Greetings. This letter is a follow-up to the last in which I wrote about talented investment managers searching for great companies to grow your money. Let me start by emphasizing that investing is not just about buying stocks. Fixed income investments—high- interest savings accounts, bonds, high yield debt and so on—have an important role in a portfolio. For the moment, though, I’m looking at stock selection. A later newsletter will look at fixed income investing.
But back to my last newsletter where I wrote--
As an investor you want to own the best companies that will grow their stock price over time because they are better at what they do than their competitors. Better companies do well, regardless of broader economic conditions, because they take existing business away from other companies.
So the best companies do two things: build a better mouse-trap and take business away from the other mouse-trap builders. Let’s illustrate this by looking at the example of Ryanair, an investment choice of Geoff MacDonald of Edgepoint Wealth. Anyone who has travelled in Europe has likely heard of the discount airline called Ryanair. You may have even flown with Ryanair and, perhaps, not been thrilled with their service. But you will likely fly with them again because their tickets are 50% or less than the competition and, for many flyers, price matters most. What you may not know is that Ryanair has grown its market share from zero to become the largest airline company operating in Europe in just ten years. They were able to do this because they created a competitive advantage through innovation.
What were these innovations?
1. Sell airline tickets over the internet. This allows for software in the background to provide very sensitive price monitoring and changes moment by moment. For example, you may start filling an empty plane by offering tickets for a few dollars. As soon as the amazing price attracts buyers, you start putting prices up. The software manages the ebb and flow of ticket demand and pricing until you fill the plane, all the while ensuring that you fly at a profit.
2. Fly to alternative airports. Traditionally, every airline wanted to fly into a city’s major airport. That’s where the services were and the fancy airports. The problem is that airlines pay huge fees to the major airport. Ryanair decided to break this monopoly by flying to smaller airports near the major cities, and in Europe there is lots of choice. Just think of all the airport options around London, England. Ryanair enjoyed massive savings by taking advantage of this opportunity.
3. Buy planes cheaply. How do you do this? Ryanair noticed that Boeing and other plane manufacturers operate a cyclical business, meaning that the cost of a new plane varies widely over the course of an economic cycle. In a recession when fewer people are flying, traditional airlines stop buying planes. As a result, a Boeing is desperate for orders of new planes. At those times, Ryanair puts in an order for 5 planes a year for the next 5 years. They are able, this way, to buy planes at a 50% discount which amounts to a saving of many millions of dollars.
I don’t know about you, but I find this stuff pretty neat. But coming back to my point about great companies, Ryanair takes business away from its competitors through discount ticket prices. And this allows them, very simply, to identify a route in high demand—say London to Paris—fly their plane, and steal customers from the other airlines because Ryanair’s ticket is half the price. Over the last ten years, they have been busy filling planes in good economic times and bad: there may be fewer people flying in the recession, but all the more reason to fly cheaply.
The other aspect of successfully investing in great companies is to buy the stock when it’s cheap. An investment manager can do this two ways: [1] identify a great company and its potential before this potential is widely known; [2] buy the company’s stock when it is out of favour or being ignored and its price drops. Geoff MacDonald bought Ryanair during this recent recession when investors sold off shares in airline companies believing that fewer passengers meant airlines would not survive. MacDonald, convinced of the competitive advantage of Ryanair, bought the stock during the sell-off. He and his investors have done very well with Ryanair stock over the last few months.
How long will MacDonald hold on to Ryanair stock? He will sell it off when he’s made a lot of money on it and when he has identified another company that represents a better opportunity for growth than Ryanair.
My goal is to identify investment managers with the ability and dedication to buy great companies. We look to them to grow our money and history shows that the best managers are able to do this for us over time, regardless of economic conditions. Yes, stock investing will have its ups and downs, but over the long term our patience should be rewarded.
Bye for now,
Tom
Tuesday, November 10, 2009
Monday, November 9, 2009
STOCK MARKET UPDATE
Stock market update: What have markets been doing and what should we make of it?
Greetings to you all.
As you know, I often like to start a current market update by looking at what I wrote in a previous market update. It keeps me honest and allows me to develop a theme. In my market update of March 23, 2009, I wrote--
So for money you've already invested, patience and staying invested are essential. If you have cash on the sidelines that you want to grow? Take advantage of this bear market by investing before it's over, not after.
As it turns out, I was wrong about one thing and right about the other [more important thing]. Looking back 6 months from today, we can see with hindsight that March 23 was actually 2 weeks after the end of the bear market. I was right about my view that March 2009 was an excellent time to invest in stocks. Since the market low of March 2009, the Toronto Stock Exchange [TSX] is up 48%, the US stock market [S&P500] is up 60%.
So 2009 has provided good news for investors and the bear [bad] market, which began in the fall of 2008, has been followed by a bull [good] market and patience has been rewarded. Yes, we are looking for more growth to get us back to where our portfolio was, but the strong recovery of 2009 should provide us with confidence the next time we experience a bear market.
Now we turn to the questions of the day. Does the global economy still face challenges? Yes, the banking crisis of 2008 that helped trigger the bear market will not be fixed overnight. And if we want to look for economic things to worry about, we can certainly find them.
Why have stock markets gone up so much in spite of lingering economic problems? Because stock markets anticipate good news [they are what we call a "leading indicator"]. Investors pushed up markets [1] not because they believed the recession was over, but because they felt confident it would end sooner than anticipated, and [2] as they saw markets recover, they wanted to participate.
Here's the last question I want to deal with, one that is most important to investors—Going forward, can we rely on our investment in stocks to grow our money so that we can afford to live when we retire? The answer is it depends. Let me explain.
The most important thing about buying stocks is to buy the right companies. You know the old saying that 50% of doctors finished in the bottom half of their class. The same is true of companies: as an investor you want to own the best companies that will grow their stock price over time because they are better at what they do than their competitors. Better companies do well, regardless of broader economic conditions, because they take existing business away from other companies. How are we going to pick the best companies when it's not an easy task? [You won’t do it by buying index funds which are blind pools, but that’s for another newsletter.]
An important part of my job is to find those mutual fund managers that can identify the best companies to own. These managers will be unusually smart and dedicated to ongoing research and being on the road to meet with company executives. Only this way will these managers really understand a company and identify opportunities. The fruit of that talent and labour will be shown in the out-performance of their mutual funds compared to the competition and the index. This outstanding performance helps me to identify them as I compare the performance of the 5600 mutual funds available in Canada.
The other way I identify the top managers is to meet with fund managers throughout the year. I, and about a dozen other financial advisors, had lunch yesterday with Geoff MacDonald of Edgepoint Wealth. Geoff spoke about the work that went into discovering two of the companies he's bought for investors in his mutual fund, and how these companies have an advantage over their competitors that should result in a rise in the value of the company's stock. Geoff was insightful, excited about what he had discovered, and he had good answers for the questions I asked. And I can tell you that not all managers pass the test as well as Geoff did for me.
I’m excited to tell you about one of the companies that Geoff has invested in, Ryanair, but I’ve written enough for now. I will say more in my next newsletter which I will send out soon.
For investors, a mutual fund can look like nothing more than a name on a statement that’s there month after month. In reality, the funds I choose for investors are all about what’s behind the name: the investment managers that I have researched and chosen because I know them well enough to respect them and what they’ve accomplished. The manager’s ability and dedication to buy good companies is what we rely on to grow our money. History shows that good managers are able to do this for us over time, regardless of economic conditions.
Watch for my next newsletter.
Bye for now,
Tom
Greetings to you all.
As you know, I often like to start a current market update by looking at what I wrote in a previous market update. It keeps me honest and allows me to develop a theme. In my market update of March 23, 2009, I wrote--
So for money you've already invested, patience and staying invested are essential. If you have cash on the sidelines that you want to grow? Take advantage of this bear market by investing before it's over, not after.
As it turns out, I was wrong about one thing and right about the other [more important thing]. Looking back 6 months from today, we can see with hindsight that March 23 was actually 2 weeks after the end of the bear market. I was right about my view that March 2009 was an excellent time to invest in stocks. Since the market low of March 2009, the Toronto Stock Exchange [TSX] is up 48%, the US stock market [S&P500] is up 60%.
So 2009 has provided good news for investors and the bear [bad] market, which began in the fall of 2008, has been followed by a bull [good] market and patience has been rewarded. Yes, we are looking for more growth to get us back to where our portfolio was, but the strong recovery of 2009 should provide us with confidence the next time we experience a bear market.
Now we turn to the questions of the day. Does the global economy still face challenges? Yes, the banking crisis of 2008 that helped trigger the bear market will not be fixed overnight. And if we want to look for economic things to worry about, we can certainly find them.
Why have stock markets gone up so much in spite of lingering economic problems? Because stock markets anticipate good news [they are what we call a "leading indicator"]. Investors pushed up markets [1] not because they believed the recession was over, but because they felt confident it would end sooner than anticipated, and [2] as they saw markets recover, they wanted to participate.
Here's the last question I want to deal with, one that is most important to investors—Going forward, can we rely on our investment in stocks to grow our money so that we can afford to live when we retire? The answer is it depends. Let me explain.
The most important thing about buying stocks is to buy the right companies. You know the old saying that 50% of doctors finished in the bottom half of their class. The same is true of companies: as an investor you want to own the best companies that will grow their stock price over time because they are better at what they do than their competitors. Better companies do well, regardless of broader economic conditions, because they take existing business away from other companies. How are we going to pick the best companies when it's not an easy task? [You won’t do it by buying index funds which are blind pools, but that’s for another newsletter.]
An important part of my job is to find those mutual fund managers that can identify the best companies to own. These managers will be unusually smart and dedicated to ongoing research and being on the road to meet with company executives. Only this way will these managers really understand a company and identify opportunities. The fruit of that talent and labour will be shown in the out-performance of their mutual funds compared to the competition and the index. This outstanding performance helps me to identify them as I compare the performance of the 5600 mutual funds available in Canada.
The other way I identify the top managers is to meet with fund managers throughout the year. I, and about a dozen other financial advisors, had lunch yesterday with Geoff MacDonald of Edgepoint Wealth. Geoff spoke about the work that went into discovering two of the companies he's bought for investors in his mutual fund, and how these companies have an advantage over their competitors that should result in a rise in the value of the company's stock. Geoff was insightful, excited about what he had discovered, and he had good answers for the questions I asked. And I can tell you that not all managers pass the test as well as Geoff did for me.
I’m excited to tell you about one of the companies that Geoff has invested in, Ryanair, but I’ve written enough for now. I will say more in my next newsletter which I will send out soon.
For investors, a mutual fund can look like nothing more than a name on a statement that’s there month after month. In reality, the funds I choose for investors are all about what’s behind the name: the investment managers that I have researched and chosen because I know them well enough to respect them and what they’ve accomplished. The manager’s ability and dedication to buy good companies is what we rely on to grow our money. History shows that good managers are able to do this for us over time, regardless of economic conditions.
Watch for my next newsletter.
Bye for now,
Tom
The Family Cottage
Greetings.
The transition of the family cottage from one generation to the next can be a major issue for many families. This article came across my desk today, so I thought I would pass it on in case it's of interest.
http://www.advisor.ca/advisors/tax/estateplanning/article.jsp?content=20090922_170748_5324
Cheers!
Tom
The transition of the family cottage from one generation to the next can be a major issue for many families. This article came across my desk today, so I thought I would pass it on in case it's of interest.
http://www.advisor.ca/advisors/tax/estateplanning/article.jsp?content=20090922_170748_5324
Cheers!
Tom
September 21, 2009--Estate Planning Basics
Greetings! My regards to everyone and I hope you enjoyed your summer.
I have a couple of newsletters planned for the next month and will write about the state of investment markets the next time.
This time I want to write in some detail about two planning issues: the ENDURING POWER OF ATTORNEY and the PERSONAL DIRECTIVE [or Living Will]. These two documents are essential tools in your planning for the future, regardless of your age, and take effect should you become unable, due to physical or mental incapacity, to make your own decisions. I encourage you to read on and explore the links that I provide.
PERSONAL DIRECTIVE WHAT KIND OF INSTRUCTIONS CAN I LEAVE IN A PERSONAL DIRECTIVE?
Your instructions can be about any or all personal matters that are non-financial, such as:
• medical treatments you would or would not want;
• where you would like to live;• who you would like to live with;
• choices about other personal activities (recreation, employment or education);
• any other personal and legal decisions, and
• who you want to care for and educate your minor children if you are not capable of doing so.
So how does a Personal Directive differ from a will? It provides directions about non-financial matters should you, during your lifetime, become unable to direct your own affairs. The Personal Directive allows you to put your wishes in writing and appoint an agent to act on your behalf to see that your wishes are carried out. This is important because your relatives and friends do not automatically have the legal right to make decisions for you.
The Government of Alberta has established a Registry for Personal Directives to make it easier for interested parties, for example medical staff, to find your Personal Directive and contact your agent. Please see the following link to a pamphlet provided by the Government of Alberta on Personal Directives.
http://www.seniors.gov.ab.ca/services_resources/opg/persdir/publications/pdf/OPG1645.pdf
When you look at the list above of the potential purposes of the Personal Directive, you may not feel strongly about all the items, or they may be items you have not thought about. But you may feel strongly about your medical care, or who will look after your children during a period of mental incapacity. So don't hesitate to write a Personal Directive now about those things that you feel strongly about. You can add to or amend your Personal Directive at a later time.
The most common reason that individuals write their Personal Directive is to direct their medical care and communicate their wishes regarding extraordinary measures to prolong life in the case of a very serious illness. Without the Personal Directive, doctors are left responsible to use all extraordinary measures regardless of what family and friends may say. The Personal Directive is your way of having your wishes acted upon. Legislation regarding Personal or Advanced Directives varies by province.
For my clients in BC, please see--
http://www.viha.ca/advance_directives/faq.htm#today
My clients in Ontario, please see--
http://www.culture.gov.on.ca/seniors/english/programs/advancedcare/docs/AdvancedCare.Guide.pdf
ENDURING POWER OF ATTORNEY
The Enduring Power of Attorney is complementary to the Personal Directive. The Enduring Power of Attorney allows you to provide directions and appoint an agent [your "Attorney"] should you become, during your lifetime, unable to make decisions related to your financial affairs. The Enduring Power of Attorney is cancelled at the time of your death at which point your Will applies to your estate. The Enduring Power of Attorney would allow your agent to keep your financial life going should you become incapacitated. For example, without the Enduring Power of Attorney your family and friends would not have access to your individual bank accounts to pay your bills, or have authority to watch over and direct your investments. To read more about the Enduring Power of Attorney, see--
http://www.justice.gov.ab.ca/dependent_adults/enduring_powers_of_attorney.aspx
Needless to say, you will want to choose your agent very carefully. Be sure to consult your choice to confirm his or her willingness to be appointed. Spouses will typically appoint one another. If you are not sure whether you have written a Personal Directive or an Enduring Power of Attorney--this may have been done when your Will was done--check to see which documents are with your Will or ask your lawyer.
Looking after all three documents can be done with the assistance of a lawyer which allows you to benefit from her or his legal expertise. Many lawyers provide this expertise at a reasonable cost, assuming your affairs are not complicated, as a public service. Registry offices and some Drug Stores will have generic, fill-in-the-blank forms which, while lacking personal legal advice, are much better than nothing. Please let me know if you have any questions.
I hope that you will take this newsletter as a prompt to undertake your drafting of a Personal Directive and Enduring Power of Attorney. Clearly we do not hope for a future incapacity. But should it happen, we want to be prepared, we want our wishes to be clear and we want to lessen the stress on our loved ones.
Cheers!
Tom
I have a couple of newsletters planned for the next month and will write about the state of investment markets the next time.
This time I want to write in some detail about two planning issues: the ENDURING POWER OF ATTORNEY and the PERSONAL DIRECTIVE [or Living Will]. These two documents are essential tools in your planning for the future, regardless of your age, and take effect should you become unable, due to physical or mental incapacity, to make your own decisions. I encourage you to read on and explore the links that I provide.
PERSONAL DIRECTIVE WHAT KIND OF INSTRUCTIONS CAN I LEAVE IN A PERSONAL DIRECTIVE?
Your instructions can be about any or all personal matters that are non-financial, such as:
• medical treatments you would or would not want;
• where you would like to live;• who you would like to live with;
• choices about other personal activities (recreation, employment or education);
• any other personal and legal decisions, and
• who you want to care for and educate your minor children if you are not capable of doing so.
So how does a Personal Directive differ from a will? It provides directions about non-financial matters should you, during your lifetime, become unable to direct your own affairs. The Personal Directive allows you to put your wishes in writing and appoint an agent to act on your behalf to see that your wishes are carried out. This is important because your relatives and friends do not automatically have the legal right to make decisions for you.
The Government of Alberta has established a Registry for Personal Directives to make it easier for interested parties, for example medical staff, to find your Personal Directive and contact your agent. Please see the following link to a pamphlet provided by the Government of Alberta on Personal Directives.
http://www.seniors.gov.ab.ca/services_resources/opg/persdir/publications/pdf/OPG1645.pdf
When you look at the list above of the potential purposes of the Personal Directive, you may not feel strongly about all the items, or they may be items you have not thought about. But you may feel strongly about your medical care, or who will look after your children during a period of mental incapacity. So don't hesitate to write a Personal Directive now about those things that you feel strongly about. You can add to or amend your Personal Directive at a later time.
The most common reason that individuals write their Personal Directive is to direct their medical care and communicate their wishes regarding extraordinary measures to prolong life in the case of a very serious illness. Without the Personal Directive, doctors are left responsible to use all extraordinary measures regardless of what family and friends may say. The Personal Directive is your way of having your wishes acted upon. Legislation regarding Personal or Advanced Directives varies by province.
For my clients in BC, please see--
http://www.viha.ca/advance_directives/faq.htm#today
My clients in Ontario, please see--
http://www.culture.gov.on.ca/seniors/english/programs/advancedcare/docs/AdvancedCare.Guide.pdf
ENDURING POWER OF ATTORNEY
The Enduring Power of Attorney is complementary to the Personal Directive. The Enduring Power of Attorney allows you to provide directions and appoint an agent [your "Attorney"] should you become, during your lifetime, unable to make decisions related to your financial affairs. The Enduring Power of Attorney is cancelled at the time of your death at which point your Will applies to your estate. The Enduring Power of Attorney would allow your agent to keep your financial life going should you become incapacitated. For example, without the Enduring Power of Attorney your family and friends would not have access to your individual bank accounts to pay your bills, or have authority to watch over and direct your investments. To read more about the Enduring Power of Attorney, see--
http://www.justice.gov.ab.ca/dependent_adults/enduring_powers_of_attorney.aspx
Needless to say, you will want to choose your agent very carefully. Be sure to consult your choice to confirm his or her willingness to be appointed. Spouses will typically appoint one another. If you are not sure whether you have written a Personal Directive or an Enduring Power of Attorney--this may have been done when your Will was done--check to see which documents are with your Will or ask your lawyer.
Looking after all three documents can be done with the assistance of a lawyer which allows you to benefit from her or his legal expertise. Many lawyers provide this expertise at a reasonable cost, assuming your affairs are not complicated, as a public service. Registry offices and some Drug Stores will have generic, fill-in-the-blank forms which, while lacking personal legal advice, are much better than nothing. Please let me know if you have any questions.
I hope that you will take this newsletter as a prompt to undertake your drafting of a Personal Directive and Enduring Power of Attorney. Clearly we do not hope for a future incapacity. But should it happen, we want to be prepared, we want our wishes to be clear and we want to lessen the stress on our loved ones.
Cheers!
Tom
Tuesday, July 14, 2009
Market update from April 29th, 2009
Greetings to all.
Nice to see the sun today and no snow!
I wanted to update my last market update that I sent you. My March 23, 2009 headline was-- Stock markets up over 5% today, 20% in the last couple of weeks. What does it mean?
Today is April 29, 2009. So what's happened since March 23? The Toronto stock market [TSX] is up another 5.1% and the index sits at 9416 points. New York [S&P 500] is up another 6.0% since March 23 and the index sits at 874. It's obviously good news for investors when markets have a good run: we see that markets can go up after they've gone down. And to be fair, I have to point out that markets have to recover much more to get back to where they were.
The TSX peaked at about 15,000 points in 2008, the S&P 500 peaked at about 1550 points in late 2007. How long will it take to recover and surpass those peak levels? Well, bear with me--no pun intended--as I look at some more numbers.
The last bear market ran from 2000 to 2002. We all remember that one which overlapped with the events of 9/11. When the bear ended in 2002, markets went into a recovery rising to the peak, as stated above, of about 15,000 on the TSX. But do you want to guess at the point level of the TSX at its low in 2002? Was it 9000 or 7000 points?
I think it's remarkable that the TSX was as low as 5,695 in 2002. The recovery took it from 5,695 to 15,000 in 2008. That's a climb of over 9000 points or 168% from the low. Has the TSX had that kind of recovery before? In the 1990s, the market recovered 203%, 253% in the mid-1980s, 288% the mid-1970s.
Should the market climbs 160% again--from where it is today at 9416--that would take the TSX to near 25,000 points. That's well above its 2008 peak of 15,000. No one can say how long the climb would take, but we can say that the markets have done it before.
Cheers! Tom
PS-so what is the TSX index anyway [more properly known as the S&P/TSX]? The index was invented to measure the rise and fall of the Toronto stock market over time. The index includes about 70% of the largest companies whose stocks trade on the Toronto Stock Exchange. If, on average, these stocks rise in value today, then the index will go up accordingly. The index value in points--e.g. the TSX closed at 9416 points today--has no absolute meaning, it's all relative: the index is measured each day so that we can compare to what the index was yesterday, a month ago or 20 years ago.
Nice to see the sun today and no snow!
I wanted to update my last market update that I sent you. My March 23, 2009 headline was-- Stock markets up over 5% today, 20% in the last couple of weeks. What does it mean?
Today is April 29, 2009. So what's happened since March 23? The Toronto stock market [TSX] is up another 5.1% and the index sits at 9416 points. New York [S&P 500] is up another 6.0% since March 23 and the index sits at 874. It's obviously good news for investors when markets have a good run: we see that markets can go up after they've gone down. And to be fair, I have to point out that markets have to recover much more to get back to where they were.
The TSX peaked at about 15,000 points in 2008, the S&P 500 peaked at about 1550 points in late 2007. How long will it take to recover and surpass those peak levels? Well, bear with me--no pun intended--as I look at some more numbers.
The last bear market ran from 2000 to 2002. We all remember that one which overlapped with the events of 9/11. When the bear ended in 2002, markets went into a recovery rising to the peak, as stated above, of about 15,000 on the TSX. But do you want to guess at the point level of the TSX at its low in 2002? Was it 9000 or 7000 points?
I think it's remarkable that the TSX was as low as 5,695 in 2002. The recovery took it from 5,695 to 15,000 in 2008. That's a climb of over 9000 points or 168% from the low. Has the TSX had that kind of recovery before? In the 1990s, the market recovered 203%, 253% in the mid-1980s, 288% the mid-1970s.
Should the market climbs 160% again--from where it is today at 9416--that would take the TSX to near 25,000 points. That's well above its 2008 peak of 15,000. No one can say how long the climb would take, but we can say that the markets have done it before.
Cheers! Tom
PS-so what is the TSX index anyway [more properly known as the S&P/TSX]? The index was invented to measure the rise and fall of the Toronto stock market over time. The index includes about 70% of the largest companies whose stocks trade on the Toronto Stock Exchange. If, on average, these stocks rise in value today, then the index will go up accordingly. The index value in points--e.g. the TSX closed at 9416 points today--has no absolute meaning, it's all relative: the index is measured each day so that we can compare to what the index was yesterday, a month ago or 20 years ago.
Newsletter April 6th, 2009
Greetings! All of us have probably read in the newspapers how the current environment is encouraging thrift. One challenge of trying to save money is that there are so many items in our budget that are "must-haves" and therefore hard to trim back. What if some of the must-haves could be bundled together to save money?
All of us probably use two or more of these services: TV, phone and internet. Bundling refers to buying a package of two or more of these services from a single service-provider with a resulting savings. And we may already have two or more services from a single provider but because we have not applied for bundling pricing, we may be paying too much.
Take for example Shaw and Telus. Shaw provides cable, digital phone and internet. While I'm well aware of Shaw cable and internet, it had not dawned on me that Shaw was now in the [landline] phone business with long distance packages. Check out their site to see how bundling might save you money-- http://www.shaw.ca/en-ca/ProductsServices/BundlesAndPricing/default.htm
Telus, of course, provides landline and mobile phones, long distance packages, internet, but they are also into TV now. You can check out their bundling options at-- http://promo2.telus.com/tm/09/q1/bundle/ab/index.html
Speaking of long distance, here's an interesting option that I use-- 10-10-969 is a long distance calling provider for landlines that you can use on almost any landline. It does not require you to sign a contract and the service travels with you anywhere in Alberta and the BC lower mainland, Okanagan and Victoria. I even use it at home on my second landline because I do not do enough long distance on that line to justify signing up for a Telus long distance package. From what I've seen, their pricing is very competitive. Just dial 10-10-969+1+area code+ number. The billing will show on the statement of the landline provider. Check out the details at-- http://1010969.ca/
Happy bundling!
Tom
All of us probably use two or more of these services: TV, phone and internet. Bundling refers to buying a package of two or more of these services from a single service-provider with a resulting savings. And we may already have two or more services from a single provider but because we have not applied for bundling pricing, we may be paying too much.
Take for example Shaw and Telus. Shaw provides cable, digital phone and internet. While I'm well aware of Shaw cable and internet, it had not dawned on me that Shaw was now in the [landline] phone business with long distance packages. Check out their site to see how bundling might save you money-- http://www.shaw.ca/en-ca/ProductsServices/BundlesAndPricing/default.htm
Telus, of course, provides landline and mobile phones, long distance packages, internet, but they are also into TV now. You can check out their bundling options at-- http://promo2.telus.com/tm/09/q1/bundle/ab/index.html
Speaking of long distance, here's an interesting option that I use-- 10-10-969 is a long distance calling provider for landlines that you can use on almost any landline. It does not require you to sign a contract and the service travels with you anywhere in Alberta and the BC lower mainland, Okanagan and Victoria. I even use it at home on my second landline because I do not do enough long distance on that line to justify signing up for a Telus long distance package. From what I've seen, their pricing is very competitive. Just dial 10-10-969+1+area code+ number. The billing will show on the statement of the landline provider. Check out the details at-- http://1010969.ca/
Happy bundling!
Tom
Monday, March 23, 2009
Stock markets up over 5% today, 20% in the last couple of weeks. What does it mean?
Greetings.
Stock markets are up over 5% today, 20% in the last couple of weeks. What does it mean? Let me write about what we do know, and what we don't know.
We do know--
--That investors--both individual and institutional--have cash they want to grow by investing in the stock market. A 5% gain on the markets today proves that investors will put money back into the market when they find a trigger that creates optimism. This need to grow money will be one factor that will bring the recovery in stock markets.
We don't know--
--Whether the last couple of weeks are the beginning of the recovery. They might be, but we don't know. Just as the end of bull [good] markets cannot be spotted in advance, the end of bear [bad] markets is not seen in advance. It's only in the rear-view mirror that we will know that the bear market hit its bottom on such-and-such a date.
We do know--
--That investors who wait for a sign that the bear market is over will miss the start of the recovery. There are two reasons for this: [1] The end of a bear market is not announced in advanced. [2] Growth in the stock market happens on just a few days when the market makes a powerful push upwards. Let me elaborate on this second point because it is very significant to understanding how stock markets really work. Consider this--
--Take the example of the US stock market [S&P 500] between 1993-2007 [that's 15 years or 5475 days]. An investor who stayed invested in that market for those 5475 days grew his money at 10.5% per year. But the remarkable thing is this: if the investor missed the best 30 days during those 15 years, he would have grown his money at only 2.2% per year. And if he missed the best 60 days, his return was negative!
By far, most days on the stock market are inconsequential. The growth in the market is delivered only on those rare days. If you miss those days, you miss the growth. So for money you've already invested, patience and staying invested are essential. If you have cash on the sidelines that you want to grow? Take advantage of this bear market by investing before it's over, not after.
Cheers!
Tom
Stock markets are up over 5% today, 20% in the last couple of weeks. What does it mean? Let me write about what we do know, and what we don't know.
We do know--
--That investors--both individual and institutional--have cash they want to grow by investing in the stock market. A 5% gain on the markets today proves that investors will put money back into the market when they find a trigger that creates optimism. This need to grow money will be one factor that will bring the recovery in stock markets.
We don't know--
--Whether the last couple of weeks are the beginning of the recovery. They might be, but we don't know. Just as the end of bull [good] markets cannot be spotted in advance, the end of bear [bad] markets is not seen in advance. It's only in the rear-view mirror that we will know that the bear market hit its bottom on such-and-such a date.
We do know--
--That investors who wait for a sign that the bear market is over will miss the start of the recovery. There are two reasons for this: [1] The end of a bear market is not announced in advanced. [2] Growth in the stock market happens on just a few days when the market makes a powerful push upwards. Let me elaborate on this second point because it is very significant to understanding how stock markets really work. Consider this--
--Take the example of the US stock market [S&P 500] between 1993-2007 [that's 15 years or 5475 days]. An investor who stayed invested in that market for those 5475 days grew his money at 10.5% per year. But the remarkable thing is this: if the investor missed the best 30 days during those 15 years, he would have grown his money at only 2.2% per year. And if he missed the best 60 days, his return was negative!
By far, most days on the stock market are inconsequential. The growth in the market is delivered only on those rare days. If you miss those days, you miss the growth. So for money you've already invested, patience and staying invested are essential. If you have cash on the sidelines that you want to grow? Take advantage of this bear market by investing before it's over, not after.
Cheers!
Tom
Wednesday, February 18, 2009
March 2, 2009 is the RRSP Deadline
Only 15 days to the RRSP deadline for contributions to your RRSP that you can deduct from your 2008 income.
Time is running short. If you need to consider topping up your RRSP, please call me for an appointment soon. The last week in February is very busy and I would hate to be unable to accommodate your meeting request. When you come, we can discuss investment options from the safe option to the growth option and everything between.
RRSP investing for 2009
You can also consider taking advantage of the bear market by setting up a monthly, automated investment for dollar-cost-averaging [DCA] for your 2009 RRSP contribution. This would see you buy into growth investments bit by bit without the worry of trying to pick the bottom of the market.
A new idea for this year
Given the merits of DCA, some fund companies have developed an interesting option, the "DCA fund." You can contribute to this fund now before the March 2nd deadline and collect your RRSP contribution receipt for 2008. As a DCA fund, you are buying a safe, interest-earning investment that then moves your money into balanced or growth investments bit by bit over the year ahead. This works well for clients who need to make their RRSP contribution before the deadline but don't want to invest all at once into growth investments.
These are just some of the ideas I have.
I can be reached at 403-229-0128 or by replying to this email.
Cheers!
Tom
Time is running short. If you need to consider topping up your RRSP, please call me for an appointment soon. The last week in February is very busy and I would hate to be unable to accommodate your meeting request. When you come, we can discuss investment options from the safe option to the growth option and everything between.
RRSP investing for 2009
You can also consider taking advantage of the bear market by setting up a monthly, automated investment for dollar-cost-averaging [DCA] for your 2009 RRSP contribution. This would see you buy into growth investments bit by bit without the worry of trying to pick the bottom of the market.
A new idea for this year
Given the merits of DCA, some fund companies have developed an interesting option, the "DCA fund." You can contribute to this fund now before the March 2nd deadline and collect your RRSP contribution receipt for 2008. As a DCA fund, you are buying a safe, interest-earning investment that then moves your money into balanced or growth investments bit by bit over the year ahead. This works well for clients who need to make their RRSP contribution before the deadline but don't want to invest all at once into growth investments.
These are just some of the ideas I have.
I can be reached at 403-229-0128 or by replying to this email.
Cheers!
Tom
March 2, 2009 is the RRSP Deadline
Only 15 days to the RRSP deadline for contributions to your RRSP that you can deduct from your 2008 income.
Time is running short. If you need to consider topping up your RRSP, please call me for an appointment soon. The last week in February is very busy and I would hate to be unable to accommodate your meeting request. When you come, we can discuss investment options from the safe option to the growth option and everything between.
RRSP investing for 2009
You can also consider taking advantage of the bear market by setting up a monthly, automated investment for dollar-cost-averaging [DCA] for your 2009 RRSP contribution. This would see you buy into growth investments bit by bit without the worry of trying to pick the bottom of the market.
A new idea for this year
Given the merits of DCA, some fund companies have developed an interesting option, the "DCA fund." You can contribute to this fund now before the March 2nd deadline and collect your RRSP contribution receipt for 2008. As a DCA fund, you are buying a safe, interest-earning investment that then moves your money into balanced or growth investments bit by bit over the year ahead. This works well for clients who need to make their RRSP contribution before the deadline but don't want to invest all at once into growth investments.
These are just some of the ideas I have.
I can be reached at 403-229-0128 or by replying to this email.
Cheers!
Tom
Time is running short. If you need to consider topping up your RRSP, please call me for an appointment soon. The last week in February is very busy and I would hate to be unable to accommodate your meeting request. When you come, we can discuss investment options from the safe option to the growth option and everything between.
RRSP investing for 2009
You can also consider taking advantage of the bear market by setting up a monthly, automated investment for dollar-cost-averaging [DCA] for your 2009 RRSP contribution. This would see you buy into growth investments bit by bit without the worry of trying to pick the bottom of the market.
A new idea for this year
Given the merits of DCA, some fund companies have developed an interesting option, the "DCA fund." You can contribute to this fund now before the March 2nd deadline and collect your RRSP contribution receipt for 2008. As a DCA fund, you are buying a safe, interest-earning investment that then moves your money into balanced or growth investments bit by bit over the year ahead. This works well for clients who need to make their RRSP contribution before the deadline but don't want to invest all at once into growth investments.
These are just some of the ideas I have.
I can be reached at 403-229-0128 or by replying to this email.
Cheers!
Tom
Tuesday, February 10, 2009
MAKING SENSE OF THE MARKETS
...................................................................................................................
The media currently love to talk about how we might be headed into another depression, it's a terrible time to invest, and that current events are going to unfold as they did in the 1930s. I wanted to address this briefly.
What we've heard?
The "dirty thirties" were a terrible time to be invested in the stock market because there was a depression going on. Let's examine this claim
The background and the facts--
The Depression was triggered in part by the collapse of the stock market from 1929 - 1931. The performance of the New York stock market at that time--as measured by the S&P 500-- looked like this:
1929....-10%.....[this has been rounded so read it as a drop of less than 10%: i.e. 0 to -10%]
1930....-30........[-20% to -30%]
1931....-50
Needless to say, this drop was a severe blow to investors and gives one pause to think of how it could have happened. It makes for a fascinating story but let me give you a brief summary: there were two major things at play.
1. The stock market in the 1920s was influenced, literally, by a handful of wealthy families. As a group, they met over cigars to engage in stock market manipulation on a grand scale and, sadly, no one stopped them. They helped push stock market prices to irrational levels to feed their greed.
2. The small investors in the stock market routinely invested--it's hard to believe now--ten dollars where nine of those were borrowed!
So you can see that the stock market then was a house of cards. And when the cards fell, not only were investors faced with large losses, the small investors were left with large debt.
What is interesting, for the purpose of this newsletter, is the part you don't hear about now, namely, what happened to the stock market in the aftermath? Here are the numbers--
1932....+20%
1933....+60
1934....-10
1935....+50
1936....+40
1937....-40
1938....+40
1939....-10
sum...+150%
Conclusion--even the worst bear market was followed by a strong bull market. And there is an historic correlation: the worse the bear market, the stronger the bull market that follows.
My recommendations--
1. Bear markets are to be tolerated. Be patient, hold on to your stocks, the bull market is coming.
2. Investors who have the courage to buy in a bear market, when no one wants to buy, have been very well rewarded.
To repeat what I've said in previous newsletters, I don't know when the next bull market will begin. But for people who are invested--or who now buy more--and then are patient, the timing won't matter. And waiting for the end of the bear market before investing is like waiting for the wind to change direction.
Cheers!
Tom
Tom Buck M. Ed CFP
Assante Financial
403-229-0128
PS--one of the most interesting documentaries I have every watched is shown periodically on PBS as part of the series, "American Experience." The show is titled The Crash of 1929. It can be watched online at--
http://www.pbs.org/wgbh/amex/crash/program/index.html
The media currently love to talk about how we might be headed into another depression, it's a terrible time to invest, and that current events are going to unfold as they did in the 1930s. I wanted to address this briefly.
What we've heard?
The "dirty thirties" were a terrible time to be invested in the stock market because there was a depression going on. Let's examine this claim
The background and the facts--
The Depression was triggered in part by the collapse of the stock market from 1929 - 1931. The performance of the New York stock market at that time--as measured by the S&P 500-- looked like this:
1929....-10%.....[this has been rounded so read it as a drop of less than 10%: i.e. 0 to -10%]
1930....-30........[-20% to -30%]
1931....-50
Needless to say, this drop was a severe blow to investors and gives one pause to think of how it could have happened. It makes for a fascinating story but let me give you a brief summary: there were two major things at play.
1. The stock market in the 1920s was influenced, literally, by a handful of wealthy families. As a group, they met over cigars to engage in stock market manipulation on a grand scale and, sadly, no one stopped them. They helped push stock market prices to irrational levels to feed their greed.
2. The small investors in the stock market routinely invested--it's hard to believe now--ten dollars where nine of those were borrowed!
So you can see that the stock market then was a house of cards. And when the cards fell, not only were investors faced with large losses, the small investors were left with large debt.
What is interesting, for the purpose of this newsletter, is the part you don't hear about now, namely, what happened to the stock market in the aftermath? Here are the numbers--
1932....+20%
1933....+60
1934....-10
1935....+50
1936....+40
1937....-40
1938....+40
1939....-10
sum...+150%
Conclusion--even the worst bear market was followed by a strong bull market. And there is an historic correlation: the worse the bear market, the stronger the bull market that follows.
My recommendations--
1. Bear markets are to be tolerated. Be patient, hold on to your stocks, the bull market is coming.
2. Investors who have the courage to buy in a bear market, when no one wants to buy, have been very well rewarded.
To repeat what I've said in previous newsletters, I don't know when the next bull market will begin. But for people who are invested--or who now buy more--and then are patient, the timing won't matter. And waiting for the end of the bear market before investing is like waiting for the wind to change direction.
Cheers!
Tom
Tom Buck M. Ed CFP
Assante Financial
403-229-0128
PS--one of the most interesting documentaries I have every watched is shown periodically on PBS as part of the series, "American Experience." The show is titled The Crash of 1929. It can be watched online at--
http://www.pbs.org/wgbh/amex/crash/program/index.html
Sunday, February 1, 2009
2008 Year-end Statements
Greetings!
Year-end 2008 Statements will be arriving any day
The turbulent markets since September 2008 have caught the attention of all of us. Bear markets come along on average once in every four years. This one has been harsh and is reminiscent of what investors experienced in 2001, the mid-1980s and the mid-1970s. We should expect, then, that a snap-shot of your portfolio on December 31, 2008 may well be alarming.
As I have done in my regular newsletters to you, allow me to provide context and be encouraging-
--Bear markets are part of investing for growth and are always followed by recovery. Recovery often occurs suddenly.
--Only a portion of your portfolio is exposed to the volatility of growth investments.
--For growth, you own good businesses [i.e. TD Bank, not General Motors] which will benefit from the recovery. It is just a question of when the recovery will come, not if.
--My client portfolios have not been hurt nearly as much as the stock markets.
--Stock markets recover before the economy does.
--Your exposure to growth investments is, by design, meant to be long term. Further, your time horizon is old age--not retirement--so as to protect your money from the erosion of inflation throughout your remaining years. So you have time to wait for the recovery and, with patience, you will realize the growth that you need.
--As a measure of my confidence in the recovery, I have invested $80k of my own money since the bear market began [trying to behave like a Warren Buffett]. Should you have cash to invest for the long term, I encourage you to consider doing the same. We can talk about it.
A number of clients have come in for a review [and to discuss an appropriate Tax-Free Savings Account for them]. This has allowed a discussion to take place and for information to be shared that clients are not getting from the media. Clients have appreciated the information and been encouraged by it.
I welcome a visit from any of you. If we have not done a review for a year, then we are due to meet.
Finally, I have attached some interesting reading on market volatility and the behaviour of successful investors. I highly recommend that you read it, and would appreciate your feedback. You can find it on the net at--
http://www.nezperce.org/content/081024%20Davis%20Funds%20Wisdom%20ofGreat%20Investors.pdf
Thank-you for your patience.
Tom
PS--what statements are coming? You will receive statements from fund companies, from MRS and B2B Trust for any self-directed accounts and Assante will be sending a comprehensive statement [showing the mutual funds you own but not term deposits].
Year-end 2008 Statements will be arriving any day
The turbulent markets since September 2008 have caught the attention of all of us. Bear markets come along on average once in every four years. This one has been harsh and is reminiscent of what investors experienced in 2001, the mid-1980s and the mid-1970s. We should expect, then, that a snap-shot of your portfolio on December 31, 2008 may well be alarming.
As I have done in my regular newsletters to you, allow me to provide context and be encouraging-
--Bear markets are part of investing for growth and are always followed by recovery. Recovery often occurs suddenly.
--Only a portion of your portfolio is exposed to the volatility of growth investments.
--For growth, you own good businesses [i.e. TD Bank, not General Motors] which will benefit from the recovery. It is just a question of when the recovery will come, not if.
--My client portfolios have not been hurt nearly as much as the stock markets.
--Stock markets recover before the economy does.
--Your exposure to growth investments is, by design, meant to be long term. Further, your time horizon is old age--not retirement--so as to protect your money from the erosion of inflation throughout your remaining years. So you have time to wait for the recovery and, with patience, you will realize the growth that you need.
--As a measure of my confidence in the recovery, I have invested $80k of my own money since the bear market began [trying to behave like a Warren Buffett]. Should you have cash to invest for the long term, I encourage you to consider doing the same. We can talk about it.
A number of clients have come in for a review [and to discuss an appropriate Tax-Free Savings Account for them]. This has allowed a discussion to take place and for information to be shared that clients are not getting from the media. Clients have appreciated the information and been encouraged by it.
I welcome a visit from any of you. If we have not done a review for a year, then we are due to meet.
Finally, I have attached some interesting reading on market volatility and the behaviour of successful investors. I highly recommend that you read it, and would appreciate your feedback. You can find it on the net at--
http://www.nezperce.org/content/081024%20Davis%20Funds%20Wisdom%20ofGreat%20Investors.pdf
Thank-you for your patience.
Tom
PS--what statements are coming? You will receive statements from fund companies, from MRS and B2B Trust for any self-directed accounts and Assante will be sending a comprehensive statement [showing the mutual funds you own but not term deposits].
TFSA, the Tax-Free Savings Account--Part II
Hello again!
This letter is Part II of my information on the new TFSA, the Tax-Free Savings Account.
"With its ability to immediately shelter investment-related income from taxation, the TFSA should become an indispensable wealth planning tool for all Canadian investors," ---says Doug Carroll, Vice President, Tax & Estate Planning at Invesco Trimark.
I sent out Part I before Christmas and again a few days ago. Part II today is meant to sharpen your thinking on the TFSA and how it can be an opportunity for you. We are all used to paying tax on investment growth. We put money in a savings account and we have to declare the interest and pay tax. Or if we buy a mutual fund or stocks and bonds outside an RRSP or RESP, we will again receive investment growth that we have to pay tax on. The TFSA eliminates, forever, any tax on investment growth and thats what makes it exciting.
So you ask--"If I'm going to take advantage of a TFSA, what do I need to have to get going?" The answer is--
--money to invest. You can put in up to $5000 into a TFSA in 2009 either with a lump-sum or set up a monthly automatic PAC plan with as little as $50 per month. If you don't have any money but you do already have OPEN investments [i.e. investments outside an RRSP or RESP], you can transfer $5000 from your OPEN investment into a TFSA.
"So I have some money but should I be putting it in my RRSP or RESP [an educational savings plan for your kids]?
Yes, most people should contribute to their RRSP and RESP first, before setting up a TFSA. [If you're not sure you are "most people," then just ask me.]
"OK, so I have some money to put in a TFSA, so what should I invest in?
A TFSA can hold the same investments as an RRSP or RESP. So the question of what to invest in is the same as always and depends on--
--how long you are going to invest for.
--whether you want conservative investment returns, OR long-term growth.
Other things to consider--
--when you take money out of a TFSA, you can put in back into the TFSA but not until the following year. Therefore, a TFSA does not work as a short-term savings account where you are putting money in and out of the account regularly.
--the TFSA has one advantage: sheltering investment growth from tax. It follows, then, that the more growth you have in your TFSA, the greater the tax you save. Consider two investors each 50 years old. They each plan to put $400 per month into a TFSA for 15 years. The first investor puts his money into a conservative investment earning 4% [interest]. After 15 years, he will have $98,000 and will have saved $10,400 in taxes.* The second investor goes for growth at 8% per year [capital gains]. After 15 years, he will have $138,000 and will have saved $13,200 in taxes.**
Having said this, the foremost consideration for any investor is when he needs his money back from the TFSA: if he wants his money back in 3 years or less, the conservative investment approach is required.
*as compared to making the same investment outside a TFSA.
**remember that capital gains are taxed at a lower rate than interest income.
Bye for now,
Tom
Tom Buck, M. Ed. CFP
Certified Financial Planner
Assante Financial Management Ltd
#600, 1414-8th Street SWCalgary, AB T2R 1J6
TEL 403.229.0128
FAX 1.866.386.9776
This letter is Part II of my information on the new TFSA, the Tax-Free Savings Account.
"With its ability to immediately shelter investment-related income from taxation, the TFSA should become an indispensable wealth planning tool for all Canadian investors," ---says Doug Carroll, Vice President, Tax & Estate Planning at Invesco Trimark.
I sent out Part I before Christmas and again a few days ago. Part II today is meant to sharpen your thinking on the TFSA and how it can be an opportunity for you. We are all used to paying tax on investment growth. We put money in a savings account and we have to declare the interest and pay tax. Or if we buy a mutual fund or stocks and bonds outside an RRSP or RESP, we will again receive investment growth that we have to pay tax on. The TFSA eliminates, forever, any tax on investment growth and thats what makes it exciting.
So you ask--"If I'm going to take advantage of a TFSA, what do I need to have to get going?" The answer is--
--money to invest. You can put in up to $5000 into a TFSA in 2009 either with a lump-sum or set up a monthly automatic PAC plan with as little as $50 per month. If you don't have any money but you do already have OPEN investments [i.e. investments outside an RRSP or RESP], you can transfer $5000 from your OPEN investment into a TFSA.
"So I have some money but should I be putting it in my RRSP or RESP [an educational savings plan for your kids]?
Yes, most people should contribute to their RRSP and RESP first, before setting up a TFSA. [If you're not sure you are "most people," then just ask me.]
"OK, so I have some money to put in a TFSA, so what should I invest in?
A TFSA can hold the same investments as an RRSP or RESP. So the question of what to invest in is the same as always and depends on--
--how long you are going to invest for.
--whether you want conservative investment returns, OR long-term growth.
Other things to consider--
--when you take money out of a TFSA, you can put in back into the TFSA but not until the following year. Therefore, a TFSA does not work as a short-term savings account where you are putting money in and out of the account regularly.
--the TFSA has one advantage: sheltering investment growth from tax. It follows, then, that the more growth you have in your TFSA, the greater the tax you save. Consider two investors each 50 years old. They each plan to put $400 per month into a TFSA for 15 years. The first investor puts his money into a conservative investment earning 4% [interest]. After 15 years, he will have $98,000 and will have saved $10,400 in taxes.* The second investor goes for growth at 8% per year [capital gains]. After 15 years, he will have $138,000 and will have saved $13,200 in taxes.**
Having said this, the foremost consideration for any investor is when he needs his money back from the TFSA: if he wants his money back in 3 years or less, the conservative investment approach is required.
*as compared to making the same investment outside a TFSA.
**remember that capital gains are taxed at a lower rate than interest income.
Bye for now,
Tom
Tom Buck, M. Ed. CFP
Certified Financial Planner
Assante Financial Management Ltd
#600, 1414-8th Street SWCalgary, AB T2R 1J6
TEL 403.229.0128
FAX 1.866.386.9776
Subscribe to:
Posts (Atom)
Posts
