I have a prediction to make in the wake of the poop our economy is currently sliding around on. Here it is in on its own line and with quotes to make it look more prophetic:
"The new successful investor will invest in people, not hedges."
Explanation: Now that we have confirmed in at least a few big scandals that it is people and their financial ethics and education that mess up the economy and many investments, the new successful investor will invest where there is human accountability and quality leadership, not a cold, and very diverse fund.
And I also say this:
"Financial security is found with secure people, not the appearance of security."
Explanation: This is a spin-off of the first one but with more focus on the people involved in our investments. We have seen billions of dollars disappear in shady ways and watch in awe. But really, why should we be surprised? We have allowed it. And we keep on allowing it. They brand their investments to look secure. They are faceless brands like the Starbucks emblem without the barista. They look secure and trustworthy...until you get the bitter and burned taste in your mouth and wonder why you made the investment. The new investor will research the leaders. They will dig deep into their financial habits and integrity before they put their precious money there. They will learn how to study financial reports instead of trusting someone else to tell them it's ok.
B.L.I.P. Heros
Tuesday, December 16, 2008
Thursday, October 9, 2008
Faith vs. Fear
These days, we are instantly aware of everything that's going on. That's a double edged sword, though. For example, who with any money in the stock market today, in the middle of the Credit Crunch (I prefer to call it the "Debt Disaster") isn't quaking in their boots and poopin' in their pants? Here are some paraphrased financial headlines that I can recall:
-Worse Crisis Since the Great Depression
-Another Bank Crashes - Who's Next?
-Consumer Confidence Crashing
-yadda yadda crashes/fails
Yet, after a few minutes chatting with a few folk who actually work right in the market, it always seems that there is a missing perspective. Working at a downtown coffee shop allows me to speak directly to the customers who are largely from the financial sector. After a few moments chatting, here is how the above headlines transformed:
-Worse Crisis Since the Great Depression - but... worse one day losses in the market occurred in the 80's.
-Another Bank Crashes - Who's Next?...but, what do you expect when banks are giving mortgages to people without jobs, and then giving them secondary loans based on the 'equity of their new homes'??
I had no idea they were lending like that!
I never read anywhere a comparison of one day drops like that.
When you read a headline, don't become instantly fearful, but instead seek out a balanced perspective from someone who is right in the midst of it.
In times of fear, we need faith. Remember that faith is the opposite of fear. Yet, faith without wisdom isn't real faith. You can't just sit there and say "My 'financial advisor' said that my RRSP portfolio will recover so I'm just going to hold." without doing some due diligence yourself. You have no one to blame but yourself for lack of knowledge. It's all out there.
Seek knowledge and wisdom before buying, holding or selling.
"Mr. Top Investor says "Sell All Now!"
Do you do it? Maybe. But do your due diligence.
I have a random stock holding of 500 shares of some random company. It's all random. My research was random, my purchase was random and my entire relationship with the shares has been less-than-random. Can I blame anyone but myself for this total flop? No. Instead I should slap myself for wasting my money and taking away a meal out from my wife and I!
So, a proper balance of knowledge, wisdom (try and fail of us and others), and faith (read the book of James in the Bible for more on faith) will strengthen our ship for stormy seas.
-Worse Crisis Since the Great Depression
-Another Bank Crashes - Who's Next?
-Consumer Confidence Crashing
-yadda yadda crashes/fails
Yet, after a few minutes chatting with a few folk who actually work right in the market, it always seems that there is a missing perspective. Working at a downtown coffee shop allows me to speak directly to the customers who are largely from the financial sector. After a few moments chatting, here is how the above headlines transformed:
-Worse Crisis Since the Great Depression - but... worse one day losses in the market occurred in the 80's.
-Another Bank Crashes - Who's Next?...but, what do you expect when banks are giving mortgages to people without jobs, and then giving them secondary loans based on the 'equity of their new homes'??
I had no idea they were lending like that!
I never read anywhere a comparison of one day drops like that.
When you read a headline, don't become instantly fearful, but instead seek out a balanced perspective from someone who is right in the midst of it.
In times of fear, we need faith. Remember that faith is the opposite of fear. Yet, faith without wisdom isn't real faith. You can't just sit there and say "My 'financial advisor' said that my RRSP portfolio will recover so I'm just going to hold." without doing some due diligence yourself. You have no one to blame but yourself for lack of knowledge. It's all out there.
Seek knowledge and wisdom before buying, holding or selling.
"Mr. Top Investor says "Sell All Now!"
Do you do it? Maybe. But do your due diligence.
I have a random stock holding of 500 shares of some random company. It's all random. My research was random, my purchase was random and my entire relationship with the shares has been less-than-random. Can I blame anyone but myself for this total flop? No. Instead I should slap myself for wasting my money and taking away a meal out from my wife and I!
So, a proper balance of knowledge, wisdom (try and fail of us and others), and faith (read the book of James in the Bible for more on faith) will strengthen our ship for stormy seas.
Thursday, October 2, 2008
Working with Independent Contractors - Wisdom in a Rant
I thought it would be good to post an excerpt from an email I wrote to someone about a certain company that failed us. I thought this rant would benefit anyone who may elect to work with a small business or independent contractor as these guys operate in most industries. Just remove "IT" and replace with whatever industry you happen to be working in:
-------------
Even since you wrote your email about ...., we also had our trust breached. Do you remember XXXXX (violating company name here)? Yesterday they denied promising to include a 3D logo (we were both there and heard the promise but it wasn't written in the contract) and then they tried to get full payment from me for the project without even mentioning that Joe was in a dispute over the 3D logo. They called me up and they were like "Joe agreed to everything, let's do the final payment. I'll send someone over right away to collect." I knew that there MIGHT have been an issue with the logo since I hadn't seen it so I decided to stall the payment meeting. So I go and check my email and there is an email dispute about the logo that they didn't even mention to me on the phone.
So, don't use XXXXX. We live, we learn. They're only harming themselves. In fact, I was planning to not worry about the logo and leave it at that but then they pulled this move on me and I got all hot under the collar. Very foolish of them. I bet it wouldn't take them more than 10 minutes to make one, either! Then they accused me of trying to 'squeeze more out of them when they've been so nice to us." They were so nice to complete most of what they agreed to! How nice of them! I would have thought it would have been nicer if they did all they agreed to, though.
Granted this issue doesn't weigh on the same scale as what you are going through, but I what you wrote is true is that it keeps happening and we keep getting stronger and wiser. It is true. Now when I deal with any transactions with small or independent guys, I'm so much more prepared. One of the first things Joe and I test now is the speed and quality of responses and communications. From now on, if I don't sense extreme professionalism from a firm or independent, I'll just walk away. We also learned that when dealing with IT guys, it is very much worth spending more using a firm that has a 'business person' leading the IT guys. These IT guys are nothing but computer geeks [I have a ham radio and I built my own PBX box so I'm one too, so that's not derogatory] trying to make money with their skill. They have limited business sense. They get excited about a project and then when it wears off they are gone - mysteriously! It's uncanny. When doing IT projects you need to be dealing with a sales person/manager who has the power to force these guys to do the work and on time. Otherwise, they'll do it on their time or randomly. What a great lesson to learn! I bet they don't even cover that in MBA courses.
And the value of SUPER clear contracts that include:
a) exactly what will be produced to the very sickest detail and
b) exactly what day/hour those detailed items will be delivered to the client
without those, it's just a mess. Our last contract with XXXXX had those items and lo and behold it was done almost perfectly on time. They skipped a few proofing steps which I was then able to point out to them when they had the nerve to accuse us of trying to 'squeeze more out of the project'. Sigh.
So yeah. PTL for earthly wisdom! Seek wisdom. Hunger after it. It's much more valuable than gold. If these fools in the banking industry had a bit we wouldn't be flying so fast towards the new world order and the mark of the beast! But God's will be done and life is short anyways.
-------------
Even since you wrote your email about ...., we also had our trust breached. Do you remember XXXXX (violating company name here)? Yesterday they denied promising to include a 3D logo (we were both there and heard the promise but it wasn't written in the contract) and then they tried to get full payment from me for the project without even mentioning that Joe was in a dispute over the 3D logo. They called me up and they were like "Joe agreed to everything, let's do the final payment. I'll send someone over right away to collect." I knew that there MIGHT have been an issue with the logo since I hadn't seen it so I decided to stall the payment meeting. So I go and check my email and there is an email dispute about the logo that they didn't even mention to me on the phone.
So, don't use XXXXX. We live, we learn. They're only harming themselves. In fact, I was planning to not worry about the logo and leave it at that but then they pulled this move on me and I got all hot under the collar. Very foolish of them. I bet it wouldn't take them more than 10 minutes to make one, either! Then they accused me of trying to 'squeeze more out of them when they've been so nice to us." They were so nice to complete most of what they agreed to! How nice of them! I would have thought it would have been nicer if they did all they agreed to, though.
Granted this issue doesn't weigh on the same scale as what you are going through, but I what you wrote is true is that it keeps happening and we keep getting stronger and wiser. It is true. Now when I deal with any transactions with small or independent guys, I'm so much more prepared. One of the first things Joe and I test now is the speed and quality of responses and communications. From now on, if I don't sense extreme professionalism from a firm or independent, I'll just walk away. We also learned that when dealing with IT guys, it is very much worth spending more using a firm that has a 'business person' leading the IT guys. These IT guys are nothing but computer geeks [I have a ham radio and I built my own PBX box so I'm one too, so that's not derogatory] trying to make money with their skill. They have limited business sense. They get excited about a project and then when it wears off they are gone - mysteriously! It's uncanny. When doing IT projects you need to be dealing with a sales person/manager who has the power to force these guys to do the work and on time. Otherwise, they'll do it on their time or randomly. What a great lesson to learn! I bet they don't even cover that in MBA courses.
And the value of SUPER clear contracts that include:
a) exactly what will be produced to the very sickest detail and
b) exactly what day/hour those detailed items will be delivered to the client
without those, it's just a mess. Our last contract with XXXXX had those items and lo and behold it was done almost perfectly on time. They skipped a few proofing steps which I was then able to point out to them when they had the nerve to accuse us of trying to 'squeeze more out of the project'. Sigh.
So yeah. PTL for earthly wisdom! Seek wisdom. Hunger after it. It's much more valuable than gold. If these fools in the banking industry had a bit we wouldn't be flying so fast towards the new world order and the mark of the beast! But God's will be done and life is short anyways.
Monday, September 29, 2008
The Financial Market Crisis
After doing much reading this week in the Globe and Mail, I felt it was time to compile a post to discuss.
I think the general consensus by experts and the average person is that the problem is debt. Globe had a quick interview with Margaret Atwood because apparently she is writing a book about debt. Weird, eh? Also, it seems much of her perspective is biblical. In her opinion, one of the biggest problems is student loans and credit cards. I agree that that is a major problem because that's where young adults are taught that there is an unlimited amount of money to borrow and all you have to do is sign up. However, I think she missed something even more simple, but she addressed it indirectly. They asked her how she learned about money and she answered "From having a bank book at eight years old." Then she mentioned elsewhere in the article that her mom was thrifty and her dad liked buying land. She also likes buying land and although she didn't mention it, I'll be she's a bit thrifty too. So, the real root, in my opinion, is poor financial instructions by parents to their children, or the mistake of the children not listening to their parents. Since 'parent-aged' people are also now having debt issues, I'm guessing it's more of the former than the latter.
Elsewhere in the Globe I read another neat quote: "If you don't get a return ON your money and a return OF your money, you don't know how to run a bank." So true. How under the sun could a) a bank offer a zero-down debt and b) people be dumb enough to take one? Well, 'b' is understandable because people will line up for 'free' things, but 'a' is the more disturbing thing. In my opinion, anyone who would take a zero-down, non asset secured loan where your payments are mostly interest, if not all, should not be offered a loan at all. The 'loan interview', if the institutions were smart enough to even have one, should have been like this:
If we offered you a zero-down loan, even though you have nothing to secure it, it's based on market volatility, your job doesn't pay enough to leave you with any fun money, and it will take forever to actually start paying down the principle, would you take it?
If they answer 'yes' then the financial institution should never loan that person money.
But the problem is that they did! They even encouraged it! I remember when we were buying our home that our 10% down was crazy enough. I borrowed from family to make that percentage higher. Even with 30% down it's painful to look at the interest vs. principle payments every month. The financial institutions were operating in the 'now' instead of looking at historical trends. How could they not know that the housing markets will soften at some point? All of these 'borrow from the value of your home to renovate your bathroom' ads have suddenly stopped appearing. Hmm. Why is that?
It's tempting. As an investor you see all these easy loans around and you think "I'll use that easy money and invest and make more." Well, sure. We can and it's possible. But through this situation, I've learned that one must look at the debt ratio very closely before investing in companies. And a company needs to keep their debt ratio in good shape.
The famous "OPM (Other People's Money)" promoted by Rich Dad is a good thing, however, wisdom and lifestyle sacrifices are needed. Can we pay back the debt on time if the market we're in sputters? Before borrowing money against our assets, we need to ask ourselves if we can service those debts if the value of the assets drop 20%.
Thankfully, like Margaret Atwood, I have a go-getter mom and a thrifty dad. I have the boldness to try, but the thriftiness to consider the implications of a debt. I'm sure that through this that we'll grow in wisdom and be even better prepared for future investing.
I think the general consensus by experts and the average person is that the problem is debt. Globe had a quick interview with Margaret Atwood because apparently she is writing a book about debt. Weird, eh? Also, it seems much of her perspective is biblical. In her opinion, one of the biggest problems is student loans and credit cards. I agree that that is a major problem because that's where young adults are taught that there is an unlimited amount of money to borrow and all you have to do is sign up. However, I think she missed something even more simple, but she addressed it indirectly. They asked her how she learned about money and she answered "From having a bank book at eight years old." Then she mentioned elsewhere in the article that her mom was thrifty and her dad liked buying land. She also likes buying land and although she didn't mention it, I'll be she's a bit thrifty too. So, the real root, in my opinion, is poor financial instructions by parents to their children, or the mistake of the children not listening to their parents. Since 'parent-aged' people are also now having debt issues, I'm guessing it's more of the former than the latter.
Elsewhere in the Globe I read another neat quote: "If you don't get a return ON your money and a return OF your money, you don't know how to run a bank." So true. How under the sun could a) a bank offer a zero-down debt and b) people be dumb enough to take one? Well, 'b' is understandable because people will line up for 'free' things, but 'a' is the more disturbing thing. In my opinion, anyone who would take a zero-down, non asset secured loan where your payments are mostly interest, if not all, should not be offered a loan at all. The 'loan interview', if the institutions were smart enough to even have one, should have been like this:
If we offered you a zero-down loan, even though you have nothing to secure it, it's based on market volatility, your job doesn't pay enough to leave you with any fun money, and it will take forever to actually start paying down the principle, would you take it?
If they answer 'yes' then the financial institution should never loan that person money.
But the problem is that they did! They even encouraged it! I remember when we were buying our home that our 10% down was crazy enough. I borrowed from family to make that percentage higher. Even with 30% down it's painful to look at the interest vs. principle payments every month. The financial institutions were operating in the 'now' instead of looking at historical trends. How could they not know that the housing markets will soften at some point? All of these 'borrow from the value of your home to renovate your bathroom' ads have suddenly stopped appearing. Hmm. Why is that?
It's tempting. As an investor you see all these easy loans around and you think "I'll use that easy money and invest and make more." Well, sure. We can and it's possible. But through this situation, I've learned that one must look at the debt ratio very closely before investing in companies. And a company needs to keep their debt ratio in good shape.
The famous "OPM (Other People's Money)" promoted by Rich Dad is a good thing, however, wisdom and lifestyle sacrifices are needed. Can we pay back the debt on time if the market we're in sputters? Before borrowing money against our assets, we need to ask ourselves if we can service those debts if the value of the assets drop 20%.
Thankfully, like Margaret Atwood, I have a go-getter mom and a thrifty dad. I have the boldness to try, but the thriftiness to consider the implications of a debt. I'm sure that through this that we'll grow in wisdom and be even better prepared for future investing.
Sunday, August 31, 2008
The Sacrifice of the Investor
The life of the investor is hard. Very hard.
All he does is give up his free time and money in the hopes of seeing a return on his labours. He toils, and toils and toils. Family and friends start to urge him to 'get a real job' where he can enjoy weekends like the rest of the people and get stat holidays off. All forces around try to push him back down the road to mediocrity. No one understands him and he is isolated. If any attempted investment should fall short of wonderful gains, the investor takes the full brunt of the 'failure' and his direction and intentions are again brought into question.
"Why don't you get a normal job?"
"All we have are loans. We don't have any spending money."
"Where are all the gains? If we were doing a normal job we'd make more than this."
"Why is my life so hard?"
But he who doesn't take his hand off the plow will win.
He who takes his failures and uses them to win, will prosper.
A few pieces of bread and a couple of fish can and will be multiplied.
Don't quit.
Don't settle for mediocrity.
Seek knowledge. Heed wisdom.
Encourage each other and surround yourself with like-minded individuals.
...and don't quit!
All he does is give up his free time and money in the hopes of seeing a return on his labours. He toils, and toils and toils. Family and friends start to urge him to 'get a real job' where he can enjoy weekends like the rest of the people and get stat holidays off. All forces around try to push him back down the road to mediocrity. No one understands him and he is isolated. If any attempted investment should fall short of wonderful gains, the investor takes the full brunt of the 'failure' and his direction and intentions are again brought into question.
"Why don't you get a normal job?"
"All we have are loans. We don't have any spending money."
"Where are all the gains? If we were doing a normal job we'd make more than this."
"Why is my life so hard?"
But he who doesn't take his hand off the plow will win.
He who takes his failures and uses them to win, will prosper.
A few pieces of bread and a couple of fish can and will be multiplied.
Don't quit.
Don't settle for mediocrity.
Seek knowledge. Heed wisdom.
Encourage each other and surround yourself with like-minded individuals.
...and don't quit!
Sunday, July 27, 2008
Go East, dude
As one Taylor will say to go north, another...wiser Taylor will tell you to go east. I have reasons which I don't want to tell you just yet, but I CAN say that my investment here has gone up 30% in one year. Home builders can't keep up with the boom, and most people have no idea how many more jobs are coming.
You see, New Brunswick, Saint John in particular is run mostly by one family business. They're strategy is very smart. When the economy has a downturn they buy up flailing businesses: ship building, oil refineries, sawmills, pulp and paper, liquid natural gas ports, and most recently...well I can't say, but when the economy turns around they will be sitting on a fortune. Of coarse not every venture succeeds, but they have been around for a hundred years and show no signs of slowing down.
I have a contact in city hall who hears things whispered in hallways and broomclosets and reports back to me. I have been forewarned, and feel that I should tell you. I have set my family up in a base camp here for a couple of years to buy up property and see Canada's sexy East Coast. Hopefully we're not too late. The worst case scenario is that we end up living in a beautiful old victorian house with acreage for a fraction of the price we would have paid in smelly Vancouver.
If you listen to T1 (the waynenator) he will say to buy in the north and hope your house doesn't fall over before you make a profit. The problem is; people have known about the port for years and serious investors haven't jumped on it. I would look into the vacancy rate before dishing out a 'hot tip' like that. In SJ, it is 2% and falling drastically, not to mention it is also the '#1 happiest place in Canada' according to recent polls.
You see, New Brunswick, Saint John in particular is run mostly by one family business. They're strategy is very smart. When the economy has a downturn they buy up flailing businesses: ship building, oil refineries, sawmills, pulp and paper, liquid natural gas ports, and most recently...well I can't say, but when the economy turns around they will be sitting on a fortune. Of coarse not every venture succeeds, but they have been around for a hundred years and show no signs of slowing down.
I have a contact in city hall who hears things whispered in hallways and broomclosets and reports back to me. I have been forewarned, and feel that I should tell you. I have set my family up in a base camp here for a couple of years to buy up property and see Canada's sexy East Coast. Hopefully we're not too late. The worst case scenario is that we end up living in a beautiful old victorian house with acreage for a fraction of the price we would have paid in smelly Vancouver.
If you listen to T1 (the waynenator) he will say to buy in the north and hope your house doesn't fall over before you make a profit. The problem is; people have known about the port for years and serious investors haven't jumped on it. I would look into the vacancy rate before dishing out a 'hot tip' like that. In SJ, it is 2% and falling drastically, not to mention it is also the '#1 happiest place in Canada' according to recent polls.
Sunday, June 29, 2008
Go North
It seems that Prince Rupert and surrounding areas could be a very wise choice in which to invest. Fuel prices are skyrocketing and we still need to get products from Asia to North America and back again. They have massively beefed up their port and they are almost at capacity. That alone is bringing in $2 billion annually to the area. From there, cargo can shoot straight across to the east of north america. It's just way better and cheaper for the big boys. It's very significant.
I expect the prices of real estate and businesses to begin to see growth in the very near future. They have been way, way down for the last 13 years or so, so I hear, so I'm sure someone with extra cash kickin' around would do well to put some there.
Further, it's coastal. Coastal is better and more beautiful, in my opinion. Look at the coasts of the world.
The original vision for Rupert was to be 'Vancouver' but the founder abandoned plans.
I expect the prices of real estate and businesses to begin to see growth in the very near future. They have been way, way down for the last 13 years or so, so I hear, so I'm sure someone with extra cash kickin' around would do well to put some there.
Further, it's coastal. Coastal is better and more beautiful, in my opinion. Look at the coasts of the world.
The original vision for Rupert was to be 'Vancouver' but the founder abandoned plans.
Tuesday, May 27, 2008
Retail - An interesting adventure
Hello Blippers,
How I've longed to read and post here, but May was a month of indescribable transition. In fact, I'm still transitioning from smaller, non-retail business to owning a coffee shop franchise. I have been working as a barista, janitor, bookkeeper, human resources, inventory manager, mechanical mr. fixit, and more, from literally dawn until dusk, 7 days a week, for an entire month.
But it's a great experience. I cannot believe that people do this. I have now got to take my hat off to any person who ever decides to try retail, because it is NOT for the weak. It's just really hard.
But it's a good hard. I think all Blippers need this. As I listed above, my skillset is increasing at an alarming rate. My people skills are going up, my leadership skills are skyrocketing, my physical and mental endurance is increasing, and I believe that the long haul will also show an improved marriage, though right now it's very hard in the middle of the slave-like labour.
What I've learned is that a coffee shop is very much about the owner, but also the location. A coffee shop in a poor location has less hope, but, if the owner is always present and people like him (I'm thinking of Rusticos on Main street) and has a decent location, then they can do well, I'm sure.
Month 1 was very much a pouring out of financial resources. Even now I can't see much left over..but..I've already got a kind of 'pulse' on how things work. Very interesting. The better the 'pulse' gets, the more peace I have and the better I get.
Enough babble. I just wanted to inform you what I've been up to while sharing whatever is relevant to our lives.
Over and out.
How I've longed to read and post here, but May was a month of indescribable transition. In fact, I'm still transitioning from smaller, non-retail business to owning a coffee shop franchise. I have been working as a barista, janitor, bookkeeper, human resources, inventory manager, mechanical mr. fixit, and more, from literally dawn until dusk, 7 days a week, for an entire month.
But it's a great experience. I cannot believe that people do this. I have now got to take my hat off to any person who ever decides to try retail, because it is NOT for the weak. It's just really hard.
But it's a good hard. I think all Blippers need this. As I listed above, my skillset is increasing at an alarming rate. My people skills are going up, my leadership skills are skyrocketing, my physical and mental endurance is increasing, and I believe that the long haul will also show an improved marriage, though right now it's very hard in the middle of the slave-like labour.
What I've learned is that a coffee shop is very much about the owner, but also the location. A coffee shop in a poor location has less hope, but, if the owner is always present and people like him (I'm thinking of Rusticos on Main street) and has a decent location, then they can do well, I'm sure.
Month 1 was very much a pouring out of financial resources. Even now I can't see much left over..but..I've already got a kind of 'pulse' on how things work. Very interesting. The better the 'pulse' gets, the more peace I have and the better I get.
Enough babble. I just wanted to inform you what I've been up to while sharing whatever is relevant to our lives.
Over and out.
Tuesday, March 25, 2008
Tax Strategies - HELP!
Like the title of this post? I hope it summarizes how I (and apparently others) feel about taxes. I think that's why many people don't get into business for themselves. They like those automated Quickbook payroll stubs that roll out every two weeks and show them how much was robbed from them. They like not having to figure it out. I also like not having to figure it out, but, I have to be a man and face the fact that no friend, family member or otherwise seems to know enough to mentor me.
It reminds me of a quick story to prove my point. I just finished reading a book about Canadian tax strategies (link at the bottom) and realized that I am not obligated to pay my employer taxes every two weeks. Instead, I could save it till the end of the year and pay then. The reason is obvious - compound interest on the money we didn't pay every two weeks. So I approached our bookkeeper (someone who knows something about books) and she said 'You can do it but it's complicated." As soon as I heard that I was like 'Oh. It's complicated' and that little ball of stress came into the front of my head and I broke out into a rash and vomited (ok, the last two aren't true). Anyways, point is is that because of the stress of knowing that I had to figure it all out on my own, I just quit. I gave up. I said 'forget it. Too complicated." I now thoroughly doubt that it really is that hard.
I could pay a CA $395/hour but I'm not quite there yet. And it's not a good investment if you don't speak any of his lingo, unless he is able to dumb it down to street level (unlikely). Further, I think it's a matter of us needing to take responsability for our learning on this one. I therefore propose a BLIP Symposium for 2008 on the topic of:
'Taxes - We're Takin' Back Our Money from the Man, Man." (other titles open to discussion)
I propose that we dig deep and search far and wide for the easiest, more effective books on the topic. We need to learn how to get ahead.
2007 and the beginning of 2008 was a time for me to realize that I am hopelessly undereducated about taxes, bookkeeping, and accounting. The reason is simple - I've never studied the stuff. I fared well in most of my skool courses so why can't I take this one on? And, by jove, this one is worth big $ to us. It can add more dough to our seed money.
Let's start with this book, because I recall Taylor 2 and I were discussing it as an easy read and worth reading
The 10 Secrets Revenue Canada Doesn’t Want You To Know! - by David Voth
It reminds me of a quick story to prove my point. I just finished reading a book about Canadian tax strategies (link at the bottom) and realized that I am not obligated to pay my employer taxes every two weeks. Instead, I could save it till the end of the year and pay then. The reason is obvious - compound interest on the money we didn't pay every two weeks. So I approached our bookkeeper (someone who knows something about books) and she said 'You can do it but it's complicated." As soon as I heard that I was like 'Oh. It's complicated' and that little ball of stress came into the front of my head and I broke out into a rash and vomited (ok, the last two aren't true). Anyways, point is is that because of the stress of knowing that I had to figure it all out on my own, I just quit. I gave up. I said 'forget it. Too complicated." I now thoroughly doubt that it really is that hard.
I could pay a CA $395/hour but I'm not quite there yet. And it's not a good investment if you don't speak any of his lingo, unless he is able to dumb it down to street level (unlikely). Further, I think it's a matter of us needing to take responsability for our learning on this one. I therefore propose a BLIP Symposium for 2008 on the topic of:
'Taxes - We're Takin' Back Our Money from the Man, Man." (other titles open to discussion)
I propose that we dig deep and search far and wide for the easiest, more effective books on the topic. We need to learn how to get ahead.
2007 and the beginning of 2008 was a time for me to realize that I am hopelessly undereducated about taxes, bookkeeping, and accounting. The reason is simple - I've never studied the stuff. I fared well in most of my skool courses so why can't I take this one on? And, by jove, this one is worth big $ to us. It can add more dough to our seed money.
Let's start with this book, because I recall Taylor 2 and I were discussing it as an easy read and worth reading
The 10 Secrets Revenue Canada Doesn’t Want You To Know! - by David Voth
Behavioural Economics and Investing
Here is an interesting consideration - our psychology (I hate spelling that. I'm changing the spelling to 'cy-call-ogy').
Master Song (Avatar Pending) informed me that it's very important to understand how our cycallogy affects our decisions. At first I thought, "I'm not affected by this cahooey hooa fluffy cyko stuff," but it seems that I was wrong... I was wrong once before too.
He used the example of how a person, when there are many bidders bidding on an item will bid much more when there is great competition, while they will usually be much more cautious when there is only one other competitor. Their starting bid is much higher in a high-competition environment. Of course, I immediately thought about Ebay. That's pretty cool. It's true. I would do the same thing. I'm a victim of my cykee.
So, I saved you a google search on the subject and came up with, of course, a wiki link and a random PDF. Turns out the random PDF displays well and seems to sum up some of the big items well.
Here you go:
Wiki link
Random PDF on Behavioural Economics Cycallogy
Master Song (Avatar Pending) informed me that it's very important to understand how our cycallogy affects our decisions. At first I thought, "I'm not affected by this cahooey hooa fluffy cyko stuff," but it seems that I was wrong... I was wrong once before too.
He used the example of how a person, when there are many bidders bidding on an item will bid much more when there is great competition, while they will usually be much more cautious when there is only one other competitor. Their starting bid is much higher in a high-competition environment. Of course, I immediately thought about Ebay. That's pretty cool. It's true. I would do the same thing. I'm a victim of my cykee.
So, I saved you a google search on the subject and came up with, of course, a wiki link and a random PDF. Turns out the random PDF displays well and seems to sum up some of the big items well.
Here you go:
Wiki link
Random PDF on Behavioural Economics Cycallogy
Tuesday, March 11, 2008
A Mill a year for 25 or 17 mill up front?
So, I'm not sure if I got my numbers right, but my parents were talking about this 'dilemma' some lottery winner was having - she couldn't decide whether to take 17 million up front or 1 million per year for the next 25 years.
Being the accredited investor that I am, I immediately started thinking about compound interest... ok. I'm not an accredited investor but Master Song insists that I master compound interest...but anyways, here are my findings. Follow along as I learn:
a mill/year for 25years (investing at 3.4%)
year 1 - 1,000,000
year 2 - 2,041,364.37
year 3 - 3,083,108
year 4 - 4,139,150
year 5 - 5,209,687
year 6 - 6,294,918
year 7 - 7,395,044
year 8 - 8395044
year 9 - 9,640,803
year 10- 10,786,853
year 11 - 11,948,633
year 12 - 13,126,359
year 13 - 14,320,250
year 14 - 15,530,527
year 15 - 16,757,416
year 16 - 18,001,145
year 17 - 19,261,945
year 18 - 20,540,050
year 19 - 21,835,697
year 20 - 23,149,128
year 21 - 24,480,586
year 22 - 25,830,319
year 23 - 27,198,578
year 24 - 28,585,617
year 25 - 29,991,694
So there you go. If she really sucked, she'd make 10 million dollars just in interest. Just leaving it in the bank.
So, she lost 30 million minus 17 million for a total of 13 million.
But... the argument was that she could take the 17 million and do some rocking and rollin' style investing at much more than 10% ROI.
Thoughts?
Being the accredited investor that I am, I immediately started thinking about compound interest... ok. I'm not an accredited investor but Master Song insists that I master compound interest...but anyways, here are my findings. Follow along as I learn:
a mill/year for 25years (investing at 3.4%)
year 1 - 1,000,000
year 2 - 2,041,364.37
year 3 - 3,083,108
year 4 - 4,139,150
year 5 - 5,209,687
year 6 - 6,294,918
year 7 - 7,395,044
year 8 - 8395044
year 9 - 9,640,803
year 10- 10,786,853
year 11 - 11,948,633
year 12 - 13,126,359
year 13 - 14,320,250
year 14 - 15,530,527
year 15 - 16,757,416
year 16 - 18,001,145
year 17 - 19,261,945
year 18 - 20,540,050
year 19 - 21,835,697
year 20 - 23,149,128
year 21 - 24,480,586
year 22 - 25,830,319
year 23 - 27,198,578
year 24 - 28,585,617
year 25 - 29,991,694
So there you go. If she really sucked, she'd make 10 million dollars just in interest. Just leaving it in the bank.
So, she lost 30 million minus 17 million for a total of 13 million.
But... the argument was that she could take the 17 million and do some rocking and rollin' style investing at much more than 10% ROI.
Thoughts?
Learning about Money from a Commie
I was looking through Youtube for videos about investing (ok...I lied. I was actually watching a chick launch a potato at a target from a homemade cannon) when I came across a very cool video about the history of money. Wow. All my questions answered about where the current monetary system came from. Granted it seems to be published by a communist, but it seems like sound information.
It is a 47 minute video but I strongly recommend it. It's low budget (like us) and is really intriguing. And when you are done, suddenly the markets and interest rates and even our bills and coins make more sense. I think it is good for investors. We need to know everything about money if we are going to make a lot of it.
Enjoy and feed me back.
Money Movie
It is a 47 minute video but I strongly recommend it. It's low budget (like us) and is really intriguing. And when you are done, suddenly the markets and interest rates and even our bills and coins make more sense. I think it is good for investors. We need to know everything about money if we are going to make a lot of it.
Enjoy and feed me back.
Money Movie
Monday, March 10, 2008
Pools and Real-estate Value
A client of mine asked me if by installing a relatively expensive pool whether it would increase the value of his real-estate enough to compensate the purchase. I was mixed on the topic so I started asking around and then I realized it would be a good post for BLIP.
First, this pool is not a 'normal' pool. http://www.swimex.com/home/
They can be used both as a hot tub and pool, apparently, and dont take up much space.
Regardless, it brings up some good discussion points that I wanted some feedback on. I will put two categories, 'for' and 'against' the pool. Try to add some to my list or describe in detail why you agree, disagree.
FOR
-Kids like pools
-creates a visually appealing atmosphere for a summer sale of the house
-differentiates your house from your neighbours (at least in the Vancouver area)
-
AGAINST
-some buyers will look and see 'maintenance costs' and run
-some buyers will look and see 'hard work to maintain. I don't want to work'
-some buyers will say "I would rather have a garden to pee in or a lawn to cut'
Other considerations:
-If the neighbourhood is uppity, it should be a pro rather than a con because someone buying there won't be looking at the financial liabilities as much.
Thanks for your feedback!
First, this pool is not a 'normal' pool. http://www.swimex.com/home/
They can be used both as a hot tub and pool, apparently, and dont take up much space.
Regardless, it brings up some good discussion points that I wanted some feedback on. I will put two categories, 'for' and 'against' the pool. Try to add some to my list or describe in detail why you agree, disagree.
FOR
-Kids like pools
-creates a visually appealing atmosphere for a summer sale of the house
-differentiates your house from your neighbours (at least in the Vancouver area)
-
AGAINST
-some buyers will look and see 'maintenance costs' and run
-some buyers will look and see 'hard work to maintain. I don't want to work'
-some buyers will say "I would rather have a garden to pee in or a lawn to cut'
Other considerations:
-If the neighbourhood is uppity, it should be a pro rather than a con because someone buying there won't be looking at the financial liabilities as much.
Thanks for your feedback!
Thursday, February 28, 2008
Edward Jones
Not sure what I think of these guys. I built a relationship with a new 'advisor' who keeps calling. However , they have a violent takeover mentality. They want to be on every street corner, which makes me think they have enormous overhead, which means me, the investor is paying for it. He says I can get 7-12 percent with them, and also get life insurance.
Anybody know anything?
Anybody know anything?
Wednesday, February 27, 2008
"The Matrix has you..."
To those out there working in the system:
Imagine a world that has been pulled over your eyes to blind you from the truth. You are not in control of your own life. Your mind is trapped in the idea of stability, security, and accountability.
Now imagine that in reality, you are plugged into this system merely as a source of energy--a battery--for the use of a much larger organization. You are expendable, replaceable, disposable.
But, what if you were to wake up? What if you were able to unplug? Maybe you could do much more. You could take control of your own life (as much as God allows).
This isn't just a sci-fi story. This is real.
To all of us working "the job" ... the "career" : Free your mind.
It's difficult, and it takes faith. No one makes the first jump. Once you start to believe in yourself, it will be difficult to go back. In fact, you cannot be reinserted into the system. You will reject it.
Ignorance may be bliss, but it is still ignorance.
Of course, you may choose to enter into the system once in a while to get certain things done, but at least you can now see the bigger picture.
I'm not trying to tell you that you can dodge job offers. When you're ready, you won't have to...
Imagine a world that has been pulled over your eyes to blind you from the truth. You are not in control of your own life. Your mind is trapped in the idea of stability, security, and accountability.
Now imagine that in reality, you are plugged into this system merely as a source of energy--a battery--for the use of a much larger organization. You are expendable, replaceable, disposable.
But, what if you were to wake up? What if you were able to unplug? Maybe you could do much more. You could take control of your own life (as much as God allows).
This isn't just a sci-fi story. This is real.
To all of us working "the job" ... the "career" : Free your mind.
It's difficult, and it takes faith. No one makes the first jump. Once you start to believe in yourself, it will be difficult to go back. In fact, you cannot be reinserted into the system. You will reject it.
Ignorance may be bliss, but it is still ignorance.
Of course, you may choose to enter into the system once in a while to get certain things done, but at least you can now see the bigger picture.
I'm not trying to tell you that you can dodge job offers. When you're ready, you won't have to...
Wednesday, February 20, 2008
The Economist
Taylor and Gentlemen,
I have been 'coaching' English (I don't call it teaching anymore because I feel like I'm learning more from him) to Master Song, as you know. We have been using The Economist as our study material, as he is a professional investor. While studying this magazine, I realized that it's really a wonderful and super valuable tool to have in our toolshed. When I started discussing newsstand prices he mentioned that you can read it for free online. Cool! I forgot what era we live in. So, I'm going to make plug for The Economist and encourage all of us to read it often. It can also very much be the source of good discussions.
Hope this helps.
http://www.economist.com/
ps. Do we have a link resource list anywhere on this thing? We should be building that up, but only adding things that we all agree are valuable. Like Pooprider, for example. Everyone needs more poop in their life.
I have been 'coaching' English (I don't call it teaching anymore because I feel like I'm learning more from him) to Master Song, as you know. We have been using The Economist as our study material, as he is a professional investor. While studying this magazine, I realized that it's really a wonderful and super valuable tool to have in our toolshed. When I started discussing newsstand prices he mentioned that you can read it for free online. Cool! I forgot what era we live in. So, I'm going to make plug for The Economist and encourage all of us to read it often. It can also very much be the source of good discussions.
Hope this helps.
http://www.economist.com/
ps. Do we have a link resource list anywhere on this thing? We should be building that up, but only adding things that we all agree are valuable. Like Pooprider, for example. Everyone needs more poop in their life.
Monday, February 11, 2008
Virtual Estate - Dot Com Collection
In light of my recent domain registration habits, I decided to look into what makes a good domain name.
I came across this article:
Most domains won't make you a lot of money, but in the case of owning a business that has a specific name, not owning the domain could cost you a lot of money.
The thing about domain names is that they are relatively cheap, and they can potentially have very high returns. On the other hand, you can basically lose whatever you put into it very easily.
The article covers many good points about domain name investing. These points can also be translated into real estate investments.
I just thought that it was neat to see the crossover. I'm sure there is something intelligent to say about it, but instead I'm going to go look at my domain name collection*.
*Note: this does not say investments :(
I came across this article:
10 Tips for Investing in Domain Names
I wouldn't say that your time is well-sent sitting around and thinking about the right domain name to buy, but assuming that you have some plans for a business or a fancy blog... then it might be worth holding on to a domain name.Most domains won't make you a lot of money, but in the case of owning a business that has a specific name, not owning the domain could cost you a lot of money.
The thing about domain names is that they are relatively cheap, and they can potentially have very high returns. On the other hand, you can basically lose whatever you put into it very easily.
The article covers many good points about domain name investing. These points can also be translated into real estate investments.
I just thought that it was neat to see the crossover. I'm sure there is something intelligent to say about it, but instead I'm going to go look at my domain name collection*.
*Note: this does not say investments :(
Saturday, February 9, 2008
Apples and Compound Interest
Much to my amazement, Wayne Taylor (#1) admitted to forgetting the laws of compound interest. And to think I came so close to investing with him whilst he was still fumbling around in the dark. While, I still fear he may need some straightening out, so I'ma make it real simple.
Example:
Wayne Taylor (#1) has a hundred apples.
Peter Taylor (#2) wants those apples.
Peter tells wayne that he will pay him 10% a year (compounding) for use of his apples.
Y=Year
E=Apples earned at 10%
T=Total amount of apples
Y ...E... T
1 ...10... 110
2 ...11 ...121
3 ...12 ...133
4 ...13 ...146
5 ...15 ...162
So after 5 years, what does Wayne have?
Wrong.
He has a crate of ROTTING APPLES! 162 to be exact. But he would only have 150 rotten apples had it not been compounded. However, as an uneducated investor, he never looked into what Peter was doing with his apples.
Peter baked PIES!
The first year, he made 10 pies.
Second year, he used his profit and made 20 pies.
Third, he made 40 pies.
Fourth, 80 pies.
Fifth, he made 160 pies!!!!!!!
At the end of five years, Peter had a thriving pie business, and paid Wayne back in rotten fruit that was unsuitable for pies.
And That's how compound interest works from BOTH sides!!!
Peter Taylor - Eats apple pie like it ain't no thaaaaaaaang
Example:Wayne Taylor (#1) has a hundred apples.
Peter Taylor (#2) wants those apples.
Peter tells wayne that he will pay him 10% a year (compounding) for use of his apples.
Y=Year
E=Apples earned at 10%
T=Total amount of apples
Y ...E... T
1 ...10... 110
2 ...11 ...121
3 ...12 ...133
4 ...13 ...146
5 ...15 ...162
So after 5 years, what does Wayne have?
Wrong.
He has a crate of ROTTING APPLES! 162 to be exact. But he would only have 150 rotten apples had it not been compounded. However, as an uneducated investor, he never looked into what Peter was doing with his apples.
Peter baked PIES!
The first year, he made 10 pies.
Second year, he used his profit and made 20 pies.
Third, he made 40 pies.
Fourth, 80 pies.
Fifth, he made 160 pies!!!!!!!
At the end of five years, Peter had a thriving pie business, and paid Wayne back in rotten fruit that was unsuitable for pies.
And That's how compound interest works from BOTH sides!!!
Peter Taylor - Eats apple pie like it ain't no thaaaaaaaang
Wednesday, February 6, 2008
Compounding Interest - The Difference Between Savings Accounts and Loans
Today my time with Master Song was most interesting. As you could tell from reading the very scholastic post here, you'll see that I was inspired to dig into the important topic of compound interest. Now that I've started that thread I wanted to move on and present to you what he did to me. It was a shameful experience but I love those experiences because they are memorable and one actually learns through being shamed. Wow! New idea! Shame children during school to help them learn better! Ok. Maybe not.
The question that shamed me and got me on this was this (and try to think about it before reading the answer. Be sure you have a position):
If Bank A would lend you $100 at 5% and their savings account was only offering you 4%, but bank B would give you 7% in their high interest savings account, would you borrow the $100 from Bank A to put it into Bank B? Why, or why not?
...think...
...think a little more...
...my answer was 'Yes. That's something I would do."...
...think...
Ok. So you know I was shamed so my answer was obviously wrong.
Why, though? Why not do that? The answer is found in the way that the compounding works. Apparently (and I hope to run some scenarios in a follow up post when it isn't 1:15am) savings accounts are compounded quarterly or annually. I always thought since they pay you monthly that they are compounded monthly. How wrong I was apparently. Loans, on the other hand, are compounded monthly.
So, the theory is that if you borrowed at 5% and you are paying interest monthly, that you'll end up paying more than the 7% (Perhaps much more?) at Bank B.
For investors, this is really nasty important. These leveraging guys out there... They may be even more off-base than I originally thought.
Did I ever tell you I had a guy who tried to get me to leverage 25K to just put in some random mutual fund with hopes that it might make 7-10% 'over the long haul'? haha.
Well, that would have been better than my random stock purchases. :(
By the way... Master Song strongly approves of our blog idea as a way of increasing our knowledge base. He thinks that within 5 years we might be ready to start, hehe.
We live. We learn.
And if we don't learn, we don't invest.
T1 out.
The question that shamed me and got me on this was this (and try to think about it before reading the answer. Be sure you have a position):
If Bank A would lend you $100 at 5% and their savings account was only offering you 4%, but bank B would give you 7% in their high interest savings account, would you borrow the $100 from Bank A to put it into Bank B? Why, or why not?
...think...
...think a little more...
...my answer was 'Yes. That's something I would do."...
...think...
Ok. So you know I was shamed so my answer was obviously wrong.
Why, though? Why not do that? The answer is found in the way that the compounding works. Apparently (and I hope to run some scenarios in a follow up post when it isn't 1:15am) savings accounts are compounded quarterly or annually. I always thought since they pay you monthly that they are compounded monthly. How wrong I was apparently. Loans, on the other hand, are compounded monthly.
So, the theory is that if you borrowed at 5% and you are paying interest monthly, that you'll end up paying more than the 7% (Perhaps much more?) at Bank B.
For investors, this is really nasty important. These leveraging guys out there... They may be even more off-base than I originally thought.
Did I ever tell you I had a guy who tried to get me to leverage 25K to just put in some random mutual fund with hopes that it might make 7-10% 'over the long haul'? haha.
Well, that would have been better than my random stock purchases. :(
By the way... Master Song strongly approves of our blog idea as a way of increasing our knowledge base. He thinks that within 5 years we might be ready to start, hehe.
We live. We learn.
And if we don't learn, we don't invest.
T1 out.
Tuesday, February 5, 2008
What I forgot from Math Class - Compound Interest
Will wonders never cease? Today, more than 14 years after studying math, I finally had to reflect on what I studied. The compound interest formula (CIF from heron in). The reason for this post will be connected to a subsequent post, likely to be named 'Understanding the Backbone of Savings and Loan formulae".
It, as I recall, was my only fond memory from Math. I recall that it 'just made sense'. Well, I forget the actual formula but today I realized it's paramount to review. So, we're gonna do a little Math, kids. This might seem like elementary to you brainiacs at BLIP, but for those under-developed mathletes like myself, read on and get schooled:
Thanks to Wikipedia (which we all know is true and never erroneous) I relearned how important the frequency is in the CIF. I also learned that the frequency must be disclosed to the people involved. That I didn't know.
But let's work the forumula! That's where you can start pluggin' stuff in and having deep feelings of regret over past errors in taking loans, and, if I recall correctly, also where you can realize how much money you WOULD have had....if only you studied harder in Math..
FV = PV(1 + i)n
(I don't know how to make that 'n' superscript, nor how to make that 'i' squiggly and cool like they did at wiki.)
So what does it all mean?
FV = future value (investors drool here)
PV = Present value (investors pull hair out here)
i = fixed interest rate
n = period
By going here you will be able to see variations on the formula like if you want to figure out how much PV you need to get X amount of FV. But that's not FV so who cares?
I decided to do a copy and paste from Wiki because it's cool to see someone else do the work:
Let's make a real-life example! Yay!
I bought about $4000 of a failing stock because I didn't know what I was doing. It's value has since dropped to under $2000. So, let's see what I would have had in a simple savings account if I kept it there instead of trying to be a bigshot investor before my knowledge and awareness was at an appropriate level.
PV (back then) = $4000
n= 12 (let's say 12 quarterly cycles have passed even though I didn't buy them all in one shot, close enough for fun)
i = .075% (let's just say that it was an average of 3% compounded quarterly)(and don't forget that little nasty zero because it messed me up. I wrote .75 and I thought I would have been Warren Buffet!)
FV = PV(1 + i)n
FV = 4000(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)
Ok! Drum rollllll!
$9527!
JUMPIN' JEHOSOPHAT BATMAN... I wish I never made this post!
Crap.
Poop.
Let see now
Reality PV (like TV) = $2000
Virtual PV (what i would have had) = $9527
Net loss on this puppy: = -$7527
Well, boys, I think I'm a bit depressed now. I'm quittin' BLIP and putting my money in a high-interest savings account. See you at the top, suckers!
It, as I recall, was my only fond memory from Math. I recall that it 'just made sense'. Well, I forget the actual formula but today I realized it's paramount to review. So, we're gonna do a little Math, kids. This might seem like elementary to you brainiacs at BLIP, but for those under-developed mathletes like myself, read on and get schooled:
Thanks to Wikipedia (which we all know is true and never erroneous) I relearned how important the frequency is in the CIF. I also learned that the frequency must be disclosed to the people involved. That I didn't know.
But let's work the forumula! That's where you can start pluggin' stuff in and having deep feelings of regret over past errors in taking loans, and, if I recall correctly, also where you can realize how much money you WOULD have had....if only you studied harder in Math..
FV = PV(1 + i)n
(I don't know how to make that 'n' superscript, nor how to make that 'i' squiggly and cool like they did at wiki.)
So what does it all mean?
FV = future value (investors drool here)
PV = Present value (investors pull hair out here)
i = fixed interest rate
n = period
By going here you will be able to see variations on the formula like if you want to figure out how much PV you need to get X amount of FV. But that's not FV so who cares?
I decided to do a copy and paste from Wiki because it's cool to see someone else do the work:
Translating different compounding periods
Each time unpaid interest is compounded and added to the principal, the resulting principal is grossed up to equal P(1+i%).
A) You are told the interest rate is 8% per year, compounded quarterly. What is the equivalent effective annual rate?
The 8% is a nominal rate [jargon defined on Wiki elsewhere]. It implies an effective quarterly interest rate of 8%/4 = 2%. Start with $100. At the end of one year it will have accumulated to:
$100 (1+ .02) (1+ .02) (1+ .02) (1+ .02) = $108.24
We know that $100 invested at 8.24% will give you $108.24 at year end. So the equivalent rate is 8.24%. Using a financial calculator or a table is simpler still. Using the Future Value of a currency function, input
- PV = 100
- n = 4
- i = .02
- solve for FV = 108.24
Let's make a real-life example! Yay!
I bought about $4000 of a failing stock because I didn't know what I was doing. It's value has since dropped to under $2000. So, let's see what I would have had in a simple savings account if I kept it there instead of trying to be a bigshot investor before my knowledge and awareness was at an appropriate level.
PV (back then) = $4000
n= 12 (let's say 12 quarterly cycles have passed even though I didn't buy them all in one shot, close enough for fun)
i = .075% (let's just say that it was an average of 3% compounded quarterly)(and don't forget that little nasty zero because it messed me up. I wrote .75 and I thought I would have been Warren Buffet!)
FV = PV(1 + i)n
FV = 4000(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)
Ok! Drum rollllll!
$9527!
JUMPIN' JEHOSOPHAT BATMAN... I wish I never made this post!
Crap.
Poop.
Let see now
Reality PV (like TV) = $2000
Virtual PV (what i would have had) = $9527
Net loss on this puppy: = -$7527
Well, boys, I think I'm a bit depressed now. I'm quittin' BLIP and putting my money in a high-interest savings account. See you at the top, suckers!
Sunday, January 27, 2008
Investing with other people
Some people who are involved in this blog assume that investing with other peoples money is a great idea. I have fought tooth and nail to prove that it isn't.Mr. Rayban has gone ahead and invested in property with friends with the purpose of fixing and selling. That, I would like to state is not a bad idea. Everyone puts in money, everyone does the work, then everyone reaps the benefits. That is like buying shares in a short term job.
However, this individual is talking about a longterm contrarian investment in an apartment block with investors who are strangers. But problems arise when there are different opinions involved. For instance:
1. I've been researching this area for a year and a half, and payed to travel there and meet professionals in the industry, and see if it was a viable opportunity. My trip cost $4000. So can I include my research time, and the cost of the trip as part of my share?
2. People are fickle, and tend to change their minds often. An investor grows impatient after his 10k is tied up all year, and returns have been minimal. Even though he has signed his money over and can't have it back until property is sold or shares are bought out, he is angry at the investment manager, and keeps bringing up how he could make more in an rrsp.
3. Additional costs add up. Lawyer and accountant fees accumulate making the profit margin even smaller. In fact, each investor could actually end up paying extra each month with additional expense.
I realize (as disposable joe will point out in the comments) that it's a good starting point for someone who has no cash, but if their lacking funds, their share will be small, and they won't see much return anyways.
This is why the most important thing I suggest is to get your spending under control, and save a down payment of your own, or rob a bank, or marry rich and old.
Mr. Taylor #2 - Soars like a solo flying turkey
Wednesday, January 23, 2008
Foreign Markets - Foreign Currencies - Double Double
So I was meeting with Master Song again and he opened my eyes to another cool and simple thing. Here is the summary of our long meeting.
1. US market takes a hit (ie. new random war starts, Donald Trump sneezes, Bill Gates farts)
2. Foreign markets feel the fluctuation exponentially more (he had a reason for this but I can't remember the details)
3. Foreign markets go down a lot, US not so bad.
4. Canadian dollar = pretty good. So, us Canadians keep our eyes on crashing solid markets. Our example was Hong Kong.
5. We buy index (I don't even know how to write the verb....we 'buy on the index' we 'invest in the index"??) in that market
6. US market turns around and goes up single digit percentage while the HK market double digit recovers.
So you're thinking... cool. I just saw double digit growth! But that's not all. Sometimes the currency can also work in your favour. During these tricky times, often their currency takes a hit simultaneously. So you buy their crappy market prices with strong Canadian loonster against their poopy currency and you gain twice.
There you go. Now, hopefully I won't be like the average J...person and just watch these things slip me by!
1. US market takes a hit (ie. new random war starts, Donald Trump sneezes, Bill Gates farts)
2. Foreign markets feel the fluctuation exponentially more (he had a reason for this but I can't remember the details)
3. Foreign markets go down a lot, US not so bad.
4. Canadian dollar = pretty good. So, us Canadians keep our eyes on crashing solid markets. Our example was Hong Kong.
5. We buy index (I don't even know how to write the verb....we 'buy on the index' we 'invest in the index"??) in that market
6. US market turns around and goes up single digit percentage while the HK market double digit recovers.
So you're thinking... cool. I just saw double digit growth! But that's not all. Sometimes the currency can also work in your favour. During these tricky times, often their currency takes a hit simultaneously. So you buy their crappy market prices with strong Canadian loonster against their poopy currency and you gain twice.
There you go. Now, hopefully I won't be like the average J...person and just watch these things slip me by!
Wednesday, January 16, 2008
MF's The Continuing Epic
Dispositional Joe has laid out the basics of investing in a mutual fund. And I will agree that if you can't find the time to look into good companies and read balance sheets, it's an okay way to go. There is of coarse fees attached to this endeavor. I'll lay them out:
1. front end load - fees up front, facing your victimizer
2.back end load - hold onto your ankles, pay when you sell
3.no load - a trick.
No load has you buy in for free, and every year you hold, the fee goes down. and when you sell, if you held for around 5 years, there is no fee. However, if you sell early, you'll have to sell that corvette limo to pay your fees.
It's no wonder that Peter Lynch who operated the magellan fund, earning an average of 30% annually through good times and bad advises people to invest on their own.
He went into Dunkin Donuts, had a good cup of coffee, then bought shares. Women everywhere started buying Hanes Leggs, he noticed and bought the shares. He doesn't make buying a decent stock into some mystical wiccan ceremony. That's why you should buy the book "One Up on Wall Street".
Anyhow, I gotsed to go to the lawyers office.
Mr. Taylor (#2) - Holds his ankles when he buys MF's.
1. front end load - fees up front, facing your victimizer
2.back end load - hold onto your ankles, pay when you sell
3.no load - a trick.
No load has you buy in for free, and every year you hold, the fee goes down. and when you sell, if you held for around 5 years, there is no fee. However, if you sell early, you'll have to sell that corvette limo to pay your fees.
It's no wonder that Peter Lynch who operated the magellan fund, earning an average of 30% annually through good times and bad advises people to invest on their own.
He went into Dunkin Donuts, had a good cup of coffee, then bought shares. Women everywhere started buying Hanes Leggs, he noticed and bought the shares. He doesn't make buying a decent stock into some mystical wiccan ceremony. That's why you should buy the book "One Up on Wall Street".
Anyhow, I gotsed to go to the lawyers office.
Mr. Taylor (#2) - Holds his ankles when he buys MF's.
Friday, January 11, 2008
Paying It Forward
Is it really worth it to pay off an investment mortgage early?
Every year you can write off the interest as a direct expense, and if you have renters, they are basically paying your taxes down all year dollar for dollar. However, if you pay the mortgage off outta your hard earned money, and are still working you'll be paying more in tax (up to 50% in BC). You're basically giving money to the government with no perks. No my friends, I work as hard as possible to keep myself in the lowest tax bracket possible, and I don't need the rent to throw me over the top (yet). I think it is much better to save your cash for a new investment to gain more leverage. I could take 20K and throw it on my mortgage so I'm paying less interest in the long run, or I could use it as 20% down on a new building that will cause that money to triple in the next two years.
Brace yourself Taylor #1, this requires ... discipline. That hundred bucks you want to give to the foreign market could be crateloads of kimchi, so put it in a safe place, keep your income to a minimum, and stay true to your heart, soldier.
It's hard for me to remember what it's like to not have at least a million in the bank, but let me say this to the poor of society:
"take $40'000 out of your savings account and put a down payment on a house, then rent it out."
Because the sooner you do it, the sooner it will be paid down and working for you.
Mr. Taylor (#2) - thinks like a millionaire
Investing in Foreign Stock Markets
Word up, gents.
I wanted to start a thread on the topic that I hinted at in another thread about investing in the Korean stock market. However, let's keep this thread more generic because other markets might come into play.
Have either of you invested in a foreign stock market directly? If so, can you please describe your experience?
The reason it looks appealing to me is a) you can score on the high loonie value right now and b) other markets are probably rocketing faster than ours...of course.. I wouldn't know a good stock market from an Egyptian hyeroglyphic. That aside, my pride won't let me be humble so I'll cover up somehow.
Why don't we take, say, $100 each and give it a 'trial run' just to see how the process works?
but you guys are all talk so why do I bother?
I want investors with good old fashioned...balls. It felt rude to write that. 'Balls'. How carnal. It felt even ruder, but yet more humourous, to put the adjective 'old fashioned' before the balls, indicating somehow that modern balls aren't made the way they (more spiritually accurately 'He') use to make them.
Accept my apology. May this post never come back to haunt me and my dynamic investing career.
I wanted to start a thread on the topic that I hinted at in another thread about investing in the Korean stock market. However, let's keep this thread more generic because other markets might come into play.
Have either of you invested in a foreign stock market directly? If so, can you please describe your experience?
The reason it looks appealing to me is a) you can score on the high loonie value right now and b) other markets are probably rocketing faster than ours...of course.. I wouldn't know a good stock market from an Egyptian hyeroglyphic. That aside, my pride won't let me be humble so I'll cover up somehow.
Why don't we take, say, $100 each and give it a 'trial run' just to see how the process works?
but you guys are all talk so why do I bother?
I want investors with good old fashioned...balls. It felt rude to write that. 'Balls'. How carnal. It felt even ruder, but yet more humourous, to put the adjective 'old fashioned' before the balls, indicating somehow that modern balls aren't made the way they (more spiritually accurately 'He') use to make them.
Accept my apology. May this post never come back to haunt me and my dynamic investing career.
Wednesday, January 9, 2008
The Feeling Ain't Mutual
Every one considers the mutual fund at one point in their life. It sounds safe. It sounds sure. But what is it really?
Well, it's a good debate topic. Instead of investing in a stock, in which you generally have no control over the performance of the return, you can invest in a mutual fund (MF), where a licensed broker will manager a portfolio of stocks in order to return the most stable return.
On the outside, we can see the following analogy when you trying to get your money from point A to Point Z:
Stocks = "riding in a car with no steering wheel" - Mr. Kiyosaki
MF = riding in a car with a taxi driver (Yes, he has a steering wheel... or does he?)
That's usually how MFs are sold anyway. There are two major types of MFs: Registered (RSP), and Non-registered.
RSPs usually require a minimum amount to be inputed every month. That amount is also taken before taxes, and will not be taxed. Returns are generally higher than Non-registered MFs; however, your money will be locked in for some time.
Non-registered MFs allow a lot more flexibility and act a little bit more like a savings account. Somewhere along the line, the bank opened a "savings account" for me that was really a Non-registered MF. As soon as I decide what I want to do with that money, I can redeem it. Except that:
** An early redemption fee may apply if this Fund is redeemed or transferred within 30 days of purchase. (90 days for certain e-Series units). Please see the Fund’s Prospectus for details.
It's a difficult debate because mutual funds definitely have shown returns, but are the right things to do with your money?
My dad told me a story once about how he lost a bunch of money in the stock market after a big crash. He then decided that it was safer to invest in a mutual fund, so he dumped his money in an MF. A few days later the market went back up again, but the money in his MF did not change. The moral of the story is: how can anything be a real worthy investment if it doesn't respond to the market. My dad still doesn't believe in MFs.
If the market isn't in control of a mutual fund investment, then who is?
A lot of MF brokers will tell you than they can get you to point Z in 50 years, and chances are that they can. But your money will be locked in for the long run.
What do you want to do with your money?
If you want to be an investor, then do your homework and invest in the things that will bring you to point Z faster without tying up your cash.
If you don't know what you're doing, or do not want to do anything with your money, then perhaps a mutual fund is worth considering.
Well, it's a good debate topic. Instead of investing in a stock, in which you generally have no control over the performance of the return, you can invest in a mutual fund (MF), where a licensed broker will manager a portfolio of stocks in order to return the most stable return.
On the outside, we can see the following analogy when you trying to get your money from point A to Point Z:
Stocks = "riding in a car with no steering wheel" - Mr. Kiyosaki
MF = riding in a car with a taxi driver (Yes, he has a steering wheel... or does he?)
That's usually how MFs are sold anyway. There are two major types of MFs: Registered (RSP), and Non-registered.
RSPs usually require a minimum amount to be inputed every month. That amount is also taken before taxes, and will not be taxed. Returns are generally higher than Non-registered MFs; however, your money will be locked in for some time.
Non-registered MFs allow a lot more flexibility and act a little bit more like a savings account. Somewhere along the line, the bank opened a "savings account" for me that was really a Non-registered MF. As soon as I decide what I want to do with that money, I can redeem it. Except that:
** An early redemption fee may apply if this Fund is redeemed or transferred within 30 days of purchase. (90 days for certain e-Series units). Please see the Fund’s Prospectus for details.
It's a difficult debate because mutual funds definitely have shown returns, but are the right things to do with your money?
My dad told me a story once about how he lost a bunch of money in the stock market after a big crash. He then decided that it was safer to invest in a mutual fund, so he dumped his money in an MF. A few days later the market went back up again, but the money in his MF did not change. The moral of the story is: how can anything be a real worthy investment if it doesn't respond to the market. My dad still doesn't believe in MFs.
If the market isn't in control of a mutual fund investment, then who is?
A lot of MF brokers will tell you than they can get you to point Z in 50 years, and chances are that they can. But your money will be locked in for the long run.
What do you want to do with your money?
If you want to be an investor, then do your homework and invest in the things that will bring you to point Z faster without tying up your cash.
If you don't know what you're doing, or do not want to do anything with your money, then perhaps a mutual fund is worth considering.
Tuesday, January 8, 2008
Group Investing - Worth looking into
I just wanted to post an idea that I've been thinking about for some while. I have been approached by several people that if I were to head up some real estate investment 'thing' that all these people would invest what they could in it.
So I started thinking (gotta stop doing that!).... Couldn't I just start up a corporation, open a bank account, take all their money, and then buy something like a house or a huge appartment block? Or do you have to climb through a wack of CRA red tape before being able to do something like this (more like a fund of sorts)?
I have felt restricted in my investing because I can only leverage so much on my own with the personal net worth I have. But if we took 5% of 20 people's net worth, we could do a bunch more, I think.
Could it work like simple shareholders?
Thanks if you've given this some thought.
So I started thinking (gotta stop doing that!).... Couldn't I just start up a corporation, open a bank account, take all their money, and then buy something like a house or a huge appartment block? Or do you have to climb through a wack of CRA red tape before being able to do something like this (more like a fund of sorts)?
I have felt restricted in my investing because I can only leverage so much on my own with the personal net worth I have. But if we took 5% of 20 people's net worth, we could do a bunch more, I think.
Could it work like simple shareholders?
Thanks if you've given this some thought.
Saturday, January 5, 2008
My advise for the Poor in wallet
I think it's only fair that I start this post with a picture of me in a different phase of life. It shows that everyone starts somewhere, as I laid out for my young padawan this very evening.Young Chris I'll call him to preserve his identity said to me "Peter, Master, I have accumulated debt, but I want to be like you one day, where should I start?"
I looked upon him with kindness and asked how much debt we're dealing with. He said it was somewhere short of 50'000 in student loans, credit and vehicle. I had to think hard. I've a lot of places in this life, but never that far down the debt road, and I've obviously never paid for education. I took three long sips of whiskey, bummed a cigarette, then pulled an answer out of my posterior.
"Chris, it's going to be a while before you're out of debt" I said "the best thing you can do is consolidate to a single loan payment with a ten year term which will cost around 550 a month. You can then write off the interest. The next thing is to make sure you have a home business to obtain as many write offs as possible. Then exercise some discipline, and put something into savings each month."
I know he makes a worthy wage, and so I told him my secret to wealth: "Buy East Coast Canada. The rent to purchase ratio is very much in favor of the investor."
He told me that he thought of buying a love pad for him and his wife, but upon reading B.L.I.P. he realized it ain't such a hot idea. His rent is in the 900 range so he needs to stay renting and put aside 500 a month to purchase his first investment.
I told him that as a treat, when he purchases he can have the privilege of being an admin on this blog, because until he buys, he ain't got nuthin to say.
Mr. Taylor (#2) - reached full jedi status
Friday, January 4, 2008
What Inflation???
As Taylor #1 already knows, I'm a man of few words,so I found a pic that speaks thousands about the Vancouver market.
This 2 bedroom shack with it's 9 sq/ft yard is selling for $669'000. In other words, a tiny building lot in a less than desirable (commercial drive) area of town is selling for almost 3/4 of a million bucks. In some more developed parts of the world, this price tag would be warranted, but considering it was worth 200'000 5 years ago, I think the potential buyer is sending the seller to his retirement. My uncle said houses in this area were selling at 80G in 1988. THAT was a good time to buy Taylor 1.
If you want to figure out what a society can sustain as far as housing prices, look at some of the higher paid individuals like family doctors. They make 14'000 a month (government regulated) After tax, they have $10'000 in their account a month. A bank will give them a mortgage based on 33% of their income, so their mortgage payment can be $3300 a month, or a $550'000 mortgage.
A DOCTOR CAN'T EVEN AFFORD THIS SHACK!
And people look at me like I'm crazy for buying an apartment on the east coast for $100'000 that rents for $22'000 a year.
Doomsday Prophesy
Keith Green once said "If God wants to get our attention he do three things.
First: He'll touch our ecology (In BC that's the pine trees, and if you don't believe me, then you've never been north of Vancouver)
Second: He'll touch our economy (A strong dollar isn't always a good thing)
Third: He'll raise up an army to overtake us. (Hopefully we've learned by this time)
Keepin it reeeeeeeaaaal
Mr. Taylor(#2)
Thursday, January 3, 2008
Buy Near Skytrain - Taylor 1 Makes a Hunch
I wanted to post a prediction. I don't usually have strong convictions but when I have I was bang on correct in the past. This one isn't as hard to believe as other ones but it is like this:
Buy real-estate and all available land near any existing or soon to be existing Skytrain station.
I lived for 2.5 years in Korea. I didn't have a car.... and life was better without it. I got where I was going faster and I was less angry. I also started reading...investing books! Which actually lead to my first investment property.
When I came back to Canada I immediately started looking for a place to live that was walking distance to the Skytrain and found one. Life was continually much easier than I remembered it in Canada before I went to Korea. So I tested the theory and borrowed my parents car and got stuck in rush hour traffic. I became an animal within a few short moments.
Then a few months later we bought our first primary residence right by the SKytrain. I was speaking to the construction top-dog guy and he said that in Germany the highest price real estate in the country is basically anywhere along the train line. Then I thought again about Korea - same thing! Then I realized... this isn't a Korean thing - this is a global thing. And it's going to hit Vancouver before you can say Bob's your uncle.
More good news if you take action now. The big 'hold up' for some people to not buy near the Skytrain was the supposed problem of crime. I did a little research on that topic and found that it's actually not true. Check for yourself. The highest crime seems to be near Broadway and Kingsway if I recall correctly. There isn't even a Skytrain station there. And, to top it off, apparently they are going to finally put in the long-awaited turnstiles. This will certainly reduce the ease of certain individuals of abusing substances and then stealing things along the Skytrain line to feed their habit. I have to admit this is an issue but am convinced it'll be greatly curbed when the turnstiles are in place.
And there you have it! Anyone got a few hundred thousand kickin' around so I can buy more?
Buy real-estate and all available land near any existing or soon to be existing Skytrain station.
I lived for 2.5 years in Korea. I didn't have a car.... and life was better without it. I got where I was going faster and I was less angry. I also started reading...investing books! Which actually lead to my first investment property.
When I came back to Canada I immediately started looking for a place to live that was walking distance to the Skytrain and found one. Life was continually much easier than I remembered it in Canada before I went to Korea. So I tested the theory and borrowed my parents car and got stuck in rush hour traffic. I became an animal within a few short moments.
Then a few months later we bought our first primary residence right by the SKytrain. I was speaking to the construction top-dog guy and he said that in Germany the highest price real estate in the country is basically anywhere along the train line. Then I thought again about Korea - same thing! Then I realized... this isn't a Korean thing - this is a global thing. And it's going to hit Vancouver before you can say Bob's your uncle.
More good news if you take action now. The big 'hold up' for some people to not buy near the Skytrain was the supposed problem of crime. I did a little research on that topic and found that it's actually not true. Check for yourself. The highest crime seems to be near Broadway and Kingsway if I recall correctly. There isn't even a Skytrain station there. And, to top it off, apparently they are going to finally put in the long-awaited turnstiles. This will certainly reduce the ease of certain individuals of abusing substances and then stealing things along the Skytrain line to feed their habit. I have to admit this is an issue but am convinced it'll be greatly curbed when the turnstiles are in place.
And there you have it! Anyone got a few hundred thousand kickin' around so I can buy more?
Exit Strategy Part 1 - Real Estate
I realize that there are quite a few exit strategies in the world. Most things you can enter you can usually also exit (except for, perhaps, North Korea). But in the business world and investing I have come to realize the importance of the exit strategy. I have failed miserably in stocks because of this. I'll write another post about my famous stock tragedy of my young teen years but just trust me when I say that you shouldn't be emotional or sentimental with stocks. If they are plumetting, it's usually for a reason. I'd be about 6K richer if I knew this. Maybe more.
Since I also now have investment real estate, I realized that it is also meet (I like King James English) (and I careth not if I use it incorrectly) to plan a real estate exit strategy. When I first got involved, I was just happy to get the initial decision process and gut wrenching fear of taking action behind me that I never sat down to consider when I'll actually sell this investment for a profit! Go figure. So today I started doing so and I came up with a cool new revelation. Let's use 100K in all my examples because I got 51% in Math 12... or was it Math 11? Whatever. I suck at Math is my point.
100,000 - here's your house
10,000 -here's your deposit
5,000 - here's your closing costs (don't forget these are all random numbers guessing my way)
90,000 - here's your mortgage amount
6000 - rent for the year at $500/month
enough detail already! Details are for weirdos anyways. Systems are for cool people...moving on.
Point is this. Let's say at the end of the year you've put out 15,000 + lose some on interest of course. Your renter is paying down your principal so let's say there was 30% interest and 70% principal (who knows how random I'm being now). That'd be 4,200 paid off the outstanding 90K. Say... $86K left. Here's the point. Your amount owing went down. And here's the beauty part as we all know - The market generally goes up. Let's say it goes up conservatively by 3%. Now your 100k is worth 103k market value and the amount owing has dropped from 90k to 86k.
I know. You're thinking 'duh. Who doesn't know this stuff?" And Taylor #2 might say "You're wasting blog space. Go away." But it's just cool to me. If the market shoots up, so up goes those numbers on the value side. Probably also bumps up the rent potential too.
Meanwhile, buddy over at Mind-ur-Life Financial is trying to get you to dump your 10K in a volatile foreign market fund that you have no control over. I dunno. Maybe I've just got a bad taste in my mouth about those thangs but real estate sure seems more tangible and acheivable for someone with limited time.
You boyz have anything intelligent to say about real estate exit strategies or are you readin' this goin', "Dude...he's right. I have to sell this thing one day, don't I?!"
Be well. Stay out of hell.
Since I also now have investment real estate, I realized that it is also meet (I like King James English) (and I careth not if I use it incorrectly) to plan a real estate exit strategy. When I first got involved, I was just happy to get the initial decision process and gut wrenching fear of taking action behind me that I never sat down to consider when I'll actually sell this investment for a profit! Go figure. So today I started doing so and I came up with a cool new revelation. Let's use 100K in all my examples because I got 51% in Math 12... or was it Math 11? Whatever. I suck at Math is my point.
100,000 - here's your house
10,000 -here's your deposit
5,000 - here's your closing costs (don't forget these are all random numbers guessing my way)
90,000 - here's your mortgage amount
6000 - rent for the year at $500/month
enough detail already! Details are for weirdos anyways. Systems are for cool people...moving on.
Point is this. Let's say at the end of the year you've put out 15,000 + lose some on interest of course. Your renter is paying down your principal so let's say there was 30% interest and 70% principal (who knows how random I'm being now). That'd be 4,200 paid off the outstanding 90K. Say... $86K left. Here's the point. Your amount owing went down. And here's the beauty part as we all know - The market generally goes up. Let's say it goes up conservatively by 3%. Now your 100k is worth 103k market value and the amount owing has dropped from 90k to 86k.
I know. You're thinking 'duh. Who doesn't know this stuff?" And Taylor #2 might say "You're wasting blog space. Go away." But it's just cool to me. If the market shoots up, so up goes those numbers on the value side. Probably also bumps up the rent potential too.
Meanwhile, buddy over at Mind-ur-Life Financial is trying to get you to dump your 10K in a volatile foreign market fund that you have no control over. I dunno. Maybe I've just got a bad taste in my mouth about those thangs but real estate sure seems more tangible and acheivable for someone with limited time.
You boyz have anything intelligent to say about real estate exit strategies or are you readin' this goin', "Dude...he's right. I have to sell this thing one day, don't I?!"
Be well. Stay out of hell.
Investment House #2 - 'The Dream Shack'
Look.
Well I'm obtaining my second investment property, but this time, I'm just turning it for profit. Here's a list of expenses:
$220'000 - Purchase price
$1500 - Closing costs
$12'000 - Improvements
$8'000 - Realtor fees (selling)
$4000 - Mortgage payments (3 months, with only 300 going to the principle)
________
$245'500 is my approximate cost.
Now, places in the building are selling around $245, so is there money to be made? Should I shoot to make it higher end? I was told the places that sold were livable, but not fancy. So I began wondering if I should put in higher priced flooring & nicer appliances. The building itself is only sub-par.
What do you think?
Mr. Taylor (#2)...investor
Well I'm obtaining my second investment property, but this time, I'm just turning it for profit. Here's a list of expenses:
$220'000 - Purchase price
$1500 - Closing costs
$12'000 - Improvements
$8'000 - Realtor fees (selling)
$4000 - Mortgage payments (3 months, with only 300 going to the principle)
________
$245'500 is my approximate cost.
Now, places in the building are selling around $245, so is there money to be made? Should I shoot to make it higher end? I was told the places that sold were livable, but not fancy. So I began wondering if I should put in higher priced flooring & nicer appliances. The building itself is only sub-par.
What do you think?
Mr. Taylor (#2)...investor
Wednesday, January 2, 2008
Dif'rent Skoolz of Thawt
Taylor Number 1, Thou standeth on sinking sand.
OWNING VS. RENTING: The debate continues.
I thought I had schooled you in this subject before, but alas, I see you still stuck in the mindset of an industrial revolutionist. Being an IP means doing whatever it takes to grow your empire until it is supporting your butt, then when you are financially set, you can buy your corvette limousine.
I realize everyone likes to own stuff. It makes us feel secure. However my logic has not wavered. I'll lay it out for all the people to see, thus showing my infinite wisdom. We'll do it over ten years so it is feasible to all.
Let me preface this exercise by saying that rent in this part of the world we live in is quite a bit less than the average mortgage, thus making this logic of mine make sense.
Owner
$216'000 - Mortgage Payment for a 300'000 house over 10 years ($1800/month)
$ 10'000 - Land tax
$ 5'000 - Improvements
___________
$231'000 - for ten years of livin'
Luckily your house has appreciated @ %5 every year for the ten years, and is now worth $346'000. So you sell, and pay the bank back the remaining 235'000 . Leaving you with 111'000 which you promptly pay income tax on to the tune of %35 (depending on your tax bracket I'm too lazy to figure it out) So you are left with 72'000. Not bad considering you lived for free the last ten years.
Now lets look at the other side
120'000 - Rent payment for 10 years ($1000/month)
$0 - tax
$0 - Repairs
Now, of course you've been putting the additional $800 away in an RRSP fund each month earning a modest 8%. You've earned 146'000 without taking on the risk of a high mortgage, or a volatile housing market.
Of course you could say the housing market has gone up %10 a year recently, but then you're just gambling. Tradition trends have the market going up at 4% per year.
I'm getting a headache from thinking so hard.
Does this make any sense?
Mr. Taylor (#2)
OWNING VS. RENTING: The debate continues.
I thought I had schooled you in this subject before, but alas, I see you still stuck in the mindset of an industrial revolutionist. Being an IP means doing whatever it takes to grow your empire until it is supporting your butt, then when you are financially set, you can buy your corvette limousine.
I realize everyone likes to own stuff. It makes us feel secure. However my logic has not wavered. I'll lay it out for all the people to see, thus showing my infinite wisdom. We'll do it over ten years so it is feasible to all.
Let me preface this exercise by saying that rent in this part of the world we live in is quite a bit less than the average mortgage, thus making this logic of mine make sense.
Owner
$216'000 - Mortgage Payment for a 300'000 house over 10 years ($1800/month)
$ 10'000 - Land tax
$ 5'000 - Improvements
___________
$231'000 - for ten years of livin'
Luckily your house has appreciated @ %5 every year for the ten years, and is now worth $346'000. So you sell, and pay the bank back the remaining 235'000 . Leaving you with 111'000 which you promptly pay income tax on to the tune of %35 (depending on your tax bracket I'm too lazy to figure it out) So you are left with 72'000. Not bad considering you lived for free the last ten years.
Now lets look at the other side
120'000 - Rent payment for 10 years ($1000/month)
$0 - tax
$0 - Repairs
Now, of course you've been putting the additional $800 away in an RRSP fund each month earning a modest 8%. You've earned 146'000 without taking on the risk of a high mortgage, or a volatile housing market.
Of course you could say the housing market has gone up %10 a year recently, but then you're just gambling. Tradition trends have the market going up at 4% per year.
I'm getting a headache from thinking so hard.
Does this make any sense?
Mr. Taylor (#2)
Buying a House You Can Afford
In this article, Jim Yih talks about buying only what you can afford in real estate. Some people buy sexy homes that are worth more (surely) but may pay a heavy price to do so. Also in this article he discusses 'other investing' versus putting your savings into your home.
Buying versus Renting a Home
The Vancouver Sun had this article published on December 28th. Jim Yih explains his opinion about why it's better to own a house, rather than rent one. This topic of buying a house as an investment versus saving the extra money you WOULD have spent on the mortgage and investing it wisely, is a valid and interesting discussion. So let's discuss!
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