[VIDEO] Common Investing Mistake: Judging by Past Performance


Even investment advisors sometimes make this mistake of judging stocks by their past performance. At TriDelta, we believe that investments should be forward looking towards the future instead. Watch this 2 minute video clip to find out more:

If you liked this video, check out the TriDelta YouTube channel for more videos on financial planning and investing.

[VIDEO] Understanding & Avoiding Emotional Investing


Getting emotional about your investment is likely to hurt your returns. Watch the video below that discusses how to avoid emotions like greed or fear when it comes to your investment decisions!

If you liked this video, read our article about The Role of Emotions in Investing or visit our Youtube Channel for more financial planning videos.

Avoid These Inflexible Investment “Traps”

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Canadians are voluntarily putting billions of dollars into financial investment “prisons” – where the money is locked in for years, without much flexibility! There are other good alternatives available for investors; however, most people simply don’t know enough about these financial traps.

Here are three examples of financial prisons that you should avoid:

1) The mutual fund deferred sales charge (DSC)

What is the advantage of having to hold money in a fund family for   seven or eight years for fear of a financial penalty? Why buy a DSC version of a mutual fund when there is usually a no-load fund available that is probably just as good? At the Investor’s Group Dividend Fund, if you want to take your money out as cash in the first year, there is a 5.5% penalty! You have to invest for seven years before the penalty decreases to zero.

As an alternative, you could buy the RBC Dividend fund or a similar fund, with no load and a five-year return that is 2-per-cent better than the Investors Group fund – and best of all, no penalties for not “locking in” your money.


Photo: Marlon Bunday

2) RESP scholarship funds

If a seven-year sentence sounds long, how about 18 years? That is what you are voluntarily doing when you set up an RESP using a scholarship plan. These plans can be beneficial, but only if you are willing to do the time, meaning that you are committed to a payment every year (often for 18 years). If you want to leave the plan, you face significant penalties.

A better alternative is any other type of RESP plan, where once you open an account, you can choose to contribute or not, can choose what to invest in, and have real control over your money. This can be set up at any bank or brokerage firm.

3) Five-year GICs

At one time, low market risk was the appeal for investors “locking up” their funds for five years. In today’s world, the rates are simply not worth it. Accord to the CIBC website, you can get 2.1% in a five-year GIC. High interest savings accounts like People’s Trust offer the same 2.1% interest, but you can take your money out at any time. You are better off with this type of alternative.

Just remember: as an investor, you have many options when it comes to choosing where to put your money. Make the flexibility of your funds a top priority when choosing your investments, and you can successfully avoid “investment traps” such as these ones.

If you liked this article, read about another type of investment to avoid: the guaranteed retirement income plans.

Psychology: The Role of Emotions in Investing

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Everybody seems to “know” that getting emotional about investment decisions and market fluctuations is a bad idea. However, when it comes to making investments, human psychology often plays a large role and investors have a difficult time keeping emotions out of it. It goes without saying that this type of “emotional investing” can lead to very negative consequences.

One of the most common examples of emotions posing an obstacle to smart investment decisions is when it comes to “risk tolerance.” At the first sign of discomfort, many investors run to “adjust their risk levels.” I believe that it is more prudent to avoid this temptation. Because “risk tolerance” is a concept derived from our emotions, and not our intellect, this is every bit as volatile as any human emotions.

Successful investing is to a large extent managing our emotions, which often prompt change at precisely the wrong time.

People also change their “risk tolerance” in reaction to, rather than in anticipation of, market movements, which confirm it is also a lagged response.

Another key observation is that individual investors react to market movements by altering their comfort and “risk tolerance” in line with market cycles rather than against the cycle as should be the case.

Let me explain. As stock prices rise – and especially as they rise sharply, which reduces stock value – the investor perceives that risk in those companies/markets is actually declining, when in fact it is rising.

Since price and value are inversely related, risk is greatest when prices are high; the opposite is equally true. As stock prices rise there is less and less substance supporting the advance. Hence, the curve of a rising stock market is synonymous with rising risk.

Top -performing equities and mutual funds continually demonstrate this counterintuitive trend. Remember Nortel? At its peak people could still not buy enough. And the reverse remains true, which is when the individual investor no longer wants to own stocks and it is precisely at this moment that you can be sure we’re approaching the point of maximum financial opportunity. Just ask Warren Buffett or Peter Lynch when they get excited. It’s certainly not at market tops; that’s for sure.

The following chart illustrates the importance of managing our emotions when investing. Notice that if you relied solely on your emotions, you would drive yourself out of the market just before the point of maximum financial security. As our emotions become more negative, we often forget the bigger picture:


Human nature will ensure that this trend lives on, but through us you have the opportunity to disassociate emotional investment decisions by allowing us to invest professionally and ensure long-term success.

To avoid another investment myth, read about the reasons an age-based investing strategy may not be right for you!

Is an Age Based Investing Strategy Right for Me?

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The common advice tells us to “invest according to age” but this is not always right for you.

The idea is that at the age of 40, your investment portfolio should apparently be 40% bonds and 60% stocks, and at the age of 80, it should be 80% bonds and 20% stocks. The idea is that the bond portion of your portfolio should equal your age, as bonds are less volatile. As you get older, your time horizon shortens and you want more stability.

But this is not always smart.

Because everybody is different, with different financial circumstances, here are six questions to determine if you should invest according to age:

1) What does the rest of your financial world look like? If you are going to have a defined benefit pension plan and government pensions that cover most of your expenses each month – then your personal investment account should probably be much more aggressive, regardless of your age.

2) What are bond yields? Where are interest rates going? Currently, it is a poor point in the cycle with bonds offering very low yields and carrying interest rate risks, so even if you are 80 years old, you might not want to hold too much of your portfolio in bonds.

3) Who is actually going to use the money? We work with many older clients who will likely never use half their portfolio. We can be very conservative with the “needed” part of the portfolio, but why do so with the other funds? Those assets are earmarked for their kids. Even if you are 75, it is the children’s appropriate asset mix that should apply to that part of the portfolio.


4) How much risk do you need to take? If you are 55 and trying to “catch up” to your financial plan, it might be necessary to have a more aggressive growth strategy (weighted more towards stocks), but if you are already in a great financial position, you might not want to worry about the investment markets at all.

5) What if  you don’t want to generate taxable investment income? What if owning GICs, government bonds and cash is the least tax-efficient investment for you? Even at an older age, you might then consider a heavier weighting towards stocks in your portfolio.

6) Are you likely going to be around at age 95 or does your health suggest that you may not make it past 65? Clearly, a 60 year old in great health should have a different portfolio than a 60 year old who is battling a terminal illness.

The key here is that your investment portfolio should be tailored to fit your personal needs, and not based on a “life cycle” investing strategy.  Take a look at my Globe and Mail personal finance column, where this article first appeared.

Deferred Sales Charge (DSC) on Mutual Funds


For mutual funds investors, deferred sales charges (also known as “back-end fees”) can cause a lot of headache when investors come to realize that their investments are essentially locked-in by deferred sales charge (DSC).

The following information is based on what I wrote as an original article for the Globe and Mail.

What is a Deferred Sales Charge (DSC)?

The DSC is a fee that gets charged to a client (5-6% in year 1, declining to 0% in years 6-7) if they sell a mutual fund without transferring it to another mutual fund from the same company.

How DSCs started

Canadian mutual fund executives pay stock brokers or mutual fund salespersons and their companies a 5% up-front fee. The problem is if a client decides to move the assets out of the fund family, the mutual fund company needs to recover this commission already paid out.

It does this by having the client pay the DSC commission fee, which can be large if they leave the fund in the first few years. In many cases, clients keep their money invested with the same fund family solely to avoid paying this fee.

Mutual fund sellers claim that these fees are supposed to encourage people to “buy and hold” for a longer time. However, if somebody is not getting the level of return they would like, this just traps people to stay with the same fund company. Investors might be interested in “buying and holding” but with a different fund; the DSC fee effectively prevents this.

Investor solution

As a consumer, the solution is simple: watch out for DSC fees. If you want to invest in mutual funds, learn about the different mutual fund fees first and consider your options (including low-load or no-load funds that do not have DSC fees).



Industry solution

There are many steps that regulators could take. The best would be to make the adviser pay the DSC if a client leaves early. By putting the adviser on the hook, you can be certain that far fewer of them would sell funds on a DSC basis.

Regulators can make all of the requirements for full disclosure and signatures that they want – and they should – but until you make the adviser pay, there will still be a strong incentive for stock brokers and mutual fund salespeople to sell mutual funds with a DSC.

An alternative to mutual fund investments can be segregated funds. Read this short, informative post about the benefits of investing in segregated funds.

At TriDelta Financial we help our clients to invest intelligently, tax efficiently and never with DSCs. If you want to learn more about how we can help, contact me at 1-888-816-8927 x221 or email me at

Ted Rechtshaffen MBA, CFP
TriDelta Financial