Modest Equity Market Returns: In this recent paper, Elroy Dimson, Paul Marsh and Mike Staunton authors of Triumph of the Optimists update their research into stock returns relative to bonds in 19 different countries. They estimate that the expected returns from stocks will be a rather modest 3% to 3-1/2% relative to bills.

Modest Asset Class Returns: The Economist magazine points out that it is not just stocks; all asset classes are priced to provide low returns going forward. It seems to me stocks are the best of the bunch. A real return in the range of 3% isn’t too shabby (assuming valuations remain comparable to today).

Donate shares, not cash: Tax expert Tim Cestnick explains why donating publicly-traded shares or flow-through shares is better than donating cash.

Changing Investment Strategy: Should you abandon buy-and-hold and adopt a market timing strategy? Asking the question after markets have fallen is a clue to what the answer should be says Preet in his Globe column.

Around the blogs

Money Smarts Blog is not convinced that paying directly for investment advice alone will make much of a difference.

Why we pay more for dairy products: Larry MacDonald writes that not only does supply management forces us to pay more for dairy products, tax payers will also be on hook if highly-indebted farmers start to default. (NB: The post originally said we are paying more for “diary” products. Thankfully, we don’t have supply management of diaries in Canada.)

Canadian Couch Potato reported that QTrade is now offering commission-free ETFs.

Million Dollar Journey likes the ING Streetwise Funds for its simplicity. One potential downside with balanced funds is the inability to locate assets in different accounts based on their tax efficiency.

Estate Litigation: The Blunt Bean Countered featured a guest post by a lawyer specializing in estates on the top five areas that are the subject of estate-related litigation.

Today’s Economy Blog’s Kevin Press interviewed an Occupy Bay Street protester to learn more about the movement and comes away very unsure what the protest is about.

Thicken My Wallet offered some do’s and don’ts for holding an open house.

That’s it for this week. Have a great weekend everyone!

This article has 9 comments

  1. CC- Thx for the mention, my guest poster will be pleased and maybe I can now squeeze another blog out of him in the future 🙂

    I also must tell you, as I am trying to move myself to become an index investor(at a glazier like pace) I have referenced many of your older posts on various ETF’s, your catolouge provides an excellent source of info.

  2. I’m actually surprised that the equity risk premium is so *high* in the first paper you linked to. At the end of September, U.S. long bonds had actually outperformed the S&P 500 over 1, 3, 5, 10, 20, and 30 year periods:

    i.e. The equity risk premium has been *negative* over long bonds over the last 30 years, at least for U.S. investors whose universe is the S&P 500.

    I guess when you go back 111 years as the authors of the paper do, the equity risk premium returns. But I’m wondering whether it’s realistic to expect even a 3% equity risk premium going into the future.

    • @Viscount: I agree that it is entirely possible that equities could return less than bonds going forward. It’s a scary thought considering how low bond yields are today. Having said that I think the odds of stocks under performing bonds over the next 20 years is low. If bond yields go up, stocks will still do okay but bonds will get massacred. If bond yields stay about the same, stocks will do better because already dividend yield alone is very close to bond yields (higher in many countries). If we have deflation, bonds will do better but stocks will also do okay (in real terms).

      @The Blunt Bean Counter, @Preet: Thanks for your comments.

  3. Thanks for the link Ram – have a great weekend.

  4. Tim Chesnik

    “You’ll also be entitled to a donation tax credit for the $10,000 value donated to charity in this example. This will save you $4,500 in taxes at a marginal tax rate of 45 per cent thanks to the donation tax credit.”

    Maybe this guy should actually donate to charity. The tax credit doesn’t work that way.

  5. Thanks for the mention. I need to write something more positive for a change. 🙂

  6. Bryce, with no disrespect, other than the first $200 of donations, that is exactly how it works. I don’t always agree with everything Tim writes, but he is absolutely correct. Techncially the donations are tax credits and maybe that is why you are saying Tim is wrong. But he just cut to the chase, at a 45% tax rate the savings are $4,500 after the first $200 bucks

  7. My bad. I had skipped down to the flow through shares section and I didn’t read the part where he was explaining that the range with Provincial tax credits.

    I would also like to see articles that explain the donation of proceeds from employee stock options.

  8. Thanks for mention, Ram. Maybe we should add quotas to the list of asset classes – the returns are pretty stellar.