Ed Rempel Org

Ed Rempel – Not Sold on ETF’s and Index Funds

Why I Won’t Own an Index Fund or ETF

 Skilled Fund Managers

Many investors are skeptical that there exist fund managers who have skill and who can beat the index over the long-term. Other investors believe that there are fund managers who have skill, but that it’s impossible to identify them ahead of time.

There are skilled fund managers that can be identified ahead of time. I know quite a few of them. You just have to look using the right criteria.

Identifying Skill

When looking at funds, many investors take an objective approach and study recent returns, look at ratings or statistics, or try to forecast which sectors will perform well.

Other kinds of skill evaluations are more subjective and rely on insider judgments, e.g., doctors assessing other doctors, or even actors judging performances of their peers.

The evaluation of a fund manager falls somewhere in between those two approaches, the objective and the subjective. I believe that, to find the best fund managers, you have to study them, not the fund.

Start by finding fund managers that have beaten their index over their career or long periods of time. This could be in more than one fund. They do not need to beat the index every year – just over time. Then study them to find out how they do it. Is it because of stock-picking skill?

Outperforming the appropriate indexes is just one factor in the criteria. Top fund managers are usually not trying to secretly follow the index–they’re more likely to have an effective style (like value investing), and have high “active share,” which means that they’re investing in a way that differs from the index; they also often have great experience and have their own money invested in the funds that they manage, i.e. “skin in the game”.

My All-Star Fund Managers

One of my special skills is identifying all-star fund managers — it’s essentially my main focus related to investments. I’ve found around 50 fund managers over the years who I would characterize as having superior skill, and all of them have beaten their index over long periods of time.

Most of those 50 managers are on my “watch list”. I own only a handful of those funds. Although I’m resistant to the idea of sharing statistics about my own personal investments, mostly because my investment style may not be suitable for every investor, I want to emphasize that it’s possible to identify skilled fund managers early and ahead of time.

Why I Will Never Own an ETF or Index Fund

I won’t ever own an ETF or an index fund because I’m not happy with below-index returns. I choose investments based on the fund managers–I want to invest with the Albert Einstein of investors, the absolute best. ETFs and index funds don’t have fund managers, so I’m not interested. The goal of investing is to obtain the highest long-term return after fees, and a skilled fund manager provides enough value to pay for those fees and more.

Above-Index Returns

There are really two options when you’re pursuing above-index returns: one, you can find yourself an all-star fund manager, or, second, you can choose a portfolio manager who’s paid by performance fee. When portfolio managers are paid by performance fee, they’re motivated to beat their index. If they don’t beat the index, the fees are similar to ETFs. If they do beat the index, the fee pays for itself.

Getting above-index returns is all about finding skill.

An Introduction to Financial Instruments

What are financial instruments, and how are they used in the world of finance? These are the kinds of questions you might be asking yourself as a newcomer to the market. You will certainly need to know what they are, and how you can make the most out of such assets.

These financial instruments are simply the types of assets which can be bought and sold. Such financial instruments are often also regarded as capital packages which are up for trade. The majority of financial instruments will keep a very useful stream of capital which fuels investors all over the world and their various activities in the market.

Making the Most out of your Means

Such assets come in various forms, including as cash, or in some cases as a right stipulated by a contract that the delivery of receiving of cash must be adhered to. They can also be a piece of evidence that one is entitled to ownership of a particular entity.

Financial documents are generally broken down into two forms, virtual or real documents which connote a tangible agreement made regarding any kind of monetary amount. Those financial instruments which are equity-based will provide proof of ownership for a particular asset.

A financial instrument based on debt will obviously be for things like loans which were formed by investors for the sake of asset owners.

More Interesting and Valuable Forms

Then there are the financial instruments that fall under a third and very unique category, that of foreign exchange instruments. Such a division is broken down further into other subcategories, such as common share equity and preferred share equity.

The International Accounting Standards has outlined financial instruments to be any binding contract which will provide financial assets to one party, while to another it will provide a liability which possesses an equity or financial liability.

The Variety in Financial Instruments

There are two main kinds of financial instruments: Derivative instruments and cash instruments. Such cash values will be influenced directly and stipulated by the current markets. The relevant securities need to be easily transferable.

One can also use cash instruments in the form of deposits, as well as loans which were appropriately set up between a lender and a borrower.

The attached characteristics and values seen in derivative instruments will generally be based on what the underlying vehicle factors happen to be, such as indices, interest rates, and of course assets.

The Classes of Assets

There is indeed what is known as an asset class when we look at financial instruments. Such classification will depend on an asset’s formation as an equity-based or debt-based asset. In terms of financial instruments that are short-term and based on debt, you can expect a lifetime of around a year or less.

You need to ensure that you know how this classification system works, especially with the assets you are most likely to encounter the most, depending on the main sectors of the market you may be entering.

Ed Rempel CFS

Ed Rempel Top Key Note Speaker at The Canadian Financial Summit

Ed Rempel is a well known Canadian “Financial” Keynote Speaker and shares his enthusiasm and many years of experience to primed financial audiences that want, need and deserve more and better insight and information. Join Ed Rempel a senior financial industry expert with a host of other top speakers at the Canadian Financial Summit. www.canadianfinancialsummit.com September 13-16 Online Event.

 

 

4 Situations When You Need To Assert Yourself Financially

There will be times in your life when you have to assert yourself financially. If you don’t find a way to stand up for yourself, there will be severe monetary consequences. And often all you have to do is research what you deserve, and be confident as you are trying to get the appropriate results.

A few of these situations in particular that require positive energy on your part might be in the case of a slip and fall accident, when you are invoicing as a seller of some good or service, when you’re dealing with returns and exchanges of products, and in the event of divorce or separation. People will take advantage of you if you don’t claim what is yours.

Slip and Fall Accidents

If you’re involved in a slip and fall accident and are injured, and you’re not at fault, then you’re owed some financial compensation. If you’re not assertive about claiming damages, then you’re simply not going to get anything. If you need to, contact a slip and fall lawyer who understands exactly the type of information that you need to present, and is willing to present it in the most beneficial manner.

Invoicing as a Seller

If you sell some product, the chances are very likely that you have to send out invoices. People will push back against this invoicing and say that they don’t owe you anything. You need to approach that situation confidently, and do everything that you can to get the money that you deserve. People will try and scam you for every possible reason, and if you fall for their schemes, you’re going to end up in the red when it comes to your bottom line financials. Learn to make good deals, and then make sure people stick to them on the other side of the equation.

Returns and Exchanges

If you buy something, and it doesn’t work out whatever reason, you should be able to return or exchange it. There are lots of companies that can try to pressure you to not go through this process because it costs them money. Don’t keep something that you’re not happy with, just because you feel like the company is bullying you. Do whatever you have to do, and follow the process to return or exchange, and never second-guess yourself.

Divorce and Separation

Conflict often happens in divorces and separations because of money. If you don’t figure out how to confidently ask for what you deserve, then your former partner is going run all over you. If there’s a legal matter involved, be sure that you have a lawyer who’s on your side, but at the very least you have to feel like you are in control of your destiny when it comes to splitting finances evenly.

3 Financial Reasons To Outsource Certain Small Business Tasks

If you own your own small business, you likely are somewhat of a jack-of-all-trades. However, there are probably a few, if not more, tasks that you either can’t do effectively or don’t want to have to do on your own. This is the perfect scenario in which to consider outsourcing some of your business tasks in order to keep your business running smoothly without you having to be so hands-on. However, many small business owners fear that outsourcing won’t necessarily be a smart business move. So to help you decide whether outsourcing is something your business should undertake, here are three financial reasons to outsource certain small business tasks.

Cut Back On Labor Costs

Paying someone to do a job can be a very expensive cost for small businesses. This is especially true if you’re feeling like you need to hire someone to do a job that isn’t necessarily at the threshold of being full-time. In this situation, AllBusiness.com writes that this could be when outsourcing makes financial sense. By outsourcing certain tasks, you can get the finished product you need without having to hire and train an employee to do it. You won’t have to keep an employee on your payroll but you can still get the work done that you need completed.

Decrease Your Overhead Costs

Not only can hiring a new employee cost your business a lot of money, but you then have to accommodate that employee at your place of business. Depending on the type of business you’re running, you may not have the room to bring on the number of employees you need to complete certain tasks. Luckily, James Bucki, a contributor to TheBalance.com, shares that outsourcing can help by reducing overhead costs in this way. By removing your need to have office space for employees to work through outsourcing, you can still have a successful business while using your space and the funds to run your space more effectively.

Maintain Efficiency Without Higher Costs

Especially if you’re able to work with a reputable and well respected outsourcing agency, your business will be able to be more efficient and have potentially higher quality products without having higher costs. Joe Mullich, a contributor to Forbes.com, writes that using a third-party provider can help to simplify and standardize certain business processes that otherwise would cost your business a lot of money to handle on your own. This leaves you and your employees open to spend your time working on other money-making areas of the business rather than having to slog through mundane administrative work when necessary.

If you’ve considered outsourcing certain business tasks but were unsure about the financial aspect, use the information provided to help you see if this would be a good financial option for your business.

Refinancing may still be an option

To no one’s surprise The Bank of Canada has left its key interest rate unchanged at 0.5%. After reading the latest Monetary Report, it doesn’t sound like it will raise its policy rate any time soon. Inflation is flat, as is wage and export growth, and there is still uncertainty in the US and globally.

Despite record low interest rates, some new home buyers are finding it challenging to qualify for a mortgage due to a new round of rule changes announced late last year. These changes have also affected existing mortgage holders who may want to refinance to get a lower rate.

While low interest rates and robust regional housing, markets continue to be the norm, Canadians are still burdened with record-high debt loads. The ratio of debt to disposable income rose to 167.3% by the end of 2016. That means Canadians owe $1.67 for every dollar of disposable income, up from $1.66 the year prior.

If you’re sitting with equity in your home yet can’t seem to manage your debt payments, refinancing could still be an option. With credit card interest rates often pushing the 20% range and unsecured lines of credit in the 7% and higher range paying off high-interest debts can make sense.

Let’s review a refinance. Specifically, you are increasing the amount of your mortgage to pay off debt. Your actual mortgage payment may or may not increase, depending on a number of factors, and you may incur a penalty to break your existing mortgage if you are refinancing midterm, but your overall monthly payments should decrease. You could be paying off the refinanced debt at a much lower interest rate, which could save you thousands of dollars in interest in the long run.

Here are some reasons to consider a refinance:

Decrease your overall monthly debt payments by using your equity to pay off those high-interest credit cards or unsecured loans, which can help you better manage your budget.
You can refinance to purchase another property. Using the existing equity in your home can be a great way to buy a rental property which, if done right, can also make the interest you pay tax deductible.
You could also take out some of the equity for investment purposes.
Or you may want to refinance to renovate.

As you can see there are many factors to consider before deciding to refinance. Each individual’s financial situation is different. Call me and we can discuss the options available to you.

Guy Ward is a Mortgage Broker in Calgary, Alberta with TMG (The Mortgage Group Alberta) and can be contacted at www.guythemortgageguy.com

What’s going on with my appraisals

Changes in mortgage rules for home buyers and insurers certainly have had an impact on the housing market, and those changes have impacted property appraisals as well. Conventional mortgages – up to 80% of the value of the property – historically, were required to have a full appraisal. Now, in many areas of the country, an appraisal may also be required on insured mortgages — 80 to 95% loan-to value.

The decision to approve a conventional mortgage, after all other lending criteria have been satisfied, is made on a property’s fair market value. This is defined as the market value of an interest in land at the highest price reasonably expected, when sold by a willing seller to a willing buyer, after an adequate amount of time and exposure to the market.

So who determines the value of that property? One could argue that the market itself determines the value, which is true, but from a lender’s perspective that number must come from an independent third-party – the appraiser. An appraiser, who is specifically trained and has sufficient experience, will be asked to offer an impartial, written opinion of the property’s value.

Realtors normally use a comparative market analysis (CMA) to evaluate a property’s value based on local market data. Agents analyze listing and sales data for comparable properties in the area to recommend a price to list or to offer. However a CMA is not an appraisal. Although appraisers use the CMA approach, they use it in combination with other factors to determine the value of a property.

The major difference is that appraisals are done for a specific client — the lender. Because real estate is the major security for mortgages, the market value estimate needs to be as accurate as possible. Appraisers use ‘sold’ properties information only and compare similar property types, in close proximity, that have sold within a relatively short period of time – usually 90 days.

Not all residential properties are subject to a traditional appraisal. If the property is in an established area with similar properties then sometimes the price can be validated electronically. This model of appraising property, called automated valuation model (AVM), has become quite popular in the last 10 years.

However, given the nature of the housing market these days, mortgage lenders have moved away, in many areas, from AVMs for conventional mortgages, and for some high-ratio mortgages as well, and are asking for live, full on-site appraisals.

At the end of the day, an appraisal must reflect a property’s realistic true market value and needs to be backed up with accurate data.

So why does an appraisal come in lower than expected?

With the introduction of bidding wars, where, in some areas, prices may be artificially inflated, appraisers are still tasked with coming up with a property’s fair market value. Rapidly changing markets can be very challenging for an appraiser to properly evaluate a home’s worth.

Appraisers will try to get to the purchase price when evaluating a property. However, sometimes the sale is a few weeks ahead of the market. If prices are increasing, it may not show up in their analysis yet and the appraisal will reflect a lower value.

At the end of the day, the appraisal has to be a realistic evaluation of a property’s true market value and be backed up with data.

Guy Ward is a Mortgage Broker in Calgary, Alberta with TMG (The Mortgage Group Alberta) and can be contacted at www.guythemortgageguy.com

Every company needs a money manager and so might every wealthy investor

The Canadian Dollar and MONEY.CA
Money in Canada

Managing an investment portfolio was relatively easy in the 1980s and 1990s, but there has been a significant increase in complexity over the past decade. The investment climate and markets is more volatile and demanding, and today’s low interest rate and returns don’t look like they are going to change anytime soon. To get better returns, the wealthy are adding non-traditional investments such as private equity, real estate and hedge funds to their portfolios, as well as diversifying globally, which just increases the potential complications.

It’s tempting then to turn the whole thing over to someone else to manage if you can get through the sheer volume of asset managers, products and strategies to pick someone. But even among wealthy investors, there is still a lot of confusion about whether they should have discretionary or non-discretionary investment portfolios. In other words, should you and your family manage the investments, or outsource the decisions to an individual or a firm of experienced professionals? For those who lack the investment experience, time or discipline to be involved with dayto-day decision making, discretionary investment management services are a popular option. Firms that provide this are called outsourced chief investment officers and should be licensed as portfolio managers with a provincial securities regulator such as the Ontario Securities Commission.

But not all discretionary services offered by the country’s myriad banks, brokers and portfolio managers are the same and there are at least eight important factors to consider when choosing one. Does the firm: Have the skill, experience and resources to evaluate and manage assets across public and private markets? Have an “open architecture” approach, or the ability to allocate capital without conflict-of-interest to any independent asset manager from around the world in areas such as direct lending, real estate, private equity and hedge funds? Have the ability to access “best-in-class” institutional quality traditional and alternative asset managers? Provide a culture centred on client relationship management and strong communication? Offer robust performance reporting along with relevant custom benchmarks? Allow for clients to meet or speak with underlying asset managers? Take tax considerations into account to optimize returns on an after-tax basis? Offer more than a one-size-fits-all approach that utilizes just one or a few asset classes, such as stocks and bonds?

If the answer to any of these questions is no, you should probably look elsewhere, or, at the very least, realize you’ll have to compensate for that lack of ability in some other way at your own expense and time. But if your family hires an outsourced CIO, you and the advising representative (a registered individual who can provide investment advice at a portfolio management firm) will start your relationship by discussing and documenting your unique investment objectives and constraints. Topics covered should include how much investment risk you are willing to take, the desired level of return for taking on that risk, liquidity needs, tax considerations, performance reporting and benchmarks, and the asset classes and markets you will allow your portfolio to be invested in. A written investment policy statement is then provided as a best practice that documents all of the above.

Your advising representative is then authorized to make all the necessary investment decisions (within the agreedupon guidelines) and will not require consent for individual transactions. This service, which also consists of regular communication through methods that best suit your family — whether it’s in-person meetings, webcam meetings, telephone conversations, emails and newsletters — forms an important part of the ongoing relationship. The relationship is of prime importance, since your investment objectives and strategy may need to change to provide a tailored fit as conditions within your family change.

Original publication: http://business.financialpost.com/financial-post-magazine/every-company-needs-a-money-manager-and-so-might-every-wealthy-investor 

A Few Ways To Save Money With Your Home Office

It’s important to have an office set up in your home if you work from home. Not only does this make your home business look more professional, but it will also help you stay more focused when it comes to getting your work done each day. Setting up a home office doesn’t need to be pricey.

Many people think that it’s cheaper just to work from the couch, but not only does that affect your focus, it can also cause you back and neck pain. You don’t have to go broke setting up your office, though. Here are some tips on what you’ll need and how to save getting them.

The Internet

You need to have the internet in your home office, but that doesn’t mean you have to have satellite or cable internet. There are other options. No matter your option you want to be able to be connected via wifi since sometimes you might be emailing from your phone in other rooms of the house.

If you want to stay connected even when you leave your office, maybe to go to a restaurant or coffee shop, you may want to invest in a wifi hotspot. This can also cut down on your need for an internet bill. Some companies only offer you internet as a packaged deal or charge you more if you opt for internet only.

Electronic Devices

You are going to need a good smartphone for your home business, as well as a computer. You may just want a laptop or you might want both that and a desktop computer. When it comes to savings money on these items you should shop around. Know when the best months of the year are to get good deals on computers.

You’re also going to need a printer, and an all-in-one is the best bet if you need to be printing, scanning, and making copies. If you spend time set-up at business expos you might want to invest in a tablet or even a portable TV with a DVD player. These allow you to show videos, slideshows and more to attract more customers.

Office Furniture And Decor

Those electronic devices aren’t the only things you need to make a home office. You also want to have a desk that has room for all of the work you’re going to need to do. You want a desk chair that promotes good posture.

Desk lamps, paper cutters, and lots of pens and pencils are also things you’re going to need a lot of. Consider shopping for office supplies during the “back to school” sales when you can get great discounts. This includes things as small as push pins and staples.

Debt and debt settlement services

The debt-to-income ratio has hit the headlines again. This time the ratio rose to 167.3 % in the fourth quarter of 2016 compared to 166.8% in the third quarter. That means for every dollar of disposable income, consumers owe $1.67. Approximately 63% of that debt is in mortgages.

While this increase worries some policy-makers, studies have shown that consumers have been able to pay their debt relatively easily. Low interest rates have allowed consumers to pay down more of their mortgage principal, with payments split almost evenly between interest and principal in the fourth quarter.

But for some, the debt load is unmanageable and they search for solutions. You are no doubt familiar with advertisements from debt settlement services that promise to settle a consumer’s outstanding debt, for a fee. The caveat is buyer beware. If you’re considering this option, make sure to do your research and find a reputable company to work with. Or, I may be able to refer you.

Before you pay upfront fees or service charges, I may be able to help. Much of what debt settlement services offer can overlap with the services of a licensed mortgage broker.

Here’s how it works. Mortgage brokers can arrange debt consolidation on a mortgage renewal or on a refinance. When arranging a consolidation mortgage loan on a refinance or renewal the amount of the mortgage principal may be increased to pay out the total debt amount. This becomes part of the mortgage commitment and a condition of the mortgage loan. On closing, your lawyer will disburse the funds to your creditors and register the new mortgage.

What you need to know
A refinance alters the terms and conditions of your mortgage; specifically you are increasing the amount of your mortgage to pay off debt. Your mortgage payment may or may not increase, depending on a number of factors, and you may incur a penalty to break your existing mortgage if you are refinancing midterm. Depending on your current mortgage you could be paying off the refinanced debt at a much lower interest rate, which could save you thousands of dollars in interest in the long run.

As with all renewals, it’s always a good idea to review your mortgage with a mortgage broker who can shop the rates for you and get you the best deal, tailored to your particular situation. And, if you decide to switch lenders, there are no penalties at renewal time.

One of these options may be the perfect solution if you’re struggling with debt. Call me today for more information.

Guy Ward is a Mortgage Broker in Calgary, Alberta with TMG (The Mortgage Group Alberta) and can be contacted at www.guythemortgageguy.com