Canadian Money Review

my worst financial advice!

2008-07-21T20:05:00.002-04:00

The Big Cajun Man has challenged some bloggers he knows to describe their worst mistakes in advising people on their finances.

Here's a few I made myself:
- Advising people with their finances! What do I know about finances, really? If something were to go bad, it would really make my life miserable! Nowadays, I try to repeat advice from the pros and stick to he obvious (minimize your fees, diversify, etc.).
- Advising somebody when to sell a stock ... the person did sell them with a small profit but the stock went much higher after!
- Telling friends and family to open direct brokerage accounts! It feels like suggesting to people that they should buy a plane for their personal travel even if they don't know how to fly it ...
- Giving stock advice taken from a newsletter to friends and family without proper disclaimer that this was still risky!

from Men's Health: why you don't need a debit card

2008-07-04T22:58:00.001-04:00

Here's an article in Men's Health that confirms what I always believed: debit cards were invented for the benefit of the banks, not the consumers: http://www.menshealth.com/fitinvestor/carmendebit.html .

retire sooner

2008-06-24T21:36:00.002-04:00

I found these 6 rules to retire sooner from MSN.CA

mortgages: variable or fixed (4% vs 5.15% !)

2008-06-16T23:06:00.002-04:00

I was talking to my mortgage broker today as I'm getting ready to renew my mortgage later this summer. She recommended again (I said no the first time around for my initial term) to go with variable. As I was browsing the Internet to find more info, I stumbled on my RSS feeds and this info from Larry McDonald was just under my nose:

But academic studies, notably those from Professor Moshe Milevsky at York University, show that variable rates on mortgages are better over the long run. You will save on interest costs at least 75% of the time, and knock a year off your amortization period.

That's very interesting information. What I'm wondering though is what are the odds that in the next 3 to 5 years, the variable rate goes way above the 5.15% I could lock in now for 5 years.

I think I will take the chance this time with variable if more research proves it's a good option. For example, I'll double-check what would have happened if I had taken variable 5 years ago instead of locking at 4.49% for a fixed five years term.

giving Etrade a break: funny ads

2008-06-16T22:28:00.000-04:00

I've complained about Etrade before, but guess what ...I'm still with them! They've improved their service and their security tokens are still a very safe feature.

So I thought they've earned a break from my previous 'bashing' ... here's a link to some funny ads they've put out: http://www.youtube.com/etrade

nothing new to report :-)

2008-06-09T20:22:00.002-04:00

I've been pretty busy at work and at home with the baby so I haven't been blogging too much as you've noticed :-)

A quick thought though: one of the funds I own, CHOU RRSP has been going down this year. Since it's a deep value fund, I decided to buy some more since Francis Chou is currently looking for bargains. If I buy XIU right now (the 60 biggest companies of TSX index), I'd buy into a lot of oil related speculation. I think it's good to own uncorrelated assets.

a sucker's rally?

2008-03-26T21:45:00.001-04:00

an interesting quote from Business Week today (which speaks by itself!):

Stocks: Beware the Sucker's Rally

Have equities finally hit bottom, or is the market's recent rebound a trap for overeager investors?

Jim Leech "I think fear has just moved so far" (Globe and Mail -Derek DeCloet)

2008-03-23T19:54:00.002-04:00

Derek DeCloet from the Globe and Mail interviews Jim Leech ("To the public, he may be best known as the private equity deal maker who snagged BCE last year, or perhaps as the new head of the Ontario Teachers' Pension Plan") who is saying that people might be overeacting to the current economical bad news.

I would tend to agree with him except for one thing: the current extent of the credit mess is not fully known yet and many more surprises might lurk ahead. It might be prudent to use these opinions as a starting point for resuming investing in the market (which a lot of people I know have stopped doing "until things get better") but buying by small chunks over a period of time. If the markets go up, then you will still profit and if they go down, then you have money left to buy stocks on sales ...

renewing my mortgage: shopping for the best rate

2008-03-16T10:02:00.002-04:00

I've been lucky to get a 4.49% 5 years fixed mortgage rate about 5 years ago. As I'm due to renew in August, I'm starting to follow the rates closely since I should be able to lock one in soon (in April). The last time I talked to my mortgage broker, before the recent 0.5% drop in rates, the best I could get was 5.7%. I also checked with my current lender, MCAP, and they would offer 5.8%. I'm pretty sure they will match the rate if my broker asks them. I'll have to check again to see if these rates have dropped. I'm not a big fan of variable rates especially since I've seen how some were stung by those over the last 5 years.

This post should also serve as a reminder not to renew automatically with your current institution but shop around to get the best mortgage rate ...

___

Who is your mortgage provider? Are you satisfied with them? Have you shopped for rates recently?

no TFSA?

2008-03-14T21:52:00.002-04:00

Larry McDonald tells us why we might never see TFSA in action ... I like his idea of reduced income tax insteas. The only thing I like about TFSA is that it rewards investors instead of spenders...

too much snow in Canada: no more shovels!

2008-03-14T07:59:00.002-04:00

I know a few people who tried to buy a shovel recently only to find that all stores seem to be sold out. I had the same experience when trying to buy a snow roof rake. So I went browsing on the good old Internet and found the Sno-Knife. I've ordered it and I will try it on my roof where snow has accumulated to 4 feet high in one area! I'll let you know if it works well or not.

gas prices keep going up!

2008-03-12T20:04:00.002-04:00

Gas prices are going up again... Although I don't regret buying my all wheel drive car (very useful and safe this past winter!), I wish the automakers would speed up the switch to more fuel efficiency and make all cars hybrid for example. That would probably bring prices down because of economy of scale. Then fuel efficiency would be less of a choice between safety and economy.

how to lose an advertiser in 30 days

2008-03-12T08:47:00.001-04:00

Redflagdeals will not be a sponsor anymore ... I think their cost per click was too high with this site. Which makes me realize that a lot of the advertisers on Google Adwords must not be getting their money's worth either ...

Thanks to Redflagdeals for the opportunity trying out this new ad concept ... back to just Google ads.

ps: don't be sorry for me, I am really not doing this for money :-))

RESP bill: the conservatives don't want it!

2008-03-11T20:01:00.002-04:00

the conservatives are trying their best to kill the bill ... after playing nice with the Senate, they are now making it an election matter

I try to avoid political statements, but let's just say they won't get more sympathy from me after that ...

[update] RESPs on steroids!

2008-03-06T20:33:00.004-05:00

A pretty amazing private bill was voted today in Parliement by all parties (except the Conservatives in power!). It basically gives a tax break for RESP contributions up to 5000$ a year. I've had a quick look in the Canadian PF blogosphere and didn't see that fact reported much. It's amazing because:

It's another good news after the recent big TFSA announcement.
It's a bill promoted by a backbencher MP
It was approved by the opposition without the ruling party's consent
It will help promote more investment in education
It's another tax break we are getting (the GST cut being another example)

update (March 7): Tories want the senate to stop the bill!

follow-up on contractors in Ottawa: Tony's snowblowing finally charged for fraud

2008-03-05T20:56:00.003-05:00

A quick update on Tony's snowblowing on CFRA. I had talked about that company in this earlier post. The police has charged them with 34 counts of fraud. It's comforting to see that the bad guys do get caught sometimes.

new federal budget: a huge gift for investors

2008-02-26T22:00:00.003-05:00

Canadian Capitalist has the primer on the new federal budget windfall available in 2009:

Tax-Free Savings Account (TFSA)

His take on it:

My personal opinion is that the TFSA is a vast improvement over any half-baked scheme to defer capital gains.

My take on it? It's a great measure for investors with fresh money to invest. I'm not sure what it does for low income families. I'd be curious to see what measures in the budget were targeted for low-income families if any.

Business Week: Top International Dividend Paying Companies

2008-02-24T11:02:00.003-05:00

Business Week has come up with 20 stocks of international companies (that trade as ADR) with good dividend payments.

Here's the list (go to their site for details):

Allied Irish Banks	AIB
AstraZeneca	AZN
AXA	AXA
Banco Bilbao Viscaya Argentaria	BBV
Banco Santander	STD
Barclays	BCS
Chunghwa Telecom	CHT
Diageo	DEO
Enel	ENSTY
France Telecom	FTE
Genesis Lease	GLS
ING Groep	ING
Lloyds	LYG
Nissan Motor	NSANY
Royal Dutch Shell	RDSA
Sanofi-Aventis	SNY
Taiwan Semiconductor	TSM
Telecom Italia	TI
Telefonica	TEF
Total	TOT

Bank of Montreal announces 325M$ write-down ; more bad news for the banks

2008-02-19T22:57:00.003-05:00

The banks debacle is definitely not over. BMO just announced a 325M$ write down. My guess at this point is that other banks will announce new write downs in a not too distant future.

That coupled with more and more recession talk in the US does not spell good news for short term investors. Long term value investors will see a good opportunity to buy stock on rebate ...

Going back to the article, here's a scary quote on how BMO is playing the SIV game:

Bank of Montreal also said it would provide financial support capped at $11
billion for the structured investment vehicle Links Financial, and as much as
€1.2 billion, or $1.77 billion, for Parkland Finance. The assets of both SIVs,
which sell short-term debt and invest the proceeds in higher-yielding
securities, have been reduced since July 31.
"Rather than putting the SIV
issue behind it, today's announcement sets the stage for it to migrate onto
BMO's balance sheet over time," a Blackmont Capital analyst,. Brad Smith, said
in a note, in which he downgraded the stock to "hold" from "buy". "This action
increases the potential for additional losses should asset sales prove more
challenging than currently anticipated."

I took the jump: a whole new layout for the blog: tomatoes and flowers welcome :-)

2008-02-17T22:19:00.003-05:00

After having changed my blog title, I've finally switched my layout. I hope it looks cleaner and helps readers find that they want fast as well as make it easy to read the posts.

What do you think?

Are you suffering from a bad case of mental accounting?

2008-02-16T00:35:00.005-05:00

Thanks to The Canadian Money Reviewer for the opportunity to guest post. My handle is Free@45 and I mostly write about Educational Technology topics but have been firmly focused on finance, financial goals and wanted to share a few tidbits about what I have learned.

Is Mental Accounting Negatively Impacting the Growth of Your Investment Portfolio?

I have recently enjoyed the book “Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons From The New Science Of Behavioral Economics” by Gary Belsky and Thomas Gilovich. One of the many interesting topics that were covered in the book was the idea of “mental accounting.” The concept outlined by Richard Thaler in 1980, attempts to describe the process whereby people code, categorize and evaluate economic outcomes. Mental accounting theorists argue that people group their assets into a number of non-fungible mental accounts.

Let me try to explain how I understand the concept and how this might be helpful or harmful to you:

So you receive a $5000 inheritance from your grandmother who grew up in the depression. You stick the inheritance in an account that is very low risk – say a GIC or High Interest Savings account because you feel that your grandmother wouldn’t have taken on higher risk with that money, so you shouldn’t either.

Another example is putting money inside an account that is mentally accounted for as a vacation fund. You put $300 there, month after month, over a year; all the while carrying a Credit Card loan of $2000 @ 18.5%. If you had not mentally accounted for this money as a vacation fund, you could pay off the credit debt and then start saving for the vacation.

Mentally accounting for money in the last two examples leads to both an ultra-conservative approach to investments and an inefficient debt repayment strategy. How might mental accounting help you?

Well, I am a recent convert in saving for bigger purchases, rather than using consumer debt to pay for them. Don’t buy it if you can’t afford to pay for it right away. We don’t carry any significant consumer debt, a couple hundred on a Capital One (Prime + 0.9) credit card. This was not always the case, but we have worked hard in order to make it the case. My family is in maternity leave mode, but before our second child was born, we calculated what type of money we would need for the extended maternity leave and were able to save it. So when my wife goes back to work we should not have any consumer debt that had helped pay for the maternity leave. It also means we will be able to shift back into investment mode when my wife starts working full-time again.

Having calculated our retirement numbers for age 45, 50, 55 it gives us a financial goal to aim for. It also helps us to determine what amount that we would need to invest in order to achieve these numbers. I don’t think we need to squirrel away every dollar into investments, if we are incurring significant consumer debt to do it. Also, we need to balance the needs of today against future needs.

Now, if I were take mental accounting at face value this last example could follow along the first two examples as a conservative use of money that could be better directed into a riskier investment with a better return, subtracted from the rate of interest from a line of credit. Still, I need to create a balance, and as long as our investments are on track, why not save for those big purchases? It might also help avoid over spending, which can easily occur when buying using credit. This might balance out any gains made from a riskier investment.

Maybe you have a different interpretation of mental accounting? Love to hear your opinion.

Reference: "Mental accounting - Wikipedia, the free encyclopedia." Main Page - Wikipedia, the free encyclopedia. 14 Feb. 2008

Photo courtesy of charlie_cva

Thanks for reading Canadian Money Review

Moneysense top Canadian mutual fund for this year: good for your RRSP and for your conscience?

2008-02-14T11:25:00.005-05:00

The top rated Canadian Equity Mutual fund this year in the Moneysense Honor Roll 2008 is "Ethical Canadian Dividend Fund". They have a 5 years annualized return of 'only' 19.12%, but they top the chart with a risk-adjusted return of 34.01%. What caught my attention is that it's an 'ethical' fund. Is it just a fluke or is there a new trend with socially responsible investing that could be leveraged to get better returns?

Here's the fund description found in Morningstar:

"The investment objective of the Fund is to maximize returns primarily through a combination of dividends and capital growth from Canadian companies. The Fund follows a socially responsible approach to investing. The fundamental investment objective may only be changed with the approval of a majority of unitholders at a meeting called for that purpose."

web of frauds (part 2)

2008-02-12T23:02:00.003-05:00

I've written recently about a site that copies my blog to generate adsense traffic. The funny thing is that since I wrote the post and contacted the registrar (Namecheap) of the fraudster (STREETSTOCKINFO), the offending site has removed all my content and switch to some Chinese newspaper! Now I've found another copycat: www DOT whytradeoptions DOT com . I've contacted Namecheap.com again since they were helpful last time. If that does not work, I'll try the Google DCMA complaint process.

----
thanks for reading Canadian Money Review

web of fraud! do any of you bloggers know something about this?

2008-02-10T21:22:00.000-05:00

I found an amazing web of fraud this weekend: there is a site that is only dedicated to copying all my blogs and that adds the keywords 'online stock trading' to the posts. The site is "www DOT streetstockinfo DOT com" . I guess they are trying somehow to trick the search engines. By digging some more, I've only found that it is a privately registered site. I've written to the domain registrar to see if they can do anything about. The real scary part is that I've searched references to that site and found "fdafct DOT org" pointing to it (and the domain registration email from that site is not valid). And looking up that last site returned tons of links. So there is a web of fraudulent links out there.

Have you ever experienced anything like this? Is there anything one can do about this?

---
thanks for reading Canadian Money Review

Save some money: How to be an instant handy man around your house (thanks to MensHealth magazine)

2008-02-09T11:24:00.001-05:00

I've always been lucky and had my father and some friends to help me out with house repairs. I say lucky, because as you all know, a plumber can be very expensive (as are his colleagues in other fields). Maybe though it's time that I switch my keyboard for a hammer! Where do I start? I found this interesting article in MensHealth describing 16 quick tips to fix many things in a house. They're not all good tips (why did they throw one about wireless routers?) but they're worth a look ...

My favorite tip from the list:

Fix a hole in drywall
1 Cut a square or rectangle at an easy-to-measure size—like 5 by 5 inches—around the hole with a utility knife, says former Sex Pistols front man John Lydon, who knows a few things about punching (and fixing) walls. Be sure to expose half the width of the closest stud.

2 Cut a new square of drywall to fit. Screw the patch onto the stud, and cover the cracks with a piece of joint tape. Coat the entire work area with a thin sheet of joint compound.

3 When dry, sand the area with a fine-grit sandpaper and apply paint primer over the patch. If you still see seams, coat with more compound and sand again.