Dr. Garth

Nurse Jiggles is back from the spa with newly-painted talons. The clinic doors have been flung open to the huddled masses in the parking lot. The melodic snap of latex gloves fills the air. And we’re ready for fresh victims. Let’s roll.

Here’s Pete. Says he’s been reading this pathetic blog for the past seven years, since he was just a kid of 25. “Your advice has been invaluable to me,” he says in an MSU.

But really?

Here’s his story: “My girlfriend and I both 32, recently bought a house in the burbs for 1.35M hoping to start a family soon. She’s a nurse practitioner making 125k and I’m a software engineer making 135k.” Just your typical Millennial couple with a combined income of $260,000 – ready to joyously plunge into a million-dollar mortgage.

“She owned a condo in Toronto that she managed to sell after months on the market and a price reduction. She’ll walk away with 190k and other than that she’s got 85k. I never owned property before and have 450k saved 33k in a LIRA, 68k RRSP, 16k FHSA, 140k TFSA and the rest is in non registered accounts.

“We have both agreed to fork 175k each for a down payment of 350k. This is where the dilemma comes in, should we be putting down more to reduce monthly payments or do we stay invested for compound growth, larger savings in case of job loss or repairs? Should I maximize the 60k RRSP withdrawal for first time homebuyers or stay invested for tax free growth?  Get some cosmetic optional renos done or leave them down the line once we have maxed out our registered accounts?”

First, Petey, let’s hope you and the GF understand the risks of getting into the binding commitment of property ownership and the enduring obligation of a million dollars in mortgage financing, with making a binding obligation to each other. Why not marry? Is this an indication of a relationship that may not last? Do you have a legal agreement regarding the property’s disposition if things go south? Are you aware that if one party exits the other is 100% responsible for the entire debt?

Second, you’re buying because you want to start a family, right? But kids don’t care. Certainly newborns are ambivalent about deeds and home loan details. Just ask. You’re walking into a big obligation (owning a house) plus a financial hole (seven-figure mortgage) and now want to add a new and unknown stress (child) which will involve a mat leave, reduction in income and possiby a desire by your partner to be a mom instead of a nurse. Have you talked this out?

Third, if you’re going to own property together, have debt together and have a kid together, why have you not combined finances? There’s nothing but overlap, duplication, reduced returns and missed opportunities when you keep separate accounts. It’s another yellow flag.

These are the important questions. Your others are trivial. Yes, take advantage of the RRSP Home buyer’s plan and also drain the FHSA. If you can score a fixed-rate mortgage in the low 4% range, then borrowing that amount is fine since investment returns over the next two years should be substantially higher. Forget the renos. You’ll be shocked at the cost of outfitting a home even without throwing money at improvements. Plus insurance. Property tax. Maintenance costs. Utilities.

Oh, and did I mention you should marry her? We expect a report.

Now here’s Chris, who has been watching the bizarro political happenings to the south and wonders what to do next.

“As we are likely heading into another period of inflation (thank you tariffs, wars, deportations), I thought it apt to ask if you have advice on alterations in the coming months to a balanced and diversified portfolio?  Equities will likely go up in the long-term, maybe leave them alone?  Perhaps switch to short-term bonds from preferred shares and long-term bonds?  What to do with REITs?  Most curious, would you recommend a percentage in commodities (obviously diversified…. No gold or cannabis here)?”

The best defence, always, is to stay diversified and balanced. Buy ETFs, not individual stocks. Maintain a global portfolio exposure (thirds Canadian, US and international). Hedge against the loonie by 20-25%. Own fixed-income assets to counterbalance equity risk. Hang in at a 60% growth, 40% boring mix. Rebalance once a year. Stop looking at it weekly, daily or hourly. Stuff your tax shelters.

In general, expect the next two years (until Trump faces the midterm elections) to be a crapshow of change, executive orders, volatility and (likely) romping equity markets. Corporate taxes will be cut. Regulations gutted. Green initiatives abandoned. American companies coddled and favoured. The US equity markets should achieve consistent record levels – until reality hits the fan.

Tariffs are inflationary. Deportations are inflationary. Over-stimulation of markets and GDP is inflationary. Unless Trump diddles with the Fed (unlikely but not impossible) interest rates will have to reverse, and the second half the this presidency could be a road back down to increased consumer costs, swelling unemployment and voter dissatisfaction.

But, maybe not. The point is we don’t know. We can only speculate. We cannot protect against events yet to unfold. This is the essence of investing in a B&D way – to maintain as much equilibrium and consistency as possible in a weird world. Don’t roll the dice. Don’t invest based on headlines. Don’t try to be smarter than Mr. Market, because you never will be.

Don’t be a bull. Do not be a bear. Never be a pig. You’ll do fine. And stay married.

About the picture: “Hey Garth, Here is a dog picture (better than a blog comment)of Keta in our family bike,” writes Colin. “Hope you had a great thanksgiving. Sorry for the threats and abuse that get sent your way. I really appreciate what you do.”

To be in touch or send a picture okf your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2024/11/13/dr-garth-49/