Archive for May, 2007

New Canadian Money Blogs

May 29, 2007


Here are some of the new entrants in the Canadian Personal Finance blogosphere:

Ellen Roseman needs no introduction. She writes a popular personal finance column for the Toronto Star and is the author of six books. She has recently started blogging and like her columns, her blog posts cover consumer affairs and personal finance topics. (RSS Feed)

Financial Jungle is written by a thirty-something Vancouver resident with a keen interest in dividend investing. Recent posts covered topics such as closet index funds, Vancouver Real Estate, Retiring in exotic locations like Thailand etc. (RSS Feed).

Financial Security Quest is a recently launched blog with the tag line “Money, Real Estate, Passive Income and Early Retirement”. Recent posts discussed dividend-growth strategies, investing in rental properties etc. (RSS Feed)

Mike has often left long and perceptive comments on various posts and inspired by William Bernstein’s book, has started his blog at Four Pillars. Though the blog has just gone live, I am confident that we can look forward to interesting posts. (RSS Feed).

Investment Jungle promises “to empower individual investors to gain the knowledge, skill and confidence required to invest in high quality stocks”. The blog features analysis of individual stocks using rules found in Phil Towne’s Rule # 1 book. (RSS Feed)

A Tour of ETFs: Vanguard Europe Pacific ETF

May 29, 2007

22 comments is reporting that Vanguard has filed a registration statement with the SEC for a new ETF that will seek to track the MSCI EAFE Index. Pending approval the ETF will be available in the third quarter of 2007.

Unlike the flood of ETFs that are being introduced all the time, the new ETF will be of interest to long-term investors as it competes with the more popular iShares MSCI EAFE Index fund on price. The MER for the new fund is expected to be 0.15% or about 20 bps lower than the iShares fund.

The new fund will allow Canadian investors to build their entire foreign equity exposure using Vanguard ETFs: VTI (entire US market with a MER of 0.07%), the Europe Pacific ETF (international developed markets with a MER of 0.15%) and VWO (emerging markets for a MER of 0.30%).

Update: The ticker symbol for the Vanguard Europe Pacific ETF is VEA.

Research on Financial Circumstances of Retirees

May 28, 2007


I would like to express many thanks to reader George for pointing out an excellent research article by Malcolm Hamilton. The report, titled The Financial Circumstances of Elderly Canadians and the Implications for the Design of Canada’s Retirement System, delves into data from StatsCan’s Survey of Household spending and compares income and spending patterns of working-age and retired Canadians.

The report finds that while prime age Canadians do have a larger income, most of their income goes toward taxes, mortgage, savings and providing for young children. In retirement, most of these expenses are greatly reduced and the amount available for consumption (which reflects the standard of living) is not much less than for prime age Canadians. For instance, senior couples, on average, earn slightly more than half that of prime age couples, but the amount available for consumption is only 14% less. In fact, the surprising finding of the report is that seniors are saving and gifting a full 16% of their gross incomes. It is hard to argue that consumption of seniors is reduced out of necessity when they save a significant portion of their incomes at a late stage in life.

The report concludes:

Much of Canada’s retirement system, both public and private, has been built on a faulty assumption — that seniors need to replace 70 per cent of their employment income to maintain their standard of living. Most of the evidence suggests that the required ratio is 30 per cent to 70 per cent depending on an individual’s circumstances, with the average closer to 50 per cent than 70 per cent. The fact that today’s seniors have roughly half of the income of prime age families, but can afford a similar standard of living, supports this conclusion.

The news is also encouraging for those who want to retire early:

Those who save heavily, either because they participate in expensive pension plans (as are common in the public sector) or because they adhere to a strict savings regime, will typically find that they can retire in their 50s and live comfortably on 50 per cent of their employment income. If they keep working until they achieve the conventional 70 per cent target, they may have trouble spending their retirement income, particularly as they push into their late 70s. The recent experience of public sector plans suggests that many Canadians are prepared to retire in their 50s with pensions that are at the low end of the range that has traditionally been considered adequate.

Related: The Truth About Early Retirement from Reader’s Digest.