Monthly Archives: February 2012

Are you superior or inferior?

Posted on by
4

Troy over-acting at the Actor's Foundry

One of the things I always ask myself before I invest in anything is whether the rate of return I am receiving is superior or inferior to inflation. To me there is no point investing in an ING DIRECT account offering a 1.5% rate of return (before tax) if the inflation rate in Canada is 3%. Hard to get excited about only losing 1.5% of my money instead of 3% every year!

Well did you know that this same rule applies when you are acting?

One of the things I really enjoy about training at the Actor’s Foundry in Vancouver, is that you never know who will be hanging around the school. I was fortunate enough to be there when producer/director/writer and all around good guy Michael Nankin decided to sit in on our class.

He taught me an important lesson that I use in all my acting work today.

Continue reading →

Buy low?

Posted on by
4

I just finished working on the film Random Acts of Romance and have some free time on my hands now. It’s been good to catch up on my reading.

In my last post I stated the obvious importance of buying low and selling high. From what I have been reading this week, it looks like the economy has turned the corner and we are entering a recovery stage. If that is true, it would be a good time to start investing as the next few years should be quite profitable.

Here’s what I have been reading…

Continue reading →

Buy high. Sell low.

Posted on by
2

Funny, we all know we should buy low and sell high, but the majority of investors do quite the opposite. The last few years have been quite rocky for financial markets, so people have been in a mad rush to pull money out of the stock market and buy “safe” bonds.

The problem with this is that you are selling your stocks on a dip (locking in your losses) and then all those people buying bonds at the same time have driven up bond prices (buying high) and lowered bond yields.

This is the reason that you need to figure out an appropriate asset mix for your age and stick to it without emotion.

You can always use the old rule of taking 100 subtracting your age and using that number as the percent of money you keep in the stock market. So, lets say you were 40. You would subtract 40 from 100 and get a sum of 60. Your portfolio would then be 60% stocks and 40% bonds.

But here is the important part…

You need to re-balance your portfolio (without emotion) when the market swings.

Let’s say the market dropped like it did the last few years and the value of your stocks went down and the value of your bonds went up. You should then sell some of those bonds (sell high) and buy some more stocks (buy low) until you are back at your planned asset mix. In the above example 60% stocks and 40% bonds.

When the stock market is high, you would do the opposite. Take some money off the table by selling some shares and buy some more bonds so that you were back to your 60% 40% asset allocation.

This works the same if you have a mix of mutual funds. That’s why it’s important to know what your mutual funds are invested in.

I invest in a couple of mutual funds through our actors union UBCP. I have one that holds stocks and one that is a mix of bonds. I check the website regularly to check if my asset mix is where I want it to be. If the stock market is crashing, I call up and get them to sell some of my bond mutual fund and buy more of the stock mutual fund. I wouldn’t miss the chance to buy shares when they were on sale!

This step of re-balancing your portfolio is one that a lot of people miss. By rebalancing, you are always buying low and selling high and keeping your emotion out of the decision.

This step can make a big difference in the returns you will see in your investments!

Happy investing.

Watchlist

Posted on by
Reply

In my last post I suggested you go to Globe Investor and set up a Watchlist. Today I thought we would play around with some numbers and take it for a bit of a test drive.

Once you are signed in to your Watchlist, click the drop-down window under “view” and pick the “build your own” tab. You can then click “customize” and choose from many different icons. You can hide or show these icons and slide them to the left or the right depending on how important they are to you.

Here are a few I slide to the left because I like to see them at first glance.

  • Latest price (the current price of the stock)
  • Chg today % (the percent the stock is up or down)
  • 1y Chg % (the percent the stock price has changed since a year ago)
  • PE Ratio (the current price divided by the earnings per share) **this number is popular indicator of whether a stock is overpriced or not**
  • Yield (the percent the company will pay you in yearly dividends)
  • Dividend growth 5y (how much have they grown their dividend in 5 years)
  • Price-to-book ratio (price of the stock divided by the value of the company’s assets)
  • Analysts recommendations (do analysts think this stock is a good buy or not)
  • 52-week range (what is the lowest and highest price the stock has had in the past year)
  • Latest news (a collection of news stories that talk about that company)

Let’s look at a couple of companies I have on my Watchlist and see what the numbers tell us…

Continue reading →

A powerful tool

Posted on by
Reply

I heard from a couple of actors this week who took my advice and picked up a copy of Derek Foster’s book “The Lazy Investor”. Not only did they say they enjoyed the book, but they liked the feeling of being productive and learning something new while sitting around on set for 12 hours a day.

I have read a lot of financial books, but the reason I like Derek’s book so much is because it gave you homework. I have read many books that say, “spend less, save more, diversify, pay off your credit cards, bla bla bla…”, but once I finished the book, I didn’t have anything I could do right there, right then to take action and make more money!

Today, I’m giving you homework!

In How to pick a winner we talked about how to narrow down a list of companies that you might want to start investing in. But once we had narrowed that list down to 8 companies, in 4 different industries, we were still left with the task of picking the best company in each sector.

Today I am going to tell you how to set up a free online tool that I use every day to not only research companies, but track in real-time the value of the investments you already own.

Continue reading →

Playing detective

Posted on by
Reply

In my last few posts, I talked about how I started with a list of a few companies and through a process of elimination, decided on what company I wanted to invest in.

This process of researching companies is one that most financial planners think is too time consuming or difficult for the average investor. Instead they tell you to just stick your money in a mutual fund and let some fund manager charge you 2% of your total portfolio every year to manage your funds.

While some people may enjoy this hands-off approach, I find researching companies to be one of the joys of being an active investor. By doing a little reading online every day, I also understand what is going on with the market in general and don’t make knee-jerk decisions to buy or sell stocks.

Let’s look at some examples…

Continue reading →

How to pick a winner part III

Posted on by
5

And the winner is…

In the last post we narrowed our list down to eight companies in 4 different sectors. They were:

  1. Bank of Nova Scotia, Bank of Montreal and CIBC (banks)
  2. Enbridge and TransCanada (pipelines)
  3. Fortis or Suncor (energy)
  4. Bell Canada (telecommunication)

Ideally you would pick one from each sector and have a nice little portfolio of dividend paying stocks in 4 different industries. Since DRIPs are a little tricky to set up, you might want to start with one and then look to add a new one every six months or a year.

If I could only pick one company out of that list and was setting up my first investment, the clear choice for me would be…

Continue reading →

How to pick a winner

Posted on by
1

I have written before about how I like to invest in companies through their dividend reinvestment plans. For me DRIP plans are the best way for a small investor to get started investing and avoid fees.

If you are unsure how DRIPs work please look under “Subjects” on the right side of this site and click on “DRIPs”. I would also suggest picking up a copy of The Lazy Investor by Derek Foster. In the book he takes you step by step through the process of setting up a DRIP and explains their advantage.

I am in the process of setting up a new DRIP right now. I have picked out a company, bought a single share and have requested that a share certificate be mailed to me in my name. In a future post I am going to tell you exactly how I set it up, what problems I ran into and how it is all working out.

Today I thought I would tell you how I decided what company to invest in.

Continue reading →

Playing chicken

Posted on by
Reply

Looks like someone finally blinked in the big game of chicken the banks have been paying with each other.

Bank of Montreal recently introduced a five-year fixed-rate mortgage over 25 years at 2.99%, which observers said is the lowest in recent memory. In response Royal Bank and Toronto-Dominion Bank both announced a four-year fixed-rate mortgage with a 30-year-amortization at 2.99%.

The Globe and Mail is reporting that officials in Ottawa were unhappy with the move at a time when the government is concerned about Canadians taking on too much household debt. People are taking advantage of low rates to pile on debt which could result in big problems in the future if (when) rates begin to rise.

These rates were short-lived and all three banks have since raised their rates on a four-year fixed-rate mortgage to 3.39%.

Could this signal the peak of the real estate market in Canada? There are many signs that the American economy is recovering and these emergency low rates are no longer necessary to fuel an already overheated real estate market.

On Garth Turner’s blog he recently quoted one Vancouver realtor as saying, “since October, it’s like someone turned off the tap. It’s became absolutely dead.”

In Abbotsford, real estate sales have just hit the lowest point since 2009. There are now 8,320 houses for sale in the Fraser Valley, and last month just 799 sales.