In my search for good mutual funds, I found this 5 stars (Globefunds) no load fund: TD High Yield Income . The MER is high, but the returns can be interesting. One problem I found though is that they vary a lot:
This year (YTD) : 11.94%
Go see this editorial by Art of Money. It's really interesting since it talks about getting rich quick schemes ... So many people get scammed through the Internet!
Have a look at Larry McDonald's blog on rebalancing your portfolio. It seems that frequent rebalancing is not ideal. Which makes sense because of the transactions costs frequent rebalancing create...
I don't usually like mutual funds too much because of their high MERs, but I found this article in the Globe and Mail that talks about Norm Larmarche and his Front Street Capital funds. His returns are really impressive, even the 15 years ones:
I received a call from a meat reseller that obtains meat from organic farmers. They asked if they could provide us with a free meat sample and talk to me and my wife about what they offer. Being interested in eating more organic foods and wanting to find out more (and always willing to experiment for my readers :-) , I agreed to meet with their sales representative. The way they operate is to sell meat in bulk, it comes individually packaged in small frozen portions once a year. They can provide you with a freezer free of charge, on loan for the year. They let you chose from a list the types of meats/seafood/fish that you usually buy and they send you 4-6 weeks later meat to last you for a year (roughly) according to the number of people in your household. For 2, we were told that this comes to 4-6 lbs of meat each week. They state that the quantity of meat depends on the type chosen so if you choose mainly expensive cuts, you get less of it. They state they guarantee satisfaction and that if you don't like your selection or certain cuts, they can modify your order once. The catch?
1) You have to spend 3000$ on their meat minimum for the first 12 months (up to 18 months, that's as long as they guarantee their meat to last in a freezer).
2) They encourage you to select as many types of meats as they can. This probably ensures that you don't only select filet mignon.
3)They do not sell meat per pound. They chose how much meat you get and in which proportions (so you may get as much pork, as lamb and beef).
4) They do not give you details of what you will receive until you receive it. They say that would be too complicated. Hence you have no idea how much you pay per lb of each type of meat.
5) They are anxious to make you sign, give a deposit on your credit card right away, that it can be canceled and reimbursed later on... (a sales tactic I really dislike).
Conclusion?
1) It would cost us 14$ per pound of meat regardless of what meat you get (chicken, lamb, ground pork or beef... This seems excessive even for organic stuff and even if we included stuff like salmon, lamb, filet mignon... I am always weary of companies that do not give me details of what I am buying. After all, when you buy a 3000$ item, don't you want to know it's specifications to shop around and get the best price? How is meat any different? Wouldn't you need to know how much you get of what before signing on the dotted line?
2) You clearly pay for your free freezer on loan if you pay so much for your meat especially since they remove the 150$ bonus if you take the freezer!
3)THIS IS MY PERSONAL MOTTO: NEVER EVER sign a contract right away when it involves large sums of money. Always take a minimum of 24 hrs to think about it (that was my dad's advice, thanks dad!) . Any business that tells you that you won't get the same price or promotion the next day or week does not deserve your patronage (this was not the case here but I have seen this with gyms). This 24 hr window to think can save you many headaches, what seems like a good idea at the time often is not when you think about it longer.
4) My wife's take on the issue: Doesn't this take the fun out of cooking, choosing a recipe and going out to buy exactly the cut that you want for a dish? Isn't nice to chose the specific piece of meat that you want?
So, I am not saying that these businesses are bad, only that my analysis indicated that this particular way of operating was clearly not worth it for my wife and I. As I always say, you need to do your own research of course to make up your own mind.
Here's an article that describes who the alleged fraudster was and what he did:
Here's some basic tips to protect yourself against financial advisors fraud ..
dear readers,
a reader, who has been the victim of a fraud from a now convicted (and penniless) stock broker , sent me an email yesterday seeking advice on what to do to recoup a fairly significant amount of lost RRSP money. Although I've suggested a few things (contacting the provincial securities commission, reading the Naked Investor , going to the small claims court to get some money back, banding with other victims, etc.) I fear I am really out of my league here. Apparently, the broker was an independent one associated with a big company. So the company has no fault at all here. All the communications were from that big company letter head though. Is that a new trick from the financial corporations to pass the blame down?
What advice can you give that reader? For now, he's asked me, understandably, to remain anonymous, but I can relay special advice that you don't want published on this site. Otherwise, please leave comments here.
thanks
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Here's another good option I've received via email (I'll keep it anonymous until the sender gives me the green light to publish his name)[...]there are a couple of options. One is the Ombudsman for Banking Services and Investing (OBSI), while the other is the Canadian Life and Health Insurance OmbudService. It’s not clear which is the right office, given that investments are the problem here while at the same time GWL is an insurer. I’d try OBSI first. Note: these services are by no means a sure thing, but they are a no-cost way for individuals to seek redress from financial firms.
As I'm recovering from an overdose of food, I can still say I haven't feel so relax in a while about this season of the year ... the trick? Since there are no recent kids yet in the family, we were able to try the gift exchange: each draws a name and gives his/her gift to the person picked. The gift amount? Twice your age! (with an exception above 79 years old :-) So we really cut down on the number of gifts and the total cost of gifts. Which obviously reduced the amount of shopping. And that's a good stress reducer. We also spent much less time unwrapping gifts and more time enjoying each other's company. It also starts being more about giving and being creative since we have to think about a good gift for that person and we can't ask for ideas. Xmas had become a shopping list for electronic gizmos. I think everybody agreed that this was a great idea and made the evening very enjoyable. The best part of this, is that with the money saved, it frees up more money to give to charity. (Isn't that a nice concept? Less for the big stores, more for United Way!)
In my end of year ritual of reviewing all my investments, I think I've rediscovered the power of basic investing :-) Despite all my fancy transactions and buying in gold, energy, international funds, I have to admit that my best investment so far has been in Royal Bank. Since I bought it (July 2005) it's up 42% not counting dividends (which have been raised a few times). It's only a fraction of my portfolio though.
I'll have to reflect on that, but it's inspiring me a new year resolution:
Invest in stocks I know that are easy to understand (definitely from the "book" of Peter Lynch). Go after proven results rather than big promises. Buy companies that have a strong brand (sounds like Warren Buffet's advice :-) Keep diversifying, but not by any means possible, only when it makes sense. Do not scatter my investments all over the place, select only the best stocks. Focus on value investing but not to the point of ignoring good investments like Royal Bank (which is not a cheap stock to buy). Resist the temptation to buy things that are too good to be true (e.g.: high yield income trusts).
Here's an excellent article (part 1 is here) on the Smith Manoeuvre to make your mortgage payments tax deductible. It's on the MillionDollarJourney blog. It's not the first time somebody talks about it, but he's got a good summary and it's a really underused tax optimization technique.
Because when sentiment becomes extremely positive on an asset, your risk of loss increases, since almost everyone who wants to buy has already done so. Cautious investors should step aside or reduce their exposure. On the other hand, extremely negative sentiment can be the precursor to a rebound in price. People are so down on the asset that even a small piece of good news can set off a wave of buying. Thus, bargain-hunting investors search for value among despised assets. Not every one of these assets will rebound of course, but some of them will do so spectacularly.
I was rereading my last Moneysense issue (December 2006 / January 2007 : Investing 2007 The top 200) and I stumbled on the Bonus Supplement "Donald Trump and nine other celebs share their #1 tips for success". I understand they need to sell issues and Trump helps do that but I really think that a bankrupt empire builder is not the best role model for the average person interested in personal finance. My favorite quote from this article:
[...] most people would rather invest in a great building than a dilapidated duplex on a dangerous street. With the skyscraper, if you hit, at least you hit big. And if you don't hit, what's the difference between losing $100,000 or hundreds of millions of dollars? Either way you've lost, so you might as well have really gone for it.That has convinced me to sell my house and buy the Scotiabank Place. :-)
In you short sell a stock, your broker will lend it to you. The stock will come from the brokerage's own inventory, from another one of the firm's customers, or from another brokerage firm. The shares are sold and the proceeds are credited to your account. Sooner or later you must "close" the short by buying back the same number of shares (called covering) and returning them to your broker. If the price drops, you can buy back the stock at the lower price and make a profit on the difference. If the price of the stock rises, you have to buy it back at the higher price, and you lose money.
JP asked me:
"Why when big companies announce important news that affect the stock price, the price move has already occured?"
A very funny story: the Congress in the US thinking about taxing The World of Warcraft and other online games assets!
Also: what is our Canadian government doing about online gambling profits? That's a lot of money going under the radar!
I've finally found the confirming argument I was waiting for(KimSnider.com) ... most financial advisors are not worth the price you pay them in hidden commissions. Better to do it yourself (if you are ready to learn about investing).
Canadian Dream has an interesting post that disagrees with the notion that an RRSP is the ultimate retirement instrument. I think he has a good point (using it for early retirement). I still think though it's worth maxing out RRSP contributions.
Which reminds me of a very cool link for those who wonder whether to pay down their mortgage or contribute to an RRSP.
Canadian Capitalist has a very good collection of links today.
Following up on my last flash update about Skype Out... I just went on a business trip and where I used to have to get people to call me to avoid hotel phone charges, I just now use Skype. I had my laptop and connected to the hotel free wireless connection. Then equipped with my Linksys CIT 200 Skype phone
I could easily hold all the free conversations I wanted. Next year, it will cost 30$ a year to make free domestic calls, but it's only about 2 cents a minute to make calls in North America. I also use Skype to call my brother in California, whether on his own Skype or his cell phone. He's actually using Skype as his only phone service! He got a SkypeIn phone number for about 20$ a year and he receives normal call. He has a Linksys phone too and he says that for the last month, the calls quality has been awesome. He's saving big bucks with that solution. New Skype phones are actually available that don't require your computer to be on all the time, they connect directly to your router (or any WI-FI access point with this NETGEAR phone). Technology advances like that always amaze me :-)
I went to Loblaws today to buy a few items. I noticed a machine that I had not noticed before, a coin converter...
I brought my loose change to the store and felt quite excited when the machine took it and handed me 148$!! Those pennies in your piggy bank might add up to more than you thought!!
So for those of you who don't bother keeping your pennies at the store when the clerk hands them to you, think twice, they might pay you a nice meal out or more money aside for rainy days.
The machine in question does charge a not so small fee (9.8%). But think about it this way, if you leave that money at home in your piggy bank, you are not gathering the 2% after-tax interest that you could easily gather if you placed it. And your money depreciates because of inflation (approx. 2%). So you can actually be losing 4% a year if you leave it at home. You would make up for the fee in about 3 years of leaving your coins untouched. So the fee for the change conversion can be money well spent.
If you think about it though, the government should be sponsoring those machines to lower the admin fee. It costs a lot for the Canadian Mint to produce all those new coins every because people keep coins at home. The New Zealand Bank even concluded that it costs 1.6 cent to produce a penny! If you're really motivated, read this article for more information on the costs of having to manage pennies.
hi,
following my story on my encounter with Investors Group, a reader sent me an email asking:
"My friend works for Primerica and wants me to buy mutual funds from him. [...]Is that a good idea? [...]"I've done some research and found the following regarding their fees structure (multiple fees!):
PFS Investments Inc. (“PFSI”) endeavors to collect a mutual fund support fee, or what has come to be called a revenue-sharing payment, from the fund families we offer to the public. These revenue-sharing payments are in addition to the sales charges, annual service fees (referred to as “12b-1 fees”), applicable redemption fees and deferred sales charges, and other fees and expenses disclosed in a fund’s prospectus fee table.
Here's an article from Business Week about how to invest in a weakening economy and dollar environment. They obviously meant it for the US economy, but I think it still applies very well to the Canadian case too. I've just read an articlein Investors Digest saying the Canadian dollar might have peaked ...
Here are the five areas they suggest to seek refuge in:
1. U.S. Large-Cap Stocks
Buying large cap canadian AND US stocks is a good option in my opinion. The bank and insurances companies are an obvious buy. US stocks like General Electric or even Warren Buffet's darling Coke are good defensive buys as well. Interesting quote:
"It's a positive for the market, not a negative, as long as it's orderly,"
2. Foreign Stocks
Buying foreign stocks is a hedge against a falling currency. Make sure, as they point out in the article, not to use currency hedged funds which would beat the purpose!
S&P's Young suggests allocating 15% of the equity portion of a portfolio to
developed foreign markets, represented by the iShares MSCI EAFE index (EFA)
ETF, along with a 15% weighting in iShares MSCI Emerging Markets (EEM)
3. Foreign Bonds
Having bonds in Euro and Yen can be a good hedge against a falling dollar.
Kokernak uses institutional shares of Pimco Foreign Bond (Unhedged) (PFUIX),
which invests in government-issued overseas bonds. The fund posted a 5.76%
return this year through Oct. 31. T. Rowe Price International Bond (RPIBX)
also provides foreign currency exposure and has a three-star Morningstar rating.
4. Energy
If the dollar goes down and interests rate and inflation go up, it would make the energy price go up which would be good for commodity stocks.
5. Basic Materials
Don Martin, owner and founder of Los Altos (Calif.)-based Mayflower Capital
recommends investing in base and precious metals—and the companies that make
them—along with foreign securities, oil, and natural gas.
Putnam's Makino
favors Canadian mining company Teck Comincko (TCK),
which produces copper, nickel, and zinc. "They're about 8 to 9 times earnings,
copper is only marginally off its all-time highs, and the supply-demand
situation looks very positive," Makino says.
Some people want to retire as soon as possible, other can't quit work (article in the G&M). With the new Ontario law that prevents forcing people to retire because of their age, it really opens the door to somebody working forever. I think that's great. If you like your job and you can still contribute to society, why stop? Especially if there are not enough new grads to fill in the void!
What would you do if you knew you wanted to work for a very longtime? Would you be putting all this money aside in your RRSP? Or you would be spending it to the last dime as it comes in?
I personally still like the early retirement approach of Canadian Dream.
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Weekend entertainment: here's a very simplistic yet good to keep in mind review of year end to do personal finance items on YOUTUBE. (From an american TV channel, but it still applies to us in Canada)
It took me a few years to discover this (maybe because the insurance companies don't advertise it): you can actually pay your home and auto insurance by credit card (CIBC AeroGold in my case). The downside if having to pay in one installment. So I'm not sure if it's worth it or no (maybe not if you can place that money in a high interest saving account instead). Do you know of any insurance company that would take the payments monthly from a credit card?
Each year
Here are the stocks that get an A grade on both the VALUE and GROWTH scales: Kingsway Financial , E-L Financial , Algoma Central, Goodfellow, IPSCO, Manitoba Telecom and Russell Metals.
I've looked at one of these stocks in more details: Kingsway Financial (KFS.TO).
What do they do?
KINGSWAY FINANCIAL SERVICES INC. is a property and casualty insurance company operating in North America. The Company offers non-standard automobile insurance and other specialty products through its wholly-owned insurance subsidiaries in Canada and the United States.
Q3 2006 compared to Q3 2005
---------------------------
- Net income increased 19% to $37.4 million compared to $31.3 million
- Operating earnings(1) increased 37% to $31.9 million
- Diluted earnings per share increased 20% to $0.66 compared with $0.55
- Combined ratio improved to 97.2% compared to 97.8% in Q3 2005
- Underwriting profit improved to $12.7 million compared to
$10.0 million last year
- Gross premiums written increased 7% to $483.9 million
- Investment income increased 40% to $31.5 million
- Annualized return on equity of 16.8%
- Book value per share increased 18% to $16.14 from $13.65 at Q3 2005What about their outlook?"Revenues and earnings continue to grow in line with our expectations," said Bill Star, President & Chief Executive Officer. "Strong operating results, in particular, from our Canadian operations and increased investment income have resulted in a solid third quarter and first nine months of 2006. Our growth in earnings and excellent return on equity have also increased our capital strength, while reducing Kingsway's operating leverage. Market conditions continue to be competitive, but we are starting to see indications of improvements, particularly in the U.S.. Consistent with our operating strategy, we expect to continue to seize opportunities for profitable growth as they arise."
In a previous post about Investors group, I've recommended to go with a fee only financial planner. I personally try to do everything myself. But I do not recommend this for everyone. It's very risky since it's easy to get caught in the hype on some stocks and trends (see income trusts bust!). I've been very prudent and lucky so far in my investments but I still managed to make a few bad decisions. Like buying energy stocks at the top of the curve! Or buying a small video games software company that went bankrupt (that was with my play money though).
Here's an interesting third-party quote on this from Investopedia:
Conclusion
The fee-only structure of compensation perhaps allows investment professionals to do well for themselves while taking their clients’ best interests to heart. These types of professionals allow investors to access professional expertise while gaining independence from compensation-based advice.
It should be noted that commissioned services may very well be the most suitable for some investors. Particularly in the case of a smaller portfolio where less active management is required, paying the occasional commission is probably not going to be the downfall of the portfolio’s returns over the long-term. Yet for anybody who has a very large portfolio to manage, whose investment objectives necessitate frequent trades and active asset allocation, the rise of the fee-only investment advisor is akin to portfolio nirvana!
A lot has been said recently about the new income splitting possibilities for retired spouses. I think it's a great new fiscal tool that people should take advantage of. Consult a tax specialist if you're not 100% sure of how it works.
It's important to know that revenues from an RRSP are eligible as well.
But to help you, Ive collected a few links on the topic:
Excellent article from CBC on income splitting for senior citizens.
Here's a good article in the Toronto star about income splitting for Canadian retirees.
Obvious but good to keep in mind, couples with largest income difference will benefit more from the National Post.
Globeadvisor has a story on the topic as well. Simple and clear version.
Just for fun I've decided to use Google Book Search for old books about personal finance and see what our predecessors had to say about personal finance (the quotes are linked to URLs on Google Book for proper quotes references). I've looked for quotes that were highlighting the importance of personal finance knowledge. The search was not as fruitful as I'd hoped but much better than if had to search books in a regular library... Take this with a grain of salt as it is slightly more entertaining than informative. Basically I just wanted to say that personal finance has always been a subject that matters and it is today more than ever.
1871
"So we ask every Antioch freshman to take a course in personal finance. At the
beginning of this course each student brings to class a budget of his purposed[...]"
1902
"But his personal finance causes a pitying smile whenever mentioned. Even his own
letters show that he was careless in keeping accounts[...]"
1935
"Our American passion for secrecy in matters of personal finance has always seemed
to me absurd and unreasonable"
1936
"Personal finance information, attitudes, and skills must and should be learned
while a person is young. Young people need to develop basic understandings ..."
1940
"CONSUMER CREDIT INSTITUTIONS: The growth of consumer financing ; charge accounts and mercantile credi; the doctrine of usury; pawnbrokers and their operations; the activities of the loan shark; remedial loan societies;"
1950:
" NOT EVEN a lawyer can hope to know all the points of law which might have a bearing on his own personal finances."
It's the weekend. I can't think too hard :-) So here are a few disparate thoughts vaguely related to personal finance. I've received my latest copy of the MoneySense magazine yesterday. It's always a great moment for me :-) There is always a treasure trove of information in there. I really recommend that you subscribe to it for good unbiased advice on personal finance.
This month they recommend a blog by Paul Kedrosky. There is also a very wise book recommendation for investors: Annual Reports 101 by Michael Thomsett. To be a self-investor, you really need to be able to analyze how a company is doing.
I've also started reading the book Winning by Jack Welch. I'll let you know how that goes ...
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My wife has a tip for you to save money: stop buying books, go to the the library... (If you live in Ottawa, go here )
