Author Archives: BetCrooks

Book Review: Sleep-Easy Investing: Your Stress-Free Guide to Financial Success by Gordon Pape

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Some people who have only read very recent articles by Gordon Pape tend to underestimate him as a writer and as a financial educator. He’s a retired journalist who carved a niche out for himself reporting on financial topics and especially mutual funds when they were a new and exciting way to invest. When I was first sorting out our finances into some sort of organized structure with at least a semblance of a plan, I found and first read Sleep Easy Investing. I enjoyed it then and still it enjoy it today. Here’s my review of the book:

Tone
The book is written in a comfortable conversational tone. In some ways it’s as if your well-educated, kind, warm uncle is sharing advice with you. There are many personal stories and “reader” questions and answers in the book, which make it more believable and interesting.

For example, it’s a bit frightening (to me) to read the true story of an unemployed, insolvent young man who wrote pleading for help after “accidentally” buying a huge amount of a penny stock on margin just before the stock plummeted. True or not, it’s easy to see how it could happen. We’ve all met people like that young man.

The book seems aimed at readers in their 30s and up, but it has advice that could help anyone.

Practical
This book is mostly about what to watch out for and what not to invest in if you want to sleep well. It also discusses basic asset allocation principals. It suggests some portfolios based on percentages in different types of investments (bond funds; stripped bonds; preferred shares; GICs; income funds; equity funds) for different life stages.

Drawbacks of the Book Sleep-Easy Investing

Portfolios Lack Specifics
The book includes sample percentage allocations for investing for a variety of ages and stages. For example, it offers a “Basic Sleep-Easy RRSP Portfolio.”

Unfortunately, for a variety of reasons, including the age of the book, the portfolios tend to recommend what % of various mutual fund classes to hold. For example, “20% Conservative Canadian equity funds” or “10% bond funds or fixed income ETFs.” The reader may have to mentally adjust these to suit the best available products now.

Age
The book was written in 2008, based largely on information from 2007. It would be great if there was a more up-to-date version as in the past few years more ETFs have become available, the cost of discount brokerages has decreased and we’ve had a major world financial crisis. Perhaps surprisingly, though, the book still provides a LOT of relevant information.

Who the Book Won’t Help
This book won’t help someone who is deeply in debt.

This book won’t explain highly risky investment strategies in depth for those prepared to take those risks. It briefly touches on several of them, but only as explanations of the types of investments to avoid if you want to “sleep easy.”

Who this Book Should Help
For those just sorting out their ideas about money, risk and investing this book should help bring issues and ideas into focus.

Even if the reader is prepared to take more risks, the book should help them to identify what those risks are before they are actually taken. Sometimes people make high risk choices without even realizing what they are getting into.

Who is the Book’s Intended Audience
I am in the target audience for the book. I tend to being very conservative with money. I am willing to accept making a very low return to ensure a high degree of safety on the majority of my savings.

This book is for investors with, at highest, a medium level of tolerance for risk. The book is not aimed at investors who don’t mind losing everything a few times in their life while chasing stellar wins in the market.

Will You Sleep Better Following this Advice?
You certainly should. It may be hard to throw away the dream of becoming rich through putting a small amount of money into a stock and having it grow 50 times as large overnight. If you do throw out that unlikely wish, however, and follow the practical advice in the book on asset allocation and risk management you will be able to sleep comfortably no matter whether the market is surging up or down.

What Did I Personally Take Away from the Book?
I found this book provided a framework for our investing decisions. It introduced topics we hadn’t considered when we first started investing and offered ways to manage them. It also provided a sense a reassurance that it was okay to invest based on our personal need to sleep well at night.

Topics Covered in Sleep-Easy Investing

  • Why are you investing and how? What type of investor are you? (greedy; blissfully ignorant; fearful)
  • What makes a Sleep-Easy Investor? (balance; common sense; attention to detail)
  • Everyone is an investor. Many invest in real estate by buying a home. When investing by buying a home you will not sleep easy if you: overpay; overextend; aggressively refinance; buy or sell at the wrong time.
  • Sex and money are the main sources of conflicts in marriages and both can cause loss of sleep. (!) You can lose sleep because of worry about: not having enough money because expectations exceed returns; foolish spending; debt; fear of losing your savings.
  • If Fear or Greed controls your investing decisions you won’t sleep easy. The 2000-2002 dot com stock market crash; get badly burned once, be afraid to invest ever again.
    Ignorance is too expensive. High returns don’t come from low risk investments; investing in securities you don’t understand will usually hurt you; hedge funds and day trading are not for sleep easy investors.
  • Beware of Bubbles: tulip mania; south sea bubble; Japan; dot coms and Nortel. Following the herd will stampede you off a cliff. (Personally, I think gold may be the next bubble to pop.)
  • Risks: Inflation risk; tax risk; interest rate risk; stock market risk; political risk (including the elimination of income trusts in 2006); default risk (including when companies go bankrupt); economic risk (including bumper crops and crop failures); liquidity risk (including selling real estate when everyone else is also trying to sell).
  • Considerations when choosing an appropriate level of risk: age; family situation; security; income needs; growth; diversification.
  • Hot Tip Nightmares. Insider trading; scam tips; email scams; pink sheets.
  • Leverage is not for sleep easy investors.
  • Tax savings. Too good to be true schemes will cost you at least an audit. Not good for sleeping. What are the legal ways to save on taxes. (There aren’t many!)
  • Retirement Follies. Most people want to retire early but have not saved anything. Even retiring late they may have trouble if they don’t save substantially.
  • Panic attacks. Try to insulate yourself from the panic that sweeps through when bad news breaks unexpectedly. Markets often swing wildly in response to news that is not clearly understood yet. Panic selling is a sure-fire way to lose money.
  • Be very wary of investing “products” that claim to give you the profits of the stock market without the risk. Most are not a good investment.
  • Questions to ask when evaluating a recommended portfolio.
  • The types of investments: fixed income; variable income (including bond funds; income trusts; floating-rate preferred shares); growth.
  • What should Sleep Easy investors put their money into? (HISAs; government savings bonds; T bills; bankers’ acceptances; money market mutual funds; GICs; term deposits; bonds; stripped bonds; bond funds; mortgage-backed securities; mortgage funds; fixed-income ETFs; preferred shares; selected income funds; conservative equity funds; low risk balanced funds; real estate investment trusts.)
  • What should Sleep Easy investors NOT put their money into? Common stocks; most income trusts; most index-mirror ETFs; precious metals.
  • Sleep Easy Investors should choose to balance risk across geographic distribution and style diversification (value; growth; indexing).
  • Sample portfolios: RRSP; RRIF/LIF; non-registered portfolio under 50, 50-60, 60-70; tax efficient portfolios; ultra-soft bed portfolio.
  • Reader question and answers. Interesting case studies from letters to his newsletter.

Conclusion
It’s a good book for providing a calm, clear view of how to invest if you are not comfortable with high risk.

Related Reading

Join In
Do you need or use a Sleep Easy approach to investing, or are you more of a gamble-the-baby-food money type of investor? Please share your experiences with a comment.

Book Kindle
Currently only available in the USA.

How to NETFILE a Tax Return from GenuTax Standard 2012 Online to the CRA for Free

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After downloading and installing GenuTax Standard 2012, testing it with a personal Canadian income tax return, and again with a very simple business income tax return, I was ready to calculate my spouse’s taxes. After that, I filed my spouse’s tax return online (with him watching over my shoulder and telling me where to click!) following the instructions provided by GenuTax. And it cost us nothing!

Well, we did make a donation to GenuTax. But I don’t mind supporting entrepreneurs voluntarily as much as I mind supporting faceless (often international) corporations who can set a pretty steep price on a pretty simple item.

UPDATE: I hope to file a return again in the spring of 2014 using GenuTax Standard 2013 if/when it gets approved by the CRA. For now, I hope this article will help explain what to expect.

Here’s how I filed online:

Filing Your Canadian Income Tax Return Using GenuTax Standard 2012

  1. Start GenuTax by double clicking on the icon on your desktop.
  2. To review your tax forms, click on the Print Preview icon at the top of the screen.
  3. Click to select “Full copy of return for your personal records”
    then click the OK button.
  4. You can then read through all of the forms to see what was filled in and where, and look for exceptions or mistakes.
  5. When you are done, click on the Close button.
  6. Or you can print a paper copy to review.

After reviewing your tax forms in detail, if everything looks good, you are ready to file.

Preparing to NETFILE

  1. At the bottom of the screen,
    1. click on the Jump to Section (F9) button.
    2. If Filing the Tax Return is highlighted, click on the OK button.
    3. (If not, highlight it, then click the OK button.)
  2. To NETFILE, select Yes then click on the Next button.
  3. Read the warning about name changes, then click the Next button.
  4. Click on the Use NETFILE button.
    1. If prompted, save any changes to your taxpayer file by clicking Yes.
    2. Highlight, copy and save the location of your tax file to Notepad, WordPad, or another program to keep it handy.
      For example: C:\Documents and Settings\user7\My Documents\Tax\Netfile\BetCrooks.tax
  5. Click on the NETFILE Go to CRA’s NETFULE Website button.
    NOTE: StudioTax 2012 also listed several warnings and suggestions of items to review before filing. It seems slightly more robust than GenuTax Standard in this respect.
  6. Click on the Ready to File button on the CRA webpage at http://www.netfile.gc.ca/

On the Canada Revenue Agency Site

  1. Click on the Ready to File button.
  2. Read the information.
  3. If you want to continue click on the I agree with the Terms and Conditions – proceed button.
  4. Click on the applicable button:
    • I am filing an income tax return with the CRA for the first time.
      NOTE: it is asking if you have filed an income tax return form before by ANY means including by mail. It does not mean is this the first time you have filed a return by NETFILE
    • My personal information including my name, mailing address or direct deposit information has not changed.
    • I need to update my personal information with the CRA including my name, mailing address, or direct deposit information before I can proceed with NETFILE.

On the NETFILE transmission page

  1. In the Social Insurance Number (SIN) text box, type your SIN number.
  2. In the Date of Birth (YYYY MM DD) fields, type your date of birth as described.
  3. If you are filing your first income tax return with the CRA check the box, I am filing an income tax return with the CRA for the first time. It will then prompt you to enter your given name, second name, family name etc.
  4. After clicking on the Browse button,
    1. navigate to where the file is stored on your computer.
    2. Double click on the name of your file.
  5. If you intend to pay any taxes due within the next 5 days by internet or telephone banking and if you want your Notice of Assessment to show that you have paid, click on the box beside “I will make an electronic payment using my financial institution’s Internet or telephone banking services within the next five days”
    They will then place a hold on your return till after the 5 days before they review your taxes and print your Notice of Assessment.
  6. Read the Declaration.
    If you agree, click the check box beside “I agree with this declaration.”
  7. Click on the File my return now! Button.
    1. You will receive a message thanking your for using NETFILE which should include your proper name.
    2. It should say
      “We have successfully received your 2012 tax return.”
    3. Be sure to make a note of the confirmation number, or print the page for your file, by clicking on the Print this Page button.

If you wish to file a return for your partner or spouse, click on the link Ready to file.

Otherwise, you can close your browser window.

Finishing with the GenuTax Standard Program

  1. Going back to the GenuTax Standard program, click on the Next button.
  2. It will prompt you to answer whether the CRA NETFILE website successfully received your return.
  3. Click to select YES then click on the Next button.
  4. In the field, type your NETFILE Confirmation Number, then click on the Next button.
  5. If you wish to print your return, click on Print Tax Return, then click on the Next button.
  6. GenuTax will thank you. You can close the program.
  7. If you liked the program, please consider making a donation.

You’re finished! Now you’ll have to wait and see if the CRA agrees and deposits a huge chunk of change in your bank account. (Well, I can dream!)

In the meantime,

  • be sure to file your supporting documents and keep them for at least 6 years in case the Canada Revenue Agency asks to see them
  • if desired, backup the program and your .TAX file to a more secure storage media, like a DVD
  • PAY any amount owing! The deadline for payments is April 30, 2013. If it’s later than that, pay immediately to reduce the interest charges that are building up.

Related Reading

Join In
Did you NETFILE your taxes this year with GenuTax or another product? Did the program help you save on your taxes? Did the CRA agree with your math? Please share your experiences with a comment.