1. Finance 101 (for Canadians!)
Farhan Thawar
April 2013!

2. Agenda
Saving
Spending
Debt
Investing
Insurance
Retirement
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3. Warning!
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Source: The Black Swan

4. Financial Planners
“The Stock market is the only game in town where the guys
who drive Rolls Royce’s take advice from those who take
the subway”
- Warren Buffet
• Most financial planners make money via
• Transaction fees
• MER
• Kick-back on certain investment choices
* If you do use one, make sure it’s a fee for service
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5. Saving
How much should you save?
Saving strategies that work
1 Pay yourself first (automatic)
2 Credit/debit cards (leave at home)
• Create barriers (wait a day before you buy anything)
3 Jar method
Emergency fund (6-12 months)
– Cash or LOC

6. Alice vs. Bob
Alice starts saving at 25 ($4k/year)
– Stops saving after 10 years
– Contributed $40k total
Bob starts saving at 35 ($4k/year) till 65
– Contributed $120k total
How did they do?
Let’s assume 8% growth
Source: The Wealthy Barber Returns

7. Compound Interest
Einstein called this
– the 8th wonder of the world
– the greatest force in the universe
– Greatest invention of mankind
If you put 1 penny on the first square on a chessboard and
2 on the second square, and continued on doubling, how
many pennies would be on the last square?

8. Alice vs. Bob

9. Spending
“It is preoccupation with possesions, more than anything
else, that prevents us from living freely and nobly” –
Bertrand Russell
“I can resist everything but temptation” – Oscar Wilde
– Stop going 
Experiences vs. stuff: [NYTimes] Will it make you happy? -
http://bit.ly/cQu4ui

10. Spending
Spending Summaries
Finding deals (RFD): www.redflagdeals.com
If you have to use credit cards
– Credit card rewards

11. Spending
Rough Guide (The Motley Fool Money Guide)
– Housing and Utilities: 25-30%
– Food: 10-15%
– Vehicles: 10-15%
– Insurance: 5%
– Saving and investing: 10-15%
– Entertainment: 5%
– Clothing: 5%
– Medical: 5%
– Childcare and Education: 1-8%
– Gifts and Charity: up to you
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12. Spending
“Never keep up with the Joneses. Drag them down to your
level. It’s cheaper”
– Quentin Crisp
Teachers are pretty happy (because they hang out with
other teachers)
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13. Debt?
Good vs. bad debt
Who has credit card debt?
– Re-finance!
– Clear LOC method ($7k)

14. Good Debt
Money borrowed to buy an appreciating asset where the
cost of servicing the loan doesn’t affect your abilty to save
to the appropriate level and where the principal will be fully
repaid before your retirement.

15. Cashtration
The act of buying a home, which renders the subject
financially impotent for an indefinite period of time.
Reminder: Mortgage means “death pledge”

16. Investing
1 “First rule of investing, don’t lose money
2 Second rule of investing, see rule #1.”
Warren Buffet

17. Investing
Do you have a mortgage?
– Easy strategy 
Should I open an RRSP/TFSA?
– If you don’t have a mortgage, than yes!

18. RRSP vs. TFSA
Source: The Wealthy Barber Returns

19. Investing
Imagine a market with just 3 investors (Buffet, Munger, and
Soros)
What should you do with $30k?
1. Pick your own stocks
2. Invest in an index fund
3. Invest in all 3 managers
4. Pick a manager

20. Investing
A year later: Market performed at 8%
• Buffet: 12%
• Soros: 9%
• Munger: 3% ((Buffet + Soros)*-1 by definition!)

21. Results
1. Pick your own stocks (?)
2. Invest in an index fund (8%)
3. Invest in all 3 managers (8%)
4. Pick a manager
• Buffet: 12%
• Soros: 9%
• Munger: 3%

22. What about costs?
Typical ETF: 0.5%
Typical Mutual Fund: 2.3%
1. Pick your own stocks (?)
2. Invest in an index fund (7.5%)
3. Invest in all 3 managers (5.3%)
4. Pick a manager
• Buffet: 9.7%
• Soros: 6.7%
• Munger: 0.7%

23. Investing - MERs
Management expense ratio
– THERE IS NOTHING MORE IMPORTANT THAN MER
The expense ratio is the only reliable predictor of future
mutual fund performance
– Financial Research Corporation and Standard and Poor’s
studies

24. Investing – Active vs. Passive
What’s the difference?
Moneysense: http://www.moneysense.ca/2010/10/21/six-
strategies-to-build-your-wealth/
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25. Sleeping scale of major investments

26. Sleeping scale of major investments
Source: A Random Walk Down Wall Street

27. Investing – Active vs. Passive
What’s the difference?
Moneysense: http://www.moneysense.ca/2010/10/21/six-
strategies-to-build-your-wealth/
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28. Investing – Active vs. Passive
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Passive Rules!

29. Investing – Active vs. Passive
Couch Potato strategy
– It pays to be lazy
Canadian Shareowner
– Limited stock selection
Mutual fund vs. ETF
– ETFs get efficient past $20k or so
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30. Investing – Couch Potato
Sample portfolio
– %Age in bonds
– 1/3 of rest in CA equities
– 1/3 of rest in US equities
– 1/3 of rest in INTL equities
So Boris (if he’s 25):
– ~25% in bonds basket
– ~25% in CA equities basket
– ~25% in US equities basket
– ~25% in INTL equities basket
Rebalance once per year (15 minutes!)
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31. Couch Potato 2012
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32. Investing – Passive
Why it works:
– No sales commissions (if you use Mutual funds)
– Low operating expenses (MER!)
– Tax efficiency
– No need to hire a financial advisor
– Higher diversification, lower risk
Source: The Boglehead’s Guide to Investing
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33. Investing – Passive
“The conclusions [supporting trying to beat the market] can
only be justified by assuming that the laws of arithmetic
have been suspended for the convenience of those who
choose to pursue careers as active managers”
– William F. Sharpe (Nobel Laureate in Economic Sciences”
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34. Investing - Barbell
Nasim Taleb’s strategy (The Black Swan)
Made 99% of his money in one day (Oct. 1987)
Made $150MM in fall of 2008
Portfolio
– 80-90% in bonds (or other fixed income)
– 10-20% in ultra-risky investments
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35. Investing - Dividend
What’s a dividend?
Derek Foster’s strategy
Buy stocks that will pay dividends
Make money with your money
When you hear: “How do you make your money work for
you?”
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36. Investing – DIY – no strategy
Really hard
Likely impossible to beat the Russian Phds
Hard to exploit market inefficiencies
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37. Health Insurance
Do you have dependents?
If yes:
– Term life insurance
Other types:
– Critical illness
– Disability

38. Retirement
Models
1 Make money for a while, then start spending it (Traditional)
2 Make less money all the time (4HWW)
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39. Top 10 Resources
Mandatory reading/listening:
• MoneySense Magazine – www.moneysense.ca
• John Bogle podcast interview - http://bit.ly/clwrhT
Great Books/Sites
• The Wealthy Barber Returns by David Chilton
• The Little Book of Common Sense Investing by John Bogle
• www.CanadianCouchPotato.com
• The 4-Hour Workweek by Tim Ferriss
• Stop Working by Derek Foster
• The Black Swan by Nasim Nicholas Taleb

40. How to start!
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