Tuesday, April 23, 2013


Malcolm Hamilton, an actuary and pension consultant with William M. Mercer Ltd., in the Introduction to Jonathan Chevreau's The Wealthy Boomer, provides this handy "rule of 40":
Take 40. Divide by your mutual fund's MER. And presto, you've got the number of years it takes management expenses to consume one-third of your investment.
Warning: Now if you think that's painful then you may not want to read further.
The "rule of 40" is just an approximation1

Assume a mutual fund's MER is 2%. In the first year you pay 2% of your fund as an MER, leaving 98%, i.e.

1 - MER = 1 - 0.02 = 0.98

In the second year you pay 2% of the remaining 98%, leaving 96.04%, i.e.
In the third year you pay 2% of the remaining 96.04%%, leaving 94.12%.
But that's not all!

Now if you think this sounds bad, stop reading any further. It gets worse. Much worse. Those nasty little MERs don't include the cost of brokerage fees, bid/ask spreads and other expenses that are charged directly to the fund. Those extras can easily add another 1% or even more to the annual erosion of your fund. Actively-managed funds incur higher costs due to their usually higher levels of trading. And small cap funds lose even more each time they trade a stock due to the wider bid/ask spreads.
And remember, like MERs these extra fees pile up regardless of how you fund performs.
But wait there's more!

So far the analysis applies only to tax-sheltered accounts like RRSPs. In a taxable account you'll also have to share your returns with the taxman.
For example, in a taxable account at 50% marginal tax rate, assuming an average annual return of 10%, inflation at 3% and an MER of 2.5%, after 25 years you get to keep 36.89% of your money, the fund company 44.62% and the taxman 18.47%.

by Tyrone C. Phipps
04 23 2013

Monday, April 8, 2013


When I graduated from university  in 1960 there were numerous employment opportuinities at the equivalent of $250,000/year in today's dollars.

Employment today at $7.25/hr ($14,000+/year) is a travesty of incompetent economic management.

Dan Zwicker

Krystina Sulatycki likens the job fair she attended just be­fore graduating from Ryer­ son University's .MBA program two years ago to a rat race as she found herself surrounded by about 100 other applicants. They were all apply­ing for one position.

"That's kind of what it was like then," :Ms. Sulatycki, 28, recalls. "[The job market] was definitely challenging, and especially since I was at a career pivot point, Ididn't have a lot of previ­ous experience and that's what employ­ers were looking for."

Ms. Sulatycki's experience reflects much of the hopelessness many  Can­adian youth face in today's labour mar­ket.   Job prospects for young Canadians continue to diminish, with  larch's un­employment rate for people between the ages of l5 and 24 at 14.2% - nearly double the national average of 7.2%.

What's more, a recent TD Economics report released this year said that the loss of tens of thousands of youth jobs during the recession will cost Canad­ians $23.1-billion in lost wages for the next 18 years.

Yet some twenty somethings  are much more optimistic about the future than what the headlines portray - and they are demonstrating that by veering into the entrepreneurial fast lane.

Toronto-based Ms. Sulatycki, for one, said that not having a job worked in her favour. Being unemployed allowed her more time and freedom to focus on starting up Stylehawk, a social shop­ping app, soon after graduation.

"Had I found work, I probably would have started this on the side and it might have grown slower, or taken a different route," Ms. Sulatycki said.

No mortgage, no children, the ability to be mobile
Stylehawk, which launched on the Canadian App Store last December, now features 19 retailers including The Bay. Sephora and Roots.The app is designed to act like a mall
direc­tory, where users can enter stores, browse items, and identify whether they 'have: 'share: or 'buy' it.
For Ms. Sulatycki, who also holds an undergraduate materials engin­eering degree from University of Al­berta, Stylehawk and entrepreneur­ ship has allowed her to pursue her dream  early in her career.
"Stylehawk evolved from my de­sire to be able to walk into a store, and then hear, 'Hi Krystina, your changeroom is ready for you. We took the liberty of picking up a few things: and then I'll just go and try them on, Ms Sulatycki said
"That's what I'd like shopping to be like. I'm trying to give retailers an opportunity to personalize a custom­er's shopping experience."
That kind of entrepreneurial spirit is becoming more popular among young Canadians, according to Jane Wu, co-founder and chief happiness officer of Toronto-based Penyo Pal, which makes interactive app games to teach children Mandarin, English or French.

The  22-year-old, for example, said her decision to become an entrepre­ neur had little to do with today's job market difficulties, and everything to do with the "popularizing concept of being at the prime of your life, when you're super, super able to tol­erate risk."
Iother words: No mortgage, nochildren  and the ability to be mobile. Ms. Wu was selected for the Next 36 program, a "startup boot camp" for promising Canadian undergradu ­ ates, where, she helped create Penyo Pal with $50,000 seed money and a team of three other students in the program.
"The entrepreneurial community in Toronto and Canada has been im­ proving. Just five years ago, it wasn't common for high school or univer­ sity students to want to jump into a startup," Ms.Wu said.
"Now, I find I'm having this con­versation multiple times with other friends -even those who have jobs in big corporations."
Likewise, 22-year-old Phil Jacob­ son turned down a few job offers in brand management at big-name cor­ porations when he graduated from Wilfrid Laurier University's under­ graduate business administration program last year. He opted to focus his full-time attention on PumpUp, a personalized workout app he co­ founded with University of Waterloo student Garrett Gottlieb in  201L
"The way things worked out for me, it was just a matter of finding a right fit," Mr. Jacobson said. "But I could definitely see I        wasn't able to  get a job, I'd think about doing some­thing on my own or pursue working for a smaller startup."
At the same time, for many twenty something entrepreneurs, youth can also be a hindrance. With little or no professional experience behind them, they have to hustle to prove themselves.
"We lack a track record. Beyond Penyo Pal, no one knows what we can do," Ms. Wu said, adding that it is especially difficult when trying to raise funding.
Despite the challenges, Ms . Sulatycki said it would be hard to swap her entrepreneurial passion to work fo r someone else. "Maybe in the right environment, if it involved what I'm passionate about -strategic en­vironment, Iwould be open to  it,"she said. "But I'm also very happy working for myself now.
By April Fong
Financial Post
April 8, 2013