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Ongoing Commentary October 5, 2010 David Trahair is a chartered accountant who heard a lot of complaints about the stock market crashes that we have experienced the last few years. Most people complained about the fact that their net worth was substantially less than previously. Trahair believes that you can retire well without using the stock market or even an investment advisor. He believes that Guaranteed Investment Certificates, paying down all debt and avoiding overspending is the basic way to go for one to build wealth. He believes that you buy a home, pay down the mortgage, reduce your expenses where possible and forget buying RRSPs until all your debt is cleared away. This really goes against what many advisors tell you. But I know this works, I have seen it in action, and what results is that none of your cash is ever lost by bad investments unless you yourself do it. This book is a refreshing tale of what can happen when you are conservative. It means you never allow any cash to be lost in the stock market or investing schemes. I enjoyed reading this book and the conservative opinion. The book is entitled 'Enough Bull, How to retire well without the stock market, mutual funds or even an investment advisor', by David Trahair, CA. February 22, 2010 If you are a company investor, this is the time of year we receive company documents in the mail. Most people don't bother to open the pesky plastic wrapped booklet(s). But wait a minute, this can be a valuable resource to have a quick look at. Too much information is better than too little....even though some of this 'information' is hard to decipher. Let's just do a quick analysis of what you could find out about the company in which you have invested your hard earned cash. As with any company, it is good to keep your overall knowledge as least partially updated and informed. This is where the rubber meets the road, so to speak when you give yourself a chance. Step 1: Read the 'letter to shareholders'. This is written by the CEO(and his public relations company) and gives the snapshot of the latest trends and challenges the company will face. Ask yourself if what you are reading lines up with what the general media are saying about this industry. Or is there some discrepancy? Step 2: The Balance Sheet. From this you can determine the liquidity and the solvency of the firm. The balance sheet give you a list of company assets - what do they own- and also lists what the liabilities are - what does the company owe or what debts are there. The balance sheet lists the shareholder's equity which is the 'net worth' of the company. It may be listed as the common stock plus 'retained earnings'. This equation should balance - that's why it is called the Balance Sheet. Look closely at the Assets - have they increased or decreased since last year? Look at the Debts - have they increased or decreased. What is the explanation? Is the company able to pay short term debts quickly (liquidity). Step 3: Cash Flow Statement. Where was the cash made during the year and where was it spent? This is the 'show me the money' report that every investor can understand. We will talk more about this on a later post, but remember, have a look at those reports when they come in the mail. Get a feel for what they are saying, and soon you will be understanding a lot more! ********* January 29, 2010 How can this be? We are already well into the new year..the weather is still cold and I haven't got my income tax done yet. Guess I had better get working. I spent a couple of weeks away on a cruise - in the Caribbean yet. How great is that! Beautiful weather, blue water and lovely cruise environment. The best of all is the break from this Canadian winter and of course, seeing new country. The lovely islands that make up the Virgin Islands are really too amazing. The white sands, the countryside scenery and the best weather that I have ever encountered all make this a lifetime experience. I loved every minute of the adventure. More on this later. ***** December 13, 2009 When I look at the Edward Jones 'Investment Insight' for Dec./Jan.2010, I see they are recommending investments in IGM Financial Services. I agree in that it is a solid company, with a dividend of $2.05 annually. I own shares in this company and agree that it is a good stock for both growth and income. Investing in Canadian companies, and receiving dividends from them, means we are increasing our own personal wealth with dividend income (treated in preferential manner by CRA) and through growth in the company share price. Growing your wealth while you are busy living your life is the ultimate goal. Easy and simple, after your wealth management system is in place. November 13, 2009 Money and Investing: so many differing opinions. Everyone associated with investing says that mutual funds are the way to go. No one tells you that mutuals funds are every bit as risky as common stocks, that their price per unit fluctuates as much as regular stocks and that there is a fee charged to you when you invest in these funds. To me, it is best to stay invested in your blue chip dividend paying stocks through your dividend investing plans, sending your savings in to the plan to invest in more stocks as your finances allow. Don't bother giving your money away through 'fees' - it is much more to your advantage to invest in Blue Chip Canadian stocks. No fees, no extra costs, just investing with no fees. It really can't get better than that unless you win the lottery. August 22, 2009: Beautiful day today in Saskatchewan. The sun is shining, the wind is soft and all is well. Just finished rereading 'The Investment Zoo' by Jarislowsky. It is a good book - especially beginning Chapter 7 - Investing in the Jungle - where he talks about compound growth, a variety of investment types and dividends. Choosing non-cyclical essentials is a good part of this strategy. The investment approach is dull, disciplined and on track. Throughout the book he emphasizes to 'keep it simple' and always be 'paddling your own canoe'. He believes people get bogged down by too much information which often just confuses rather than clarifies things. He believes that buying is easier (which it is) and that there are only 2 reasons to sell a position - the stock has gone too high and the company no longer fits the criteria of your investment policy. I don't really agree with him here about selling....remember when Imperial Oil arrived at $140 per share - it split it shares down to $30 range- a 3 for 1 split...just because a share price accumulates doesn't mean it needs to be sold...ie.BerkshireHathaway. Generally though, this is a good read and well worth borrowing from your library. July 25, 2009: Finally, warm days and some sun! This is the time of year to sit and enjoy life and enjoy the fact that your investments are continually working for you. Each day that you enjoy summer, the markets are still working, the business world is still making money, and at least for those who own blue chip shares, your net worth is still increasing. That is what I love about Dividend Reinvestment and Blue Chip investing. Everything is working, even while you are relaxing. Every once in a while I check my accounts online to ensure that all is well. I take a few minutes in the morning to read the latest news about the business world, make sure that any news about companies whose shares I own, are still on track. If there is bad news, I take a few moments to investigate that news and make a mental note to pay attention to the future of that company. Anyways, today I can just relax with my lawn mower and then a cool refreshment after the chore is finished. Hope you are also having great days! ****** July 13, 2009 Summer has had few warm days in Saskatchewan, Canada - days for sitting in the sun reading good investment books. But I have had enough time to get through Thomas Friedman's "Hot, Flat and Crowded' detail laiden book. A heavy read this is, but as usual, many ideas and good explanations of world issues. In this book he discusses how we need a green revolution - the whole world needs it. Why? Because the whole world wants to live the way Canadians and Americans live. And that cannot be done without some major shifts. The author has travelled the world and met with some of the wealthiest, knowledgeable people who have shared their opinions. What does Friedman really advocate? He says we have five key problems that need to be addressed: - Energy supply and demand - currently there is only one-way communication from our utilities - the power company supplies us. If we at home have power to sell back(from our solar panels), our utility has no way of knowing or receiving this power from us.
- Petropolitics - the cash paid to middle east/asiatic countries for our 'oil requirements' has made those nations extremely wealthy making those nations' governments stronger, yet their people poorer - a breeding ground for radical terrorists.
- Climate change - have we tinkered with nature's operating system and have to pay for it soon?
- Energy poverty - Africa is a country of great energy poverty -food, safe water.
- Biodiversity loss - The planet is 4 billion years old-life is 2 billions years old, normal extinction rate is increasing from 1 million years before extinction.
We need new approaches to energy problems, to poverty, to life on earth in general. We need to take care of the planet and to develop new ways of doing things. On another note: And for those just beginning the wealth management process, here is another piece of information... "Passive income" is that income that is earned by an investment that needs very little management. It is money invested that brings you a return while you sleep. Dividend investing is one example. When you buy shares in a blue chip company, that company pays you dividends quarterly, so you do not have to do any management or other activity. Just watch your account grow. |
