the lencurrie life » stocks

Do Your Research Before You Buy Your Stocks

lencurrie — Tue, 27 Apr 2010 13:02:55 +0000

The latest book I’m reading “One Up On Wall Street” is a great read, I’m not quite done of it yet with about 100 pages left, but it’s a great companion book to my other favorite finance book “The Wealthy Barber”.

The reason that I like it so much is that it fills in the gap in how to research a great company and gives great explanations as to what some of the confusing terms are when you’re looking at a stock. I will do a bigger review later on, but I though i’d comment on the fact that most people (including myself) will do more research into that new laptop or iPad or whatever before we look into the ‘hot tip’ of a stock company your boss just told you about, or the extremely undervalued company which is on sale right now and about to move higher.

With the Internet at our disposal, investors are armed with almost too much information. You can research and develop ideas on absolutely everything, from the latest technology put into the 4g iPhone to nuphedragen reviews or some other drug you want to use to lose weight:P

The point I guess I’m trying to get across is that before you go and invest in a stock or any investment. Do your homework. If your goal is the “long-term”, than it makes sense to spend at least a “short term” researching what you’re investing in.

How to make $8,000 from a one-time $10,000 RRSP contribution

lencurrie — Mon, 26 Apr 2010 00:57:58 +0000

I know tax time is behind us.. but you know, I just found this blog article and decided to write about it. I haven’t written many financial posts lately and this is one that I didn’t want to leave till the last minute.

It’s really a straight forward concept, but I’ve never really thought of it this way.

If somehow you ended up saving, or have $10,000 to contribute to your RRSP – instead of taking the refund (say you’d get back $4600 for that contribution) and spending it, you turned around and contributed it back into the RRSP again. You would then have $14,600 in your RRSP – AND you’d get back another $2,116 approximately (if you’re in the top tax bracket). That year you put that into the RRSP as well.. you’re now up to $16716 in your RRSP – and you have yet to re-contribute anything! This year, you get back $973 from the tax man for that refund and then you put that back in again.. you see where I’m going with this?

Eventually you’d have over $18000 from your original $10,000 working for you in your RRSP without having to anything – and hopefully that amount would be growing as well since it’s invested properly…. right??

To recap the years:

10,000 in refund of 4600
4600 in RRSP, get back 2116
2116 in RRSP, get back 973
973 in RRSP, get back 448
448 in RRSP – buy dinner with refund

So let’s see now, $10000 year 1, $18000 year 5… hell that’s a 12.5% growth rate without making an investment at all.. not bad eh??

I’ve actually spoken to a few friends about this and they all agree that this is what was meant to be done with RRSP returns.. odd I never thought of it like this.. I know I have a LOT of room for investing into my RRSP – and I’m seriously debating going this route to maximize the return on my money.

Ladies and Gentlemen, we are at Par – And no, not talking golf.

lencurrie — Tue, 06 Apr 2010 19:29:42 +0000

I knew this day would come soon, and sure enough.. today is the day. The Canadian Dollar is at par again with the US Dollar. It got pretty close back in mid-march as I posted before, but today it breached (although as of this minute it’s back up over just by a fraction of a cent).

Should be interesting to see how fast all the major companies drop their prices to reflect the difference between the US and Canadian markets.

Start Saving Money Now! I Will Teach You How (Part 2)

lencurrie — Fri, 12 Mar 2010 20:58:03 +0000

You Can Save Some Green.. Definitely

So in part 1 of this series I wrote about basically how easy it was to open up an account with Questrade, and told you step by step on how to go about doing it. In this part, I’m going to show you how to fund your account, make it automatic and how to start buying mutual funds.. whether it be on a monthly, bi-monthly, yearly basis. I mean unless you’ve got some loose diamonds hanging around which needs selling, you’re going to need to save. I’ve already talked about dollar-cost averaging before, so if you haven’t read that article.. it’s a pretty good primer as to why regular contributions and purchases are better than all at once buying.

So that’s what we want to setup in this step, to make it as automatic as possible. After you get your account setup, if you bank with any online banker which you can pay bills with – you can setup Questrade as a payee and set up an automatic transfer.

It can be as little as $20 a month but just so you know, the minimum required to start trading I believe is $1000 for a new account. This is fine really, as if you to set up an automatic transfer for say $50 a month or $25 a check, it would start building up and building up, and you wouldn’t even realize the money was gone out of your bank.. next thing you know, you’ve got $1000 to start investing! Most of the major banks offer all kinds of different pre-authorized transfers or bill payments, you can choose whatever you like.

Personally, what I find works for me is to have $50 transferred out the day I get my paycheck deposited into my account, then I don’t miss it.. it’s gone before I even knew I had it – which makes “missing it”, a lot easier as I can’t miss what I didn’t know I had!

So now that we’ve started that, and if you’re actually going to take the plunge and try this out, I suggest you start taking a look at a series of mutual funds. Check out my blog article on why you should buy your Mutual Funds with Questrade.. trailer fees alone could make the difference, I know it did for me.

Currently, Questrade doesn’t offer a regular mutual fund purchasing plan yet. I actually just received word this morning they don’t offer it – but what I like about their service, is that they said “yet”. I can’t imagine it will be too long, especially with others asking about it.

Ironically enough, they DO offer a pre-authorized cash contribution plan for Claymore Funds. This is sort of the exception to the rule I guess. With this setup you don’t even have to setup the automatic bill payment. You can simply fill in your banking information and they will debit your bank on whichever day for a pre-authorized amount which is even easier! I would certainly suggest you take a look at the Claymore funds – I wrote about one that which I thought was excellent (and provided monthly dividends) awhile ago as well.

Ok, so now that we have it all setup to withdrawal and funding the account.. our next step is to do the DRIP. (Part 3 coming up)

RRSP Deadline is soon, and I’m making some moves.

lencurrie — Mon, 22 Feb 2010 18:22:56 +0000

As the March 1st RRSP contribution deadline approaches, I’ve been relatively busy trying to get things in order.

I must say that Questrade has become a large reason why this is happening. I am re-discovering and really appreciating Questrades’ services lately. Firstly, I realized not that long ago that I can trade mutual funds really easily using Questrade. Second, and probably a bit more important – is that they have what they call ‘the Mutual Fund Maximizer’.

The Mutual Fund Maximizer sounds pretty stupid, but in actuality it can save you a TON of money. How? Read on my friend.. see, when you or I go the bank or a broker to buy mutual funds – you don’t actually think they do it for free do you? I’ll give you an example.. if I were to stroll into my Royal Bank and purchase a mutual fund for my RRSP account in the amount of say about $5000. The mutual fund which I chose has a MER (management expense ratio) of 2%. Part of that 2% (which comes directly from my $5000 investment on a yearly basis) goes right back to the company that holds the fund, manages the fund, and sells the fund.. forever!

This may seem fair to you, but not to me! I can understand why they would get it perhaps when I first bought the fund.. but why say, after 10 years of doing nothing.. are they still getting it?

Questrade does their best by rebating you or giving you the portion that they recieve directly (called trailing fees) into your account. After all, you’re doing all the work – why should they benefit? In most instances, the trailing fees are around 1% of the MER, but they have a pretty handy lookup tool where you can find out exactly what it is.

Just for an example – I just purchased $400 worth of RBC Global High Yield Advisor Series today. This fund has a NAV (current price) of $9.25 approximately, which is really irrelevant to me. I’m actually purchasing it by the dollar amount. The MER on this fund is 1.64% which equals to around $6.56 yearly. Ok, this really is a bad example as the amounts are so small, but add a few zeros into that number and you’ll see what I’m talking about.

Mutual Fund Maximizer

So if I had purchased this fund through RBC between the fund manager, and the bank – they would receive the $6.56 MER every year for as long as I owned the fund. With the Mutual Fund Maximizer however, I looked up the % I get back using Questrades rebate lookup tool, and it’s 0.720%. Which means I get $2.88 back into my account, which reduces the MER to 0.92%, and I’m only paying $3.68 back to ‘the man’.

This may seem like small potatoes to you, but let’s look at some different numbers.

Say for example I purchased $400 a month for 12 months for 10 years and the fund stays at $9.25. Quick math tells me that equals $48,000. If I were to have simply bought that fund through RBC or a broker – I would have paid $4329.60 to RBC during that time. If I purchased via Questrade the same way – I would only have paid $2428.80. Simply by using Questrade and getting back the trailer fees (which is what they call it) I saved myself $1900.80!!

On another note – I just opened up a TFSA account as well at Questrade. Why? Well.. if I do any regular trading.. why not?? The basic principle is that I can contribute up to $5000 a year and trade to my hearts content.. with no tax implications. If I made $20,000 the first year by getting some crazy options trades to come into my favor.. I can cash that out and pay no taxes on it baby! Sweet!! I also ‘believe’ that since the account was at $20,000 – I can re-contribute that amount as well instead of being held to the $5000 yearly limit. I’m not sure about that however… I can’t see myself going above the $5000 ‘play around amount’ for quite some time.

The way I look at a TFSA is exactly that.. a play around trading account, and I’m not funding it until my line of credit, and all other bills.. are looked after first

Want To Buy A 100x Leveraged ETF?

lencurrie — Thu, 19 Nov 2009 19:39:52 +0000

Make sure you read the whole post… found at Jason Kelly’s Blog.

look at the 3x.. now imagine 100x!!

Kelly Capital is proud to announce on Friday the 13th the world’s first pair of 100x leveraged ETFs: Kelly Daily Nasdaq 100 Bull 100x Shares (SOAR) and Kelly Daily Nasdaq 100 Bear 100x Shares (SINK). The investments seek to replicate, net of expenses, 10,000% of the daily performance of the Nasdaq 100 Index in the case of SOAR, and 10,000% of the inverse daily performance in the case of SINK. The funds will invest at least 80% of assets in securities that comprise the index. They will also utilize financial instruments that, in combination, provide leveraged and unleveraged exposure to the index. The funds are nondiversified.

“These are intended for attentive traders only,” said Kelly Capital Chief Executive Officer Jason Kelly at the press conference following the launch party in New York City. “The extreme leverage employed will cause both funds to go bankrupt within the course of most trading days. However, those paying attention during the day will be able to maneuver in and out of the funds before they crash to zero.”

Kelly Capital will reset and relaunch the funds at the beginning of each trading day. The company is in talks with the Security and Exchange Commission (SEC) about the possibility of relaunching the funds after lunch should they go bust in the morning session, but the SEC is balking. SEC spokesperson Ben Meriwether remarked, “We recognize the right of investors to employ as much leverage needed to find fortune or ruin in a day, we just aren’t sure of the need to extend that right twice per day.”

Kelly thinks the SEC will come around to his firm’s way of thinking on the issue, but is happy for now that investors will have access to the funds at least once per day. “Investors these days aren’t content to wait years for returns on their investment. They want to know the outcome as quickly as possible, and at 100x leverage our products currently offer the fastest investment outcomes.”

Connecticut-based investment research firm Evanescent Lucre monitored a paper trade in SOAR during yesterday’s market. From its report: “On Thursday, November 12, 2009 the Nasdaq 100 Index fell 0.17% in the first 10 minutes, rose 0.62% in the next 20 minutes, fell 0.45% in the next 20 minutes, rose 0.28% in the next 30 minutes, and fell 0.61% in the next 40 minutes. On that same path in the market’s first two hours, SOAR fell 17%, rose 62%, fell 45%, rose 28%, and fell 61%. By 11:30 a.m., a $10,000 investment was worth just $3,692.”

Asked to respond, Kelly reiterated that timing was critical. “Getting out after that first 62% rise was the key, in this example, and people savvy enough to use our products are likely to know that.”

Kelly said in addition to quick results, the new ETFs offer two fringe benefits: a shorter trading day for most who use them because the action will be over before lunch, and excellent tax write-offs at the end of year for those who realize they need them. “We’re focused on families, and shorter trading days gives traders more time to spend with their families. The instant tax write-off feature is very useful in the last trading days of the year when some people realize they need an efficient way to vaporize some of the year’s profits.”

Kelly Capital has filed with the SEC to grow the line of products to cover other indexes and asset classes at 100x leverage. “However,” Kelly noted, “once the leverage gets high enough, you really don’t need a wide range of products because any underlying index will produce the tiny amount of fluctuation needed to move the product price. Traders won’t care whether the slim 1.00% band of possibility they have to work with comes from the Nasdaq 100, the Nikkei 225, or the Dow. It’s all just movement, after all.”

This entire article is false and is intended to be satirical… what’s even more interesting is the post that follows up the preceding one.

Last Friday, I posted a satirical article called First 100x Leveraged ETFs. It made fun of the trend toward higher leverage among ETF products. First we had the doublers (2x), then the triplers (3x), and I projected what would happen if we got up to 100x, which is 10,000% the return of the underlying index. I used the bogus symbols SOAR and SINK for the two fake ETFs mentioned, the former following the index at 100x and the latter following the inverse of the index at 100x.

The article was clearly sarcastic, written in the style of The Onion, as the following excerpt shows:

Kelly thinks the SEC will come around to his firm’s way of thinking on the issue, but is happy for now that investors will have access to the funds at least once per day. “Investors these days aren’t content to wait years for returns on their investment. They want to know the outcome as quickly as possible, and at 100x leverage our productscurrently offer the fastest investment outcomes.”

To my dismay, a deluge of email poured in from investors, many of whom wanted to buy either SOAR or SINK. I categorized the responses by type, and came up with these rounded results:

10% Thought I should stop joking around and get back to work

20% Loved the humor and wished for more

15% Wondered which I thought better, SOAR or SINK

20% Complained that their broker didn’t offer either

30% Wanted me to let them know when the ETFs were available

5% Were pretty sure they already owned the ETFs…somewhere

A full 65% of people expressed an interest in owning products that would “go bankrupt within the course of most trading days.” A stunning 5% thought they already owned them. Only 30% of respondents got the humor.

With results like these, no wonder investment companies can foist off just about anything on investors.

The article was clearly sarcastic, written in the style of The Onion, as the following excerpt shows:

Kelly thinks the SEC will come around to his firm’s way of thinking on the issue, but is happy for now that investors will have access to the funds at least once per day. “Investors these days aren’t content to wait years for returns on their investment. They want to know the outcome as quickly as possible, and at 100x leverage our productscurrently offer the fastest investment outcomes.”

To my dismay, a deluge of email poured in from investors, many of whom wanted to buy either SOAR or SINK. I categorized the responses by type, and came up with these rounded results:

10% Thought I should stop joking around and get back to work
20% Loved the humor and wished for more
15% Wondered which I thought better, SOAR or SINK
20% Complained that their broker didn’t offer either
30% Wanted me to let them know when the ETFs were available
5% Were pretty sure they already owned the ETFs…somewhere

With results like these, no wonder investment companies can foist off just about anything on investors.

While I know there are a lot of you out there that don’t know what a leveraged ETF is.. for those who do.. this is really quite unbelievable.

Read Any Good Books Lately? You Know, All These Finance Books Say The Same Thing..

lencurrie — Wed, 18 Nov 2009 20:37:47 +0000

I’m becoming a library junkie, but I’m sort of proud of myself for doing so. Hell, up until a few years ago I barely read anything if it wasn’t on a glossy page with Maxim on the cover. Lately I’ve been picking up a TON of finance books and I have to be honest in saying the best one so far has still been “The Wealthy Barber” in terms of opening my eyes to how to save money and grow wealthy over time. What is interesting however, is how some of the themes are common throughout other books that I’m reading, things such as:

save 10% of your paychecks, and do it automatically (so you don’t have to do anything)
growth + saving + time = wealthy (don’t try to get rich overnight or in a year.. it takes time for compounding to work)
pay yourself first – this one is actuallysimilar to the first bullet, but it’s just pointed out often that it’s important to save first.. pay bills after (odd.. but true)
pay off debts and stop carrying a balance with your credit card

Anyhow I’m sure there are more that I’m missing, but those are the main themes I see throughout the books. I just finished two books, the first being Pay It Down!: Debt-Free on $10 a Day by Jean Chatzky and truthfully I thought the book was pretty boring. It really didn’t really advise on what to DO with what you’re saving and spent a lot of time talking about credit collections and how to avoid them. Also how to prioritize which bills get paid first, etc. Again, it was an easy read.. but you can pretty much guess from the front page what most of the book is going to be like. “Save $10 a day – Invest it.. be rich”.. yes yes.. we know. The second book which I just finished reading today was called The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich by David Bach. I can tell that I liked this one, as I read it a lot quicker than the previous book. It read a lot like The Wealthy Barber in terms of easy to follow and how it was structured.

Truthfully I enjoyed this book, I think that it’s a lot more relevant (likely a lot newer) to todays society as we tend to utilize things like online banking, bill paying, automatic deposits, etc. Without going too much into it, David writes to also save 10% of your gross salary, and automatically put it into an RRSP. Once there, put it in mutual funds, or something that will generally gain 10% a year. I most enjoyed the automatic part about this book as I find it relevant. You see, as it stands right now I take 10% of my paycheck and it goes into my work stock. They are also nice enough to match a certain percentage, so right there, I’m already gaining the percentage that they give me (even though their contribution is taxed). But, the book I found very relevant to me.. since I already have an automatic savings or deposit system going, I could just concentrate on the parts of the book in which it tells you where to put it and what to do with it.

Certainly an enjoyable read and again, but I’d have to say that it still ranks below ‘the Wealthy Barber’ in terms of my favorites.

Found My Investment Vehicle!.. Zoom Zoom!

lencurrie — Tue, 10 Nov 2009 01:43:52 +0000

I posted back on August 21st that I was looking for a spot to invest my Smith Maneuver money. I think I’ve found it!

I had a few goals that I wanted to achieve with this money when invested.. and the criteria was as follows:

low-risk
low commissions
automatic deductions? Or easy to purchase
dollar cost average
ability to get out at any time

The other day I was browsing the Financial blogs which I subscribe to, and noticed that The Financial Blogger had an article back on the 26th which detailed ETF’s which paid a dividend! I truthfully didn’t even know such a beast existed, but I immediately knew that I had found my new favorite investment for my HELOC (Home Equity Line of Credit) money.

As I read the list of ETF’s, I noticed that some of them had very high yield rates.. XTR (ISHARES CDN S&P/TSX INCOME) for example had at the time a 9.12% dividend yield! Wow! Now that’s the type of growth that I would want year after year.

To make a long story short, I have decided that as with most things.. if you want something done right, you have to do it yourself. So I’ve re-opened my account with Questrade, and funded it with $1000 of my HELOC. Since it’s a margin account, I’ve already made my first monthly purchase. I’ve purchased 151 shares of the FIE.A (CLAYMORE CN FINCL MNTH I ETF) at a %7.75 dividend yield. To be exact, I purchased the shares at $6.65, and it distributes a $0.04 dividend every month. So this month I’ve spent $1004.15 and will get $6.04 at the end of this month when the dividend gets issued.

Next month, I plan on buying another $1000 and then will receive $12.08 at the end of December. I entered a rough estimate of what I could make if I just used this fund, and just for fun, I averaged a horrible 2% gain over the lifetime I bought it.. check out the sheet:

I think I could live on the interest if I had $1.7 million in the bank.. now mind you, that’s when I’m 67.. and that’s 34 years away for me.. but on the other hand, that nice $354K when I’m 50 mark looks pretty darn tasty to me too Notice that this is also JUST my Smith Maneuver account, I also stopped at $98,000.

So looking at the stock itself, here’s it’s long term track record:

Now that price is a reflection of the NAV (which is in Mutual Fund terms, the price per share). Now that whole spreadsheet above is looking for a percentage gain of 2% a year (on top of the 7.75% dividend which is already being distributed.. in fact it used to be more before the big downturn in the economy last year)… so as you can see, over the course of the last 5 years, the ETF is certainly down.. but let’s use an example scenario in which hypothetically I would have purchased when it first came out in 2005.

Now keep in mind that this fund is down from $10 to $6.60 – a 34% drop in price! But then keep in mind that there are dividends distributed every month, as well as the fact that we were averaging in.

I did a quick spreadsheet up, and came up with the following numbers:

I would have invested $52,000 in the income trust if I stuck to the $1000 every month since this fund was opened. I would own 7101.54 shares IF I re-invested every cent I received from the fund (and that’s at 0.04 a month.. which is the lowest it’s been.. it used to be higher).

My portfolio would stand at $47012.21 as of the 6th of November ($47793.36 as of close today). So with a fund which has dropped 34% in less than 5 years, we would only be down $4206.64 or 8.1%.

Now I realize that this isn’t the perfect scenario, and no one likes to see numbers where they’re in the red.. however you have to realize the situation we just came out of (and a lot of people believe we’re going so sink back into!)

In any case, I don’t plan on using this as my sole ETF, however I do plan on utilizing a number of the dividend paying ETF’s as I begin my journey.. this is just the first one.

Dollar = New Highs today.. well, since last October anyhow..

lencurrie — Fri, 09 Oct 2009 13:45:33 +0000

Are we heading back to better than par for the Canadian dollar?? Personally.. ya.. think so.. and I think it’s going to be there for awhile..

Here’s the latest chart chart from yesterday I have with the latest price and you can see that 1 Canadian Dollar will buy you 0.946 of a USD right now. That’s pretty good.. but I think it’s only starting.. (As of this morning October 9th.. it’s at $0.955)

One of my favorite bloggers Tim Knight at www.slopeofhope.com also thinks that we are in for one good push up, then the equities are going to reverse quite hard (stocks/funds, etc). You can see where he’s calling for this type of movement here and here.

I’m with him.. very cautiously waiting.. I’ve been playing oil like a madman lately.. and I’m thinking it’s due for a reversal back to the 50′s level again.. we’ll see what happens. *Update - I wrote this blog article 2 days ago.. and yesterday was a pretty big push upwards again.. one has to wonder when it’s going to correct a bit.. everyone is calling for it.. perhaps that means is may not happen? Yeah, I don’t think so either.

Thinking Of Canada Savings Bonds To Invest In? Question: Are You High???…

lencurrie — Fri, 09 Oct 2009 12:29:11 +0000

0.4% Interest… that’s what you’ll get.. 0.4!!

How brutal is that eh? Department of Finance Canada has the report and I can’t help but think back to when the bonds were paying off a health 7% interest rate and my little $100 bonds that my parents made me buy were doubling every 7 years… good lord, at 0.4% interest.. I dont’ even want to guess at how long it would take, it’s not even worth the effort!

Well, if it makes you feel any better, I decided to do up a chart compounding that great rate over a period of 35 years

Ok awesome.. after 35 years of saving $1000.. we now have a grand total of $150 saved.. SWEET! Makes you wonder why they even posted this information to begin with. If you want to see what ‘real’ interest rates of return can do for your portfolio, check this my post on the two best financial screenshots you’ll ever see and the compound interest examples.

Now I don’t claim to be an expert on bonds, however from what I understand.. Governments issue them when they want to raise money.. such as to fund wars, infrastructure, etc.. That said, it doesn’t look like our government needs any extra money.. hmm.. so why don’t they cut us a break on income taxes! Screw the 1% GST cut.. let’s see them make a real difference!

The good news from that point is that it also appears that our government/banking system/economy is in good shape. I wish I could say the same for our US brothers… but I certainly can’t… they’ve simply printed out too much money to fund bailouts, wars, etc.. that they can’t pay back.. they’re in for a rude awakening.. it’s just a matter of time.