Thursday, November 10, 2011

Feeling risky?

If you're in the game to win, then you won't mind a little risk.

However, if you're like MOST of the people I work with, then you don't know, or don't want to know, or don't care, or would rather have it NOW than have it * 10 later.

Lets start with the basics:

Inflation is inevitable.  This means your $10 today will not get you squat 30+ years from now.  So if you want to "save your money" then don't go to that bank that uses that as their slogan.  Their interest rate doesn't keep up to inflation.  Why not try their funds?  I don't like expensive mutual funds and theirs are surprisingly expensive. The Bank of Canada attempts to keep the rate of inflation between 2-4%  Which is very reasonable and fiscally responsible.

So if you want ZERO risk than I have bad news for you my friends...  There isn't ANY type of currency, commodity, or investment product that has ZERO risk.  Even the cash you have in your pocket has risk.  Washing machines, holes in your pockets, sticky fingers, and of course drunken rampages.  Also, if you did manage to put it under your mattress, if you did manage to find it years later, thanks to inflation you wouldn't have as much buying power.

So how do you climb up the "risk" ladder to keep your money at least matching inflation?  You have to "buy" something, or lend your money to your bank (or a bank).  This has some risk.  Bank robberies don't count.  But the bank's fiscal prudence does.  But remember, our banks (in Canada) were hailed as the world ideal for fiscal prudence.  They decided (thanks to LEGISLATION) from the government to establish what they can and can not do with your money.  And guess what?!?!  It works!  No Canadian banks exploded during the 2008/2009 credit crunch and NO Canadian banks are going to have trouble now with the European debt problems.  Even if the euro-zone exploded and broke apart back to it's original currencies, Canada would be hurt financially (along with the rest of the world) but our banks would still stand.

So yes, there is "some" albeit a near infinitesimal risk associated with lending Canadian banks money you are insured by the Bank of Canada up to $100,000.  So if you are foolish to have $100,000 of CASH or GICs even if your bank explodes (which it won't) you'll get a nice cheque from the government to compensate you.

That said, if you invest your cash in a GIC at any of the big banks, you would be hard pressed to get a rate higher than inflation.  The best GIC for us poor slobs with only $10 to your name is currently available from  2.75% for a 5-year GIC.  So you might beat inflation or you might not.

So is that right for you?  It's not for me.  I want to do better than that.  I NEED to do better than that.  There are ETFs (Exchange Traded Funds) that supply you with more yield with a very tiny amount of risk and much better yield.  For example the Claymore 1-5 year laddered government bond ETF and the Claymore 1-5 year laddered Corporate bond ETF use government and corporate bonds to make their product go.  Now these aren't the bonds that you might have had as a child.  These are BIG boy bonds.  They pay 3-7% interest for various terms on various amounts.  The long and the short of it, Claymore does the work and you get about 4.5% interest paid out to you monthly.  Now remember, you've stepped up the risk ladder buying government and corporate bonds.  The price of these bonds goes up and down, but only a small amount.  Go take a look at these two ETFs on google finance right now to see what I mean.  They do go up and down a bit in price, but seriously it's only a few cents in any one direction.  Also, if the stock markets are plunging, they generally go UP, and if the stock markets go up they go down, but they don't move much in value in any direction.

Take a look at CLF.  When the stock market lost half of it's value in 2008/09 This fund went up 5%.  As the stock market returned, it went down to where it started and then continued to drop another 5%.  All the while PAYING you to hold it.  Since then it's essentially back to where it was before in the $20.25-20.50 range.

If you're looking for something that will beat inflation, this is a good bet provided you like expect the government of Canada to be able to continue to pay it's bills in the next 1-5 years.  And as our finance minister did recently update our status returning to a balanced budget 2015-2016 this means yes.

Disclaimer:  I'm trying to help you dammit!  If you bet your lot in life on anything I suggest and lose it, then it's your own damn fault for not exercising better judgment.  I always advocate for a diverse portfolio of stuff so all your damn eggs aren't in the same damn basket!  Plus, if you do try to sue me for your own crappy judgment, you can tell your lawyer I have a net worth of about $37.50.  Don't waste his/her time!

Friday, November 4, 2011

set your own course

During the wine and cheese function I attend the other night I heard some of the most useful and strait-forward commentary on investing that I've heard in a very long time.  Som Seif, the CEO of Claymore said that setting up your own guidelines for investing is something you have to stick to.  It will keep you out of trouble, as falling in love with a stock is the best way to lose a lot of money!  (Just take a look at Nortel.)

Just because a stock hit a high price doesn't mean they will EVER hit that again.  If all of a sudden they change their divided in a negative way it's time to re-think that stock.  Is it still a reasonable holding?  Do you see them fixing their trouble and moving on?  Or is the ship sinking?

These are hard things to know for small investors such as ourselves, but it is very worth your while to talk to your friends who invest, talk to me, watch the smart guests on BNN (Market Call & Market Call Tonight).

Don't be afraid to take some profits too...  When the market is going ganbusters then you might want to sell some of your holdings into that market strength.

Selling into strength and buying into weakness is the name of the game!

Sail well my friends.

Fixed income, dividends, and distributions

As you might have guessed from my the title of this post, I'm going to attempt to talk about these things in terms of how a hand-to-mouth artist like you (myself included) should know.

The joy of our society is that Capitolism works.  Regardless of your political stripe if you're reading this then in some way or another you've given money to big corporate.  (Unless you live under the freeway, panhandle for change and are reading this at the public library).

What does that mean?  It means that companies make money and some (but not all) choose to split the winnings with the shareholders.

Why does that matter to me?  

It's very easy to become a shareholder and get some of those profits!  Does this make me a "Wall Street" (or Bay street) fat cat?  Hardly.  My monthly income from my investments barely covers 25% of my monthly budget.  (And since most of it is in registered accounts, I don't use it to pay for my groceries.)

Why do you want to become a shareholder?  You like money right?  Ok ok, you might hate it...  But look at it this way, if you buy a small piece of a company that you expect to be around for a very long time then they will send you your share of the profits based on how many shares you own.

For example, in Canada, any of our big banks will no doubt stand the test of time (at least during my lifetime) so if you buy 100 shares of say Scotiabank (full discolsure: I own some!) then based on today's yield will pay you $0.52 per every share you own every quarter.  (4 times a year).  It works out to approximately 4%.  

Did you have to do anything to earn this money?  No...  aside from opening a brokerage account and scraping up enough money to cover the purchase price of the shares and the trading commission.  So once you buy you can sit on it the rest of your life and every 3 months you get $0.52*(number of shares you bought).  

Will they change the dividend?  Most likely yes, it will go up.  Even during the "disaster" of 2008/2009 they kept paying the dividends.  They didn't increase the payout, but they didn't decrease them or stop them completely like many other companies.

Does this make you evil for getting profit for doing nothing?  I can't answer that one for you.

There are other types of companies that pay a "distribution" but it's essentially the same thing, but it generally arrives monthly AND there may (or may not) be some taxation differences.  Mind you if you have your holdings in a registered account than it doesn't matter.

The story is the same:  they do something, they make money, they send you your slice.

Now the last part of this posting has to do with fixed income.  What does this mean?  In the investing world it essentially means BONDS or GICs.  Now I'm not talking the "Canada Savings Bonds" of yesteryear that offered decent returns.  I'm talking about "real" bonds both corporate and government.

How do bonds work?  Well, companies don't just appear magically out of thin air...  They essentially all start with one person, or a small collective of people working together to realize their dream of being able to manufacture and sell the best widget ever. 

Companies need to borrow money too!  (Just like you and me!)  So if they are a public company (more on the difference between public and private in a later post) they have a couple ways to do it.  If they decide they want to use bonds to do it, they make an offering to the market.  Company ABC is offering x number of bonds at a 5% coupon.  This means they are offering 5% interest.  There are terms to how long the bond takes to mature etc etc. but that's about it.  You would BUY the bond from them to get the interest payout.  You can also sell the bond back to the market before maturity if you need the money back without any penalties.  (There ARE trading commissions on bond trades though)  

Bonds do go up and down in price a bit (or a lot if the company or country sucks) representing the RISK that you (the investor) might be exposed to when you want to get your money back.

So if you bought Greek Bonds because they were offering 9% interest last year at this time, then sorry my friends you've lost at least half of your money!  But if you had bought government of canada bonds, or bonds from Telus, or Bell, or BMO or Scotia or hundreds of other well run boring Canadian companies then you would be sitting pretty.  The yields (how much they pay you) is of course somewhat lower but that's just the way the cookie crumbles.  You have to carefully consider what company you're lending your money too.  Just like people, not all companies or countries are responsible debtors.  They ran up their debts on booze or hookers and now are pleading poor.

So, the more risk the higher the yield.

That's about it for bonds...  Mind you most of you folks I'm writing this blog for shouldn't be thinking about bonds.  You just don't have enough money to do it!  There are easier ways to do it such as the Bond ETFs from Claymore.  (Some of them you can trade without commission with Scotia iTrade!)  They do the busy work, take a TINY percentage (0.25% for the corporate bond funds and 0.15% for the government ones) of your distribution and you don't have to do ANYTHING.  They are excellent products for the risk-adverse investor.

But if you're still young, beautiful, (and a little stupid) you don't need to worry about bonds yet...  Think about them when you hit your mid 30s.  They should be accumulated slowly as time goes on and the commission free ones from iTrade/Claymore are the PERFECT way to do it.  You can buy a handful of units at a time every month.

Disclaimer: I'm writing this article to HELP you.  If you do something stupid based on my advice without thinking it through yourself, then you have only yourself to blame.  Plus if you try to sue me for bad advice I don't have any money either, so good luck with that.  Seriously people, stop making your lawyers rich... they don't need the cash!  WE DO!  If you get burned a couple times, it's a learning experience.  Just try to remember to NOT fall in love with your holdings.

Thursday, November 3, 2011


Today I had the opportunity to attend a "vip" function at Scotia Itrade.  I met both the CEO of Claymore and the Managing Director of Scotia Itrade.  The Claymore CEO (Som Seif) looks just as striking in person as on TV.  He was however much shorter than I expected, but then again EVERYBODY is much shorter than I expect just because I am... shall we say, not short in stature.

The short (hyuck hyuck gwafawww) of the matter, I'm delighted I chose to switch to iTrade last year and I shall hence recommend to all of my minions who read my blog to do so as well.

Hopefully we won't kill them with our nickel and dime accounts!

Now on to the meat and potatoes of this posting: sticking to your guns.

I've found myself as of late perhaps introducing too many luxuries back into my budget that I have deprived myself of for so long.  It's been a long slow grind to get to where I am today, and I expect some (or much) more slow yet painful slogging to continue to get to where I want to be.

Where do I want to be?  I want to have my entire set of fixed expenses for my family covered by my investment monthly yield, and a little more left over to cover inflation.

However, as my lot in life has show me both the highs and lows of what society has to offer... Showing up at a job (where you were nickel and dimed on the fee) to discover that while serenading the party with music which they all were thrilled and enjoyed immensely we discovered later from the catering company they had spent about 5 times more on the ice sculpture in the corner than they had on the musicians which they interacted with and made many many requests of.  The opulent houses I've been to, the decadent food I've eaten all while simply being part of "the help."  On the other side of the coin, fighting for kitchen scraps on low paying gigs that are far too far away and far too long to be able to have a dinner break and not come back with anything that either wouldn't break the bank, or be entirely what we could forage in the wilderness due to the remote location of the job.

Since I have had this taste of the "finer things" I often find myself coming home with some of them on shopping trips.  I enjoy them immensely but they are simply too expensive for my financial plan right now.  The trick is keeping your will power in check and not beating yourself up (too much) when you come home with a bottle of distillers reserve single malt.

Perhaps my biggest financial mistake to date was the car...  Sure it gets me to gigs in style, it's fun to drive and it's immensely practical when you have a young family.  (Which I do!  My son just turned 1 year old in October)  But the sad reality is that it was a poor (terribly poor) business decision.

To date my car has cost me nearly $1200 per month.  "WHOOOAH!" I can hear you thinking, you must be driving a Porche!  Sadly my friends, you need to look past the advertised price of car financing and include ALL the costs associated with vehicle leasing/ownership and usage.  Guess what folks, that's the cost of leasing a Mazda 3...  Yes, I got the heated seats, and moon roof, but still had I cheaped out on the model of the car, my monthly costs will be above $1000/month.

How is it so expensive you ask?  Lease payment $400, Insurance $250, Gas $200, Parking $100+, oil changes, snow tires and the occasional small "oops" $150 and there you have it.  (Yes I know these numbers only add up to $1150).  Shocking isn't it?

Due to my enhanced travel options I did get more work than I could have taken otherwise, but it was NOT to the tune of $1200/m more.  It was generally on average only about $400-500 more.  So I'm really out of pocket $500+ a month.

So my friends, resist the temptation to get a car for as long as you possibly can.  You knew your art required a certain amount of suffering...  just suffer on the bus!  At the same time, try not to do that suffering with an expensive bottle of booze!

Sunday, October 16, 2011

Surprise, you're already in the top 1%

Please forgive me now since this is quite a sidebar from my normal politic-free unsolicited investment advice.

Guess what my friends, if you live in Canada, have a roof over your head, a computer, internet at home and eat every day YOU are already in the top 1% of the world's economic "elite."

Look down this list of the things I suspect you have and please consider your lot in life.  You're not an illiterate migrant worker in Asia/EuroAsia/India are you?  Are you living on the streets in a Mumbai slum competing with the thousands and thousands of other beggars who have NOTHING?  Are you a Somali fisherman trying to eke out a subsistence living for you and your family with the constant fear that the local pirate gangs will take you out?  Or have you been sold into slavery or into the sex trade with no hope of escape without risking the brutal rape and murder of you, and your family?

Consider the following items you might have around you:
  1. Clothing (and even occasionally clean clothing)
  2. food or at least access to food via your mobile phone speed dial
  3. health-care (if you're Canadian like me) which won't bankrupt you.
  4. safe living conditions (no threat of war-lords burning down your village)
  5. Layers of government support for retirement (Canada Pension Plan/Old age Pension)
  6. reasonably well maintained urban infrastructure (Montrealers watch out for those bridges!)
  7. Mobile phones
  8. Internet at home
  9. laptop/desktop/tablet computers
  10. flat-screen televisions
  11. credit-card debt (no doubt from too many nice lunches out)
  12. shoe fetishes
  13. electronic gadget addiction
  14. cars, scooters, motorbikes
  15. luxury coffee (Starbucks, or making it yourself with Kopi luwak beans)
  16. luxury clothing/goods/cars
  17. this list continues...
I'm sure you might not have all of these items, or even most of them but guess what?  Consider how much the FoxConn employee got paid to make your iPhone, iPod, or iPad! (Or shoes, or TV, or t-shirt, or, or or)  Even if you're on minimum wage you earn more in one month than that person gets for an entire year.  Do you think they have healthcare like we do here in Canada?  Don't be so sure.  The establishments in both India and China are often VERY lax in worker safety because it's viewed as a population control mechanism.

So the current whining of a great deal of protesters of the "occupy whatever-city-here" movement are misinformed greedy hypocrites.  They should try living in a slum in India for a month.  Many of them think they are the 99%, but seriously folks, even your minimum wage burger flipping job pays more per DAY than the kids in India get ALL YEAR for the burger uniform they sewed together for your burger-flipping ass.

 Now I'm not trying to discredit all of what they are saying.  Part of their message includes FAIR taxation for ALL and I completely agree with this part.  History has proven that ONLY a graduated income tax is the fairest most responsible way to go.  The more you make, the more you pay.  Simple.

Our American friends however have a bit more ground to stand on in their complaints since Wall Street did set them up for disaster with the sub-prime mortgage fiasco from a few years back, AND more than half of all American bankruptcies are caused from medical bills.

Thanks to CONSUMER demand for cheaply made crap a great deal of the manufacturing base in many first-world countries has been outsourced.  We did it to ourselves and only have ourselves to blame.  YOU have to make the choice to spend more on your socks or your shirts.  You have to create more demand for home-made goods.  The sooner we all do, the sooner the disparity curves flatten, and the middle classes bloom.

But if you have a job and you live in Canada, get over yourself.  YOU are in the top 1% of the world elite.  Now start behaving like you are...  Buy some shares of companies you like and for the products and services you use on a daily basis.  (I own shares of my mobile phone provider... The dividends pay for 1/3 of my bill so far.  Eventually I'll have enough shares so that the dividends pay for the phone bill completely)

Capitalism isn't going away.  We all need to man-up (or woman-up) and pay our fair share of taxes to help keep our country great and running smoothly.  (Yes there will always be scandals and corruption, but not nearly to the same extent here as there are say in Somalia!)  TAXES MUST RISE people.  It's inevitable.  You can't borrow your way out of debt.  Having said that, there are rules in place that govern what sort of incomes are taxed in what ways, so it's both honest, and ethical (and damn smart) to make prudent choices to help determine how your slice of the pie gets taxed.  (TFSA, RRSP, dividend paying stocks, etc)

The real trick my friends?  Don't get greedy.  As soon as you starting thinking of the whole pie, you're in for a world of hurt.  I'm happy with a thin thin slice.  If you get greedy you stand to lose everything.  If you set reasonable and incremental goals then you will prosper for years to come.  As a starving artist the first while can be rocky, but stay the course and it will lead you to financial freedom.  My thin slice?  Enough monthly income to pay my rent, food, phone, and travel expenses.  Then I'll have more freedom when it comes to choosing what work I accept rather than just picking up the phone and saying "Yes I'm available" every time it rings.

Full disclosure:  My "income" (which is all re-invested at this point) from my investments just cracked $500 a month, even if I don't make any trades.  (Just the yield from my dividend and distribution paying holdings)  For some $500 a month represents a pittance, for me this represents nearly 20% of my fixed monthly costs. So start now, contribute often and in a few short years you will start to smile more and more.  I know I am.

I admit "a few short years"  is a VERY difficult concept for my hipster 20-something friends.  But honestly folks if you start saving this very instant even $25 a week you'll be a moderately wealthy jackass by the time you hit 45.  Handsomely wealthy by the time you hit 55 and a completely rich asshole by the time you hit 65.  Remember how long summer was when you were a child?  It seemed to last forever.  Now look outside!  It's nearly winter...  how did that happen so quickly?

Sunday, October 9, 2011

Human nature, greed, entitlements, and crappy ideologies.

That's quite a title I know...  But I encountered a fellow musician about 15 years older than myself  who in my opinion did way too many drugs or really just needs to grow up (or both).  He is so strongly set in his thinking about the corporate greed and the whole system and how flawed and broken it is.

He was both shocked and appalled when I told him I was investing for my future.  He asked snidely "How's that working out for you?" (with strong undertones of expecting epic failure on my part) but when I told him how much I get on yield alone each month he congratulated me (with strong tones of disbelief and sarcastic) about how lucky I was.  I immediately corrected him by saying, it wasn't luck.  I did a lot of research and made careful investment choices which have gotten me to my current level.  At which point the conversation ended.  His entrenched ideology didn't let him even get curious about how I did what I did and it could benefit him and his family too.

He was so wrapped up thinking that the whole pie gets kept by big corporate and a privileged few leaving nothing for anybody else.  His comments about the largeness of said pies and how much is consumed by the "fat cats" let me to suspect that he's either very jealous, or in a messed up entitled sort of way expects money to fall out of the sky to just be evenly distributed amongst the masses.  Judging from his commentary I don't know what sort of investments (if any) this man has.  I also suspected his wacky sense of entitlement led him to believe that he deserved the whole pie just for himself.  Now that's just plain greedy!  I don't want the whole pie.

But what's going on here?  He gave up his corporate position to go back to music, his passion.  But that comes with a cost.  You have to live like me!  I haven't taken a vacation ever...  I don't travel unless it's for work, I've quit drinking on a regular basis because it costs too much, I don't have a big TV, I don't have a fancy car, I don't have a big house with expensive repairs and a costly mortgage, I don't have a fancy stereo, I don't have a new (or even newish) computer.  I don't go out to eat unless I'm working and I have no other choice, all in my quest to save as many dollars as I can to invest for my future.

Now that my monthly yield is starting to become a sizeable portion of my monthly budget I have started re-introducing certain cuts from my life.  Which is a nice treat...  It feels special to splurge $20 on a bottle of wine and really enjoy it with a nice meal that I've made myself.  (My cooking skills have improved immensely over the past couple of years so that I can do a select few restaurant quality dishes)

But back to the point, if you want a future that includes you, your art, and enough money to not have to live in a cardboard box under the free-way then get your head out of the sand and INVEST for your future.  Government debts are running at all time highs, cuts are coming and they will be brutal.  The longer they are put off, the worse things will get for those of us who depend on government funding like so many of my friends in European orchestras.

Now here's the rub people:  if your belief system includes a general hatred for big corporate then I have some bad news for you.  If you don't like subsistence living in a shack out in the middle of the woods then you are going to have a bitter, angry life full of disappointments.  (Unless you're one of the 0.1% of artists who hit super-stardom... Then you'll just be a rich jerk!)

Set your objectives honestly and reasonably.  DON'T GET GREEDY!  Greed is a recipe for disaster.   It's a tendency we have to fight ALL the time while investing.  For example I bought some shares of CLQ @ $0.50 a long time ago.  It went up to $2.25 and I should have sold, but I was holding on hoping for more and more and more.  Guess what happened?  It plunged on some bad news (faulty resource assessments) and fell back to just over where I started.  It's NEVER wrong to take profits.  There may be some choices to make though when you do decide to take some.

My advise for this all:  Invest for your future, nobody else will do it for you.  (Unless you're in a cushy government job... but my friends cuts are coming to government be careful!)  And lastly don't be afraid to take a profit.  Any profit no matter how big or small is a profit and money you didn't have before.  Just don't get greedy and don't beat yourself up for not timing it right.  You had more money then you did before, so shut up.

Disclaimer:  My advice is based on my opinions and experience only.  I have not been paid for anything I've recommended or talked about.  (I'll let you know who's paying me if that ever happens!)  If you do follow my advise, I can not be held accountable for your faulty research.  I have made money and I have lost money.  If you bet the farm on a flyer, it's not my fault.  I didn't recommend it for you.  Your actions are yours and yours alone.  I never pushed that buy/sell button on your behalf.  Plus if you try to sue me, I don't have much money anyway!

Friday, September 23, 2011

Gut it out

After the recent weeks of market turmoil and tanking I decided to try to get my legs back under me in the day-trading world.  Yes, day trading is foolish if you're reckless and don't establish parameters and rigorously adhere to them.

I bought a VERY tiny position of HOU.  Horizons 2X oil bull.  If oil goes up 1% it goes up 2%.  If oil goes DOWN 1% then you go down 2%.  Plus since it has to do tricky things to keep it's relationship decent to the oil market (which is another topic for another day) it has what's called a "tracking error" which means that if you hold it long term you're not going to make any money.  They have to do some VERY tricky things to keep the percentages locked up with the changes in oil.

Remember, it's not directly linked to the valuation of oil... just the percentage change.

I held my position for a whopping 15 minutes and then sold for a blistering profit of 1.1%

Had I risked more money it could have been a 3% profit, (thanks to trading commissions eating into the profit) but I was holding firmly to my own set of rules for this sort of thing and that's as much "risk" as I was willing considering oil has tanked so much and so quickly.

I made a whopping $10.01 on my trade today.  I think I'll go buy some lunch.

Saturday, September 17, 2011

I like Scotia Itrade.  Perhaps some of that has to do with my holdings.  They are now sufficiently large enough to qualify for a better commission pricing.  But then the news breaks:

Holy savings bat man!  That's a crazy deal!

You poor slobs (I mean readers who have just started) with only $1500 or so in your TFSA or RRSP have to pay $19.99 + $0.02/s > 1000 shares now have a select few funds you can trade for FREE.

If you're wary of links on strange blogs then I'll just tell you.  (Damn you lazy jerks for not clicking the link!)  Claymore Investing and Scotia Itrade have partnered to offer investors "long term" FREE trades on 46 different ETFS.  That means any "long term" trade you won't have to pay buy and sell commissions!

For you small fry out there that's a potential savings of $40!  (1 buy and one sell at their highest commission rates)

What does this mean?  It's the beginning of the end for mutual fund companies that have been robbing Canadians for years.  (Not direct robbery mind you... just oppressively high management fees on mutual funds).

If you're lazy and haven't read my blog, an ETF is an Exchange Traded Fund.  Which works in a similar way to a mutual fund (a basket of companies to insulate you from one company going all Enron on you) but due to the fancy mumbo-jumbo of how they work they charge WAY lower management fees.

The only thing mutual funds had left going for them was the ability to make small purchases and have all your money purchase units of the fund.  Whereas purchasing a unit of an ETF on the stock market would incur a commission to buy.

Now that Claymore and Itrade have done away with the commission provided that you make a "long term" trade then you will NOT pay any commission.  WHOOOOO HOOOO!

If you have $327.50 of cash left in your TFSA or your RRSP but can't afford to buy 100 units of something you like?  (Rather than incurring a very high per-share commission for purchasing such a small number of shares/units) NO problem!  You can buy 1 unit of any of these 46 ETFS without paying a single cent in commission.

NB:  According to the rules from Itrade you have to hold the units for at least 1 business day to qualify for the free commissions.  This of course protects them from jerks like me who would have traded 1 or 2 units 15,000 times in a single day making $0.01 at a time.  It's really to protect themselves and their servers since this kind of traffic would no doubt be done by thousands of other investors as well putting an incredible load on their servers potentially crashing their system.

Claymore has the bulk of the "free" offerings, but you will find a small selection of Horizon and Ishares ETFS too.

On Tuesday I bought 16 units of HXT in my TFSA.  It's now up a whopping 0.42% ($0.68).  I think I'll sell to triumphantly lock in this gain!

The only real catch?  How long will they offer this deal?  Who knows.  But be savy folks.  Don't go all willy-nilly and buy 1 unit each of all 46 ETFS.  If they do decide to cancel then you'll be stuck with a large selection of small positions of ETFS that won't cost you to sell, but you'll be lucky to get out in one piece.  Pick 2 or three that you would want to get anyway and use this opportunity to start building a real position.

Happy investing people!

Tuesday, September 6, 2011

"losses" and losses

If you're like me and you're probably not because if you were you wouldn't be reading my blog.  Ok, ok ok, lets try that again.  If you have taken some of my advice you now probably have a a few humble holdings or a modest selection of not very exciting units/shares and have watched them go down in value as the world seems intent on plunging into more head-spinning turmoil.

The unit values have gone down, so your overall holdings are now worth less than when you started.  Is this a point of concern?  Well, depending on what you bought, it ranges from not really to not at all.  Canada while not completely immune to the world's financial issues is still sitting on the largest bounty of raw materials ON EARTH where freedom, safety and ethics are all a part of the founding principles of this country.  Oil from the other parts of the world (mostly OPEC nations) is all based on systems that haven't progressed since the dark ages.  And to top it all off, the biggest supplier of just so happens to be funding the same extremists groups that are attacking the freedoms of their biggest customers.

Far be it from me to think that it would be a good business practice to be gracious to your best customers and perhaps try to encourage them to keep buying your product by emulating them in some ways?  Nah... lets not bother.  We need some more fat, spoiled princes waddling around who don't know the meaning of a hard day's work, or what it is to have to suffer or struggle just because your family just so happened to be squatting on the right part of desert when the good intentioned folks came by to tell them how much their property is actually worth and offered to pay them to take stuff out of the ground that they never even knew was there nor had any value.  They quickly learned how much their oil was worth though, and how have they used their profits?  Building taller and taller buildings, reclaiming land in the desert to build exclusive residences while exploiting cheap labourers from neighbouring countries.  Hoarding, accumulating, and not really doing anything with it except perhaps keeping working class people uneducated and angry.

Anyway, I digress.  This was not to be a socio-political rant.  Your holdings are secure in Canada.  While we are neighboured by the largest bully on earth who is so oil hungry they will invade (at the drop of a hat) any nation which they deem backward provided of course they have lots of conventional oil bleeding from the ground.  Thankfully our oil is all locked up in sand.  They don't know how to deal with it since the money just doesn't bleed out of the ground and into their pockets.  We have to work for it.  Dig it up.  Clean it up.  And thankfully thanks to the "progress" in the American educational system, they barely even know we exist.  If they do know there's something up there, they think it's just a barren cold wasteland.

So, being where we are in Canada right now, we have the chance to become the next fat, bloated country rich on oil and resource profits.  Buy in now while we have this world turmoil.  in 20-40 years you will thank me.

Thursday, September 1, 2011

tax time is done! Phew!

NB: this posting fell through the cracks and got put on hold by the "draft" monster.  It should have been published in early JUNE 2011.

My taxes are now done and I'm breathing a sigh of relief.  I don't owe them all that much but I suppose you could look at that from the other perspective.  This is BAD!  I wished I owed them more...  LOTS more!  Why?  That would mean I had a larger income and not this meagre pittance I've become forced to deal with.

I always find the Canada Revenue Agency a little perplexing.  They, like most people and corporations tend to "pigeon-hole" everything and everybody.  So what's a mixed artist like myself to do?  Everything I do all tends to blend into one homogenized hole of incomelessness.

Deductions are great, but they require income from which you can deduct!  After all my deferred deductions from yesteryear I'm left with about $12 of taxable income.  All thanks to those deductions mind you.  So save your receipts!  ALL of them.  I don't care if you shoe-box them.  You'll need them.  Even beer/bars are 50% deductible as entertainment expenses if you have customers or potential customers with you.  NB:  Don't try to deduct $10,000 of bar bills on $2000 of income.  It won't get you anywhere except perhaps an express visit with an auditor.

The key is to be reasonable with your deductions.

Disclaimer:  I didn't recommend any investments this time.  You can't sue me for that either.  Damn lawyers.

Getting paid to wait

As many many portfolio managers have said before, and will say again and again and again, I shall now repeat their words so that you too can reap the benefits.

What does this mean?  Big, brand name companies that you know or use their products every day.  

From a risk standpoint, our big banks in Canada will never be going away and most of them have posted huge profits for this past quarter beating the profit expectations.  Plus, with the recent world and market turmoil our banks have fallen in price by at least 10% from the recent highs during the past winter.  If you are tired of losing your savings to inflation, then why not buy a bank stock?  Plus they all yield 3.5% or better.  (No savings account in Canada currently bests inflation!  If you're a die hard saver without any investments I have some bad news for you:  you're LOSING money by saving.  Invest, invest, invest.  Or pay off your debts are FAR better ways to "save" for your future.)

So how does this get me paid to wait?  We're all waiting for economic recovery and while this happens the big bank stocks will creep up in value or go sideways or slide a bit more before things pick up.  All the while they pay 4 times a year a nice dividend.  Protip: re-invest that dividend!

Other thoughts and ideas?  Bell Canada, Rogers, Telus.  Hard to go horribly wrong with any of them.

How have I done after the recent market slip?  I did a tiny bit of portfolio shuffling but I mostly held fast.  I'm not going anywhere any time soon, nor are my holdings.  They continue to yield and do business as usual.  My income from my investments is currently all re-invested.  But if I did stop my re-investment plans I would be making approximately 15% of my monthly budget without having to lift a finger.

My opinions are mine and mine alone.  (Or regurgitated from other people who do this stuff)  If you bet your entire life's worth on some flyer I can't be held responsible.  Since I never recommended any flyer it's your own damn fault.

Tuesday, August 9, 2011


So, the markets are exploding and like me your thinking about potentially many things:
1: finding a rock to hide under
2: wishing you had taken more profits sooner
3: had a magic crystal ball that told you when such events like the past few days would be coming.

How could you have avoided this?  Well, honestly there really isn't any way to avoid such wacky market insanity.  The best way to deal with a situation like this is to BUY BUY BUY.  This of course requires that you have some cash left...  And being the foolish/greedy fellow I try not to be, I had been "all-in" for quite some time now.

Thankfully some of my more recent purchases were protected by using "trailing-stops" which got me out at a modest profit rather than riding them down to the bottom.  However, the trailing-stop is tricky.  I've often lost money on the bounce after a stop has been triggered.  So, set them with care, or be prepared to reach for the bottle of anti-acid when we have days like the past few.

In the short term, I can still see rocky days ahead.  The S&P downgrade of USA is strangely prudent in a sick kind of way.  The USA has been riding a AAA credit rating for the past 71 years and I suspect this has made them fiscally complacent thinking they could do no wrong.  This is perhaps the kick in the pants they need to get their fiscal house back in order.  The sad reality though is that rampant conservatism has crippled the government.  Unable to move forward to address the NOW as well as the tomorrow.

In the short term if you're down and still like the companies you're holding, then by no means sell them.  If you still like them, they probably look even better now at the current market prices.  So if you do have spare cash, this is the time to buy.

If you can in the next few weeks/months take some profits and keep some cash on the sidelines...  There will be more delicious buying opportunities in the near future.  (Read: ugly days on the market)

Also, due to the nature of interest rates, I have largely ignored bonds in my portfolio.  This probably a good time for all of us to start thinking about it.  If you hold bonds, now would be a good time to sell them and buy some stocks at bargain prices.  If you don't, then this would be a good time to start to VERY slowly accumulating some.  Preferably in tax sheltered accounts since interest is generally taxed at the highest rate.  And by slowly, I mean SLOWLY.  Bond prices will fall as markets recover.  It's just nice to have some bonds to give you some new cash every month/quarter AND have something to sell when markets tank so you get the cash you need to take advantage of the current discounts.

Wednesday, March 30, 2011

upwardly mobile

I know I'm supposed to be preaching advice toward the starving artist, but there comes a time in your life when you actually start making some money... Or your frugality and savvy market investing now has you a moderate or sizeable nestegg and from which you're living comfortably off the proceeds...  Either that, or you've gotten your act together and won an audition, got scouted, or been given the big break that you so desperately have been pining for all your life.

What happens now?

Well, your tax bracket is about to change...  Formerly you probably were like me only dishing out a few hundred bucks a year to the federal coffers and most of that would be for CCP (Canada Pension Plan) contributions.  Now you'll be up the creek without a paddle if you're not careful with your money!

Now, I know some of you might think this is just crazy talk seeing has you have been living hand-to-mouth for many years and any increase in income you have goes to paying off debts or stashed away in your investment accounts, rather than spent foolishly on those Italian shoes that were "calling your name" when you walked by the shop, or that shiny new iPad so you can impress all your friends when you bring it out on the town to show off.

But yes, the reality is that your taxes owed with be CRAZY relative to what you've been paying when you were poor.  So start stashing away 25% to 37% of your income into a separate savings account (as well as the 13% for HST) so when tax time comes around you won't be trying to come up with thousands of dollars you already spent!  (YES... THOUSANDS OF DOLLARS)

Don't forget to save all your receipts for anything and everything work related.  They can make a huge difference if you can manage to bump down your taxable income into the next lower bracket.  You'll have to surrender far fewer dollars to the government.

Also, as a self-employed individual, you should consider leasing equipment/cars etc. rather than outright purchases.  This way you get a bigger tax advantage for the stuff you'll need to do your craft and get you to your gigs.  Yes leasing is more expensive than outright purchase, but remember the tax savings will generally exceed the cost of financing since leases are fully deductible from your taxable income.  With cars though you have to pro-rate it against your business vs. personal usage, so if you use your car 60% for work and 40% for other than you can deduct 60% of ALL car expenses including your lease.  So an average small/mid size car costs about $10,000 including EVERYTHING.  (lease, gas, insurance, parking, oil changes, snow tires etc.)  So over a 4 year lease that's $40,000.  If your car is 60% business usage then you can deduct $6,000 a year from your taxable income.  If your in the 25% tax bracket you just saved $1500 in taxes.  If your in the 37% bracket then it's $2200 in tax savings.  Over the course of an average lease your going to pay about $2000 to $4000 at today's finance rates for most small to medium sized cars over the course of a 4 year lease.  By leasing for 4 years, you will save $6000 to 8800 in taxes.  Which is far beyond what you'll pay in financing interest.  Plus, if you have a slower year then you can defer the deductions until you're making more money again.

If you want to truly be filthy rich then try to not expand your lifestyle as rapidly as your income increases.  Keep stashing away as much as you can afford into your investment accounts.  Open up an RRSP account if you don't already have one, and if you're hitched (or even common law) then open up a spousal RRSP as well.  If your spouse doesn't have a job in the town where you got your big break then make sure you "share" as much as you can when it comes to the finances.  Currently in Canada we don't have income splitting like they do in the USA, but rumour has it that this might be coming our way after the election and new federal budget.  However if it doesn't, then make sure you fill up your RRSP and spousal RRSP to as much as you can contribute up to your allotted contribution room.  Also, if you have any cash left over, give it to the lower income spouse and have them invest it in a CASH (taxable) brokerage account.  This way they will be "earning" money too, but it will be taxed at a way lower rate.  (Depending on what sort of investments you buy of course)

I myself haven't checked out the ramifications of "joint" brokerage accounts which are possible, but to me it just looks plain messy when it comes to income taxes, so I've avoided it.  However it's something I will investigate in the future and get back to you!

Lastly, the biggest pitfall of a sudden increase in income you start feeling down about work, or your car broke or something just sets you into a bad mood.  Try to avoid "retail therapy" if you're thinking you want something and justify the purchase by telling yourself "I'm making $X a year, I deserve it!"

Sadly if you hear yourself thinking this, stop for a minute and ask yourself if you really need it, or do you just want it, and if so can you really afford it?  (Pay off those damn credit cards first!)

Don't forget to enjoy the fruits of your labour, but make sure it's from your investment distributions!  Pretty soon you won't have to work at all if you don't want to.  It's a life/work balance that you'll have to discover on your own.  It will be hard at first but stick to the plan and I promise you'll be a rich old crank in no time at all.

Tuesday, March 8, 2011

Another (tax) year over!

It's with much angst, hostility, apprehension and worry that we at this time of year get out those shoe-boxes and start tabulating our receipts.  If you're self-employed like me then you don't have to get your paperwork in order until June unlike the 9-5 crowd who have to file by the end of April.  Now this may sound all well and good since you won't have to think about it until later, however if you OWE any money (which 95% of self-employed people do) then you MUST pay it all by the earlier deadline of April 30th.

How on earth do you know how much to pay if you haven't done your taxes anyway you ask?  Good question.  If you find out the answer to that then let me know!  I'll just boil it down to the Canadian government and "bureaucratic efficiency" at it's finest.  I suspect the feds want you to voluntarily remit and then claim your deductions later.  Which for those of us who have trouble putting money aside then this is probably a good idea so you don't find yourself in a horrible mess owing money to the CRA.  (Canada Revenue Agency)  Also your HST/GST is due at the end of April as well.   Yes yes, I know some of you pay your GST/HST quarterly, but if you're as low down on the income ladder as I am, you only have to remit once a year.

Since I'm reasonably good (most of the time) keeping my hands off my savings for such things I'm usually ok with this since I can put the money into a "high" interest savings account and earn a few bucks on it. 

If you're organized like some annoying jerks I know (myself included) keep a running tab of all my expenses so at this time of year with a few mouse clicks I can print out a summary which has all the pertinent info for my accountant.  Yes, I'm sure I could "save" money on his fee if I used a software-box type income-tax dealy but an accountant (a good one) will let you know that it's probably wrong to try and deduct all of your booze receipts.  (You can actually deduct 50% of them as an entertainment expense, but don't push your luck.  If you try to write off half of your income on booze alone you're begging for an audit)

Other benefits of an accountant: he/she will be keeping himself/herself apprised to all the nit-picky details of the tax code and how it pertains to you in the starving-artist bracket.  Also depending on your arts discipline, there might be tax credits toward equipment or supplies that you might not have thought would be deductible. 

Essentially EVERYTHING you need to be creative can be deducted in some way shape or form.  Your accountant will tell you how much and when too much is too much.  Also he/she will be able to help you when you're going to make a big purchase.  A car for example: generally people will pay cash or take a car-loan out to buy their vehicle.  However leasing is often a much better way to finance since you can deduct the lease payments too!  If you buy your car you can only deduct how much the vehicle depreciates.  For some vehicles that's a lot and some not so much.

Aside from the "tax-pain" if you haven't been putting money aside for what you owe, if you stay on top of things tax time won't be all that stressful. 

Tuesday, March 1, 2011

Embrace your fears!

What a good time for this post!  Geo-political events (Mostly in Iran) have led crude oil to once again hit triple digit values.  Why?  Market INSANITY!

True, there is a lot of things to consider, and yes, supplies have been compromised.  Other problems in the middle-east could also snowball into an evil rats-nest of doom.  But has it happened yet?  No.  Did Saudi Arabia start pumping more oil to make up the shortfall?  Yes.  Did the price of oil return to it's previous level?  No.  Is the saudi king old?  YES!  (He's 87)  Did he just bribe his government to keep things going just the way they are?  YES!  (To the tune of MANY billion dollars)

So there's no supply shortfall, there is no refining shortfall, there is no distribution shortfall.  But prices are still higher than they were just 2 weeks ago.  (15% higher!)

My OPINION:  (You can't sue me for this)
Things are going to correct once everything settles down.  It may take a few weeks, it make take a month or three, or it may take a completely unrelated geo-political disaster somewhere else in the world to take the fear-mongering media's attention away from this crazy situation.

This means you should consider a SHORT position on oil.  I have a small short position which I just bought today (just before market close).  To limit my risk I'm not going to hold it for any length of time.  With luck I'll be able to sell it tomorrow.  (Yes yes, I hear you shaking your heads: what kind of crazy day-trading is this fool doing?)  I'm sure I could hold it longer and wait for a proper correction, but I'm happy to take my profits even $5 at a time!  (Yes the hourly rate looks craptackular, but profit is profit no matter how thin your slice!)  My smallest trade for profit to date has been $0.15.  Yes.  15 cents.  ONE FIVE CENTS!  It was one of my first attempts at day trading because I wanted to see if I could actually do it.

Yes folks, lots of people out there make lots of money day trading.  I really don't recommend doing it though.  Most of my strategy is long-term oriented.  Which is generally why I don't recommend short positions.  It's much easier to identify a company that will be around for a while.  (Say Bell Canada, or Suncor... something big, something that thousands or millions of customers pay for day in, day out.)

I have been up to this week been too chicken to sell anything short.  But when OIL (WTI) Hit $103 per barrel that looked just too tempting.  Even if it fell back down to $98 (which it did the next day)  I could make some fast profit.  And I did!  I earned a 4% profit by the next morning.  (Which I SOLD and put the money back in my pocket)

Previous valuation for oil before Iran exploded was in the $85 to $95 range.  I'm not holding my breath to wait for $85.  Take your profits as soon as you can if you want to try short selling anything.

So now I've told you how I've been embracing volatility, this is why you should do it:  Oil move a percent or three almost every day.  You just have to make sure your on the right side of the move.  If you go long and things don't go your way you only need to wait until you're back in the money.  Seriously folks, does the price of gasoline go down much?  (During big recessions yes... but not most of the time)  There are 10+ year stretches of history where gas prices only went up and up and up and up.  Geo-political triggers will give you sudden spikes.  Then you need to go short a bit as the dust settles.  Watch out though, as it will never return to the old range.  It will find a new higher range and stay in that range for a very long time.

Details:  The two products I use to trade oil are both Horizon Beta Pro ETFs.  They trade on the TSX.  (HOU and HOD)  They are even hedged to cover the US dollar exposure (since oil is traded internationally in USD) and to complicate things they are leveraged to give even more swing.   So if Oil goes up 1% today HOU goes up 2% and HOD goes DOWN 2%.  However the leveraging and hedging (and contango) complicate things so these two products always trend down faster than they go up.  So they are NOT great for long term holds.  (HOD only goes up when oil goes down.  Will OIL ever go down long term?  NO!  So don't hold HOD long term!  Don't hold HOU long term either!)  I was stuck out of the money for a while this past year.  I didn't get out in time during the summer doldrums.  But eventually it came back to profitability and I'm back trading these funds a few times a week.

Disclaimer: I'm not a "certified" investment adviser.  My opinions are exactly that.  I'm using them to help eek out a slightly better living than I could have afforded to if I had just put my money in the mattress.  I've made some money at this, but I've also lost some money at this.  (More gains than losses thankfully)  There is risk here people.  You can't blame me if you lose everything.  If you follow my advise and lose everything then I'll have lost everything too!  If you sue me then it won't get you much since I'll be broke too.  If your clever lawyer things he can squeeze blood out of a stone good luck! 

Thursday, February 17, 2011

RRSP update and foolish common sentiment.

I saw an article in the Toronto Star today about RRSP's and how some guy Tim of Markham wasn't about to invest in his RRSP this year because he's afraid the market is too volatile..  He really should read my blog.

Tim is sadly the last fish on the food chain.  He's availed himself to believe exactly what the mainstream media says.  Since all they report about is the doom and gloom on every market downtick and completely neglect the past few weeks that have been HUGE gains day after day after day.  If you're the last one to the race, you've already lost.  Sorry Tim.  Wake up and smell the constant growth and consistent increasing income offered to you buy even the smallest positions of the big banks.  Remember how much you pay in fees for your chequing account every month?  How much interest do you give your credit card company every month?  And if you're not as impoverished as myself, remember how much extra you have to pay for your house in the form of mortgage interest...  Several years of your life are all working just to pay the interest on your house.

To be honest I'm glad there are many people like Tim out there.  When he decides it's time to get into the market, it's probably high time for you to get out!  All the gains have been had and things will be looking to retreat for a while.

Additionally, if you are in a tax bracket where you owe a substantial amount of money to the government then you're an idiot for not contributing.  By contributing to your RRSP you pay less tax to the government.  Any dollar you pay in tax is a 100% loss and never to be seen again.  You surely see examples of government waste on a daily basis that tick you off.  Guess what!  Your tax dollars paid for it!  So the more you can contribute to YOUR RRSP, the less of your money goes to pay for this government waste. 

Yes you will have to pay tax on the money later when you retire and need to live off of it, but that's the advantage of any RRSP investment plan.  You pay less tax when you contribute, the gains are not taxed while inside the plan (so things can grow faster) and you can remove money from the plan at a bare minimum rate so the amount of tax withheld is a minimum.  (Based on the fact that you will need less monthly income to fund your life in retirement because your housing costs will be lower since you've paid off your house by then, or downsized and moved into smaller digs, or all of your children have grown up and are fending for themselves).  So you can withdraw money only at the rate which you need it.  (And if you've followed my instructions to date most of your income will be coming from your TFSA plan anyway, so you'll barely scrape the bottom of the lowest tax bracket!)

So Tim, I have only one question for you: you like giving your money to the government?  If you're so afaraid of the market volitility you can always buy government bonds, GICs or heck, even savings accounts that are RRSP., ING Direct and Presidents Choice Financial are all offering RRSP savings accounts in the 1.5%-2% area.  So you know you'll still have your money when you think it's safe to invest.

Just remember folks: when Tim thinks it's safe, that means it's time to sell all you have!  NOW NOW NOW is the time to invest.  Plus, for the younger people who read this blog you have 40+ years.  It's perfectly OK for your holdings to dip 15-35%.  Just look back to the financial crash 2 years ago.  The big canadian banks fell in value to half of what they previously were.  If you had held, you would still be up today.  It would have been uncomfortable looking at a 50% paper loss, but hold fast and keep collecting those dividends. 

If you had invested $10,000 in 2007 in any of the big banks, it would have fallen to around $5000 during the 2008/09 crash.  But today, that would be worth $12,000.  (Ish... depending on which bank you bought)  NOT including the dividends you would have collected.

Also, if you had set your stop and stayed out your $10,000 would have sold when it was down to $9000.  And if you had the wherewithal to say out and wait for things to settle your remaining $9000 could have been turned into $20,000 had you caught the market bottom... even if you were 3 months late to the party too!  (Full disclosure:  I chose to HOLD most of my positions.  I only stopped out on a few things.  It's hard to react well to day after day of craptackular market performance...  I saw some opportunities but I was too chicken to embrace them.  I did catch a couple good ones in the first quarter of 2009, but by then it was VERY clear to me that things were back on the up and up.)

In conclusion: don't be Tim.  EMBRACE volitility.  EMBRACE your friends/relatives/collegues/enemies market FEARS and buy when they sell.  Stick with me and 40 years from now you'll be living large.

Next time: how to embrace volitility

Disclaimer: My commentary is a collection of my own thoughts and opinions.  I'm sharing with you why I do what I do.  If you choose to follow my advice do so at your own risk.  I have made money, but I have also lost money.  Be careful, be prudent and don't risk everything you have and everything you can borrow.  If you lose it all you have only yourself to blame.  I can't be held liable since you're the one doing your own trading!

Tuesday, February 15, 2011

market madness

The stock market is a skittish, paranoid, insanely crazy beast.  And no doubt you've all heard the media blathering on about the doom and gloom of the market.  Mainstream media however rarely reports on when things are good or chugging along status quo.  Sensationalism in the media is key these days so if it's bad they report it...  If it's good, they don't give a crap.

However, this is good for YOU!  Yes, you.  Why?  Simple.

The more the market panics (which it does with nearly systematic frequency) this is your opportunity to buy.  I can hear you shaking your head, "RED means STOP!"  True, it does if you're driving a car, and true but it's also a signal to buy.

Sure, the market might continue to go down more (and you shouldn't put all your chips on the table at any one time anyway) but every time you see red, this is opportunity.  GOLDEN opportunity.

You have to remember who you're up against...  day traders are skittish.  They want to get in and out in a matter of minutes (or even seconds) so they are the first to bail when things go south.  Next along the food chain would be hedge funds and then next the big institutional holders.  Eventually this pops up in the media and then joe-6-pack decides to check his holdings, discovers they have gone down considerably and then makes the call to sell everything to preserve what little he has left.

Are you making money of misery?  Perhaps, but everybody who sells any kind of investment product or sells any kind of investment advice (and me who's giving it away for free) all have disclaimers, warnings and liability covering statements: past performance is in no way indicative of future performance.  So if Joe's Manure Inc. has been going skyward for the last 3 years doesn't mean anything.  If all Joe's cows get mad-cow disease and get destroyed by the government, Joe is up the creek until he can get new cows.

But, if you can wait, Joe's business will be full of crap in no time and you'll be back on track to gains.  There would of course be a crash in his stock price while he gets his new stock ready for action, and then a slow recovery.  So if you wait it out you'll still be in the game.  If you panic and sell at the bottom, you're up the creek without a paddle!  (And yes, the thought of coming up with a pun regarding the contradictory aspect of "up the creek without a paddle" vs Joe's main industry... har de-har har.)

The same can be seen time and time again in the stock market history.  Provided of course you're not buying fly-by-night operations.  (This is essentially almost the entirety of the junior mining/exploration sector)  If you stick to a core holding of the big Canadian banks then you won't have missed a beat.

If you examine the American banks during the financial disaster, they stopped paying out dividends, the stock prices collapsed and many of them exploded completely.  Meanwhile, the Canadian banks were unable to continue raising dividends...  They kept them the same!  They were still making money hand over fist so they naturally distributed the profits to share holders.  The share prices did fall however with the world market.  Why?  The market is insane.  However this represented a HUGE buying opportunity.  I did manage to buy some shares of TSE:BNS for about $27 each.  I sold them a few months later for $43.  Yes yes, I should have held on to them and I'll buy some more of BNS again.  But I had some bills to pay.

Disclaimer: I'm offering free advice.  Bear that in mind before you wager your entire life's slavings.  (Yes, slavings)  If you lose it all, don't come to me and say I didn't warn you.  I try to make that painfully clear EVERY post of this blog.  You may lose money in the market.  I'm offering up what I'm doing with MY money.  If you choose to take my advice then do so at your own risk.

termonoligy catchup glossary

For those of you who are not adept in the mystical/magical art of searching for terms/expressions/recipes that do you not know then let me shed some light on a few of the ones I've used in my past few posts.

stock/stocks/units - the small slices or pieces of a company that are traded either publicly or privately.

position(s) - (get your mind out of the gutter!)  A holding or ownership of some units of a company.  eg:  I have a small position (of 100 shares) of "Joe's manure Inc."

Stock Exchange/Market - The "farmers market" for all of the things that get traded on the stock markets.  Which generally includes: stocks, bonds, warrants, debentures, mutual funds, ETFs, options, futures, forex and of course commodities.  (I'll explain some of these later... eventually)

Mutual fund - A mostly horrible contraption built by banks and financial companies that hold portfolios of stocks.  The idea being you have diversity all wrapped up into one product.  So when one stock in the fund tanks the whole ship doesn't sink.  (Think Titanic!)  These funds are not openly traded on the stock exchanges (They trade after the market closes every day) and have lots of rules regarding how they can work.  They are often "actively manged" which means they have lots of expensive staff working hard and long hours which costs the fund.  (They take their slice of YOUR pie even if they lose your money)  Don't get me wrong, some mutual funds are great.  But they are hard to find.  (Sprott Asset management has a couple nice funds that actually do very well.  Full disclosure:  I own some Sprott010 - Small cap equity)  Also, they have fees out the ying-yang!  They often charge you money to buy them, they charge you when you sell them, and they charge you for the management!  Talk about a great product... for the bank/financial company that is!  (That's why I highly recommend buying shares of the banks and financial companies that sell these products rather than the products themselves!  Then you win even if the funds go up or down!)  The one good thing about these funds?  There is no brokerage commission to buy or sell.  (But there might be a fee from the mutual fund company, so read the prospectus!)

ETF - Exchange Traded Fund.  These are far less horrible contraptions...  Generally speaking of course.  They too are very often a portfolio of stocks but the rules are very different than the previously mentioned Mutual funds.  They trade actively on the stock exchanges and you can buy and sell your positions very quickly if you change your mind or the market tumbles.  They do have management fees but are often very very much lower than the mutual fund "brothers".  You aren't charged any fees (as the fund companies like to call them : loads) to buy or sell (except for your brokerage commission to make a transaction) and the management expense fees but they are rolled into the price and to be honest, you really won't notice them unless you're buying a bond ETF and hold on to it for 40 years...  Even still, you probably won't notice.

Profit - duh... new money.  Either found in the couch, on the street, a tax refund, or the successful sell of some stock for more money than you paid for it.  eg: you bought 100 shares of Joe's Manure inc. for $5.  Thanks to a stellar "crop" from the cows the past few months, Joe's reported better profits.  The traders on the market liked this news and started buying more shares.  The result (due to supply and demand) the stock climbed in value to $7.  You promptly sold your position for a profit of $200.

Loss - You're a dope and lost money.  (Full disclosure: I'm a dope too!  But not all is lost since capital losses in your TAXABLE accounts are 100% deductible against any of your gains.  However if you're trading inside a registered plan (like I told you to) then yes, losses are indeed lost forever.

Liquidity - How fast can you buy or sell your shares/units?  It all depends on how many other people are trying to buy and sell.  The more shares that trade on any given day means the more liquid the stock is.  IE. you can liquidate your holdings quickly if you want out.  Many of the real estate trusts I recommend are NOT very liquid.  So there can be huge swings in price in the very short term because nobody is buying or selling so the price has to go WAY up or down to catch a buyer or seller's interest.  Don't sweat it, there is a easy way to not get bitten by this.  Which I'll explain in a later posing.

Monday, February 14, 2011

An angry rant: don't fall for the mutual fund company propaganda!

I was talking to some friends at work the past few days and continue to hear about how much mistrust and mystery they have about the financial world.

EG:  My friend was proudly talking about her progress with some of the funds she had, and they had appreiciated 15% in the past year.  While some of you might think this is well and good, (and a 15% profit is good) it's a HUGE miss from even the most conservative portion of my holdings.  (excluding the bits I day trade)

Why is a 15% profit bad you ask?  Easy, in the past year the TSX has gone up 25%  (feb 2010 to feb 2011) and the big 5 Canadian banks have gone up 25-35%.  This means her holdings fell BEHIND everything else 10-20%.  This is effectively the same as losing money in the market because your few dollars will now buy less.

The more I think about it, the more I want to bulk up my holdings in the following:
TSE:BNS - Scotiabank
TSE:RY - Royal Bank of Canada
TSE:TD - Toronto Dominian (I don't own this one yet)

Also there are these neat things called index funds.  They have holdings that effectively follow/track/mimic the performance of the indexes they follow.  And index funds are a great thing to have.  The ETF versions are better since they generally have lower management fees and you can bail on them quickly if necessary.

I like the Horizion Beta Pro product that uses Leverage (and a few other tricks) to track the index but at a 2:1 rate.  So if the market goes up 1% you gain 2%.  If it goes DOWN 1% you lose 2%.  Generally speaking though, markets do go up over time if you're in it for the long haul.  (If you examine any 15-20 year brick and look as far back as the stock markets go, you'll find few 20 year periods where you would lose money if you holdings tracked the index)  This one is can be found @ TSE:HXU  You can flip it quickly or hold it for a while.

Just remember: Buy on FEAR, sell on GREED.

If the market falls and the media starts blathering on about how much it's fallen today, then this is your chance to BUY BUY BUY!  But when you see things go up for several days/weeks in a row, it's time to consider selling or reducing your position to take a little profit!

Disclaimer: Don't sue me.  I'm broke.  Follow my advise at your own discretion.  I can't be held responsible for your shoddy research.  My opinions are mine and for me alone so if you lose everything, you fully agree by having read any part of my blog that you won't sue me.  If you're lawyer thinks otherwise, this means you immediately agree to pay me $1,000,000 and pay for any legal expenses I might incur.

Wednesday, February 9, 2011

diversity... for real this time.

While betting all your money on the longshot horse looks good in hindsight (provided the longshot actually won) it's better to look with a broader focus when it comes to investing your hard earned dollars/euros/food-stamps.  Rather than trying to play the odds my approach is also not without risk, but it stands a much better chance of picking the winner.

So where is this crystal/magic 8 ball that I get my ideas from?  Actually it's easier than that.  If you want to bet on the ponies fine... but try something considerably less exciting than the $100 long-shot.  (because 400:1 odds says 399 losses and 1 win... maybe.  The only guarantee: if you don't bet, you keep your $100, but you have a 100% chance of winning nothing.)  Yes, the more I try to analogize this, the more circular and obtuse my logic gets.  Perhaps the horse track is a bad example because not much of that industry is a sure thing.  Looking after the horses however is good business.  Stables, training, grooming, feeding and waste removal.  As for investing ideas in this area don't ask me...  This was really just a bloated analogy.

Summary: if you bet everything you have on "one horse" you're a fool.  Mind you you might be thinking I'm hypocritical because since your starting small you might only be starting with one position.  But if you started with a Canadian big bank, then you're not betting on "one horse" so to speak.  But you're betting on approximately 1/5th of ALL of the business in Canada.  So that doesn't even seem like a bet any more does it?

Also, it helps in the beginning if you buy things that pay dividends and distributions.  Why?  Since you might not have much income for investing, the investments give you some which you can re-invest into something else, or withdraw and spend frivolously on a 24h bender or that big TV you always wanted.

Note: This is perhaps somewhat a contrarian view as 99% of "professional investment advisers" will say you should buy mutual funds and go for capitol gains when you first start investing as a young man/woman/thing.  There are 2 reasons they advise this: fully managed accounts generally do not charge commissions on mutual fund purchases so you can buy them in small amounts.  (Like your $25 a week)  AND mutual fund companies pay your adviser through what's called a "trailing return."  I like to think of this more of a bribe since they are stealing your money to get your adviser to recommend their product.  But since you already read my rant about mutual funds I'm hoping you generally stay away from most of them.  (Some are good... some are fantastic!  It's just hard to know what actually does do well because historical performance is no guarantee the fund will do well next week.)

Next time: why I like what I like

Disclaimer: if I'm your only source of investment advice then please stop now.  Go back home and put your pennies back in your sock drawer.  My advise may lose you money (in the short term if you panic).  The goal of course isn't to lose money and you have to stick with it.  My recommendations are a 40+ year commitment.  Which is hell I know since you still are dealing with discovering what is a "need" and what is a "want" and you're still dealing with a healthy dose of youthful stupidity.  Please I beg you, plan for tomorrow!  The world isn't going to end any time soon and I don't want you out begging on the street.

Liability: by reading this you MUST accept liability for your own actions.  I can not be held responsible for any actions YOU did.  Do your own research beyond my weekly dose of brow-beatings.  If you lose everything, please check the nearest mirror to establish blame.  If you made some big gains, then great!  Come visit and buy me a drink.  (This is not a requirement... I'm giving you an excuse to party if you need that type of thing)

Friday, February 4, 2011

how many eggs in how many baskets? What's next?

I'm sure you have already heard the old adage, "Don't keep all your eggs in one basket!"  And I know you said to yourself, "WTF!  I don't even like eggs!  What am I?  I substance farmer?  Dammit, where are my eggs Benedict?!?!"

If this is indeed the case, I shall attempt to share some wisdom with you since you're still an investing noob and don't know your posterior from a hill of beans when it comes to investing.  You perhaps even at this point are still leery of me, my ideas, and this whole "investing" thing since with financial meltdown in the past few years and the media choosing only to broadcast doom and gloom, plus with your substance income up to this point, you're saying I want my money NOW!

Well my friend, you're a douche.

Get your damn head out of your arse and start investing in your future...  And not just in "get rich quick scheme 2011 Inc."  Because they aren't in it for you, nor will you ever get rich from them.  (Protip: You can make money if you bet against them since they clearly aren't in it for the long haul.  How?  SHORT sell it and enter a "zero-bid" to close out your position after they go down the tubes.)

But since I haven't explained how short sells work yet, let's rewind (yes, that's becoming a very dated term now) and get some diversity in your portfolio.

If you started with my advice, you're now the proud owner of some shares of one of the Canadian big banks.  Since I told you to buy them (last week) they have gone up in value around 2-4% depending on which big bank you bought.  (minus your commission of course)

So what now?  I wouldn't sell it just yet.  Your position just closed a few days ago!  Big Canadian banks will thrive now, next week, next month and for as long as Canada exists.  Canada still has some draconian leftovers from eras gone by when large scale protectionism was the norm.  We're only recently challenging some of this old stuff thanks to the folks at Wind Mobile.  Canadians don't want real choice!  We want to be robbed!  (Well... at least the ones who own the stocks do!  And now you own a little slice of that so take yer profit and shaddup!)

So lets say your slow and steady savings of $25 a week has now hit $500.  You do have enough money to start buying other interesting things.  (And things that I like)  You could add to your position with your bank and that wouldn't be stupid, but it wouldn't be terribly advantageous.  $500 will only get you 6-9 shares of any of the big banks.   It's time to buy something smaller.

How much smaller?  How about something in the $4 per share range?  That will let you buy 100 of something.

I like AAR.un.  Its called Pure Industrial Real Estate Trust.  And if you haven't yet gleaned from the name, it's a real estate trust and they only manage/own industrial properties.

Why do I like it?  It pays over a 7% yield and Canada is a big industrial player.  Market forces since the crash back in 2008 have kept the price down, yet they continue to pay consistent monthly yields.

The industrial sector in Canada should be making some decent recovery/improvements/gains/increases in the next few years provided the global recovery keeps soldiering along.  (Slow and steady is far far better than an instant return to previous levels.  I'm happy it's taking so long.  It means things are realistic and sustainable!)

If you buy 100 units, you get a whopping $2.50 per month for distributions.  But put $425 in your savings account and see how much you get after a month.  ($0.75 if you're lucky)

I bought some, I've been holding it for quite some time now.  I've continued to add to it, little by little.  It's gone up nicely in value all the while paying me 7%+ yield. 
It has gone up and down a bit but hold your horses and hold on to it.  They pay you to wait.

Full disclosure:  I currently have a LONG Position in AAR.un. 

Next time: will I ever stop digressing and missing the point of my posts?  Hopefully yes and I'll explain why it's good to diversify for real!

Disclaimer: My recommendations are for me and me alone.  If you follow them and lose everything, you need to look no further that the nearest mirror to establish the guilty party.  I can not and will not accept any liability for MY decisions, since they are based on my efforts and my research.  It's my money to win or lose. 

Saturday, January 29, 2011

Harping on the same old soapbox/bandwagon/tune...

I know I promised that last instalment would be about diversification, but since this is still a shiny new blog, I'm going to take a moment here to remind you again (well... attempt to beat you over your head with) about the importance of starting early.

Yes, I know it's hard.  Yes I know you don't have enough money left over at the end of the month, and yes, I know you have debts.  I have some debt too!  It's not unreasonable to be in debt when you're in your 20s and 30s.  (Even in your 40s and 50s if you're buying a house)

The most important part is getting into the habit of not spending every last red cent with reckless abandon as soon as you get the cheque from the gig.  (Or even worse, if you spend it BEFORE thanks to your not-so-handy credit card)

If you're carrying a balance on your credit card, I have no sympathy for you, because you're a stupid MORON! Have you stopped to check your credit card bill lately?  Have you seen how much they are charging you?  Just because a store has a 50% off sale is pointless if you buying on your credit card.  You quickly lose all that "savings" (off an inflated mark-up no doubt) thanks to your sloppy spending habits and poor skills paying off the FULL balance of your card every month.  Honestly people, you're being charged 19.99% interest on your card... And some of you brilliant people are being charged 29%!!!!

Debt makes me cry!

Accidents happen and life happens.  I know.  But if you can't pay that card off in less than 3 months (so the card STOPS charging you interest) then you're an idiot for making a foolish purchase.

Now, not all debt is bad.  If you can get a line of credit from your bank, they should only charge you about 5% at today's rates.  If you can borrow at this rate then ok, you're not an idiot.  If you can get a decent size line of credit than this can be your "emergency" fund until you have enough cash on hand to do it yourself.

Also your brokerage might offer you "margin" on your CASH account.  (The taxable one)  Which can be a great tool since yes, you are borrowing money but you're using it to invest.  If you can invest in something that pays out at 8% (and typical margin rates right now are 4.75%) then you're making 4.25% using borrowed money.  The interest charged is tax deductible against the earnings.  So a starving artist like myself can almost completely eliminate any taxes owed on my taxable gains.  (Now set your damn stops on your margin purchases!  If you ride them into a black hole, you're still responsible to pay it all back!)

Now, back to my original point of this post: start early and stick with it.

I did some rough calculations for a few of my friends whom I work with on a quasi-regular basis.  (As regular as you could possibly expect in the music world)  A few of them are young couples about to (or recently have) embarked on married life and some of them are single folks who are often tempted by crazy nights out and the party scene.  If you can muster $25 a week and start before you turn 25 and continue to invest this until you retire you will have over $1,000,000 to live off of by retirement age.  Now that might not seem like a lot, but $1,000,000 invested the way I'm investing would yield $7000 to $10,000 a MONTH to live off of without even touching the principal.  And I'm not investing in crazy risky shit either.  (I do a bit of crazy shit only to keep me interested and make a few bucks on the side)  And my investment choices should cover inflation too, so you'd be living large in your retirement and all it would cost you is a measly $25 per week.

How hard is it to come up with $25 a week?  Well sadly for some of my friends it is VERY tough.  But how many times do you go out to eat any given week?  One restaurant meal with a drink or two easily costs more than this.  So why not eat at home and just go out for coffee/desert with your friends instead?  Or if you find yourself in restaurants almost every night then you're making a CHOICE to be poor.  Learn to cook dammit.  It will save you THOUSANDS of dollars a year.

I'm not saying you should be a hermit.  You should go out.  You can go out.  Just put that $25 per week away first and go out on the town with what's left over.  $25 isn't that much of a sacrifice these days, but in the long run it can add up to easy-street when you no longer want to, or no longer can work.

Now if you're truly pathetic, and can't come up with $25 a week, try to do $50 a month.  That's about how much your cell phone costs you right?  $50 a month can grow to over $400,000 by retirement age if you can start before age 25.  (That gives you income of $3000 to $4000 per month at retirement time)

Now if you're devastatingly poor and can only come up with $25 a month?  That's not a horrible life either.  Provided you can start BEFORE you have turned 25.  $25 a month will take some more aggressive investment techniques, but if worked properly you'll have $2500 or so a month in income.

Please start now.  You don't have the time to wait for better work or more work...  You're in the arts dammit!  It NEVER gets any better.  (Well, almost never)  We'll always be under the squeeze for smaller budgets, smaller seasons, smaller orchestras, smaller grants.  Either new education campaigns need to beat people over the head with the importance of art and artists, or our society will be a dull, boring, and nearly lifeless bunch of people consuming crap until the world is depleted.

Start now... You won't regret it.  Have you ever heard an elderly person complaining about how they started investing too early?  No...  Nor will you ever hear it.  If you start early you might just do well enough so that you don't have to work until you're 103 years old.  Imagine, financial freedom... It is possible and not unrealistic.

Next time: diversification.  (For real this time)

Disclaimer: My opinions are my opinions and mine alone.  If you use them for your gain GREAT!  Lets celebrate over a beer.  (You're buying)  If you're wiped out by following my advise then I'm sorry YOU messed up.  Did you read the fine print?  You can't sue me anyway since this is just my opinion and like you I have no money either!

Friday, January 28, 2011

A stop too soon!

If you've read my other posts, you've heard me extol the virtues of stop-loss orders.  They are indeed a fantastic way to save your ass/bacon/rump/skin/shirt/hard earned scratch.  However some care needs to be taken setting proper values.  Why you ask?  Well, as I found out the hard way today if you set your stop too close on a position you know is solid and expect to have it for years to come it will trigger unnecessarily.

My previously established 10% is a great starting point to handle most solid blue chip companies.  (Blue chip = huge)  However for smaller companies or even recovering companies in the current floundering economic recovery, 10% is just too tight.

My position in AGF.b was triggered today because they announced their earnings.  Did they make a profit?  Yes.  Was it more than last year at this time?  Yes.  Did the stock go up in value?  NO!  It fell like a stone past my stop, triggering the sell.  Why did it fall?  The earnings were not as rosy as predictions had expected them to be.  Now if I had any cash on hand available to make a purchase this would have been a great buying opportunity.  But it's falling!  Why would I want to buy something that's going down in value?  Well, you can buy more for less money that's why!  Also, this one question will lead me to an entirely new blog posting for a later date, because it's better to buy on fear and sell on greed.

Anyway, because I like the company and I expect to want to buy more as funds permit, I bought back the position almost instantly.  So today I lost the cost of 2 commissions and a few bucks because of the difference between the sell and then re-purchase.

Another position I hold today (Ford Motor company) nearly also triggered it's stop.  It fell nearly 14% in value in one day because they too "missed" market expectations.  The markets are really quite crazy though.  This is a chance to BUY more because Ford is leaps and bounds beyond the other North American car companies.  They were the first ones to get the fact that they couldn't keep selling us total crap and expect to keep profiting from it.  They started making more interesting cars that people weren't revolted to drive.  (I still don't drive a Ford...  I'm not sure I ever will, but when they fell to nearly $1 per share in 2009 I said, who cares if they go bust!  100 shares won't kill me if they explode.)  Ford was the only North American car company that did NOT ask for bailout money.  They managed on their own without having to go into bankruptcy protection and now they are well on their way to recovery seeing as they posted the biggest profit they have had in over 10 years.

Biggest PROFIT since 1999 and the stock price FALLS 14% in one day!  Just remember how insanely skittish the market is...  Wait for BAD news like this on a company you like and use that as your chance to buy or increase your position.

Since I had purchased Ford for just over $1 per share, I never set a stop on it as I had next to nothing to lose!  So even if it had fallen $10 a share I'd still have a profit on my hands.  Yes, $1000 less profit for my 100 shares, but still a profit.

So, take some care setting your stops.  10% is good for many things, but 15% is safer if you want to make sure you hold on to your position.  20% is also useful too for other more risky investment products provided you know the price will swing and eventually swing in your favour.

Next time: diversity...  Having a few eggs in a few different baskets.

Disclaimer: Today you read entirely about my misfortunes.  Laugh all you want.  You can't sue me for my tale of woe and financial loss.  If you do, you're an idiot since I didn't tell you to do anything.  If you do take my advise for anything please do realize your actions are your own doing.  If you want to find the source of your failure go look in the mirror!  My opinion is exactly that.  If you don't do your own research then you and only you are the source of your loss or gain.  You have waived the right to sue and if you do think you can, good luck.  I'm broke.

The "B" word is not a 4-letter word. (Budget)

I can't afford my rent... so how on earth can I budget?  Well my friend, if you really are in this much of a pickle you have to carefully scrutinize which of your (lousy) decisions got you here.  I must confess, I too often have trouble making my fixed expenses on a month to month basis, and no, it's not because I'm lousy at my investing, it's because I have my budget and I'm doing my best to stick to it.  So if I had a crappy month with no gigs then I'll have to make some sacrifices to prevent homelessness and keep the mouths at home fed.

I've watched a lot of crappy television programs about stupid people who consistently overspend, pay on credit cards, amass huge debts and then go on national television to humiliate themselves because they just want the $5000 cash reward.  Some people get it, most people don't.  The real problem is your attitude and your issues with self-entitlement.  If you find yourself saying "I deserve this..." Then you probably don't.  You're just looking for a quick fix to your moody-blues because your boss was crapping on you all week at work, or if you're like me you just had a killer work week and are so tired/exhausted/depleted that you need some kind of fix.

Always always stop and re-think your motivations if you're find yourself saying "I deserve it."  Not that you don't, but the trick is to make the money to buy it BEFORE you plunk down your plastic.  How does this relate to a budget?  Well, just like your parents (or perhaps grandparents) who survived any of the wars from the first half of the 20th century told you, "You have to SAVE."

Saving isn't hard.  It can be automated which is great if you have a 9-5 and get a steady pay-cheque.  The easiest way to save is to disappear 5-10% of that deposit instantly (into your investment account) leaving you 90% to have your way with any way you see fit.

A great way to "protect" this invested money (yes from your own damn sticky fingers) is to put it into a registered investment plan like your TFSA or RRSP.  (Fill up that TFSA first though... I talked about this before, and no doubt I'll keep harping on it again in the future!)  This way, if you want to make that "I deserve it" purchase you will have to make a phone call to your brokerage rather than just clicking with your mouse on your online banking.  This extra step of forced human contact will help prevent you from making a foolish mistake.

Now what if you don't have a steady job?  I don't.  I never have.  Everything is a contract basis and almost everything is a one-off deal.  I do have a few repeat customers but the regularity of the engagements is spotty at best.  This is why you have to budget.  So you won't be high and dry if you have a 3 month dry spell and are very tempted (or forced) to dig into your precious retirement monies.

Whatever you do if you are faced with this situation DON'T DO IT!  Seriously people, with compounding, every $10 you invest generates $1 of yearly income FOR THE REST OF YOUR LIFE.  (For those of you who are quick with math, yes, this is a 10% return after the nasty effects of inflation... so it's really a 12-15% average return on your investments... yes it's possible.  I'm averaging about 20% lifetime average so it's not unrealistic!)

So you have to start somewhere with your budget.  The trick is to start NOW!  Don't wait.  You can't afford to wait.  Every minute you waste now will cost you thousands of dollars when you retire.  There are general guidelines available on the web for how much you should save for a rainy day, for housing, for the dog etc..  Most of the recommendations are reasonable including the guidelines given on the TV shows that take great delight in revealing just how stupid broke people can be for the $5000 carrot on a stick.

The easy part?  The retirement savings portion.  The younger you are, the smaller a percentage it has to be.  The following chart will give you a VERY rough percentage of how much of your pay you should put away based on your STARTING AGE.  So if you start when you're 18, then you only have to put away 5% of your earnings for the rest of your life to assure a very lavish retirement.  (Even if you're working minimum wage!)

5% 18-20
6% 21-23
7% 24-26
8% 27-29
9% 30-32
10% 33-35
15% 36-40
20% 40-50

So if you wait, you'll have to pay WAY more of your budget to live comfortably during your retirement.

Now you say what if my union has a pension plan?  That's a great thing to have if you can VEST into the plan.  (If you don't vest, you don't get the money)  Vesting requires you meet a certain minimum number of union engagements in a certain time-frame.  However this doesn't mean you can run straight to the bar and down the extra money you don't have to invest in Jagermeister shots.

It means you can round down a percentage point or two from your investment savings.  I wouldn't cut more than 2% though since you don't know what's going to happen to those pension plans.  Legislation might change and they may reduce the payouts or who knows what.  What I'm trying to get you to do here is to be self-reliant and take responsibility for your own life rather than hoping somebody will call you with the next gig.

General guidelines
30% housing (utilities INCLUDED)
20% travel (car, insurance, parking, bus pass, taxi)
25% life (food/clothes/vacation/ipods/cell phone plans)
10% retirement
15% debts/emergency/vacation/other

If you're an urbanite your travel might be way lower so it's ok to go with 50% of your income to housing/travel.  Just make sure the sum of all that stuff is no more than 50% of your income or you won't be a happy camper...  Having a nice place is nice, but if you can't afford food because of your crippling rent you have to re-consider.  You don't have money to go out so you have to stay at home, so your home can start feeling like an expensive cage.

Now there's a problem if you're like me since every cheque you get is PRE tax and this handy reference guide is your POST tax income.  So you have to guess as to how much tax you'll have to remit and save that too!  So what this really means is you have to re-jig your numbers a bit to incorporate this extra savings bucket.

Since I make have consistently made an abysmally low income every year I don't have to save much for tax.  Also being "self-employed" as most performers/musicians/artists are you'll have many more tax deductible goodies you can claim to bring down the taxable portion of your income.  (The amount of money you have to pay tax on.)  Watch out though!  If you're having a good year, make sure to save some extra money for the tax man, or you'll get a NASTY surprise when you file your tax return.

The hard part is getting this savings rolling.  The first few months are critical  If you find yourself having 3 good months in a row you feel like rewarding yourself.  Reward yourself with a safety net!  If you do, (baring a huge devastating financial disaster like when my computer hard-drive croaked and I had to pay way too much to get the data recovered) it all starts to get easier.  If you have a crappy few months, you can dip into your emergency funds to cover your monthly expenses.  Then when work picks up again, your emergency fund recovers and is primed for your next inevitable shortfall.

After you've kept this ball rolling for a year then you'll have peace of mind, a buffer to get you through crunch times and a realistic appreciation of what you can actually afford to reward yourself when you're feeling blue.

Next time: diversity, adversity and easy slip-ups.

Disclaimer: By having read this blog you dismiss any liability I have in your investing failures.  Just remember if you do ANYTHING based on ONLY my advice, you're an idiot.  Do your homework and if you're looking to place blame for your uninformed horrible stock picks you have to only look for the nearest mirror.  My opinions are exactly that: MY opinions only.  They might be right for you, or they might not be.  I have winners and losers and my goal is to help you understand where I went wrong so that you don't have to.  If you crash and burn, lets get together for a beer to commiserate our losses and plan a new attack.