For Ed Rempel, there’s a lot of value in the “pay it forward” philosophy.
Ed Rempel is a long-time, fee-based financial planner who makes Toronto his home and who, above all, is passionate about helping everyday people get smarter about their finances and investments, so they can achieve financial freedom.
Sharing his financial and investment knowledge and insights is what led Rempel, a self-described “Wise Guy,” to launch his blog, Unconventional Wisdom. And, it must be noted, that as much as he loves writing and discussing financial and investment matters, he also loves shooting down conventions in his chosen territory. That’s pretty much the kind of ground he covers.
What are the types of conventional thinking he likes to dispel?
Let’s start with stock market returns. It’s a topic he comes back to often. In one popular post, Rempel happily dispels six of the most common myths about them. Like? Bear markets happen every three to four years. Not really, he writes. Yes, there are declines about every three-and-a-half years, but a bear market is a decline of over 20 percent. And there have only been five of them in the U.S. and nine in Canada since 1950.
Then, there’s stock market risk. “Most investors have quite exaggerated views about stock market risks, especially after 2008,” Ed Rempel writes. One is that it can take a decade or more for the market to recover after a 2008-like slam. But if you look at the historic market declines (excluding the 1930s and 2008), he points out, the recovery only took one or two years in 88 percent of them.
The problem with believing such conventions, Rempel says, is that it leads many to invest too conservatively to be able to reach their retirement goals. He notes that more than a third of Canadians aren’t saving for their retirement. One reason for that is the amount of money they have to dedicate to a large down payment on their homes, which takes them more time to pay down and less time to save for retirement.
With that in mind, one investment strategy that Rempel advocates (and, in fact, is Canada’s leading expert on) is called the Smith Manoeuvre. It’s controversial by some lights as a leveraged form of investment – and some who try it discover (too late) that their appetite for risk isn’t what they had thought at the outset.
For those with a long-term outlook and a risk-tolerant investment philosophy, though, it’s an appealing proposition. Rempel also incorporates it into a comprehensive financial plan. As he explains, the Smith Manoeuvre requires a re-advanceable mortgage, or one that’s linked to a credit line. As mortgage payments are made, the portion of the principal that’s paid down becomes a credit in the credit line. The homeowner can then borrow from the credit line to make investments that are both conservative and tax-efficient.
With the tax-deductible credit line, the refunds it generates can help pay down the mortgage. Borrowings against the credit line can also pay the interest on it. “By capitalizing the interest,” Ed Rempel explains, “the homeowner can invest without interrupting his or her cash flow.”
It’s all part of thinking outside standard investment conventions, something that Rempel is happy to help people do.