When learning how to invest, we are consistently told to conduct our “due diligence” on the investments that we’re considering buying. Yet, almost all of us haven’t actually been trained on how to analyze the investments that we’re considering, so that we choose the ones that are right for our particular situation.

To help remedy this, I thought it would be good to give listeners a bit of a training on how to actually interpret the figures and terminology that we see used here in Canada, when we’re considering purchasing an investment. 

Now this is obviously a very large topic as there are many types of investments, so I thought we could start with learning how to understand bonds (especially bond ETFs). 

We’ve definitely seen some drops in the market recently and I suspect many investors are wondering about holding bonds, if they are holding the right types of bonds, and how to actually interpret the data that you see when you’re looking up information about a bond ETF. 

Guest Bio:

To help me with this, I have Danielle Neziol back on the show. Danielle and her team actually created and continue to manage the largest bond ETF in Canada (and in case you’re curious, that ETF is ZAG from BMO ETFs which now has over $5.8 billion in net assets). 

Danielle is the Vice President over at BMO ETFs, and I thought it would be great for us to actually get some training from her on how to interpret the facts sheets that we all see when we look up any type of bond ETF, no matter who the provider is.

My goal is that this interview gives you the knowledge to be more confident in your investing, and hopefully helps relieve any anxiety that you may feel when it comes to choosing your own investments, or helping ensure that you are in the types of investments that are the best fit for you.

Resources Mentioned:

Danielle and her team host free weekly webinars where you can learn more about ETFs, as well as ask them your ETF questions. I've been a guest there several times and it really is a great resource for Canadian DIY investors.

You can view past replays and sign up to attend the upcoming webinars for free here: etfmarketinsights.com

Also, be sure to subscribe to the ETF Market Insights YouTube Channel where you can also see past recordings.

Questions Covered:

1. Investors place a lot of time deciding how much of their portfolio should go into bonds vs stocks. Yet, when it comes to bonds, there are several different types and they can each behave differently. Can you speak to the different types of bond ETFs out there, and what differences can we expect from them? Especially when it comes to changing interest rates and different economic climates?
   
   
2. When examining all these different types, I can see it being overwhelming for some investors when they do a search and see dozens of different bond ETFs out there from all the different providers. One may begin to wonder whether they should pick and choose individual bond ETFs, or whether they should just hold one large aggregate bond ETF like ZAG which holds all these different types of bonds in a diversified manner. For those struggling with this question, what advice can you give?
   
   
3. Does a rising interest rate environment like we are in now change how we should be thinking about bonds?
   
   
4. Often when I see a model portfolio from a professional in the industry, the bond portion of the portfolio includes a bond ETF that contains only Canadian bonds. ZAG if I’m not mistaken also holds exclusively different types of Canadian bonds. Why is that, when with equities on the other hand, we want international diversification?
   
   
5. One of Canada’s largest bond ETFs (ZAG) is designed to replicate the FTSE Canada Universe Bond Index. Is this index a standard that many other bond ETF providers are using as well? And for us index investors, how can we make sure that the ETF we choose is trying to replicate the correct index?
   
   
6. When evaluating which bond ETF(s) to use for our investment portfolio, we should be looking at the fact sheets of those bond ETFs to get a better understanding of what they are and how they are likely to behave.
   
   Yet, most of us haven’t been trained on how to read these, especially in regard to what the different terms mean. I was hoping that we could go through a real-life bond ETF fact sheet and you could tell us what some of the less obvious terms mean, and what we should be looking for.
   
   Let’s use ZAG as an example. Listeners can go to BuildWealthCanada.ca/zag for anybody that wants to follow along:
   
   Weighted Average Term (year): Can you speak to what that is, and what impact does that have on what you can expect from the ETF?
   
   I think at the end of the day, a lot of investors what to know, “If I buy this bond ETF now, what kind of interest income can I expect to receive?” When we look at the fact sheet of a bond ETF however, we see three different percentages. There’s the: 

• • “Weighted Average Coupon %”
  • the “Annualized Distribution Yield”
  • and the “Weighted Average Yield to Maturity”.
    
    What do each of these mean? And how can we interpret the numbers provided there?
    
    Next, we have two terms that apply to equity ETFs as well, and that’s “Maximum Annual Management Fee” and “Management Expense Ration” (the MER). Can you explain the difference between the two, and how should investors interpret these numbers when they see them on any ETF in the marketplace?
    
    What would you consider a higher vs low MER?

7. ETF fact sheets typically have an annualized performance section where they show how the ETF performed relative to its index. For ETFs that are looking to match the index, what would be considered a reasonable spread between the two vs a concerning number?

8. One page that seems especially critical to evaluate, whether evaluating a bond ETF or an equity ETF, is the “Holdings” page where we see all the investments that the ETF contains. Let’s pretend that you just pulled up a core bond ETF like ZAG and went to its holdings page. What would you look for and how would you analyze and interpret the data that you see there? (for anybody that wants to follow along, you can go to BuildWealthCanada.ca/zag and that will forward you there) and click on the holdings tab.

Areas to cover:

• Sector allocation
• Geographic allocation
• Maturity
• Credit allocation

Are there any other areas that you think are critical to look at, and if an investor is feeling overwhelmed by the large amount of bond ETFs out there and is getting into a bit of paralysis analysis, what would you recommend as their next step?

9. Can you speak to the relationship that bonds have with rising interest rates, and at what point do we start to take advantage of those higher interest rates in our bond portfolio to offset the drop in price that occurs when interest rates go up?

10. For anybody looking to learn more, can you tell us more about ETF Market Insights, the YouTube channel, and any other resources listeners may find helpful?

Today I’m extremely excited to have Canadian best-selling author, Andrew Hallam back on the show. His first book, Millionaire Teacher continues to be the #1 best seller in the Investment and Portfolio Management category on Amazon.

He is one of the world’s most prolific financial wellness speakers and over the past 16 years, he has given hundreds of talks in over 30 different countries espousing research on financial wellness, sound investing and life satisfaction.

He has been investing in the stock market for 32 years, having built a million-dollar portfolio on a schoolteacher's salary when he was in his late 30s.

In today’s interview with Andrew, we cover the subject of how to achieve balance, and how to maximize your happiness, health, and wealth.

We also cover what to expect and how to maintain balance after having hit your financial independence number. Lots of early retirees in the FIRE movement and traditional retirees continue to do some sort of productive paid work. Why is that, and is it realistic to never work again after you retire? 

As you can imagine, generating some minor income after retirement, doing something you love, can drastically decrease how much money you actually need to retire from your day job, potentially letting you leave that job you may dislike or be bored with many years earlier. 

Since Andrew is already financially independent, we dissect how Andrew has found that balance in his life between taking on meaningful and fulfilling work, and balancing that with leisure, health, and happiness.

Questions Covered:

1. When a lot of people, myself included start their financial independence journey, the goal is to never work again and that becomes a major motivator to accumulate all those savings to be able to retire.

Yet from my own experience and after interviewing many other early retirees, I've noticed a pattern where most if not all still end up doing some sort of productive work or something that could be classified as “work” even though they don't have to, since they've already reached their financial independence number.

Did you have the same experience as you moved from the accumulation stage to the financial independence and retirement stage, and from your experience what have you found to be a good balance in your own life?

2. You've spoken with many other early retirees who I assume had a similar experience in terms of that progression from initially never wanting to work again and live a life of leisure permanently, versus eventually realizing that there needs to be a balance to achieve sustainable happiness. Have you noticed any patterns from those you've talked to in terms of how they were able to find sustainable happiness and what that balance was for them in order to achieve it?

3. After reading your book, it becomes very clear that health and longevity is something that is a high priority for you, and should be for all of us since what’s the point of accumulating all this wealth and retiring if you don’t live long enough to enjoy it.

From the research that you’ve done, what have you found to be the best practices to maximize our health and longevity?

1. 1. Nutrition?
   2. Types of exercise and frequency?
   3. Cancer prevention?
   4. Stress control?
   5. Energy maximization?

4. In terms of maximizing happiness in retirement, is there a routine that you follow during any part of your day that works well for you? Or do you take a more fluid, go-with-the-flow approach, where things are more spontaneous?

5. Do you find that goal setting and trying to achieve growth and improvement in retirement adds to your happiness and fulfilment? Or do you take the approach of trying to just be happy with where you are, living in the moment, as opposed to continuously striving for more?

6. Please tell us again where we can learn more from you and get your latest book.

When it comes to the safe portion of our portfolio, we’ve talked about GICs and high-interest savings accounts before, but one option that we haven’t talked about yet, is one that gives you guaranteed income for life, no matter what the markets are doing, and those are called annuities.

So, I thought it would be good for you and me to get some annuities 101 knowledge under our belts, so that we can better understand what’s out there, what are the pros and cons of annuities, and so that we can better determine if they are something that we should look into further, based on each of our particular situations.

To learn more about this, I thought it would be good to get our information from two different sources. The first, would be fee-for-service financial planners who don’t actually create or sell annuities, but are responsible for potentially using annuities as part of a total financial plan. 

With that in mind, I’m definitely going to be asking financial planners that I interview in the future about annuities, so that we can get a holistic view and multiple perspectives on the subject.

The other source of information that I thought would be good to interview, is an actual creator of annuities. This way we’re getting the information right from the source about how they actually work, their intent, the pros and cons, and how they can potentially fit as part of a financial plan. 

To help me with this, I have Selene Soo on the show. She is the Director of Product Strategy and Development in the area of Wealth Management over at RBC. She has been there for over 17 years, and has been in the industry itself for over 2 decades, so she definitely has a wealth of experience and knowledge when it comes to annuities.

I thought I’d pick her brain so that we can get a solid foundation on annuities, and one question that I’ve been extremely curious to ask someone like her that’s actually in the industry, is for those of us who don’t have a defined benefit pension through our work (for example, those of us that are not government works, teachers, police officers etc.), is there a way that we can get the type of guaranteed income for life in retirement that the government workers get, by using annuities?

We definitely get into that question, plus a lot more. Thanks for tuning in, enjoy the learning, and now let’s get into the interview. 

In this episode, we cover the rising interest rate environment that we're currently in here in Canada, and how it can impact you financially.

We also cover how to decide whether you should go fixed or variable on your mortgage in the current interest rate environment.

Next, we cover the subject of how you can take out some of the equity that you’ve built up in your home, so that you can either use it to invest, or deploy it elsewhere (without having to actually sell your home).

We also discuss the Smith Manoeuvre, which is a technique that you can use here in Canada to make your mortgage interest tax-deductible (and be able to invest a bit easier when you pay down your mortgage).

All this and more on this month's episode. 

Questions Covered: 

1. For the first time in over 3 years, the Bank of Canada has started raising interest rates. What should we be considering if we have a variable rate mortgage or have debt that’s tied to the prime rate (like a home equity line of credit)?
2. For Canadians that have their mortgage coming up for renewal in the near future, or those looking for a new mortgage, based on the current environment, what is the mortgage rate outlook for the coming year and how can those Canadians best decide whether they should go fixed or variable?
3. From what you’re seeing, what is the real estate market outlook for this coming spring and the rest of the year? Is it likely to be a buyer's market or a seller's market? What kind of buying/selling environment should people be ready for if they are thinking of moving, buying/selling a house?
4. Home prices have grown substantially over the years making many Canadians who already own a house pretty wealthy on paper, but much of that money or equity is tied up in the house, and I’m sure many of us would like to be able to use some of those gains either for investing, or other things. We’ve probably all heard of using a home equity line of credit (HELOC) to take some of that money out, but what are the other options available to us, and what are the pros and cons of using a HELOC vs these other options? 
5. On the flip side, with the rising cost of living (we’re hearing about inflation a lot), cash flow is becoming a challenge for some Canadians, making it even more difficult to find extra cash to invest for their retirement, while also paying down their mortgage and other expenses. However, there are strategies to pay down your mortgage and invest at the same time. Can you explain this strategy to listeners that are in this situation? And what are the pros and cons? 

On this month's episode, we're going to discuss some of the most frequently asked investing questions that I receive.

The first of these is helping you decide if you should just pick one ETF for your entire portfolio (these are referred to as asset-allocation ETFs), or if you should pick and choose multiple ETFs for your portfolio to fine-tune tune it based on your specific preferences. 

We also talk about how to determine the asset allocation for your portfolio (the stock to bond mix), as well as how to determine how risky the ETFs that you're considering actually are.

It turns out that there is an actual standardized risk rating in Canada to help you determine this which I think you'll find really helpful.

Last but definitely not least, we cover socially responsible investing (also known as ESG investing) to help you decide whether ESG ETFs could be a good fit for your investment portfolio, and some things to be careful about and consider, when partaking in socially responsible investing by buying these types of ETFs.

To help me with this, I'm thrilled to have Danielle Neziol back on the show. Danielle and her team actually create some of the most popular ETFs that Canadians invest in.

She works for BMO ETFs which is the largest Canadian ETF provider in the country, so we're literally getting this information right from the source here which I'm always a big fan of. 

Danielle and her ETF research team have put together a lot of free resources for Canadian DIY investors over the years, and because there are so many of them, I created a resources page where you can see them listed and access them easily. 

They're all free, they're not affiliate links or anything like that, and you can check them out and start learning over at buildwealthcanada.ca/bmo

Enjoy, a big thanks to Danielle and the team for putting these together and making them available free of charge, and now let's get into the interview. 

Many listeners of the show (myself included) are total market index investors, where we just buy ETFs that are meant to represent the entire market as a whole, worldwide (as opposed to stock picking, or trying to speculate what will go up or down and investing based on that).

After you’ve been index investing for a while though, it’s easy to begin to wonder whether you should customize your portfolio a bit further so that it’s more aligned with your particular situation, or so that it holds more of the types of companies that you want in your portfolio.

When you start looking into this, you’ll quickly come across what is known as factor investing, which can be used to tweak your portfolio so that it holds more companies that contain specific attributes that you like.

In this interview, we talk about the benefits of doing this so that you can better decide for yourself whether it’s worth the added complexity in your portfolio.

We also discuss the risks that you need to be aware of if you partake in modifying your investment portfolio in this way, and we cover how you can analyze factor ETFs to find out which (if any) are the right fit for you.

Of course, we also cover some of the different types of factor ETFs out there and what they mean, so that you can better decide about potentially incorporating them into your portfolio.

Questions:

1. A lot of the listeners of the show are total market index investors, where we just buy the market as a whole using the same core ETFs. What is the advantage of now also adding factor ETFs into our portfolio?

2. What are the risks of incorporating factor ETFs into our portfolio vs just sticking with a total market indexing strategy?

3. There are a lot of factor ETFs out there. How do we begin to analyze them as a DIY investors to find out which (if any) are the right fit for us? Are there any educational resources you can recommend?

4. Would you consider factor investing to be “active” investing?

5. When I spoke with your team in the past, it was mentioned that BMO believes that it is most optimum to have both passive and active investments within our portfolio. Interestingly, when I interviewed Vanguard in the past, they also had the same viewpoint (I wonder if that’s a common viewpoint among all the major ETF providers).
   
   Can you share why you think our investment portfolio should have an active component as opposed to just being 100% passive through total market index ETFs?

6. When factor ETFs get launched, they don’t have a long history where we can, for example, stress test them by seeing how they performed during the 2008 financial crisis or the tech crash in the 2000s.
   
   If we want to see/simulate how that ETF would have performed in adverse market conditions, how would we go about doing that?
   
   I suppose we can use this approach for most new ETFs that get launched and that we want to evaluate?

7. How is using factor ETFs different from just using active ETFs or mutual funds?

8. Would it be fair to say that we can start with a broad, total market ETF approach, but then we can use factors to fine tune our portfolio for our specific needs?
   
   (i.e. To either increase potential returns at the cost of risk/volatility, or to reduce volatility/risk at the expense of lower expected returns?).
   
   Are there things that we should consider other than just looking at returns and volatility?

9. In one of the BMO white papers I read, it was mentioned how one strategy is to go into and out of factors depending on the economic climate. For example, if we’re seeing slowing vs rising growth, or increasing vs decreasing inflation. However, most listeners of the show (myself included), I think prefer the set-it-and-forget-it approach where we don’t have to follow the economy, the different economic markers, or the markets.
   
   Instead, we would rather just have the same ETFs to buy every month with a piece of every paycheque, and just hold those ETFs long term until retirement.
   
   For those types of investors, should they just do total market index investing or can factors still be a smart tool to use, without having to analyze what economic climate we are in?

10. Can we go through each of the different factor types and explain what they are?

11. Where can we learn more about factor investing, and where can we get some of your free tools, white papers, and other resources?

Resources:

Free ETF Tools and Resources

ETF Market Insights (Free resources, webinars, and Q&A)

Factor Based Investing ETF White Paper

BMO ETF Lookup, News and Resources: BMOetfs.com

ETF Comparison Tool (for both: Non-BMO and BMO ETFs)

Today I’m extremely excited to have Canadian best selling author, Andrew Hallam on the show. His first book, Millionaire Teacher is currently the #1 best seller in the Investment and Portfolio Management category on Amazon.

He has been investing in the stock market for 32 years, having built a million-dollar portfolio on a schoolteacher's salary when he was in his late 30s. 

Over the past 16 years, he has given hundreds of talks in over 30 different countries espousing research on financial wellness, sound investing and life satisfaction.

We cover a lot of areas in this interview, but since Andrew achieved financial independence in his 30s, I especially wanted to ask him how we Canadians can live off our portfolios long term, without depleting it prematurely (while also maximizing the income that we are able to withdraw). 

We discuss what to do when it comes to our withdrawal strategy in different economic environments, and we discuss how one can best use the 4% rule, and how we can modify it, depending on what happens in the markets. 

We also talk about one of my favourite topics, variable withdrawal strategies which help us maximize how much income we can take out of our portfolio every year (while not running out of money).

Questions:

1. For anybody that hasn’t read your books or is hearing about you for the first time, can you tell us a bit about yourself, especially when it comes to the world of investing, financial planning, and retirement?
   
   
2. You're someone that has achieved financial independence many years ago and has had to learn how to live off your portfolio indefinitely in a sustainable fashion.
   
   Just to set the groundwork and for somebody that hasn't read your books before, can you tell us what kind of investments your portfolio consists of that has allowed you to do this and retire early?
   
   
3. Do you have a system or process that you follow to determine how much money you can take out from your portfolio to live off of every year? (with the implied goal that you’re trying to maximize how much you can take out annually, while still having that amount be sustainable so that you don’t run out of money in the future).
   
   
4. There are many withdrawal strategies that one can use to live off their portfolio. Apart from the one that you just mentioned that you do yourself, are there any other ones that you like or have found to work well for others?
   
   
5. What are your thoughts on variable percentage withdrawal approaches? Ex. Taking out 4% of whatever the portfolio value is at the time, instead of more static approaches like the traditional “4% rule”.
   
   
6. Before we get into more questions can you tell us more about your new book called Balance and where can we get it.
   
   
7. When we spoke before the interview, you mentioned that sometimes when pursuing money and financial independence, we can actually fall into a trap and miss the point of why we pursue it in the first place. And in relation to that, in your book, you talk about how we need to be careful about how we define success, and how we need to strive for the goal of life satisfaction as opposed to just a high monetary figure within our portfolio. Can you speak to that bit?

If you’re working with a good certified financial planner here in Canada (a CFP), there are specific categories that they should be helping you optimize. According to FP Canada, which is the organization that issues the Certified Financial Planning designation (the CFP), there are 6 areas that should be covered, as they are critical to your financial health. 

For your reference, the pillars are insurance and risk management, financial management, investment planning, tax planning, retirement planning, estate planning and legal aspects. 

Today, we’re going to talk about the insurance and risk management pillar to help you optimize that, and my returning guest today is insurance expert, Laura McKay.

Laura used to work as an actuary, and is now the Co-founder of PolicyMe. 

One of the things that I REALLY like about PolicyMe, is that they have an incredibly useful tool on their site to help you determine how much, if any, life insurance you actually need. 

What I found really sets it apart from the other online calculators that I’ve seen, is that it will actually honestly tell you, if you do not need life insurance. 

Questions Covered:

1. As the new year kicks off and we look for ways to optimize our finances, one important area when it comes to our financial health is insurance coverage and risk management.
   
   A big piece of this has to do with life insurance. In case somebody is on the fence or not really motivated to look into life insurance, can tell us why this should be on our radar, and what are the consequences of not having this type of insurance when we need it?
   
   
2. Can you tell us more about what the role of life insurance is in financial planning?
   
   
3. I suspect that one of the reasons that looking into life insurance isn’t often near the top of Canadians’ to-do lists, is that it’s perceived as expensive and as an additional cash flow drain month-to-month.
   
   Can you give us a ball-park range of what life insurance can typically cost us in Canada, and what things can we do (that we have control of), to get the absolutely lowest rates for the coverage that we need?
   
   
4. Is there any innovation around insurance happening in Canada that we should be aware of, especially when it comes to making insurance more affordable? 
   
   
5. I’ve definitely heard of Canadians getting some really slick and persuasive sales pitches to use permanent life insurance as an investment vehicle, in addition to the life insurance coverage that it provides.
   
   Often large tax savings are mentioned as one of the key benefits. Can you talk about the pros and cons of using a less expensive term life insurance policy to just cover our life insurance needs, vs using permanent life insurance like whole life or universal life to receive both life insurance as well as an additional investment vehicle (please define whole life and universal life insurance for anybody not familiar too).
   
   
6. Of course now, with COVID being the big elephant in the room, I’m sure many Canadians are wondering whether COVID has impacted their life insurance in any way, and if they are in the process of getting life insurance, will they still receive the payout if the insured person in their family passes away due to COVID.
   
   How can we best ensure that we are covered if we get life insurance now, and for those that already have life insurance, what’s the best way to check that we're still covered?
   
   
7. For anybody listening that does not currently have life insurance, how can we best determine if we actually need it for our particular situation?
   
   
8. Whether we’re shopping around for a policy, or already have one, what kind of analysis can we do ourselves to evaluate the quality of a policy?
   
   
9. Are there certain types of Canadians for which life insurance is especially critical?
   
   
10. Personally, I've always felt a bit skeptical when asking somebody that sells insurance “How much insurance coverage I need?”. I’d think of it like asking a real estate agent how big of a house I need when their commission is obviously higher the bigger the house I purchase. With insurance, I find it often a similar story where the insurance expert that you are speaking to is maybe compensated more depending on how large the policy is that I buy, so there is an incentive for them to paint a story of why you need as much insurance as possible.
    
    For people like myself that have this concern how can we best determine how much insurance we actually need without having to take advice from someone that is financially incentivized to sell us as large of a policy as possible?
    
    
11. Can you tell us where we can get more of your educational resources and what is a good next step for someone that thinks life insurance is something that should be on their radar, but either doesn’t have any life insurance, or is not sure if they have enough through their employer, or other sources?