Tim Paziuk’s Blog

How a $100 Pair of Shoes Really Costs You $1,376.46

March 18th, 2013

When I’m lecturing to students I like to ask them how much a $100 pair of shoes costs. The most common answer is $100 plus tax. Would you believe me if told you it could be as much as $1,376.46?

A basic truth in finance is that when you give your money to someone else they get to use it, not you.

As a 20-year-old, if you convinced yourself not to buy the shoes, and invested it instead — with an assumed rate of return of 6 per cent — you’d have $1,376.46 by the time you were 65 years old.

Now, some of you are going to start thinking about taxes and inflation and those are valid considerations but there are ways […]

The United States Plan to Dig Holes.

March 6th, 2013

“A man in a forest is digging a hole. Two feet, three feet deep he goes. Soon he is in over his head. Seven feet, ten feet, fifteen, twenty. Now the sky is a small square patch of blue above him and he realizes he is in trouble. How does he get out? He announces his plan: He will keep digging in the hope that he will uncover a ladder.”

I love this analogy.

I read it in a Canadian MoneySaver article written by Wynn Quon called Punishing the Pretenders.

It so aptly describes the fiscal hole that the United States is in.

I don’t think there’s anything else that needs to be said.

Is this guy delusional?!

February 27th, 2013

I recently read a letter to the editor written by the chief executive officer of the Investment Funds Institute of Canada.

To quote “We agree that the merits of mutual funds remain valid today and suggest two additional factors that explain why mutual funds continue to be the investment of choice for 25% of Canadian households. The first is the high level of disclosure and transparency applied to funds and their fees”.

Is this guy delusional? He has to be! What disclosure and transparency? Can he show me one place where an investor can find their mutual fund charges listed on their statement? Does he believe that a “simplified” prospectus that lists fees and charges over 5 pages tells you anything? No!

Let’s […]

Where are the Mutual Fund Police?!

February 25th, 2013

I think there should be mutual fund police …

We received a “book” in our office yesterday called Investment Review – What’s Around the Corner? Top Investment Themes of 2013 put out by BMO.

I picked it up, flipped it open and landed on page 63. OMG!

Let’s take a quick look at what I saw.

BMO Guardian Select Class Balanced Portfolio Advisors Series

There’s a paragraph titled, “How This Fund Works.” Here is what it says:

“This Portfolio provides a balanced portfolio by investing primarily in a mix of mutual funds invested in fixed income and equity securities.”

Under top holdings it lists 10 BMO mutual funds which make up 99.04% of the portfolio.

The only thing worse than a mutual fund is a mutual fund of […]

When the US dam breaks….

February 22nd, 2013

In my book The Financial Navigator: Managing Your Success I made the following statement –

“It’s going to be interesting to see to what degree the American public will be willing to tolerate higher and higher tax rates. If wealthy Americans don’t feel there is a cost benefit to staying in the United States, they have choices.”

When I wrote those words I wasn’t thinking about state taxes but apparently Phil Mickelson was.

When you look at what’s been happening in the world with all the high profile defections from one country to another because of punitive tax rates, I think it’s only a matter of time before the US dam will break and Canada will become a sort of tax haven.

Who would […]

The LOC Scam.

February 20th, 2013

If you’ve been reading my blogs you know I have little patience for companies in the financial services industry that do things to con people out of their money. There never seems to be an end to how many ideas the banks come up with. If it’s not one con, it’s another.

Here’s a little known scam that affects thousands of Canadians. It has to do with the way your line of credit (LOC) may work.

Not all LOCs work the same way. Most LOCs are credit facilities where you pay interest on the outstanding balance that you used.

Are you aware of the LOC where you pay interest on a balance that you didn’t use?

One of the big five banks does this frequently!

A lot of people […]

What’s the point of Annual Audits?

February 18th, 2013

Here’s another useless exercise the investment industry goes through each year – annual client statement audits.

Each year you probably get a statement from your investment provider that comes with a letter or statement on it that says something like this …

“The annual audit of our accounts is being conducted as of December 31st, 20__. Please review this statement and directly advise our auditors, _____________, of any errors or omissions.”

Now don’t you think that if you did notice something wrong or weird during the year you would have let someone know right away? What are the chances that …

A/ the error or omission was during that period?

B/ you were actually paying attention to every statement during the year?

C/ that you understood […]

The 14th Scariest Thing You Didn’t Know About Canada

February 15th, 2013

Readers Digest just released a list of 13 Scary Things You Didn’t Know About Canada. The list included everything from Lake Monsters to Phantoms in Old Montreal. It’s interesting but everything on the lists is arguably “unreal”. What isn’t “unreal” is the 14th.

So what is the 14th Scariest thing in Canada that most people don’t know about (or chose to hide from)?

Murder Everyone’s Returns (M.E.R.s)

Actually it stands for Management Expense Ratio which is what the mutual funds charge you to manage your money……but it’s the same thing.

Canada has some of the highest MERs in the world and they are murdering investors returns.


Mutual Fund DSC’s make my blood boil!

February 13th, 2013

I came upon something yesterday that made my blood boil.

A new client dropped off his data so we could help him get his financial life in order. Like many, he had lost track of where he was going and found himself in debt and frustrated that he couldn’t get ahead.

As I was reviewing his information I came upon his RRSP statement. I noticed that, like most people we see, he had a collection of mutual funds. Now anyone who knows me knows how I feel about mutual funds – they should be banned!

I’ve been doing this long enough to control my reaction to people owning mutual funds but what set me off was a practice that is so disgusting I can’t believe that […]

Bankers Bonus

February 11th, 2013

In December there was an article in the Financial Post which described the bonuses being paid to bankers in 2012. To quote the article, “Royal Bank of Canada and National Bank of Canada led the 7.5% surge in bonus awards among the country’s lenders this year, bucking a global trend of pay cuts on Wall Street and London.”

I know that the Canadian Banks have been doing well so maybe these bonus awards are in line – but are they?

I looked at RBC’s 2011 financial statements (2012 were not available yet). In 2011 RBC had total revenue of $27.43 billion and recorded a net income of $6.7 billion. Of the $27.43 billion of revenue, $8.95 billion was paid out for “Human […]

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