year!
My wife and I recently had our second child, a beautiful baby girl. When we had our son two years ago, it was quite an adjustment to having to be on someone else’s schedule instead of just doing whatever you want, whenever you want. Although I’ve been told that having two young kids can be more than twice the work of one child, I guess I didn’t really believe them. As it turns out, it’s been a huge amount of work!
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Which is more difficult?
I had a conversation with a friend several months ago before we had the new baby and I told him that I thought going from zero kids to one kid has to be a bigger adjustment than going from one kid to two kids. My logic was that with any number of kids, you have to plan around the kids, babysit them all the time etc, whereas before the kid arrived, you had unlimited freedom (relatively speaking). Since you are already committed to being a full-time parent with one child, adding a second child shouldn’t add to the responsibility level – even if it is more actual work. My friend told me that he had a similar conversation with his wife and another couple and the two women agreed with my idea that going from zero to one kid was a bigger jump than going from one to two kids. Much to my surprise, my friend told me that he and the other Dad thought it was much harder to go from one kid to two compared to zero to one kid.
I’ve thought about this quite a bit – on the one hand I just can’t get away from my original idea that going from childless to with child has to be the biggest jump but my own experience tells me that this wasn’t the case. I think I figured out the reason and I’d like to share it with you and hope that you can agree/disagree with it.
I believe that for the mother, it’s more difficult to go from zero to one kid than from one kid to two. For the father, it is the opposite – it is harder to go from one kid to two than from zero to one.
Why is this?
Typically when a new baby arrives on the scene, the mother does most of the parenting especially if she is breast feeding. Even if Dad is really keen to help, Mom probably does 80% of the work. So for the first child, the mother has a huge change to deal with because they spend a ridiculous amount of time dealing with the baby. Dad on the other hand will spend some time with the baby but will be occupied with other tasks like food shopping, cooking, basic chores etc. Most Dads take very little time off work so they get to escape to the office during the day. In my opinion, the arrival of the first child affects the mother a lot more than the father.
Number 2 arrives
When the second child arrives – the mother will spend the majority of her time looking after the new baby. Since she has to look after the older one as well when Dad is at work, it can be pretty tough – hopefully the older one will be in daycare at least part-time. The big difference for Dad when he is at home, is that the older child will be his responsibility almost 100% of the time. So instead of just helping out with the one child occasionally, Dad really has to step it up and become a full time babysitter.
What to do about it?
In my case I took several months off after our new baby was born so I ended up being chief babysitter for our older son. As much as I like spending time with him – 12 hours a day, 7 days a week is way too much. My suggestion for anyone who just had a second child is to put the older kid in daycare or get a sitter. Even if it’s just once in a while, it will be a huge help and things can still get done around the house.
Google released their first web browser yesterday called “Chrome”. This web browser has some new advancements and will perform much faster than IE and Firefox according to their marketing material (in the form of a comic book). Being the skeptic I am, I thought I would download it and give it a test run.
As I discussed in this post on how I surf, I use the FireFox browser which I estimate is the most popular browser for most PF bloggers and serious surfers. The release of IE7, which included tabs, closed a lot of the gap between IE and Firefox but for most people who already use Firefox, there was no reason to switch to IE. Keep in mind that I’m talking about a select group of surfers – probably 95% of surfers will use either IE6 or IE7 – whichever is installed in their computer.
A download link for the beta version of Chrome is on the main google page or you can go here for the download. The download file is the installer and downloads almost immediately. After clicking on the exe file, it took about about 60 seconds to completely load up the browser. Total time spent so far is about 2 minutes.
How does it look?
Like the Google homepage, the Chrome browser is fairly clean. One of the efforts with this browser has been to decrease the clutter at the top of the screen – unfortunately I don’t have pic to show you but since it only takes a minute or two to load the thing – go look for yourself! 🙂 I would estimate that the non-surfing area is about half as large with Chrome compared to my version of Firefox. Of course your own customizations of Firefox could change this ratio greatly. The page tabs are right at the top of the screen where there is normally the title bar and there is no separate search box since the address box and search box are one and the same. It will take a bit of getting used to but it looks pretty good.
Chrome vs. Firefox speed
To test the speed I just did some simple browsing (ie opening a bunch of sites at once) and compared the speeds. Of course this test isn’t all that valid since it should be run on a clean test machine but since I was testing for my personal use – it’s valid enough for me!
First run – Chrome was incredibly fast. I was quite amazed at how fast it was until I looked at the browser results and I realized that most of the sites in the test folder required a sign in which Chrome couldn’t do yet – obviously this invalidated the first run. I went through the tabs and logged in – most of the tabs had the info in the sign-in screen but I still had to press “ok”.
After that I did some surfing and tried to determine if one browser was significantly faster than the other. The truth is that I really couldn’t tell the difference – because of the poor testing conditions and numerous variables which I couldn’t control, both browsers appeared fast and slow at different times. Things like slow websites, my own internet connection (which is not all that constant) served to interfere with the tests as well as point out that even if one browser is faster, it might not matter that much for my normal surfing.
Surfing anonymously
One of the neat new features of Chrome is the ability to turn on a “incognito” mode (click on the Control Current Page icon and select Incognito) which means that your browser will not keep any trace of your browsing history. I can’t imagine why *cough – adult* anyone would possibly *cough – situational* have any motivation *cough – photography* for such a strange thing but I’m sure some enterprising surfers will find a use for it.
Conclusions
I found Chrome to be a pretty good browser, but I don’t know if I will switch from Firefox or not since it doesn’t appear to be all that different other than the looks. I would imagine that a Firefox user who has a lot of plugins would find it difficult to leave for a new browser and would have to start over. Personally, I haven’t gotten around to installing any plugins so that is not a factor for me.
We got tagged a while back by (I think?) Prime Time Money, for the Single Step Personal Finance Challenge put together by Finance Freelance Life. The idea of the challenge is to do something, anything however big or small to improve your finances. Do you need a will? Are you paying too much for your chequing account? Do you have a jar of change that needs sorting? Changing something for the better will get you started (or finished as the case may be) to great finances.
Before I get into the single step that I took – check out Prime Time Money’s financial rap video – it doesn’t get much better than that!
On with the challenge!
As most of you know, my wife and I recently had another child so one of our financial goals was to set up an RESP account for her. RESP stands for registered education savings plan which is similar to the 529 plan in the US. RESP accounts can be either individual – for one child or family – for multiple kids. As I discussed in a previous post, there really isn’t a huge difference in either the individual or family resp. I had considered going with 2 individual accounts because it would be easier to figure out who had what money – but then I also decided that simplification is a worthy goal and went with the family plan since there is only one account involved. The paperwork was a bit of a pain since I had to set up the new account and transfer our son’s individual account to the family account as well. However, now that it is set up, I don’t have to do anything and it’s all taken care of.
I’m going to challenge you, the readers to think of something you can do to improve your finances – it will probably be something you have been putting off…feel free to let us know what you are planning in the comments!
