Where are the Black People in Finance II

I recently wrote an article asking “Where are the Black People in Finance?“. In that article I pointed out how few black people work in finance due to implicit and explicit racial bias.

While few in the investments industry would overtly call themselves ‘racist’, the environment is structured so that black people self-select out of the pool of potential candidates. As a people-manager, not only have I worked with few black people I have interviewed few black people. People simply opt out of a game at which they feel they are bound to lose. Read the full article here.

Earlier today I listened to a Bloomberg podcast investigating this very issue: Being Black on Wall Street. Unlike my article, which was from my eyes, the Bloomberg podcast shares experiences directly from black people who have worked in finance.

I think there’s no better way to understand and empathize than to hear directly from those affected. I’ve shared the podcast below:

Being Black on Wall Street: A Bloomberg Radio Special

On Wall Street, being Black often means being alone, held back and deprived of the best opportunities. This special podcast from Bloomberg Radio tells the stories of Black men and women, in their own words.

ETFs and Funds Income Investing Investing

Review: BMO Equal Weight Banks Index ETF (ZEB)

With Q3 earnings for the Canadian banks behind us, you might be considering investing in the banks using BMO Equal Weight Banks Index ETF (ZEB). This ETF exclusively holds an equal weight of each of the big 6 Canadian banks. While the convenience of this one-ticket solution is enticing, I believe using this ETF is a bad financial decision for long-term buy-and-hold investors.

I wouldn’t blame you for wanting to invest in the Canadian banks. I believe the banks have provisioned adequately for significant loan losses and are well prepared for the current economic disaster. Furthermore, Royal Bank, TD, CIBC, Scotia and Bank of Montreal respectively pay a 4.2%, 4.8%, 5.6%, 6.3% and 5.1% dividend yield (as at August 28, 2020). Many investors view these companies as interesting long-term holdings.

While ZEB can simplify the investment into Canadian banks into a single transaction, investing in a highly concentrated ETF like ZEB can be a bad idea. Anyone interested in buying-and-holding the Canadian banks for a long time might be better off simply buying the individual stocks.

Forget BMO Equal Weight Banks Index ETF (ZEB)…Buy the Stocks Instead

For example, let’s say you have $20,000 you want to invest. With an MER of 0.61%, ZEB ETF will cost you $122 per year to own plus any trading commissions. That cost (excluding the trading commission) is repeated each year in perpetuity and will rise as your holdings appreciate in value.

In contrast, you can buy 5 of the banks for a total one-time trading commission of between $0 and $50 (depending on your online broker). Let’s be generous and say you could pay $100 in commissions for the round trip. If you plan to hold your investment for a decade ZEB would cost you at least $1220 while owning the individual stocks would cost a maximum of $100.

While it’s true that ZEB rebalances between its holdings, one could easily replicate this at minimal cost annually using the dividend income spit off from these stocks.

Overall, the value proposition for ZEB is fairly weak for long-term investors. Of course, the story is different for people using ZEB for short term trading or hedging purposes. But I would guess that a significant number of people who hold ZEB don’t realize this.

If you’re a buy-and-hold investor I just saved you $1120. Don’t spend it all in one place.


How Jeff Bezos Made All His Best Decisions

“All of my best decisions in business and in life have been made with heart, intuition, guts — not [with] analysis.” — Jeff Bezos

“When you can make a decision with analysis, you should do so, but it turns out in life that your most important decisions are always made with instinct, intuition, taste, heart.” — Jeff Bezos

“There wasn’t a single financially savvy person who supported the decision to launch Amazon Prime. Zero. Every spreadsheet showed that it was going to be a disaster. So that had to just be made with gut.” — Jeff Bezos

More from Amazon CEO and founder Jeff Bezos participates in the Milestone Celebration Dinner at the Economic Club of Washington in Washington, D.C.:

Trust your gut. Subscribe to DumbWealth (free).


Does Gold Outperform Stocks Over the Long Run?

There’s a financial meme out there that suggests gold and silver have outperformed stocks over the past 20 years. The chart looks something like this:

Gold line = gold
Silver line = silver
Blue line = Dow Jones Industrial Average (DJIA)
Red = S&P 500

Looking at this chart, one might come to the conclusion that gold and sliver outperform stocks over the long run. However this conclusion is incorrect.

First of all, the relative performance shown in the chart is very sensitive to start and end dates. For example, if the chart goes back an additional 10 years the outcome completely reverses with stocks outperforming gold and silver:

Alternatively, if I shift the 20 year period to 1959-1979 gold and silver’s out-performance is dramatically amplified.

The point I’m trying to make is that the relative performance of gold and silver is highly dependent on the time period in question. In other words, the performance of precious metals changes with the economic environment. One cannot judge long-run expected returns for gold and silver based on any single period alone.

The next point I want to make is that these memes often make the mistake of comparing gold and silver against the price returns of various stock indices. The charts above use the price returns for the DJIA and S&P 500. Price returns don’t include dividends and therefore provide an incomplete picture of the actual returns from holding stocks.

Below, I’ve re-created the charts and added a black line that represents the total returns provided by large cap stocks (using the Wilshire Large Cap Index back to 1978 and S&P 500 Total Returns Index prior to 1978). While the price return for S&P 500 (red line) was 129% over the 20 year period, the Total Return (black line) was 240%. Gold and silver still dramatically outperformed during this 20 year period.

Like in the previous example, extending the history to 30 years flips the script. While the price indices outperform (as they did in the earlier example) the new total returns line dominates. The added compounding effects of dividends becomes increasingly noticeable as time goes on.

The farther back you go, the more impactful the compounding effects of dividends become. The following chart compares 100 years of returns, with the total returns index being the clear winner, while gold, silver and price return stock indices barely register.

Today, we could be in a period in which gold and silver outperforms stocks. This out-performance is highly dependent on the prevailing economics, such as negative real yields and currency depreciation. There are so many factors that nobody really knows for sure.

I personally believe a strategic allocation to gold can help improve portfolio risk-return characteristics. I also believe that we might be in an economic environment in which gold outperforms stocks. However, to extrapolate the out-performance of the last 20 years to argue that precious metals should provide higher expected returns over the long-run is misleading.

Subscribe (free) and we’ll do our best to help you build wealth:

ETFs and Funds

Canadian Mutual Fund vs ETF Flows

2020 has been a tough year, but the investment funds industry has remained resilient. Net Sales are positive and AUM has grown over last year. The crash in Feb/March will affect fee revenue for the year but overall the industry keeps moving forward. As banks report Q3 earnings, we can see that the wealth segment is holding it together. Today (August 25th) BMO beat street estimates based on wealth and trading activity. We’ll see how RBC, CIBC and TD do, as they report later this week.

In line with the entrenched trend over the past several years, ETF flows and ETF asset growth surpassed those of traditional funds by a wide margin. This trend is driven by price-sensitive investors aggressively switching to lower-fee ETFs.

While the flows into ETFs are more evenly spread across asset classes, flows into mutual funds are clearly overweight to bonds. This is likely because investors/advisors are more inclined to pay higher fees for active management in the fixed income space. The religion of low-cost passive indexing has not yet permeated the bond portion of the portfolio.

Flows into balanced funds – previously the bread and butter of the mutual funds industry (particularly the banks) – remain conspicuously absent. This is detrimental to bank wealth management divisions, which push managed solutions through their retail distribution channels.

As you can see below, dollar flows into ETFs was more than double that into mutual funds. This is a powerful trend that will likely continue.

Mutual Funds:

  • 4.5% year-over-year AUM growth
  • $3.4b net sales in July
  • $11.2b net sales YTD


  • 26.2% year-over-year AUM growth
  • $7.3b net sales in July
  • $29.9b net sales YTD
Source: IFIC

Real Estate

What You Need to Know Before Buying a Home

Buying a home costs a lot of time, effort and money. Unfortunately, many things can go wrong.

I recently came across a Reddit thread in which people shared their tips for home buyers and new homeowners.

Here are some of the best tips:

  1. Doing a bit of maintenance every year is extremely important, regardless of what type of home you buy, and do your research before you hire any contractors for any maintenance/reno work, so that you will at least have a basic understanding of what they are supposed to be doing, because they will cut corners and/or miss things, and you have to watch them like hawks and let them know that you know what they are supposed to be doing. Always get quotes before you start any work and never give them a downpayment as any reliable contractor will not need one.
  2. Also take pictures of the work area before and after they arrive, for insurance purposes and in-case they damage anything so that you have it documented. Also, never lie to your insurance company or ‘forget’ to tell them something as that is automatically used to void any claims you may have/had.
  3. If there is any non-tile flooring in the house, and not carpet, ask the seller what type it is and see if you can still buy any spares. Flooring manufacturers intentionally stop making models a few years after inception so that when boards crack or get stained or chipped or whatever, you have to replace the entire floor to keep everything matching, so if you have floor that is vinyl or laminate or engineered wood or whatever, see if you can still buy spares; trust me, you will really prefer the small investment now to replacing the entire floor later on.
  4. Ask other owners in the building (if it’s a condo) if the building has problems with leaks, and with condensation, as they are really expensive to deal with and are driving up building and unit insurance rates (at least in Ontario), and if the building has a problem with condensation then it can cost you thousands of dollars to repair if your unit is deemed to have been the cause of it.
  5. The home inspector should catch this, but check that all of the circuit breakers actually do what their labels say that they do, as if they don’t, this is a bright red warning sign of a bad wiring job, and probably means that they did a bad job in other ways too, which won’t just be expensive, but could be a fire hazard as well. If you can, try a few of the outlets too, to make sure that they are working (often they aren’t, or only one will work at a time if they are stacked), and to see if they get hot quickly, as this is another sign of a bad wiring job, but again, the home inspector should definitely check this.
  6. If it is a condo, read all of the Condo board’s documentation, as different buildings have different definitions of what is considered ‘commons’ responsibility’ and what is considered the unit owners responsibility, and that especially goes for pipes/plumbing. The condo documents should clearly state where your responsibility starts and ends, and you need to know this because if something goes wrong (burst pipe that leaks into the unit below), they absolutely will not tell you that actually on page 48 it states that toilet pipes inside the walls are actually common elements and not your responsibility, they’ll just bill you and hope you don’t catch it.
  7. Don’t make an unconditional offer that you can’t or won’t honor. If the seller accepts it, and then you pull out, and the owner sells the property to someone else for below the price you were offering, they can and will sue you for the difference, and most likely will win. If you do include conditions, make sure that they protect you and are reasonable for the other party to fulfill, and expect that they will be fulfilled, otherwise you can get into an ugly dispute with them if you then want to try and back out on account of the conditions not having been fulfilled.
  8. Don’t buy a fixer upper unless you have the cash and time to fix it up before you move in. You will just live in a constant Reno house for years.
  9. Get the sewer line scoped. Find the inspector yourself not through the realtor – check wiring, electrical boxes/panel, crawl space insulation/vapour barrier. Make sure you test each light switch to know what it does and that it is working. If it has fireplace make sure it is WETT inspected, up to code etc.
  10. Remember that the most costly expenses are to the things that you can’t typically see… wiring, plumbing, sewer lines etc. Be sure to run the hot and cold water lines independently in each room then go to the basement and listen. You may hear something out of the normal; hammering, drips etc. Same goes for running the washing machine and checking that the sump pump operates (if it has one)… it can all be a bit overwhelming at times, but it will help you better understand what might be an issue that you’ll need to address in the future… and be prepared to negotiate. The furnace in the house we bought was 20 years old, so we negotiated a percentage to replace based on typical life span, same for the sewer line… your diligence might lose you the house depending on market conditions, but will save you a whole lot of hurt down the road… and remember, three quotes for any work that you need to have done… and make decisions based on level of detail provided in the quotes and checking references/reviews… it is YOUR money and you CHOOSE how to best spend it and you can only do that with information/data… emotions are not your friend 🙂
  11. Get the inspector to actually go up on the roof to inspect it. Ours just looked from the ground and missed that the flashing was not done properly. We had the surprise of a leaking roof when we replaced the windows before moving in and had to redo the roof there and then. I tell you, its not fun having to find an extra 10k when you put all your free money in downpayment, closing costs and planned pre-move-in repairs/renos. Many inspectors are older and refuse to go up on roofs. Find the thorough ones.
  12. Visit the neighbourhood different times of the day. Do the commute to/from work to see how it is. Make sure you can put aside money for an emergency repair. Plan to replace any rental hot water heater (I have no idea why those are still a thing).
  13. Don’t rush into furnishing your home. Many homeowners tend to go all out and buy everything they can to fill every nook and cranny. Yes it’s hard to see your new home empty or filled with old second hand furniture. Furnish as you go and start with the rooms you use on a regular basis. You WILL find deals and things that fit the rooms style or need, just be patient!
  14. What the bank says they’re willing to lend you is NOT the same as “what you can afford”. Figure out what $ of mortgage you are willing to pay and how much downpayment you can put down, and ask your broker what that translates to in terms of house price. Also factor in insurance, upkeep, maintenance, repairs, replacements, move in costs, furnishings, etc etc. You do not want to be “house poor”. Live in a decent house, but can’t afford to pay for anything else. A few of my friends fell into this trap and regret it every single day.
  15. If you buy an older house try to budget for a new furnace, hot water tank and attic insulation.
  16. Always have money on the side for emergencies. After 4 years of owning my condo townhouse the condo board decided to replace all windows at owners expense, I was given 6 months to cough up $7,800.
  17. On my next house, I was excited to not live in a condo anymore. I had bought a bungalow. 1 year after purchase the french drain was at end of life and water started seeping into my basement. The insurance company paid for 2 sides of the houses french drain replacement. I made the tough decision to pay out of pocket for the remaining 2 sides. It amounted to $11,000.
  18. There will always be big budget unexpected expenses. Have some money on the side to be able to cover them.
  19. Make sure you want to stay there for 5-10 years. Unless it’s extenuating market circumstances, I like the 5 year rule for housing. You’ll never make money off a sale until you’ve possessed it for 5 years.
Master Class

Jim Rogers: How to Be a Great Investor

If you want to become a master at something you must learn from the wisdom of others. You can do this by reading books and listening to interviews with elder investors like Jim Rogers, George Soros, Warren Buffett, Stanley Druckenmiller and Ray Dalio. Unfortunately, there are few investing pundits still making the media rounds who are in their 60s and 70s. However, it is critical to learn from senior investors because they’ve experienced market and economic conditions that most professionals today couldn’t even imagine.

Jim Rogers (born October 19, 1942) is an American investor and financial commentator based in Singapore. Rogers is the Chairman of Beeland Interests, Inc. He was the co-founder of the Quantum Fund and Soros Fund Management. He was also the creator of the Rogers International Commodities Index (RICI).

In 1970, Rogers joined investment bank Arnhold and S. Bleichroder, where he worked with George Soros.

In 1973, Soros and Rogers both left and founded the Quantum Fund. From 1970 to 1980, the portfolio gained 4200% while the S&P advanced about 47%. The Quantum Fund was one of the first truly global funds.


How Much Should You be Saving?

How much should you be saving? Many people have no idea.

David Bach, author of The Automatic Millionaire, provides his recommendation:

Why does it rise with age? According to Bach, “typically the older you get the more you earn and spend. And if you lose your job it can take longer to find a job that replaces that income.”

I’ve witnessed this first hand. It frequently takes a senior executive 1-2 years(!) to find comparable employment. I can only imagine how devastating this can be to the ego, savings account and family dynamic. Since senior executives tend to be in their 40s or 50s, they probably have exhausted marriages, college-aged kids and massive responsibilities. There is no worse time to stop the regular paychecks.

This is where years of socking away money into an emergency fund helps. But how many people are doing this? The reality is quite bleak – 26% of Americans have no emergency savings at all. This means they’d be dipping into their retirement funds if an emergency occurs. Unfortunately, the median retirement account savings for Americans is only $5,000.

Unfortunately, these dollar amounts leave most people far behind target. JP Morgan provides a table (below) that illustrates how much people should have saved, given their age and salary. (I’ve also provided other retirement savings target tables below.)

Source: JP Morgan
how much money should i have saved by 25
Source: Fidelity
Source: T Rowe Price
Source: T Rowe Price

The problem I have with all of these tables is that they’re based off a multiple of your current salary. Not only that, but the multiple rises with income. This presumes that you plan to retire into a lifestyle that requires your full current salary.

Most people require about half their salary during retirement. In dollar terms, many retirees could live happily off $40-50k. For those of us who live frugally and plan to continue doing so during retirement, the actual dollar amount required at retirement might be much lower than the estimates provided by these tables.

If you’ve calculated your estimate and feel like you’re way behind, you’re not alone. According to, almost 1/3 of people in the prime of their careers (aged 35-54) have ZERO retirement savings.


Why are people so unprepared?

The average person is financially illiterate. In 2011, the Investor Education Fund conducted a survey and found that only 29% of respondents could pass a basic financial literacy test. If people don’t understand basic personal finance, they sure as hell aren’t taking the right steps to secure their financial future and prepare for emergencies.

The average person must become more invested in their financial future. I’m happy to see that the Ontario government is working towards mandatory financial education in high schools. More must be done. Unfortunately, by the time a student reaches high school many bad financial habits have already formed. Parents still have the ultimate responsibility teach their children values and behaviors that support financial freedom and flexibility.

As I alluded to earlier, the risk of ignorance is financial ruin, divorce and missed opportunities for your kids.

Get Your Free Copy of CoronaCrisis:

Real Estate

Chart: Home Insurance Costs by Ontario City

Are you paying a fair price for home insurance in Ontario? Home insurance rates vary by city. For example, home insurance in Toronto costs about twice that in Cambridge.

With little information out there, home owners and home buyers are often left in the dark when pricing out insurance costs. The last time I had to get home insurance I had no basis for comparison. So I had to spend hours on the phone with multiple providers to get quotes.

Luckily, Zoocasa did the legwork and provides average home insurance costs by city across Ontario.

Source: DumbWealth, Zoocasa

Real Estate

Canadian REITs: The Lazy Person’s Path to Real Estate Investing

Thinking about investing in real estate? Real estate investing can be profitable if you know what you’re doing. It can also be full of headaches. Many tenants suck, so it’s a gamble. Even if all goes well, real estate investing certainly isn’t passive.

Personally, I prefer the lazy route. Plenty of well-diversified and professionally managed real estate investment trusts (REITs) are trading on the TSX with very attractive yields. In fact, the average yield on all 36 TSX-listed REITs is 7.93% (as at August 19, 2020).

Of course, there are risks. REIT yields have risen recently as many forms of real estate (office, retail, residential) are under pressure and the future is unclear. Some REITs may cut their dividend so it’s best to do your due diligence. I am not speculating on whether real estate is a good or bad investment. I’m simply saying there are options available for the lazy investor (like me) who wishes to participate in the asset class but doesn’t want to become a landlord.

Below, I’ve provided the full list of TSX-listed REITs and their yields (source).

(Best viewed on desktop)

CompanyEx-Dividend DatePayable DateYieldFrequencyDividendMarket Cap
PAR.UNPartners Real Estate Investment TrustMay 23, 2019May 22, 201933.333M0.015 CAD25.8M
HOT.UNAmerican Hotel Income Properties REIT LPMar 30, 2020Dec 31, 202033.046M0.038 USD153.9M
SRT.UNSlate Grocery REIT Unit Cl UAug 28, 2020Aug 17, 202012.089M0.072 USD387.5M
INO.UNInovalis Real Estate Investment Trust UnitsAug 28, 2020Sep 15, 202010.274M0.06875 CAD227.8M
SOT.UNSlate Office REIT Trust UnitsAug 28, 2020Aug 17, 202010.272M0.0333 CAD263.6M
TNT.UNTrue North Commercial Real Estate Investment Trust UnitsAug 28, 2020Sep 15, 202010.102M0.0495 CAD502.9M
MRT.UNMorguard Real Estate Investment Trust Trust UnitsAug 28, 2020Sep 15, 20209.877M0.04 CAD302.0M
BTB.UNBTB Real Estate Investment Trust Trust UnitsAug 28, 2020Sep 15, 20209.554M0.025 CAD197.3M
REI.UNRioCan Real Estate Investment Trust Trust UnitsAug 28, 2020Sep 8, 20209.399M0.12 CAD4.9B
MR.UNMelcor Real Estate Investment Trust UnitsAug 28, 2020Sep 15, 20209.207M0.03 CAD51.0M
SRU.UNSmartCentres Real Estate Investment TrustJul 30, 2020Aug 17, 20209.087M0.1542 CAD3.5B
APR.UNAutomotive Properties Real Estate Investment Trust UnitsAug 28, 2020Sep 15, 20208.187M0.067 CAD370.2M
PLZ.UNPlaza Retail REIT UnitsAug 28, 2020Sep 15, 20207.999M0.02333 CAD356.2M
NWH.UNNorthWest Healthcare Properties Real Estate Investment Trust UnitsAug 28, 2020Sep 15, 20207.006M0.06667 CAD2.0B
HR.UNH&R Real Estate Investment Trust UnitsAug 20, 2020Sep 4, 20206.832M0.0575 CAD2.9B
CRR.UNCrombie Real Estate Investment Trust UnitsAug 28, 2020Sep 15, 20206.799M0.07417 CAD2.1B
DIR.UNDream Industrial Real Estate Investment Trust UnitsJul 30, 2020Aug 14, 20206.25M0.05833 CAD1.7B
AX.UNArtis Real Estate Investment Trust UnitsAug 28, 2020Sep 15, 20206.236M0.045 CAD1.2B
WIR.UNWPT Industrial Real Estate Investment Trust UnitsAug 28, 2020Sep 15, 20205.838M0.0633 USD1.4B
CHP.UNChoice Properties Real Estate Investment Trust UnitsAug 28, 2020Sep 15, 20205.79M0.06167 CAD4.0B
CRT.UNCT Real Estate Investment Trust UnitsAug 28, 2020Sep 15, 20205.774M0.06693 CAD3.2B
ACR.UNAgellan Commercial Real Estate Investment TrustJan 30, 2019Feb 15, 20195.712M0.068 CAD468.9M
CUF.UNCominar Real Estate Investment Trust Trust UnitsAug 28, 2020Sep 15, 20205.106M0.03 CAD1.3B
D.UNDream Office Real Estate Investment Trust Trust UnitsJul 30, 2020Aug 14, 20205.089M0.08333 CAD1.1B
DRG.UNDream Global Real Estate Investment TrustAug 29, 2019Sep 16, 20194.825M0.06667 CAD3.2B
NVU.UNNorthview Apartment Real Estate Investment Trust Trust UnitsAug 28, 2020Sep 15, 20204.691M0.1358 CAD2.4B
SMU.UNSummit Industrial Income REIT UnitsAug 28, 2020Sep 15, 20204.455M0.045 CAD1.7B
MRG.UNMorguard North American Residential Real Estate Investment Trust UnitsAug 28, 2020Sep 15, 20204.439M0.0583 CAD614.6M
AP.UNAllied Properties Real Estate Investment Trust UnitsAug 28, 2020Sep 15, 20204.296M0.1375 CAD4.7B
AAR.UNPure Industrial Real Estate TrustApr 27, 2018May 15, 20183.857M0.026 CAD2.5B
KMP.UNKillam Apartment Real Estate Investment Trust Class A Trust UnitsAug 28, 2020Sep 15, 20203.82M0.05667 CAD1.8B
GRT.UNGranite Real Estate Investment Trust Stapled UnitsAug 28, 2020Sep 15, 20203.774M0.242 CAD4.5B
REF.UNCanadian Real Estate Investment TrustApr 27, 2018May 3, 20183.641M0.156 CAD3.8B
BEI.UNBoardwalk Real Estate Investment Trust Trust UnitsAug 28, 2020Sep 15, 20203.299M0.0834 CAD1.5B
CAR.UNCanadian Apartment Properties Real Estate Investment Trust Trust UnitsAug 28, 2020Sep 15, 20202.986M0.115 CAD7.9B
IIP.UNInterRent Real Estate Investment Trust UnitsAug 28, 2020Sep 15, 20202.409M0.02583 CAD1.8B
Average Yield7.93
Median Yield6.04
All data is provided ‘as-is,’ ‘with all faults’ and ‘as available.’ We do not guarantee the accuracy or timeliness of information available. As at August 19, 2020. Source

Subscribe and get your 3 free reports:

  1. F*!K This Job: 40 Job Interview Red Flags
  2. CoronaCrisis: Surviving the Coronavirus Economic Catastrophe
  3. TSX 60 Dividend Yields Report (updated monthly)