Five smart steps to choosing the right ETF + MORE Nov 9th

(Photo by Justin Poulsen)
This story, by Dan Bortolotti, was first published at MoneySense in October of 2014. Maclean’s will be republishing a series of stories from MoneySense all week for MoneySense Week, a blitz of practical information about your bank account and bottom line during Financial Literacy Month in Canada.
Late last year, at the age of 56, Rick King found himself out of work. After some 30 years in sales and customer operations in the office equipment, telecom and energy sectors, King had become used to periods of unemployment. Over the years he’s received seven severance packages and has spent two year-long periods without a job. But when he received his latest buyout in November, King decided to leave the corporate world behind—at least for now. “I’m going to take a year to decide if I wanted to stay retired, and just explore new options,” he says. “I’m loving it.”
King can afford this luxury because he owns a paid-off home and has a seven-figure investment portfolio that’s generating enough income for himself, his wife Debbie and their 19-year-old daughter Sarah to live quite comfortably…

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There’s certainly no shortage of choice these days for investors with an eye on exchange traded funds.
The number of ETFs available in Canada has ballooned to 371 at the end of September and this number is only expected to grow as more people across the country embrace the low-cost, easy–to-use tool to help manage their investment portfolios.
While the expanding menu of exchange traded funds is a sign of growth for the industry, there’s no question that more products can be difficult for investors when it comes to selecting the right ETFs for them.
Fortunately, it’s a challenge that can be overcome. By taking these simple steps, investors can make the most of their choices:
1. Set an objective
Whether you’re saving for retirement or your next vacation, it’s always important to understand what you’re trying to accomplish and then link your investments to serve this goal. For example, money market or short term bond ETFs may be appropriate if your financial needs are imminent, while equity ETFs might be better suited for longer time horizons…

Given the choice between a simple solution and a complex one, which would you choose? When it comes to investing, many people seem bent on making their portfolios needlessly complicated.
My blog—canadiancouchpotato.com—includes a model portfolio with just three exchange-traded funds (ETFs): one covering Canadian stocks, another for foreign stocks and a third for bonds. This trio of funds includes more than 3,000 companies from around the world, plus hundreds of bonds of all maturities. It’s super-cheap with a fee of less than 0.20%. And during the last 10- and 20-year periods it would have returned about 6% to 7%. Yet so many investors have an unshakable urge to tinker with it.
I routinely get emails that go something like this: “I like your Couch Potato portfolio, but I would like to make some changes. What do you think about adding some gold, small-cap stocks, commodities, real estate, global bonds, sector ETFs, infrastructure and maybe some blue-chip stocks to the mix?” I’m exaggerating, but only a little…

This November will be the 5th anniversary of Financial Literacy Month (FLM). It’s a month-long awareness campaign to promote the importance of making informed financial decisions and developing healthy financial habits—decisions and habits that can make or break your desire to become a homeowner. So, before you even start your Multiple Listing Service search, you’ll need to get prepared. To help you, here’s a five step process that can support your decision in buying a house.
Step 1: Start saving
It seems obvious but you really have to start somewhere and the best place to start when you plan on purchasing such a large asset is by saving your own money. And saving up for a down payment doesn’t mean cramming cash under your mattress.
You can use RRSP money you’ve already saved by utilizing the federal Home Buyers’ Plan. (For information on how this works, go here.) You can also hit up family for a loan or cash gift or you can develop a work strategy that would help you earn some extra income and boost your savings…

Volkswagen has extended a financial olive branch to its angry customers by offering owners in of diesel-powered cars in Canada and the U.S. vouchers worth up to $1,000.