Investing DIY – 4 – Some tips

I thought I shouldn’t close this cycle without giving you basic tips. In the end, keep in mind that only YOU have to judge and understand what makes sense for you. I know, I know, it’s difficult: you have to take responsibility of your life and your decisions and who is ready to do this?!

The simplest thing are mutual funds. As you most probably know, mutual funds are a collection of stocks, meant to spread the risk over a number of companies of either the same profile, or in the same country, region etc. There isn’t much to evaluate:

  • what sector/country/type of business you believe will grow. There are technology mutual funds, health, energy, emerging markets… endless possibilities.
  • what type of fund you select – large or small: large funds have stability should problems show up but the downside is that they tend to have issues liquidating assets not performing. Think about it: selling 3% of 10 billion dollars, means selling 300 mil $ worth of stocks and they cannot do that overnight, especially when that asset has hit hard times, or else they might shoot themselves in the foot, dropping the price even lower.
  • who manages what. In this area the mutual fund manager is important – experience in finances, experience in that sector etc. Do your homework because it will pay.
  • performance. Look for a track of performance and check the best and worst years. Especially the worst to see if you can stomach those drops. At the same time, if the average looks good enough and you are not really close to retirement, take a chance because there is no gain without pain. Many mutual funds with high-load boast about their “performance” in years when the market is losing money. i.e. A mutual fund might lose 15% when the industry it’s focused on lost as a whole -23%… yet as somebody was pointing, we can’t eat negative returns. Same mutual funds in years when the industry made 12%, only managed to achieve an 7%…
  • Fees. MER (Management Expense Ratio) is the most important because it is ongoing. A mutual fund with 0.7% is a great deal but most, in Canada at least, charge 2.3-3%… It might seem paltry to bargain over 1% yet over years that translates in lots of money. Ofc, as somebody was pointing out there is no point in getting a very low fee fund if it doesn’t perform… yet there seems to be no direct relationship: there are low-MER funds that perform well and high-MER ones that don’t do so well. Other fees that can kill you are the loads: front-load and back-load. Front-load means they take a commission upfront, while backload means they will take some money, less and less as years go by. Usually most of it goes to the financial advisor. Most of the funds have versions that incorporate a 1% for the financial advisor while one can get the same mutual fund without that load or with a much lower load when buying a different series of that mutual fund. I personally believe that in the beginning, index funds are great – very low MER and very few other funds manage to beat them year over year. All you need is to figure out what area of the economy will grow. I have 2 iShares mutual funds – Gold and Asia without Japan – doing quite well.
  • Don’t forget to chose DRIP in case they pay dividends (and many do). Year after year, those dividends will start making a difference.

With the stocks the situation becomes more complicated – more work, more risks but at the same time potential for more growth is better. I generally subscribe to a number of newsletters who bring to my attention a number of companies within the larger picture of the industry. It was said that an average company within a stellar industry performs much better than the best company in a sector in recession. What we are trying to achieve is identify a good player in a good/excellent industry. Stay away from top performers posted in your local newspaper – read about them but normally, if they hit the large press these stocks are overpriced. How do you know that a stock is overpriced, how do you know when it’s risky?!

  • P/E Ratio – Profit of the last year/Number of shares = Earnings Per Share (EPS). Divide the price of the stock with the EPS and you get P/E Ratio which is a basic indicator of how much is the confidence in that company. Another way to put it, this P/E Ration shows how many years the earnings of that company should stay at least the same to pay for the stock itself – to get your money back. Both Google and Apple, i.e. show a P/E of more than 22, yet they grow a lot each ear… P/E Ratio is only relevant when compared to the industry average but it is something you can take in consideration. Check the growth of the company as it may justify the large P/E Ratio.
  • Dividend/Yield – if you, like me, are focusing on dividends (recommended in these uncertain times), this is important. Check for companies with long track of paying dividends, since these are not guaranteed but a long track says something. Yield will change over time as the price of the stock unit increases or drops: it’s the value of the dividend divided over the total cost of the share: i.e. if the company pays 1$ in dividends per year and the stock is currently 10$/share, the yield is 10%. If the share prices becomes 20$, then the yield is only 5%. Focus on companies that increase their dividends over years.
  • 52-week price: shows the low-end and the high-end of the stock during the last year. If the company is financially sound (check their financials) and the price is close to the bottom, chances are you will be doing good.
  • Beta – index to show how volatile a stock is, or else said how much its price varied in the last year. S&P500 – is given a beta of 1. If the Beta index of the company is below 1, it means it was more stable than the market; if it is over 1 it is more volatile. Normally, you should look for stocks with high-returns with a beta bellow 1. If you can stomach higher risks and the company has a Beta over 1, it might still be a good deal, since higher risks should always mean higher potential return. But by itself it’s not a good indicator because it is only math, not the real situation of the industry which might be in a restructuring period etc. Use it only for short-term planning.

There are more indicators but the best indicator is common sense. It is a fun game but don’t expect to win it every time. If you are not a gambler, then don’t gamble! Make solid investments that need maybe 1-2 re-adjustments per year and keep an eye on them monthly – in normal times even this could be bypassed yet surprises are to be expected in such a roller-coaster ride. Never “play” more than you can afford to lose – maybe a 10% of your portfolio – this means buying and selling on short term, stocks not so reputable. They might be a bargain but then again neighbour’s garbage is an even bigger bargain.

Other rules of thumb which, while well-known, might be news for some of you. These are normal fluctuations:

  • sell in may and go away” – stocks drop over the summer as industrial activity slows down, less interest in the market, people redeeming investments to pay for vacations. Yet, I would recommend to start when everyone else is selling. Yes, they might drop a little bit more yet in September, if you chose good investments, it will pay off and you will rejoice with the timing. Beside this, much timing cannot be done on the investments, unless you are a day trader… in which case, why the hell are you reading this?!
  • It’s normal for companies being acquired to have the stock going up and for the ones purchasing to have their stock going down
  • Before the dividend date, many investors buy that stock 1-2 weeks, maybe 1 mo, in advance, depending on the rules established (“this will be paid to investors who were on the record at the date X”). Buy outside of those rush periods and you might save a 1-2% or even more. In general, try to avoid the stampedes for a certain stock – for every Apple, there are many obscure but solid investments.
  • If your stocks follow the market indexes (NASDAQ, Dow Jones), don’t panic – it’s quite normal. Actually, don’t panic in any circumstance. Keep an eye on the investments and if they have sudden moves – drops or raises check the news to see what caused those moves.

Get Rich! Slow!

ARROGANT

I was told that I shouldn’t place myself on a pedestal, and that I brag about doing things that people consider normal. I was told that I should lower myself to the level of the street, in order to be happy and satisfied. Well, that person might as well told me to change the colour of my skin.
Most of you, reading this, are Romanian and you know why I should lower my head. Because we were given a commandment that every head that stays high should be chopped until we become a people of mediocrities. We only did chose another way than the Western culture to implement this commandment. We chose the fight and extermination of those who stand tall, instead of the “hmmm, interesting” and turning our back… and to be honest our method is not so efficient.

I always felt special. I hated it and throughout my life I tried to look at ALL people as my peers. What happened was that I asked too much of them and they felt this is unfair.
After the divorce, I was able to expand my horizon, to hear many new stories, to enter worlds that were not my own, some of which I didn’t even know they existed. Slowly I had to admit to myself that I AM SPECIAL. Sometimes, after being minimized by low people, I had to force myself to believe it, because my emotions were telling me the opposite.

Words are cheap, isn’t it?! What is more important: quality or quantity?! How much of each?! How can one measure one’s performance?! The system of reference chosen is important. Do I think highly of myself on an absolute reference system?! Not at all. I would be crazy to believe that. I read books of superb humans, I had the chance to meet people who excel in their professions, I saw feasts of performance never thought on TV… But – one of the corners of The Absolute Reference Systems, Einstein – said that everything is relative (he actually told to an actor “I have a little theory about this” :))

  • Am I the best system admin?! Shit, NO!!! Who knows who that is?! I met 3-4-5 people who can whoop my bottom when it comes to understanding technology. I know I had to work hard to get even where I am because it’s not my main interest and I wasn’t built to grasp technology with a blink of the eye. Yet, after working in about 14 companies in North America, I realized that I am in the top 10-15% of the professionals I met, while being paid much less than the others, above me. So I am proud of being a very reasonable priced asset.
  • Is it such a big deal writing?! Nope. Many people write, some even publish, some even get awards and extremely few become best-sellers.
  • Is it such a wonderful accomplishment to be handy and do things around the house: to install a fence, to put ceramic tiles, to install a toilet, or scounces?! Nope. Many men do that and that makes their women happy.
  • Big deal to have a job?! Not so much… but when life and your big-mouth, and the crisis hitting technology makes you look for a job 14 times in 10 years, and when one never has more than 3 months (and that only once, and only because of a string of bad lucks – i.e. not having “secret security clearance”) it becomes somewhat of a performance. In the most unstable years, my income actually grew. But still, not one statue giving.
  • Earth shattering to have a man cooking?! And not once every three weeks but every 2-3 days, from scratch many times, soup and second dish, every now and then trying something new, adding something to his book of recipes? God, NO! Many men cook and no statues are placed for them in the public square and it’s good they don’t do that. And who is the judge of the quality of cooking?! Others but still, the biggest critic is ME.
  • Investing with some success ?!Knowing what you are doing instead of just buying on a rumour is a good thing, yet it isn’t something stellar.
  • Losing weight, 12 kg, 24 lbs and keeping it off for 3 years?! Losing it when I was the most depressed in my life, when nothing had a meaning and I was doing this because a dying voice of reason was telling me that I have to do it, because nothing has any meaning after all.
  • Cleaning and cleaning well, basic mechanic for the cars, good taste in movies, books and interior design…

BUT HOW ABOUT ALL TOGETHER?! I know I am mediocre… but I can only compare myself with the people around me, the ones whose lives I know well. Without trying to minimize them, I know that while many are good or even exceptional at a number of things, few encompass so many qualities which MAKES ME EXCEPTIONAL and I will not allow anybody say it different.
How can I prove it though?! Oh, I know, there is only one thing that people believe easily: NUMBERS!!!

In US there were, in 2007, 44,000 registered self-employed, published authors. This was the only number I could get but it’s a generous one because I will extrapolate this to the entire planet, and one has to keep in mind that not many nations have so much publishing space available. That means only 0.014% of the world population has published their writings. That gives a whopping number of 94 million people (gosh, wayyy too many but then again open your local newspaper and you’ll see what kind of them!). Out of these how many were recognized through national awards?! Hmmmm – a statistic that I am not able to find. Do you think that 30% is a number too restrictive?! Personally I believe that 30% is a large number yet I am inclined to err in the direction non profitable for me. That puts me in the regal place of being one of 31 million people who published and were recognized officially for this.
How many of these are planning, shopping AND cooking?! A 1998 statistic (http://www.ncbi.nlm.nih.gov/pubmed/9739799) shows that 23%, 36%, 27% are respectively doing so. Ok, so we hit again the 30% rate as an average of men cooking. That elevates me to one in 10 million people of Earth. We’re not even going to enter the area “how many of them are cooking GOOD?!” What?! Don’t include women?! But it’s the same – read here: http://uclue.com/?xq=1501 – that says that in the advanced world only about 30% cook regularly.
How many of these would ever change the brakes on their cars?! (no, I will not ask how many of these have cars). 10%?! Yes, many males do maintenance work on their cars, or even thorough repairs. Think though about the ones you know personally – how many of them are deep thinkers?! 🙂 I think 10% is again a very generous assessment. Thus I find myself in a the very exclusive “MILLION CLUB”.
I don’t even want to go further and adjust for self-directed investors, because I am quite happy with this result. GODDAM, I just proven that I have the RIGHT to ARROGANCE.

I will conclude with another ranting about Romanians – so, please, other nations, turn your eyes away. We like to minimize the others and their accomplishments just so we feel better about ourselves and the lack of certified merits. We kick the ones who do a little bit better than ourselves and say “what’s the big deal” to even things and accomplishments we never even tried to achieve. The envy that I feel seeing someone rise above myself, I always used it to push myself further, to see if I cannot match those achievements (but only if I think worthy; you’ll not see me eager to eat 50 hot-dogs in 2 minutes).

Should I wait for others to praise me and my accomplishments?! Sure, that would be the decent thing to do! But don’t rush to judge unless you were raised in Romanian culture. If not, you don’t know how hurtful it is to have a mom who, when asked why she never praises me she said “I’d rather have others praise my son, than think I am a fool for praising him just because he is my son” (true line from my mother’s mouth). I waited 37 years for my mom to say something nice, to praise me for my achievements, to trust me to make the right decisions, and I wanted it on the account of proven track of record. It only happened after the divorce, when my mom praised me for cooking a soup and, more recently, for neatly arranging clothes in my luggage. I waited 13 years, while I was married, for my ex to say “You are AMAZING!”… and mean it. She said it once or twice but on longer scrutiny she laughed loud. Last year I installed concrete slabs under my deck – by myself I moved 15 tons of earth, crushed stone, sand and slabs… I basked in the admiration of my Canadian friends who were impressed but from Romanians I only got indications that I am cheap and “that corner is not quite rounded” and so on. I am sick and tired of waiting for Romanians to admit that I am pretty good and I will not let anymore, anybody, say I am common!

Yet, I know – “Nobody can be a prophet in his own land” – and we’ll (at least, “we, the Romanians” – as far of them as I feel I cannot deny my roots) always miss the endearment, the pat on the back followed by “good job” exactly from those people from whom we need it most! You see?! I am not that arrogant, after all.

INVESTING DIY – 3 – Selecting the right investments

I knew since the beginning of this cycle that this would be the hardest chapter, only I didn’t imagine it will be so hard. Why?! Because while there are only limited number of investment strategies, there are as many personal situations and characters as people on this world. This confusion, though, lasted only until I remembered something important: I am NOT a real financial advisor, writing for an audience of millions. Phewww – so all I need to do is to talk about the general guidelines that govern my decisions, rules of thumb etc. I will lay down some of them but probably now and then, as my experience grows, I will add more.

Basic Rules

  1. Invest LONG TERM. You are NOT a day-trader (trust me!). Trading often means commissions that can chew up your profit and – probably – translates into trying to time the markets. Not a bad career, interesting, exciting, but this activity is outside of my scope and I hope your too.
  2. Information is MONEY. Information and information processing. Not only financial reports but being up-to-date on the news and maybe trying to understand the world we live up to the point where we know where we are going to. I.e. If one knows that the world population is increasing by 74 million yearly at the same time that we continuously lose agricultural land due to misuse and abuse, the logical conclusion is that in the next 10-20 years agricultural-related companies will do well. Subscribe to economical magazines, financial newsletters, read the economical page of major publications… keep informed
  3. Discipline and Common sense is MONEY. Invest periodically, chose solid investments and stick to them for as long as they make sense. Just because many are selling that is not good-enough a reason to be selling – maybe you should be buying and taking advantage of the herd (but, yes, sometimes the herd can trample you so use that common sense)
  4. Greed is GOOD… but so is realism. A line in an article drew my attention – many intelligent investors know and prepare well for buying but very few are disciplined when selling: “Shouldn’t I stay with this investment some more?! It’s doing well, maybe it’s going to be making more money”… but then again, maybe not. If you estimate that there is no more growth in that sector and that is not compensated by other means, like dividends, sell it at a fair price. If the sector is doing less than good, take the beating and accept the losses. Better -7% than -35%. And remember, we’re not in this to double our money in one year but to grow them into a financial stable future.
  5. DISTRIBUTE the risk. The purpose is that overall you are making money and profits are beating the inflation. Especially in the beginning, I know what psychological impact would make losing money by betting all your cards on a single horse. So diversify by betting on the good geographical and economical areas.
  6. REINVEST. While I know that it would be very tempting to take those 2000$ profit to have that wonderful vacation, those could mean 8000$ in 20 years. If you put it that way, it might not be such a good deal. Dividend reinvestment (if you chose companies who pay dividends while insuring some growth) is a sure way to grow solidly. A conservative return of 7% will DOUBLE your money in 7 years. Not good enough?! Get a gun – 300$ – and rob a bank and you can make as much as 10,000% profit in 1h… which then you can hand it to a lawyer or a judge for a more lenient sentence
  7. Don’t forget about TAXES. If you invest outside RRSP/401K, made sure you know what you’re doing and evaluate the impact of taxes on your return. Some investments might seem meager but allow for tax deductions while others might seem booming but less so after tax. Subscribe to tax-reduction tips newsletters and use whatever means you have to reduce the taxes. Don’t give me that BS that you’re not believing in RRSP/401K/TSFA etc. – they are not GOD to believe in; simply some accounts with some perks that we can use for our own good.
  8. Invest in what you understand. Just because something makes good profits and everyone says it’s a good deal, don’t jump in the boat before you researched and made your own mind. Look for products and companies that you like and find useful. Warren Buffet said that if the business is good and solid (i.e. product is good) the price of stock will follow.

Let’s leave the theory and systemization to the ones who can do this. How did I go about investing?! Sergiu Preston helped me a lot – our conversations cleared my mind, confirmed some knowledge I wasn’t sure about and opened new idea threads.

  • Gold was a good investment although most articles were announcing that it peaked and there is no more place for growth. But then I read an article where somebody was pointing that in 1982, gold has reached 850$/ounce. Adjusted for inflation, that meant 2300$ in nowadays dollars so 1200$/ounce left ample place for growth. As the governments are printing more and more money (few years ago 440 million dollars deficit for US was a tragedy, now 1.4 TRILLION is a fact of life), it simply makes sense that all the investors would seek the shelter of gold. Fearful that the gold itself might be though too expensive and worried about liquidating should there be an issue, I turned my attention on the companies mining for gold and low-cost, no-load index mutual funds.
  • Dividends make sense in this tough economical times. Companies who seek growth when everyone is watching their pockets are making a huge gamble and by investing in them, you take one yourself. Better companies with moderate growth that put cash in your portfolio on a regular basis. I was shocked to find out that investments with 7-8-11% yield (dividends paid divided by price of share) don’t have to be risky business. Dividends are NOT guaranteed yet there are companies with a very long track of paying them – thus some certainty that, unless something earth-shattering happens – they will not cease to pay those dividends.
  • Energy – despite all the conservation promoted by the governments of the world – is required for growth and the demand drives the price of energy up. I found out that there are very good Canadian Trust Funds (google the term) which are about to transform into corporations and that the uncertainty made investors shy away from them, despite paying very good dividends 6.5-9%. With the capitalization they have (tens of BILLIONS of dollars) it’s unlikely they will vanish and bargains are to be taken advantage of. One of them, which drew my attention already converted to a corporation, it’s unit price grey by more than 4% and they still pay 6.3% dividends and there doesn’t seem to be a stop or diminishing them.
  • Emerging markets – we, the Westerners, we screw it up. By spending and spending and never saving we eroded our buying power. But hey, there are hungry new consumers on the horizon to save us and afford the luxuries we take for granted. China and other countries in Asia, Brazil and other South American countries are places where economy grows while ours is shrinking. Again, an index mutual fund – 0.73% MER and no load – was the solution to tap into that wealth-to-come. And this is a good example of personal attitude to take – soon after purchasing the mutual fund, it dropped by 7.5%. I studied the situation, I realized that it’s just a herd-attitude and stuck to them. In just 3 months they are back in black, more than 3% and I expect this trend to continue. The Chinese consumers are barely awakening and they will want everything we have: cars, electronics, apartments, nice clothes. The Chinese government started appreciating their currency, the yuan. With this, the average Xuang will see his buying power appreciating and will start buying more – thus better their economy will do. It’s just at the beginning but its a good thing to be in a sector when it starts rising than when it has peaked.

CONCLUSIONS: No matter what you do is still a guessing game. Information can help you minimize the guessing and thus the risk to a bearable level. By being informed and using your common sense, caring for your investments, not being overrun by emotions and keeping your greed in check, you WILL make profits. It’s all been written over and over again yet I write this to expose the human element: the initial fear and the joy when I realized that it’s not such a big deal to select decent investments. Bypassing the middle-man – the investment agent, who is on commision – you are already ahead of the game.

INVESTING DIY – 2 – Choosing a brokerage firm

In due time you will discover that not managing your own money leads to losses more times than gains. Probably sooner than later. In a strong economy, the lack of skills of the so-called “agents” is not so obvious. Yet when the mutual fund they chose for you charges 2.5% MER while losing 12% in value every year, things look clearer.

Don’t beat yourself. It took me more than 5 years to make the step. I thought I didn’t have enough money and thought to myself – what difference can 2-3-4% make on, let’s say, 5000$?! And, oh, my gosh, how difficult it can be to figure all those things out. And then, when I was ready, in 2007, personal things made me lose my focus and I dropped everything again. By January of this year, when I started taking the matter in my own hands, I had 10% less than the money I put in. Not so good for a 6-7 years investment, eh?! Well, that’s life! There is a right time for everything. But I also had the support and encouragement that a very good friend – Sergiu Preston –, a person with a vast life-experience and long track in investing, gave me to start this new enterprise, the act of investing by myself. He pounded on myself all these advantages I describe here, like – I am sure – he did for many other people. I am simply trying to pass-it-forward and to make the path to self-investing much easier.
In any case, when you will be ready to step in this brave new world, the first thing you will do is try to figure out who should keep your money. The comments I make below are mostly focused on Canadian brokerages. In the US, options are much wider, deals are much sweeter and things might be different but the base criteria for selecting a brokerage remains the same. Please also read the fine print and try to understand where you qualify. If you still have unclear things, don’t hesitate to contact the brokers with your questions BEFORE you sign, because later it will cost you a dime and a nickel.

Instead of doing my own research – because I am lazy and lazy is sometimes good – I googled it and I found this excellent breakdown for Canadian brokerage firms: Stingy Investor

As you check the brokerages, you will notice the wide-range variation of fees and commisions. Some are well-established and they are cheap… but only if you do >100 trades/quarter or if you keep +50,000$ in their account. For a beginner, that number of trades is unimaginable. Some charge as much as 29$/trade. Well, if you make 20 trades that is a 600$ – so you really want to pay the brokerage instead of getting that LCD TV for the bedroom?!

Ask yourself a number of questions:

  • Will I be trading in USD or other foreign currency?! Why is it important?! Because if the brokerage charges you a currency-conversion commission, you need to take that in consideration. In Canada, traditional, well-established brokerage firms will charge you 1% to change the money in USD, and when you sell the equity/mutual funds, they transform it back automatically in CAD, charging you another 1%, although you might as well desire to purchase something else from NYSE. It has been allowed to keep USD in RRSP (Canadian 401K) since 2006 , yet very few had adjusted their systems to allow such a thing.
  • How much will I be charged if I change my mind and want to transfer my funds elsewhere?!
  • What kind of customer support they have?! How does their trading platform looks like? How can I access it? Google it and see what other people say but take that with a grain of salt – might represent a particular failure and pretty much all brokerages have their share of bad stories they don’t want us to know.
  • What are the perks I can get by signing with them?! Brokerages in US sometimes pay incentives and don’t shun the 100$ you get or 100 free transactions they offer because it is, indeed, free money.
  • Do they allow DRIP (Dividend Reinvestment) and if they do, do they allow fractional investment?! (Explanation: If the company X pays you 40$ every month, it is a good idea to reinvest it by purchasing the stock of the company. But if the company is trading at 37$, buying it directly means at least 5$ spent for 1 share. DRIP allows you to have that purchase made without any fees. Fractional DRIP means the brokerage allows purchasing 0.98 units of that same share – some don’t, so if the stock is now 43$, they will place the 40$ in your account)

In short, try to imagine what you want to do, read all the publicity and fine print, tick them off with questions and pick up a firm that will satisfy your PARTICULAR needs.

But enough with the theory. Why did I chose QUESTRADE?!

  • low fees. 5$ for up to 499 shares, 0.01/share after that; 9.95$ for mutual funds
  • 1% rebate on mutual funds’ MER: but to qualify you need a certain amount (still, I can live without since I purchase funds with MER < 1% anyway)
  • 50 free-trades in the first 3 months and 100$ of free trades for every friend you refer (and he/she gets 50$ in free trades in those 3 months)
  • keep both USD and CAD in the account; the conversion is 0.5% and once changed the currency stays that way, unless I purchase something in another currency
  • while their customer service is less than perfect, and speaks with a funny accent (I have a funny accent too, Eastern European one :), they post good FAQ and I mostly rely on written documentation
    the joining process was simple and documented, most of the steps were done online.

Of course, nothing is perfect:

  • now I know that you have to log on 3 websites to see all features: one for Penson (the one that holds registered accounts), one for the main account settings, statements etc. and one for trading) – yet I can live with that.
  • Estatements are somewhat late – 10th of each month for the previous one
  • the free trading interface (one has options for paid ones – probably much better) is not great but does the trick. Now and then they list things in a way I don’t understand (i.e. USD currency kept in account was listed as a number, like a company).
  • While they allow for DRIP, they don’t allow for fractional re-investment.

Yet, I am with them and unless they screw-up badly, I will stay with them because I have no-thrill needs – and I hope that you will not try to become day-traders before you can walk 🙂

Next time I will present some basic strategies for picking up solid AND profitable investments.

INVESTING DIY – 1

WHY DIY?!

There are a thousand reasons to do so but they all pretty much translate in “because nobody care for your money as much as you do”.


The so called “investment agents” are simply “sales agents” and once they make their commission, they will forget about you until next year. You might say to yourself, for good reasons: how am I going to get the knowledge of the markets, or understand all those terms like derivatives, options, beta, EPS, P/E etc. Well, let me tell you the level of knowledge of some of the people you entrust your money with. Before migrating my RRSP investments to Questrade, I asked what fees I will be charged if I wanted to sell them. My agent redirected me to his secretary, being told “I don’t know this kind of thing”. My “agent” didn’t know what are the fees associated with my investments! How much worse can I do?!
My ex went to another agent and asked some trivial questions and made some savvy comments to let her know that she is not completely unaware of investing terms. The investment agent was so enthusiastic that couldn’t help herself ask “Did you ever consider a career as an investment agent?! You seem sooooo knowledgeable”. Otherwise she readily agreed with everything that Brindusa suggested. One would think that you walk into an “expert’s” office to get some insights, not smiling nods.


I will not badmouth a whole profession. I am sure there are good investment agents but, from what I’ve heard, those guys have their hands so full that they mostly focus on big-money and for the smaller investor they are pretty much out of touch. Indeed, you might have an active, REAL investment agent who makes you good money but then stick to him/her and thank God you are so lucky.


It just makes sense that the average investment agent will not necessarily recommend you the best investments but the ones that bring the best commission. A standard mutual fund that very seldom, if ever, beats the index mutual fund (the index of the industry the mutual fund is focused on), would charge you 2.5-3%. And that is yearly coming out of your pockets. A well managed fund, with no load – like Phillips, Hager and North (PH&N), which charge 0.8-1% will not be recommended by agents because the commission is too small. I calculated that the front-loads and back-loads (fees for purchasing a mutual fund: either paid upfront or when you sell them if they are sold before a certain period) cost me with my late agent about 2500$. Those loads are traditionally going into the pockets of the investment agent. Why would they recommend you something that makes YOU money and doesn’t leave much for them?!


I know it seems scary. I heard too the stories with people who lost everything. People asked me if I “play on the stock market”. Oh, God, NO! No such thing, not now and probably not ever. I will NOT play with my hard earned money.
Yet things are not as complicated as the fear of unknown makes them seem. After all, it’s a guessing game and, while nothing is certain, you can make safe, educated guesses as well as the “agent”, just less expensive. The point is not going for the “get rich quick” scheme, because there is no such scheme. For smart ones amongst us a “get rich slow” scheme is good enough and there are plenty of strategies. I never aim at outrageous performances – since most of the time they try to hide huge risks and weaknesses. Even so, one could get 5-7-9% dividend from perfectly sound companies, which reinvested, in time, can make the difference between a comfortable retirement and a stingy one.


Here are some initial steps to take:

  • Subscribe to some good newsletters such as (you can tell they are good if they have been for a number of years on the market – if they gave poor advice, they would not have survived long):
    • Read and understand the basics of investing without bothering too much with the higher level economical knowledge:

    • Complete Idiot’s Guide to Investments
    • follow the tutorials on Investopidia that will guide you with baby-steps to financial success.
    • Use a portfolio simulator, such as this one offered by Investopedia here – where you invest virtual funds and make virtual gains or losses.
    • Read what other people have to say, follow the financial news and try to get up-to-date with the global economy. By reading constantly the economy news from your newspaper, you’ll start understanding what industries are making money and which are in a volatile position.

Here are some facts to chew on until part II. Did you know that:

  • 300 shares of a stock paying 14% dividend, which you reinvest (DRIP), in 10 years will become 1160 shares?!!!
  • by investing 25,000$ in a mutual fund with 0.87% MER (management fees) instead of one with 1.72% MER, with 5% yearly average return, would save you almost 3000$?!!!!
  • most of brokeragers in Canada, when you purchase a US equity will charge you 1% currency conversion fee AND, if you sell the equity, they will automatically convert it to CAD, even if you want to purchase another US stock and then charge you another 1%?! Do this thing 2-3 times/year and you doubled the losses that a normal inflation (3%) would bring to your savings.

Empty Words

There are some of us who never get tired of re-evaluating everything, for inquiring, never accepting pre-digested food-for-thought… but we are few. I remember a very smart assistant-teacher who, in high-school, proved to us that what we believed to be a just rebellion against mature people was a mere template we were using to prove we are different, not that actually made us different. Some kids become goths, emo etc. just to be different: enroll themselves into a huge movement (?) to prove they are different.
With age patience fades away – and I never had much to start with. Yes, I have much more patience in other ways but not with intellectual pygmies who repeat wise sayings and yet manage to empty them of all their meaning.


You are as young as your soul is”. HUMANITY! How many times wasn’t I forced to listen to this phrase?! Armed with this phrase one can pretend one is as young as they desire or as the situation demands. It’s not a dumb phrase yet it is misused. From my observation, most people have an OLD soul after 30 (almost random age… but not quite). Some are OLD at 17, very few manage to preserve their soul young through all the vicissitudes life throws at them. Let me make myself clear. Your soul is OLD once:

  • you stop believing in blind love
  • you start making silly calculations in relationship and let the brain decide what might work and what not
  • you believe that passion is something that will come in time
  • you stop believing in true happiness
  • IF you still believe, you are not ready to fight for it and you expect it to knock at your door at midnight
  • you are suspicious about human nature and believe that people are out to get you and make you miserable
  • you try to knock down all dreams and aspirations that people might carry inside them
  • you believe that job satisfaction is something related to money
  • you believe that whomever has the biggest house, the most expensive car wins The Game.

Simply put, a 14-year old girl who plans to marry for money has an OLD soul. A 65 year old person who still looks for tenderness, kindness, can still bright up when complimented, still has goals in life and can fight for those goals, has a YOUNG soul.


A particular case comes to my mind. It comes from online dating. A Caveman wrote to this beautiful lady something that in his mind was probably a compliment: “You look good for your age! Use the looks while you can”. Don’t ask me why somebody would feel the urge to post something so hurtful. A simple answer would be “because he is Romanian” but it is really more complicated than that. Anyway she replied “As long as the soul is young, age doesn’t matter” or something to that effect. I had, at a latter time a private YM chat with her. In a very short time, this lady with a “young soul” told me – when discussing how I see a relationship – that I am being childish, naïve, that one should look for one’s best interest, that passion will come later, if ever… She blamed me for searching for true love because, apparently, there is no such thing. Life and some miserable love stories she went through (no details though, just innuendos) taught her that. While I told her that she was right, that I am childish and that I want to stay that way, I never had the heart to let her know that she is wayyyy to mature to get involved with me, unless risking being classified as a pedofile.

Being a child

I feel such a spoiled child. I sometimes feel like dropping myself down and having a tantrum: it’s not fair, I can’t take it anymore, it’s too hard. I switch sides between accusing me of being a rotten apple and giving myself a spanking, metaphysical but a hard one, and finding excuses and allowing me some leeway.
After all, just yesterday, a good friend had his contract terminated and I realized that at 3 o’clock that his cubicle is empty and will stay empty, that I lost a good and intelligent person I could share things, ideas, opinions and who will not be afraid to tell me when I’m wrong… Later in the evening, confronted with the second day of Gabriel’s impossibility to do his homework due to some mental fears I will never understand (it was as simply as copying some stuff off the Internet and I was even pointing him what to pick from larger articles), I cracked and smacked him several times. And to end the day on high note, just like the scream of somebody falling 60 floors, I was dumped by a woman I should have dumped a long time ago for reasons of being too dynamic, after I allowed her to toy with me for almost 2 months.
And suddenly I felt abandoned, confused, lost, and desperate. I simply didn’t know where to go or what to do. I remembered that for the last 2 years I have been wondering the desert of online dating… with no end near.
I remembered that I wanted to purchase a reproduction from a Klimt painting Mother and child for the kitchen… and I realized it would be dumb. I mean I love it but it would always remind me of that much-desired-seldom-acquired unconditional love I probably received as an infant but I don’t remember anymore, and that I haven’t had in almost 16 years… since I split the last time from my girlfriend then, who later became my wife but only after I had chased all the tenderness and comfort she was able to give me.
I am oscillating between whipping myself: why are you ready to shed tears, Andi?! It’s just life, you take your lemons and make a lemonade. Real don’t men pity themselves and besides there is nothing to pity: you have your health, probably even smacking him Gabriel still loves you, you have plenty of money to go around, pay your bills, build a future… You should be ashamed of yourself!
But –the other voice gets to me my ears – it’s years and years and years of solitude, solitude in 2 that can help one fool oneself that he/she is not alone… and only 2 years since the feeling from inside materialized in the monster of loneliness… Indeed, you have been loved and maybe even adored but by people who didn’t even try to matter, people whom were never capable of earning your respect, no matter how low you set the bar. So it’s your fault, it’s only you and your stupid standards: no snobs, no ignorant, no flip-flops with a good dress, no fat and complacent women, no depressed and mind-numbing women, no powerless ones who will rely on you to carry them on your back, provide them with every comfort and who, when you need it most – like now – will tell you that they cannot help you…
And yet, like a selfish child, I am filled with rage and sadness; like a dog touched by rabies I am ready to bite everyone that even come close, letting them know that I don’t need their pity or emotional crumbs that they are throwing at me… in my inner core though asking for a loving embrace, for stars in their eyes…
I have accomplished, and keep on accomplishing and doing, and proving stupidly believing – despite knowing it’s not true (see “Buying Love”) – that somehow, somebody I can love and respect will hold me in their arms and relieve me of my burden, will lay in bed next to me and caress me into sleep with the love in their eyes and whisper to me “Everything will be ok. I love you and that is a promise!”.
But… it’s ok. I know what I have to do – I need to manage my loneliness… can’t leave it unattended because it can kill you. Will sleep and forget, forget and sleep and go back to one-day-at-a-time emotional hibernation, will pull through… and live to fight another day.

MeHarmony

I just joined the famous dating/matching website. It took me through a very meticulous questionnaire and I like it thinking, like everybody else that this is a sign of seriousness. It was my second attempt. First time, I had filled the form late in the night going to extremes: either a feature was very important for me, or not important at all… in the end they announced me that they have no match for me, that I should not feel bad, because 1 in 5 people get this result. Of course I felt bad (and since I met other people who got the same answer and they felt bad too) but then I laughed at it, thinking: “OMG, I am really bad if even eHarmony rejects me… but that means I am special”.
I called it MeHarmony after a fake commercial on SNL that was suggesting that what people are looking for and finding is a duplicate of them in the opposite sex. While I don’t think that it’s the case, I noticed that in profiles listed on other dating websites that it is true: people look not to be completed and balanced by the partner but a totally identical image of themselves. This, now I realize, is another argument to my main point of this post: eHarmony, while very good in its intentions, is based on an assumption that is generally false… and no matter who good their process is from that point forward, the result will be tainted.
MeHarmony process could match people but only if they would be honest. Users are being told that there is no right or wrong so they should answer honestly. Most of them truly BELIEVE that they are being honest. From my experience though, people cannot be honest for a simple reason: being honest would mean that they know and accept that they have defects, some being big ones. No matter what is being told, introspection to know oneself and accepting the conclusions, no matter how unfavorable they might for one is not something people do. People want to feel good about them even when they have no real reasons. They are so desperate to believe that they are intelligent, kind, generous, patient that they lie, mostly to themselves. And what a better lie is there but the one you honestly believe to be the truth?! Once you managed to fool yourself, automatically you will be able to fool everyone else, especially and automated system like the one eHarmony makes available.
I remember that when I was a kid and got a bad grade or needed to hide something from my parents, I would cycle in my mind tens or even hundreds of time the lie… until that would somewhat make it true in my mind – with details and ramifications, just like the truth. I remember I saw killers that were proven without a shadow of a doubt, still denying any involvement and taking the truth even beyond the grave – and I believe they are convinced that it is the truth they speak. I know people who spend themselves silly, every penny, are in deep debt but still continue to argue that they are savvy people because they drive 10 km to save 2$ on an item. I know people who eat themselves to death but then say “I am eating so little and I still cannot lose weight”.
I always process information from stories seen or read and I identify myself with one character or another one – and to myself it doesn’t matter if that character is good or bad. At the same time, I had the chance (?) to share with somebody a documentary about OCD (Obsessive Compulsive Disorder).. The person had pretty much all the symptoms displayed by the focus of the documentary. After a few days, putting a little bit of distance from the fresh emotions, I asked the person if she can identify herself with that character… and to my surprise and hers – I could read that in her wide-open eyes – she said “There is no resemblance between me and that person”. I was flabbergasted and only then I realized how far people will go to avoid accepting their flaws.
What are my flaws? Oh, quite a few and I described them clearly on eHarmony questionnaire. I have short patience – I trained it and I provide signs that it’s running out, but it’s still shorter that the average. I need a partner who can be honest and when they made a mistake can admit it so we can discuss how we can avoid it in the future (even by not doing a thing one doesn’t have the aptitudes to do it). It’s not easy to admit you are wrong but I taught myself to do the very same thing. I am focused and I need my space now and then, so clinging to me and calling me every 1h at work will make me run out of patience. I am not kind and I sometimes tell the truth (it’s better than years back when I would always tell the truth, required or not, delicate but mostly not) – now I fought with myself and, unless you really annoy me, even when I say it I try to adopt a form less aggressive. I don’t like surprises – good or bad… sounds crazy not to like good surprises, eh? That is because I go by planning and when plans are broken that doesn’t make me feel good, so I need some time for adjustment in my mind, for realization that it’s good, that we can work it out. If my nerves are tried out by someone, after a while, I end up saying extremely hurtful things which, sometimes, might be the truth but are still hurtful and the choice of words can hit hard people. It’s after a while and only if I am being poked hard. I don’t suffer criticism if it’s “in your face” (one might say I can’t swallow my own medicine) but if there is merit, when I calm down I will acknowledge not only by deed but by words as well the truth of that criticism.
Well, the previous paragraph could be seen as an argument to what I was saying – I find myself excuses for all my flaws. I believe that they are not excuses but that they are true, the result of many years of finding out my flaws and working on them… but then again, maybe I am lying to myself so well that I have no chance in knowing the truth.

Just sunshine, wind and speed

If one reads my blog would be left with the idea that all I do is bitching… and it would an approximately correct impression. I wish I was blind, I wish I could simply enjoy life and not care what other people do or think… but that would just not be me. I always envied and blamed my father for having a quality that enhanced his life: being oblivious at everything that went around him. He would tell me often “Why do you get in fights with your mom? Can’t you just do like me: get a face appropriate with the topic, nod and just think about your projects and things you want to accomplish?” Well, the answer is NO. Now I know why – he probably has Asperger Syndrome, just like my son – and what he thought it was a developed trait it’s an inborn one. The only solution for me to be like him would be living on a desert island… and, with my luck, probably dying of appendicitis or something trivial, before I can get to a doctor. And yes – I used to blame him for withdrawing in his inner mind and letting me to deal alone with my mother’s nagging and dissatisfaction.
But no more bitching! Life is – as I often describe – interesting. No, you “shinny happy people” it’s not beautiful – sometimes is sad, other times is tumultuous, in spots is dramatic or happy… but it’s damn interesting.
Recently, as most of my friends know, I purchased a motorcycle. I had some money I was getting back from a credit card, the time is right and prices were very convenient, motorcycles attract women and I am a single dude… so I didn’t honestly was on the edge of my seat due to impatience. I was thinking also about all the hassle for the rider’s license, high-insurance for a new rider so I had my doubts. You imagine my doubts when, after a break of 13 years from the last time I rode, I had to take my new motorcycle home – I was yellow with fear, spun around a close-by parking lot until people thought I was crazy. But then it all came back to me… from the mist of my lost youth (don’t tell me that you found it!) the joy, the exhilaration of being in the wide open, fighting the wind, leaning in curves… I find it hard to describe the happiness that after just 1-2 days dawned onto me.
I was amazed how a simple object – I never believed in buying happiness – could bring so much pleasure, confidence in what is and what will be, and sheer happiness. When I sold my motorcycle – I think it was 98 – it was just like all my dreams of adventure, of open spaces, of the world being my shell had ended. I remember that when my ex would try to talk me into having a child I would tell her: “There is no 3rd seat on the motorcycle”… and then I would bend under the burden of my selfishness. And yet I sold it for all the correct reasons: I am a married man, I can’t kill myself, it’s not practical, it’s not comfortable. When I came to Canada, I flirted somewhat with the idea… but then I gave up. I used to joke (somewhat bitterly): “You know how I figured out that I am getting old? When I came to Canada my wish-list was: 1. Motorcycle; 2. Boat. Then I thought about the wind, the rain, the hassle… and I compared with the tranquility of the boat on an empty lake… and the new order has become: 1. Boat, 2. Motorcycle”. If I was true then, maybe it’s true now and maybe I found the perfect time-travel machine: the motorcycle. When I zoom across empty roads, my mind takes me back to the University’s campus where friends and I used to loiter on a fence and watch the spring wind blow up the girls’ skirts… It takes me back to a time where there were no deadlines, no real obligations or responsibilities. And then I leave the city and get in the middle of nowhere and the cool evening sends in my helmet the smell of “sinziiene” – flowers my grandfather had in the country side… and of dung… In a blink of an eye I am back to my childhood and all those enormous days of summer that ended in a story and listening to politics on a radio with lamps. And these memories are more like feelings than thoughts because I have to stay focused on the road ahead, scouring for rocks or potholes or some animal that might came out the woods.
If somebody thinks that I made a bad investment, think how much you would be willing to spend to be young again?! It’s all there, bottled in that V2 engine and it gets released into my body as I’m sprinting amidst the orange shadows of the sunset.
Yes, it’s true that after 1h of riding my buttocks are starting to get numb, I have a stabbing pain in my back but I simply cannot thing about them.
I am simply happy again. Not as happy as I could be if everything would be perfect in my life but enough to make days at least bearable if not even more enjoyable. I normally go to bed late and wake relatively early and that makes me somewhat grumpy. Now I am going to work with a smile on my face because I get to ride my motorcycle (although the morning rush can be quite unnerving).
Many people are asking me “Aren’t you afraid? So many accidents”. I am afraid – less now that when I purchased it but still the anxiety is somewhat high. Still, I ask rhetorical – why do only things that you are comfortable with? How can we become with new things, feelings, actions if we don’t experience them ever? I like challenges. Just like I love to do only complicated, presumably impossible things in my job, I also try to face any fear that my mind or my body flutters in me.
Yes, I am aware it’s still early to make long-term judgments. It might be that in 1-2 years the rain, the cold, the insurance or even a wipeout, would show me that motorcycle is not really for me. But then I will be able to lay in its grave my youth dream without regrets, love it and remember it if for what it was – a whim of crazy youth – instead of carrying it inside me as a frustration: oh, I could have been so happy if only I had the guts/the money/the X to do it.
I’m going back on my steps and maybe it’s not so wrong to look for happiness in things.

Brain – an obsolete tool

I know that I am what could be called “The Voice of Doom” but I believe that society needs people like me. Following the traditions of SciFi and distopic writers I try to show the world how bad it could be, marketed in a coherent social image. Most of the time it doesn’t really help or at least not in the short run because society has such a huge inertia. Beside that, people who, in this time of happiness, still bother reading such dark scenarios… or simply bother reading, don’t really need to be told about it because they can probably make up for themselves the society I am writing about. For those, let’s just say that I am simply adding up all the markers and unify the big picture.
Yes, the brain becomes a more and more obsolete tool. What has began as a way to enhance our lives, to free more of our time for our pleasures and to allow us to pursue the happiness, has metamorphosed into a race for removing the daily functions of our brain.
Now, let us sustain this. We use GPSes to navigate our way not only in unfamiliar surroundings but in environments that should be/become familiar, like our own cities, large or small. I met quite a few people who, after living more than 5 years in a place, still can’t name the major streets and boulevards or even highways of their town/city. At the store, the machines add, and subtract and even the change to be given/received is computed from the bills handed. In general we don’t do this and is difficult to explain to children why they should memorize the multiplication table, as long as we don’t. We don’t read and instead watch TV because images speak more than 1000 words, are easily digested. Even so, it seems that with the increase of technical quality of our TVs, the intellectual content of the programming and of movies has decreased. We have PDAs and organizers and “intelligent” cellphones that can remember the telephone numbers so that all we need to remember is “John” or “Mary”. Even guessing time instinct is quite lost since we have so many sources of finding out time. A search engine can retrieve information in a matter of seconds and children know this better than anyone, since many teachers advise them to use Google for their homework. Not so many years ago, that very same information would have taken weeks of research, a number of books read and so on – now it’s received instantaneously in a pre-digested form and students never manage to grasp the idea that education requires effort. Started as a current against the dumb memorization process of the past, the educational process now moved into the other extreme, of considering memorization a totally futile tool, even when it comes to multiplication table or the national anthem.
This advantage, of having information at our disposal, lead many people to consider that there is no necessity to store it in our brain. Just like we don’t store water in wells because we have running water, we ended up by not remembering personalities names, dates, pretty much anything that is worth remembering. As a normal consequence of this excessive “offer” process, the value of the information has decreased and the “demand” has decreased. If you can find anything, anytime, anywhere, what is the point of storing it and – mostly – processing it?
Going back to another post – many people are against using the word “STUPID”. What they fail to perceive is that using less and less our minds, we DO become STUPID, individual after individual, and – eventually – as a society! Just by not talking about it is simply pushing the problem under the rug.