Mar 022017
 

I’ve been saying for years that real estate prices in Canada are not that high. Certain areas like Vancouver and Toronto have the perception of being unaffordable. But the fact that population growth is still positive in these major cities suggests otherwise. If these places weren’t affordable then people would be moving out of them, not in. 🙂

People from all the world have wants. These wants turn into demand, which fuels certain parts of the economy. And what do young adults want right now? According to an HSBC survey, the “vast majority” of millennials want to buy property.

Demand from Young People 

HSBC bank polled 9,000 people from 9 different countries: Canada, Australia, China, France, Malaysia, Mexico, the UAE, the U.K. and the U.S. The results include some interesting numbers about the housing market among individuals between ages 18 and 35, which the bank defines as millennials.

37% of millennials said they had financial help from the bank of mom and dad to cover their housing costs. Canada is roughly in the middle of this trend.

A little over a third of Canadian millennials polled already owned their own home, and among those who didn’t, 82% say they intend to buy one within the next 5 years. Thus, housing must be relatively affordable, because even at the lowest earning stage of their careers, most people either already own property, or have the means to own in the foreseeable future. They are also willing to sacrifice a lot in order to become homeowners.

The results of the HSBC study shows that Canadian real estate may not be in a bubble. Funeral costs, health care costs, and tuition have also grown at a faster pace than inflation over the decades, but most people don’t label those sectors of the economy as becoming a bubble. So I don’t think housing is overpriced either.

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May 052016
 

The Pessimism in the Markets

Corporate profits have been disappointing lately. Apple (AAPL) recently said its revenue fell for the first time in 13 years due to a decline in iPhone sales compared to the same time last year. Apple shares are worth 26% less now than a year ago. Investors are warned the decline could continue. 🙁 Other publicly traded companies are experiencing similar challenges. Top line growth is slowing down, and its becoming harder to maintain profitability levels.

A recent article on Bloomberg.com suggests that future investment returns for millennials will be lower than prior years. It cites a study by consulting firm, McKinsey & Co, which proposes that “the forces that have driven exceptional investment returns over the past 30 years are weakening, and even reversing.” So maybe it’s time for investors to lower our expectations.

Lower Investment Returns for Millennials

The last 30 years was actually a bit of an anomaly because on average we’ve had a couple of percentage points better annual returns when compared to the past 100 years in general. Falling inflation rate has helped drive real returns, and bond prices increased substantially as interest rates fell for the last couple of decades. 🙂 But going forward we may face secular stagnation and a lack of economic growth due to an older population. Let’s take a look at the study’s findings, and future return estimates.

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Regarding U.S. equities for the time being, it appears growth in the following 20 years will be 1.4% to 3.9% lower than in the past 30 years. The director of the study, Richard Dobbs, warns that the people who will lose out the most are the millennials. Oh no. That’s me! It appears we’ll have to either work longer or find other ways to put more money in our retirement accounts. The alternative is to retire poorer and live off government cheese, which is actually a luxury in Canada considering the expensive tariffs we have on dairy products, haha. 😀

Preparing for the Next 20 Years

So here are a few of things I’m doing to deal with all this information. They may not work for you, but I will share anyway.

First, the most important thing is to lower the cost of investing. This is even more crucial if market returns will underperform in the future. Using the numbers from the graph above, the average return on U.S. equities over the last 30 years was 7.9%. So if our management fee and other combined costs were 1%, then our actual return would be 6.9% after fees. The 1% fee would effectively eat away 13% of our actual market return.

But the “slow-growth scenario” claims that over the next 20 year period the annual return of U.S. equities will be only 4%. If we still pay the same 1% portfolio fee as before, then this cost will eat away 25% of our future annual return, nearly twice as high in percentage proportion to a 7.9% market return. Bummer. 🙁

So how can we lower pesky fees and reduce the overall cost of investing? It’s simple. 🙂

How do we reduce the long term costs of plumbing? We learn some basic DIY plumbing skills. How do we reduce the cost of food? We learn to cook and meal plan. How do we reduce the cost of car repairs? We learn some basic knowledge about car maintenance like how to check the tire pressure, change the oil and air filter, etc. We can reduce the cost of any aspect of our lives by simply educating ourselves on the subject. 😉

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So if we want to lower our investment fees, we just have to better understand how to invest and manage our own money. With the advent of ETFs and robo-advisors, I hope everyone reading this blog is paying less than 1% management fee on their portfolio. If you’re interested to learn more about low cost wealth management services, check out the thorough review about Wealthfront, that my friend Jacob wrote on his blog.

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Sep 182015
 

Millennials Create Their Own Opportunities

Some people believe millennials are the screwed generation because there are no jobs for us. And that we have every right to be angry at the older generation for pillaging public coffers, taking on loads of debt, and leaving the broken economy for the younger generation to fix.
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But I don’t see it that way. So what if there aren’t a lot of high paying jobs out there for young workers anymore? Any job is a good job because any income is better than no income. The world can be an amazing place if we just lower our standards a bit. 😀
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And just because there are no jobs, it doesn’t mean there is no work. Jobs are given to us, but work can be self created. Don’t ask what the world can give us. Ask what we can produce for the world instead. 😉 Starting a small business is easy. When I was 14 I shovelled snow for my neighbours during the winter. Clearing each driveway earned me $10. Cutting grass would be a great opportunity to make money in the summer. There are plenty of busy households who would gladly pay $25 for someone else to mow their lawn every couple of weeks. Their time is valuable. And all that’s required for this to happen is for some proactive entrepreneur to go knock on their door and say, “Hey, here’s what I can do for you. How about it?”
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We can also develop knowledge based skills to make money. Being the first group of people to grow up with cell phones, laptops, and the internet millennials have a technological advantage over other working adults today. We can create a free blog in minutes. Social networks keep us informed and enable us to discuss our ideas with anyone from anywhere on the planet. We can download entire first year courses from Yale, Harvard, and other universities for free from their websites. There are non-profit organizations, such as the Khan Academy, which have free lectures on subjects like math, science, computer programming, history, art, philosophy, economics, and more. There’s also plenty of informational YouTube videos that teach everything from how to put on make-up, to how to start a small business, to how to make ricotta and spinach ravioli. ? Yum! Access to information is so ubiquitous today we can develop any knowledge based skills we desire to learn! And then use our new expertise to earn an income.

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May 212014
 

Talking heads often say that young adults are struggling more than older generations in this economy. But a recent BMO report suggests that millennials are doing just fine compared to what their parents went through at their age. The study compares the financial situations of young adults today (age 25 – 34) to that of young adults from 3 decades ago.

Millennials looking for jobs today have a 93% chance of finding one (not bad,) compared to only 90% for those in the mid-1980s due to a higher unemployment rate back then. So don’t feel discouraged if you can’t find a job right away 🙂 Just remember that your parents probably had it worse.

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The median income of people between 25 to 34 rose from $33,900 in 1984-1988, to $34,700 in 2011, after adjusting for inflation. This means we can buy 2% more goods and services than our parents could in 1984 haha 🙂 #feelingrich. Median net worth of households of generation Y was $52,000 in 2012, almost double that in 1984 ($28,752 in 2012 constant dollars.) Wow.

I understand where the older generation comes from when they say “Kids these days. They don’t know how good they have it.” The recession they experienced in the 80s must have been pretty bad 🙁 But then again, maybe it’s not a fair comparison because the world was such a different place back then 😕

While many baby boomers prospered financially in the past thirty years, one could say that their children are starting new careers and families on an equal, if not firmer, footing in most regions.”
~Sal Guatieri, BMO economist.

As a millennial I realize that on average we do have more debts today than our parents did 30 years ago. And the costs of education and real estate have outpaced inflation so certain things are definitely less affordable to us. But we have better job opportunities than our parents did. We are better educated. We have higher incomes and more purchasing power. We have almost twice as much wealth (net worth) than they had. We even have access to new innovations like the internet and smart phones, which make our lives so much easier. So I’m just glad things aren’t worse for us right now 😀

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Random Useless Fact: Sometimes evolution can backfire.

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Aug 072013
 

Read an article describing the current lifestyles of many young Americans. According to a Pew Research Center analysis, 36% of adults between 18 to 31 were still living with their folks in 2012. It used to be 32% just 5 years ago. I’ve heard people are getting married later in life. Maybe leaving the nest later is part of the reason 😕 But here’s what caught my attention, millennial males (40%,) were “significantly more” likely to live with mom and dad than millennial females (32%.)

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Adult sons are expected to do less housework, and are given more freedom than daughters so it’s easier for a young man to live at home and still feel independent than for a young women, which is probably why “women tend to mature, emotionally, faster than men,” says the chair of the psychology department at Golden Gate University in San Francisco. Furthermore young women today tend to outperform men in post-secondary education. 71% of female high school grads last year were accepted into college, but only 61% of males managed to do the same, according to the US government’s Bureau of Labor Statistics. Females also tend to finish college faster than males and have a better chance to find a job afterwards with an out of school unemployment rate of 11% compared to the guys at 16%.

Ladies: Congrats 😀 You are doing really well for yourselves. Keep it up!
Guys: Dagnabbit ( >_<) Some of you losers are making the rest of us male millennials look like a bunch of spoiled, lazy, pampered, immature, freeloading, disgraceful, good-for-nothing, piles of rubbish 😡 No wonder why women around Vancouver complain about how the men here suck and lack motivation. Haha, I’m just teasing 😛 Don’t give up guys 🙂

The following are some random comments by other people on the internet. Continue reading »