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  • Mar 22nd, 2017 12:15 am
Deal Expert
Feb 29, 2008
15474 posts
1684 upvotes
Montreal
mrtrump wrote:
Mar 16th, 2017 9:30 am
Warren Buffett wants people to invest in indexes so he can profit off the average person. I respect the guy, incredibly smart ... but he is a wolf in sheeps clothing.
How does buffet profit from you investing in an index?
Sr. Member
Aug 17, 2008
876 posts
265 upvotes
Xavier88 wrote:
Mar 17th, 2017 9:50 am
I made it quite clear that I want to leave the majority of this sum tucked away. Investing implies risk, which I'm not interested atm. I'm getting another sum in the near future, ....might think about investing a little at that point, or soon after.
Hi, I used to be much more active in the Personal Finance Forum, but don't check as often now. But noticed the title, and opened it up.

I may be mistaken, but it sounds like you do not have a lot of personal experience with investing/protecting money.

Some quick comments, that may be helpful.
  • What do you think "tucked away" to provide for future generations means? And how is that different than "investing".
  • If you tuck the funds away in "safe" places where you perceive no risk of loss, then you are guaranteeing a loss after inflation. If you really want the funds to provide for the next generation, and ones after, you need to be concerned with having the funds maintain their purchasing power.
  • Very wealthy families do not tuck away their assets and avoid "investing" due to perceived risk of loss. They invest it to maintain purchasing power. Also your time horizon is many decades; to avoid "investing" due to fear of short-term losses is not wise, when you are looking out over decades. The fact you will not be touching these funds, means you can look very long term.
As to Private Banking, Private Banks can offer you one-stop advice -- they could handle your investments, offer estate planning, and tax advice. Or you can get services separately. If you are comfortable with investing, there is no particular advantage to using the Private Banking services of a big bank for money management (you could do it yourself at a much lower cost). But if you're not comfortable, then getting someone to help you (whether it's the private banking division of a bank, or a well respected financial planning firm) is wise.
[OP]
Newbie
Feb 7, 2017
13 posts
9 upvotes
multimut wrote:
Mar 17th, 2017 10:16 am
Hi, I used to be much more active in the Personal Finance Forum, but don't check as often now. But noticed the title, and opened it up.

I may be mistaken, but it sounds like you do not have a lot of personal experience with investing/protecting money.

Some quick comments, that may be helpful.
  • What do you think "tucked away" to provide for future generations means? And how is that different than "investing".
  • If you tuck the funds away in "safe" places where you perceive no risk of loss, then you are guaranteeing a loss after inflation. If you really want the funds to provide for the next generation, and ones after, you need to be concerned with having the funds maintain their purchasing power.
  • Very wealthy families do not tuck away their assets and avoid "investing" due to perceived risk of loss. They invest it to maintain purchasing power. Also your time horizon is many decades; to avoid "investing" due to fear of short-term losses is not wise, when you are looking out over decades. The fact you will not be touching these funds, means you can look very long term.
As to Private Banking, Private Banks can offer you one-stop advice -- they could handle your investments, offer estate planning, and tax advice. Or you can get services separately. If you are comfortable with investing, there is no particular advantage to using the Private Banking services of a big bank for money management (you could do it yourself at a much lower cost). But if you're not comfortable, then getting someone to help you (whether it's the private banking division of a bank, or a well respected financial planning firm) is wise.
You're correct, this is new territory for me.
- When I say "tucked away", I mean cheque/savings account. Investing, to me means allocating a certain amount of capital into something hoping for a solid return....this usually involves a level of risk.
- In regards to inflation, I believe even the current low interest savings accounts will be able to provide comfortable lives for generations to come.
- I think a lot of wealthy families also have a dollar amount end goal, I'll be already there. But will def consider other options.

As it stands, will hit up private banking for the basics, and look into investing on my own before going down that path.

Thanks for the advice.
Newbie
Sep 25, 2016
26 posts
29 upvotes
Xavier88 wrote:
Mar 17th, 2017 11:54 am
You're correct, this is new territory for me.
- When I say "tucked away", I mean cheque/savings account. Investing, to me means allocating a certain amount of capital into something hoping for a solid return....this usually involves a level of risk.
- In regards to inflation, I believe even the current low interest savings accounts will be able to provide comfortable lives for generations to come.
- I think a lot of wealthy families also have a dollar amount end goal, I'll be already there. But will def consider other options.

As it stands, will hit up private banking for the basics, and look into investing on my own before going down that path.

Thanks for the advice.
Whatever you choose, you cannot completely avoid risk. Keeping money in a bank, or even several banks also carries risk. You need to diversify to reduce risk. That would be your best bet.
Member
User avatar
Oct 19, 2016
286 posts
86 upvotes
Toronto
If large amounts of people invest passively through an index, it leads to the very market inefficiencies that Buffett profits from.

Vanguard promotes its rock bottom expense ratios, but what is not published is market impact costs that are incurred when the fund rebalances. Since these rebalances are often announced ahead of time, they are extremely vulnerable to front running. Christophe Bernard, PhD Senior Scientist at Winton Capital Management, estimates that front running costs index investors 0.20% per year. That's 4 times the official expense ratio of Vanguard's S&P 500 ETF.

Image
mr_raider wrote:
Mar 17th, 2017 10:02 am
How does buffet profit from you investing in an index?
Deal Expert
Feb 29, 2008
15474 posts
1684 upvotes
Montreal
Very well. Buffet profits from me indexing. That doesn't negate the fact that I'm still beating every douchebag bank advisor and "wealth management" guy. Buffett has access to resources I do not. I expect him to do better than me.
[OP]
Newbie
Feb 7, 2017
13 posts
9 upvotes
wtraveller wrote:
Mar 17th, 2017 12:04 pm
Whatever you choose, you cannot completely avoid risk. Keeping money in a bank, or even several banks also carries risk. You need to diversify to reduce risk. That would be your best bet.
Short of a bank going under, there's no risk that I know of. Other than that, will look into property and a few other physical assets.
Newbie
Sep 5, 2011
4 posts
VANCOUVER
Private banking is basically a one-stop shop for affluent clients that can't be bothered with the different aspects of banking ie. banking; investments; lending; wealth protection.

I'd recommend splitting the inheritance amongst two banks to invoke some friendly competition.

PS: Cibc Kerrisdale also has a Private Banking division.

Good luck
Jr. Member
Feb 12, 2007
185 posts
16 upvotes
Toronto
Xavier88 wrote:
Mar 17th, 2017 11:54 am
- In regards to inflation, I believe even the current low interest savings accounts will be able to provide comfortable lives for generations to come.
If you want something completely "safe" you would probably want CDIC insurance, which caps out at $100,000 per institution. If you are saving seven figures, then it becomes impractical to have CDIC insurance for the entire amount, and are thereby taking on additional risk (albeit small).

Inflation is around 2% right now. "High" interest savings accounts may pay 2% now. (Sure, Tangerine may have a 3% promotion, but it caps out at 500K so you wouldn't be able to use it for the majority of the funds). Interest is taxed as regular income. So, you'd make 1% post-tax, which means your real purchasing power drops by 1% each year.

The "risk" of using only "safe" investment vehicles is that your money is slowly eroded over time as your returns do not compensate for inflation. So, these "safe" accounts do carry a real long-term "risk". If you really want to provide for future generations, a diversified portfolio of equities and a smaller component of fixed income is probably far more appropriate.

You have some major decisions ahead, and I would recommend taking the time to learn about investing. If you have the interest, I would recommend a book like The Four Pillars of Investing.
Deal Addict
User avatar
Dec 27, 2009
3157 posts
1155 upvotes
Ottawa, ON
Xavier88 wrote:
Mar 18th, 2017 10:24 am
Short of a bank going under, there's no risk that I know of. Other than that, will look into property and a few other physical assets.
The risk is you are losing value due to inflation. Your money loses its purchasing power more and more the longer it sits in a bank earning next to nothing.

Having said that, I think in the short term I would likely just park it too, but that is because I think the stock market is overvalued and due for a large correction (at which time I would feel more comfortable putting more money into it).

I'm envious that you have these issues to even think about. Nice problem to have lol.
Sr. Member
User avatar
Feb 12, 2002
626 posts
94 upvotes
Vancouver
screwdriver223 wrote:
Mar 18th, 2017 12:16 pm
If you want something completely "safe" you would probably want CDIC insurance, which caps out at $100,000 per institution. If you are saving seven figures, then it becomes impractical to have CDIC insurance for the entire amount, and are thereby taking on additional risk (albeit small).
OP mentioned USD, the CDIC only protects CAD.

In BC, only credit unions will guarantee all funds, including foreign currencies. http://www.cudicbc.ca

With a large amount of USD, I'd probably just buy US t-bills to guarantee no loss of capital. Assets are currently overpriced at all time highs for stocks and real estate. Sure OP can invest now to catch a higher run up but who cares, OP has more than enough money to fuss over any future gains.

However, I would definitely utilize dollar cost averaging into a conservative asset class over the long run, as others have mentioned, broad based US equity etf as most of the US companies have foreign exposure

Remember, most advisors are out to make a living so be careful of what they promise.
Sr. Member
Jan 14, 2011
931 posts
207 upvotes
joey003 wrote:
Mar 16th, 2017 9:29 am
I believe the default setup is flat $100/month and access to all products without any other fees (any account types, visas, etc). Along with that access to preferred currency exchange rates (though I've seen tellers override that anyway), and direct access via phone/email to a private banking rep (this I think is the most valuable). They can help do anything via phone/email, and if anything ever needs to be signed in person (applications, renewals, etc), they'll come to you.
So basically roll reversal, they kiss YOUR ass.
Deal Fanatic
Jul 1, 2007
7839 posts
679 upvotes
Like someone else mentioned, not investing involves risk. Any time you hold wealth in the form of currency you're really just holding it in the form of a medium that is intended to be exchanged for goods, services or other assets in the short-term. If that's the plan, or the plan is to make the exchange some time within the next 5 years, put it into a GIC or savings account.

If the plan is to spend the money 10+ years from now, or to have it continue to create intergenerational wealth, then there's nothing riskier - nothing more guaranteed to erode your wealth - than keeping it in currency form. Whatever the inheritance is worth to you today, it's probably a huge amount. If you don't touch it, hold it in cash, and it passes on to your kids when you die however many decades from now, will it still be worth as much to them?

A couple of responses to other posts in this thread:
  • Indexing is great and all so long as you stick with the strategy long-term, which unfortunately isn't the case among self-directed investors in real life. People start an indexing strategy (ie: "Couch Potato Investing") with the best intentions but then the markets sour and they give it up. Likewise passive investing beats active investing the way it has for a number of years, everyone proclaims active is dead, then the markets crash and active does better again, and we start this cycle anew. Long-long term, yes passive beats active in most cases, but people keep shifting their money from one to the other over 5-10 year cycles.
  • CDIC versus Credit Union guarantees: ALL of the major banks and trust companies guarantee 100% of the money deposited with them. CDIC is an additional backstop in case those banks fail and can't live up to their guarantee. CDIC is the only infallible guarantee because the people backing it (GoC) can print their own money. Provinces are in the same boat as the banks, can't print money, and most of them have worse balance sheets than the big 5 banks.
I'll just throw it out there: I'm a fee-based and fee-only CFP not affiliated with any banks and licensed in B.C.. I do CDIC eligible, B.C. credit union GIC and other fixed income crap too (when clients insist). As well, I manage low-cost ETF portfolios for various risk levels and objectives, or otherwise coach fee-only clients on how to build and manage ETF portfolios themselves. PM me if you want to talk. :)
Money Smarts Blog wrote:
Nov 29th, 2010 11:18 am
I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
Sr. Member
Feb 10, 2015
600 posts
220 upvotes
Xavier88 wrote:
Mar 17th, 2017 11:54 am
You're correct, this is new territory for me.
- When I say "tucked away", I mean cheque/savings account. Investing, to me means allocating a certain amount of capital into something hoping for a solid return....this usually involves a level of risk.
- In regards to inflation, I believe even the current low interest savings accounts will be able to provide comfortable lives for generations to come.
- I think a lot of wealthy families also have a dollar amount end goal, I'll be already there. But will def consider other options.

As it stands, will hit up private banking for the basics, and look into investing on my own before going down that path.

Thanks for the advice.
I'm going to come across like a huge jerk but whatever.

You're an idiot. You have a once in a lifetime chance and you are going to squander it. Wealthy families stay wealthy by making their money work for them not by sticking everything in a savings account (where it will be eroded by inflation) and drawing down the principle.
[OP]
Newbie
Feb 7, 2017
13 posts
9 upvotes
DanTh3Man wrote:
Mar 20th, 2017 11:24 am
I'm going to come across like a huge jerk but whatever.

You're an idiot. You have a once in a lifetime chance and you are going to squander it. Wealthy families stay wealthy by making their money work for them not by sticking everything in a savings account (where it will be eroded by inflation) and drawing down the principle.
That's not true in my case.

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