When is the best time to invest?

September 11 2014 by Ellen Roseman

Marie Engen, who writes the Boomer and Echo blog with her son Robb, talks about people who feel they can’t invest in stocks when the markets are hot. They ask, “Is it too late to buy?” and keep their savings in bank deposits at low interest rates.

Here is Marie’s response:

There is a common fear of investing at the top of the market – resulting in your staring at big losses right off the bat.

Of course, there’s always the possibility of investing right before a market downturn. But no one knows for sure when this will occur.

An acquaintance remarked last year that the market was overheating and a correction was surely due shortly. This was when the S&P/TSX Composite Index was around 12,800. Today (as of this writing), it sits at 15,550. In the meantime, he has stayed on the sidelines waiting.

Rather than fretting about when you should make your move, think instead about how long you’re planning to keep the money in the market.

Stocks are a very attractive option for long-term goals and will generally provide the best return on investment.

As the pundits say, time in the market is better than timing the market. You may live a long time, so why dump your stocks when you turn 60 or 65?

You can hold more conservative investments in your retirement years. But you should keep some money in the stock market to preserve your purchasing power.

My investing class starts tonight. Close to 90 people have enrolled, a record number.

When I asked why they signed up, I heard a variety of reasons:

– I want to understand the lingo.
– I want to learn about ETFs (exchange-traded funds).
– I want to be my own financial adviser.
– I want to prepare for the “soap opera” visits with my adviser.
– I want to find out how to reinvest company dividends.
– I want to pay for courses outside Canada in five years.

All these reasons make sense, except maybe the last. Five years is too short a period for your stock market investments to flourish, especially when you come in after a long bull market.

Here is an article I sent to the students from a U.S. blog, 7 Ways Investing Sucks (and why you should do it anyway).

Investing takes work, though you can find couch potato portfolios that demand little time. It’s an essential life skill. I’m glad to see so many people recognize they have to take control.

My interview with Mint.com

September 4 2014 by Ellen Roseman

I am a fan of Mint’s personal finance website, which came to Canada a few years ago. So I happily agreed to an interview and a link on my blog roll.

Here’s an excerpt from the article, where I express views that won’t surprise my faithful readers.

What industries do you think are the biggest offenders when it comes to unfair practices toward consumers?

Telecom troubles usually top the list. Canadians have three big wireless providers, which charge high prices and bind customers to unfair contracts. Complaints about phone, Internet and TV service keep me busy every day.

Another big area is financial services – everything from banking to credit to investing. We have a few large banks in Canada which like to say they’re on the consumer’s side. But their practices are often designed to maximize profits and favour shareholders.

What are the most common consumer frustrations, concerns or questions your readers come to you with?

Consumers are frustrated by how much energy it takes to reach large companies. And when companies settle a dispute, they don’t always compensate clients for the time spent pursuing complaints. So I go to bat for my readers to get them extra concessions.

Contracts can be confusing when written in legalese and laid out in a font size too small to read. Many customers don’t check their contracts, but trust what they are told by salespeople. That leads to heartache when a company denies a claim as based on hearsay.

If you wonder about using Mint.com to track your finances, here are a few reviews:

Investor Junkie blog: Likes the site very much, but wishes there was more investing information. It’s a weakness.

PC Magazine: Best tool for managing personal finances. The fact that it’s free seals the deal.

Young and Thrifty blog: Loved the site, but was worried about online hackers and broke up the relationship.

Moneysense magazine: Be careful. Using a third-party financial aggregator can violate your security guarantee with your bank.

How to avoid car buying mistakes

August 28 2014 by Ellen Roseman

When you buy a used car, you should order an independent inspection and a vehicle history. This can protect you from getting a vehicle with mechanical defects or hidden repairs that lower its resale value.

Sound obvious? Maybe so. But in my experience, many buyers simply take the dealer’s word on the car’s condition.

New cars don’t usually require an inspection or history. But you should do an online search of the make and model, adding the term “complaints” to bring up problems that others have experienced.

I’ll post some readers’ complaints below, along with responses from Viraf Baliwalla of the Automall Network, whose company helps buyers get the best deal when they shop for new and used cars.

Baliwalla says most car buying services are paid for by dealers and generate customer contacts for dealers. His service tries to be more like Consumer Reports magazine:

We conduct independent market price research to determine what the best prices are for all makes and models of vehicles. We sell the data to car buyers and lessees in the form of our Best Price Reports for $75.

Once you know what the best prices are in the market, it eliminates the need for comparison shopping. You can negotiate your best price quickly and painlessly.

For those who don’t want to do any negotiation, we offer our Full Concierge Service for $295. We will negotiate the price of the new car, your trade-in and those unnecessary extra fees, which we can usually get waived if not reduced.

Jim Davidson of Car$mart also runs a car buying service. I’m a customer and I like being able to save time and hassles negotiating with dealers.

Davidson says his fee of $500 (plus HST) is more than recovered in the wholesale pricing he can negotiate for clients:

We start with an initial consultation to determine your best options. Then we provide in-depth market research. Then, there’s our negotiations to secure the best price. And, finally, we deliver the new car right to your door.

We look after all of the details, providing you with a pleasant, hassle-free car buying experience.

So, do your research or hire others to do it for you. You can’t change your mind after signing a contract, a fact many buyers find out only after they are disappointed with a car purchase.

Brush up your investing skills

August 11 2014 by Ellen Roseman

My course, Investing for Beginners, starts next month. Click the link to register.

This will be my 10th year teaching at University of Toronto’s school of continuing studies. I usually get a large group taking the course (about 50 to 80 students).

The information is aimed at those who want to know more about how to invest in stocks, mutual funds or exchange-traded funds. Whether you invest on your own or work with a representative, you need to know the lingo and what questions to ask.

When: Thursday evenings, 7 to 9 p.m.

Where: Downtown campus. No room location yet.

Dates: Sept. 11 to Nov. 13, 2014.

Cost: $370 for nine sessions.

Starting in January 2015, I’ll be doing a second investing course, called How to Value Stocks and Pick the Right Companies. It is open to those who haven’t taken the earlier course. The cost is $250 for six sessions.

Hope to see you there. Please pass this along to anyone who may be interested.

Protecting new home buyers against builders’ errors

June 22 2014 by Ellen Roseman

You get a manufacturer’s warranty when buying an electrical appliance, such as a toaster, and you can purchase an extended warranty from the retailer. All this for a product that costs as little as $30 to $50.

So, when you buy a newly-built house or condo that costs $150,000 to $1+ million, you assume you will receive as much protection as when you buy an appliance.

But there’s a group of dissatisfied homeowners who write to me almost daily, complaining about problems they have experienced with Tarion Warranty Corp.

Tarion was set up by the Ontario government in 1976 to administer a statutory warranty for homes built by registered builders.

Burned buyers want to see the Ontario government set up an independent value-for-money audit of Tarion’s operations. Here is what they say:

Tarion is too close to the builders it’s supposed to regulate and doesn’t have a clear consumer mandate.

When consumers try to appeal Tarion’s decisions at a tribunal, they often find Tarion sends its own lawyers to testify against them.

Tarion has a monopoly on home warranties. It reports to the Ontario consumer ministry, but it can’t be investigated by the Auditor General or the Ontario Ombudsman.

Last week, I did a Toronto Star column about being invited to a media breakfast at Tarion’s office to be told of a major repair (more than $5 million) done to 23 homes that had cracked foundations as a result of land settling and sinking.

Some Tarion dissidents wanted to comment on this story, but didn’t get a chance because the Star closed off comments quickly. They can do so here.

P.S. Here’s an update on my blog post about hiring a roofer. After getting four or five estimates, I hired a company that a reader recommended.

The work took several weeks because of rain delays and cost more than $10,000. They removed several layers of flat roof installed in the past, making my roof six inches lower than my neighbour’s on the other side.

It’s not an easy process to manage and it’s not finished yet. My neighbour found a spot the roofers had missed, which was visible from his back yard. They’re coming back tomorrow to finish the job.

Using videos to teach young people about money

April 20 2014 by Ellen Roseman

Many people will never read a book about personal finances. The Wealthy Barber did well because it was about friends hanging out together, talking about things like baseball and cutting hair, as well as money.

For those who find books a slog, watching a video may appeal in a way the printed word does not. The whole world is on YouTube. Now I am too.

On April 15, I was the master of ceremonies at a news conference to launch a series of free online videos, based on the Financial Basics workshop I helped develop with the Financial Consumer Agency of Canada and the Investor Education Fund.

Since 2010, I’ve hosted the four-hour Financial Basics workshop at the Chang School of Continuing Education at Ryerson University, reaching about 100 people at a time. (The next one is Tuesday, May 13, 5.30 p.m.)

Ryerson is committed to financial literacy. It insists on keeping these workshops free to the public. Anyone can attend. No solicitations allowed.

Former Chang School dean Gervan Fearon decided to produce videos to reach a wider audience. The FCAC agreed to subsidize the costs. I appear in the English version. Stephane Veron, a Ryerson professor, appears in the French version.

We knew there had to be something to lighten the mood. Money lessons can be tedious.

Since there was no budget to hire actors, the producers decided to tell stories using Twitter and text chats among friends.

Hope you like the results. There’s a two-minute preview at the top of the page, letting you know about the objectives for the video project.

Searching for a reliable roofer

April 2 2014 by Ellen Roseman

Our home insurance company called to cancel our coverage for leaks coming through the roof. The reason? We hadn’t replaced the roof since 1986.

If we sprung for a new roof, we were told, the insurance company would consider reinstating our coverage.

Of course, this would save money for the insurer, since it would lower the risk of roof leaks and costly claims.

The idea of getting roof repairs scares me. I often hear stories from readers about defective shingles and worthless warranties. CBC Marketplace did a story on this in 2010.

Nevertheless, I’m looking for quotes from companies I find online. Not an easy job with a proliferation of firms.

First, I went to Homestars,which is well known for customer reviews of contractors. With hundreds of Toronto roofers listed, I looked for those with ratings of 9.5 to 10 (out of 10) and the owner’s name clearly visible.

I also went to Trusted Pros, which lets you search for contractors and find what their customers think of them. But there weren’t many reviews of Toronto roofers. Most were not yet rated.

What I did like was the site’s helpful articles, such as, “How to avoid a libel lawsuit when critiquing your contractor.”

Then, I ran across something called Smart Reno, which acts as a matchmaker for customers and contractors. I described the job and left my email address and phone number. Now I’m getting contractors calling me to see if they can inspect the roof and give quotes.

The final stop was the Better Business Bureau, which lists helps you screen out contractors to avoid (those with ratings of D or F). I checked out City Wide Roofing, which called me after I went to Smart Reno. They had an A+ rating.

Now I know why I waited so long to replace the roof. It’s an expensive job and requires an informed decision. Any advice is welcome. Wish me luck.

How to improve quality of financial advice

March 9 2014 by Ellen Roseman

CBC Marketplace recently tested advice given by 10 banks and investment firms. Using hidden cameras, it showed what happened when a potential client walked into each firm and said she had a $50,000 inheritance to invest.

While some firms performed well, others gave advice that Marketplace’s expert Preet Banerjee described as atrocious. Here are highlights:

In some cases, information was incorrect or misleading — even in response to direct questions, such as how fees are calculated.

Some gave unrealistic promises about returns, including one adviser who said that a $50,000 investment should increase by $10,000, $15,000 or $20,000 in one year.

Others failed to adequately assess the customer’s risk profile, which advisers are supposed to use to ascertain the suitability of investment products they recommend to a person.

I have my own story to tell about Maddy (not her real name), who works at the Toronto Star and told me of her dilemma.

Nine years ago, she met a friend of a friend who sold mutual funds. At the adviser’s urging, she took out a $50,000 line of credit to invest.

She was losing sleep because she hadn’t repaid any of the $50,000 — and she hadn’t gained much ground with the mutual funds purchased on her behalf.

Maddy didn’t understand the strategy, but did trust the adviser. She only started questioning things when her adviser quit the firm.

She decided to pay off the line of credit. But this wasn’t easy to do.

The adviser had invested the money in a dividend mutual fund. Each distribution was used to buy more mutual funds inside her RRSP.

Maddy had to pay deferred sales charges (DSCs) on the dividend fund. While DSCs disappear after seven years and she held the fund for nine years, each distribution started the clock running again.

Since she couldn’t sell her RRSP funds without incurring a big tax bill, she decided to transfer the portfolio to another adviser.

As a result, she could repay the line of credit only by contributing more money. The DSCs reduced her initial capital and the modest growth didn’t offset them. Meanwhile, she spent thousands on interest over the years.

Borrowing to invest rarely makes sense, except for sophisticated investors who can hold securities for years without being tempted to sell. Maddy was inexperienced and agreed to a leverage strategy when pushed to do so by her adviser.

The Investment Industry Regulatory Organization of Canada recently put out an investor bulletin on borrowing to invest. I don’t think it goes far enough.

Here’s a comment by Lindsay Speed, legal counsel and corporate secretary of FAIR Canada, an investor advocacy group. (I’m chair of the board.)

In my view, the warning language should be stronger. We have been advocating for regulators to take the position that leverage is only suitable for the most sophisticated investors.

This seems to suggest that the suitability onus is on the investor, not the adviser. And there is no mention of why an adviser would be motivated to recommend leverage.

FAIR’s recent work on leverage is shown here and here. It believes borrowing to invest is promoted by advisers hoping to increase their assets and earn more commissions and trailer fees.

If you pay for advice separately from products, you get better recommendations. Look for a fee-based adviser if you want a plan suited to your needs.

Otherwise, you can become a victim of incentives that put the advisers’ interests ahead of your own.

How does this appliance repair firm stay in business?

March 2 2014 by Ellen Roseman

Has your fridge stopped working? Has your dishwasher broken down?

Appliance Repair Guys. Service4Appliances. If you see these names, think twice about making an appointment.

Both names are used by a Toronto-area company with a reputation for unreliable repairs, high prices and unfriendly, even rude, customer service.

Check my Star column for links to the Better Business Bureau’s consumer alerts, plus Homestar’s low ratings by customers.

When I contacted owner Dan Vidoser, he refused to let me quote him because he didn’t like a previous article in the Hamilton Spectator.

Here’s a story from Marsha, who paid Appliance Repair Guys to fix her dryer, which was making a squeaky noise. The technician “fixed” it and charged $320. Two days later, the machine was making a different noise.

The technician came back, did something else and charged $80 for the service call (after saying there would be no charge because she’d filled out a warranty form).

The machine sounded even worse afterward. But all she got was a runaround.

“At the end of multiple calls, the company refused to do anything,” Marsha says. “I’m out $400 and I can’t get my money back.”

She initially paid with a debit card after being told no credit cards were allowed. She was allowed to use a credit card for the second visit, since she was out of town.

However, CIBC Visa would not give her a refund for the $80 service call, telling her she had to pursue her dispute directly with the company.

After posting a review at Yelp, where you can also find other customer laments, she tells me she’s shocked to see what happened.

“This company has ZERO accountability. How can they get away with this, other than saying that we seem to be stupid consumers?”

Here’s what I’d say. When you can’t wash or dry your laundry, keep your food cold or cook it at high heat, you’re anxious to get your appliances working again.

You find an attractive website for a repair firm that promises same-day service and has a few testimonials from anonymous customers. You’re too rushed to do any research and assume you’ll be treated fairly if your appliance can’t be fixed.

Next time, ask your friends for referrals. Check with the manufacturer to find authorized repair firms. Go to the BBB, Homestars and Yelp to find consumer complaints.

When you let technicians into your home, you’re at their mercy. They can take your machines apart and quote outrageous prices to put them back together again.

Don’t let up your guard, since the consequences can be costly.

How to be taken seriously when you complain

February 23 2014 by Ellen Roseman

I get emails every day from people who have been wronged. They want an apology, a refund, compensation — and sometimes, they want revenge.

I help them reach the right executives at a company who will listen, take action and find answers. This usually ends in a settlement.

Here’s my frustration. Some people aren’t good at advocating for themselves. They commit self-sabotage.

I have some tips on how to get better results.

Be professional and businesslike.

You’re talking to busy executives, so don’t waste their time. Cut to the chase. Summarize the problem and say what you want the company to do for you.

Many of the complaints I receive are WAY TOO LONG. People spend a lot of time talking about what happened and when. That’s tedious.

You’re not writing a book. One to two pages is enough.

Don’t get angry or use insults.

Be calm and courteous. Start by saying how much you like doing business with the company. Get the executives on your side and they’ll pay more attention.

Even when you’re frustrated, try not to let it show. Never use threats. Don’t swear.

Finally, accusations aren’t helpful. Avoid using words like fraud, theft and deception. You may end up with a legal letter telling you to cease and desist.

Focus on your priorities.

Don’t talk about every little thing that went wrong during a bad trip or home renovation. Edit yourself. Pick the top two or three issues and ignore the rest.

I’ve seen some people write lists, pinpointing as many as 15 things they want fixed. That’s overkill. Five should be the absolute maximum.

Make sure to give your contact information.

If you send an email, don’t just give your email address. Companies want to see your home address and phone number, with details on how to reach you during the day. They often prefer to call you back, rather than write to you.

Use short paragraphs.

When I forward emails from readers to companies, I break them up, using a sentence or two at a time. That’s easier to read than long paragraphs.

Bullet points work well in making your points. So does bold print. Always leave some white space on the page.

This advice will improve your chances of getting what you want. I wish you success in your communication campaigns.