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Discussing Investments
#61
(2017-01-02, 02:06 PM)Arsenal Wrote:
(2017-01-02, 01:48 PM)Pouzar Wrote:
(2017-01-02, 01:32 PM)Arsenal Wrote:
(2017-01-02, 09:19 AM)Pouzar Wrote: This thread has brought up a little bit of shame for me as I'm not truly able to participate in it to the level I should be.

I'm a partner at Canada's biggest national firms (well, maybe 2nd largest right now), practicing in corporate finance with a specialty in debt finance and syndicated credit transactions - I speak with bank executives and CEOs and CFOs of some of the biggest issuers in the country on a daily basis and have advised lending syndicates on deals worth U.S$4 billion yet my knowledge of the financial markets isn't what it should be and my personal investments lack substance.

I turned 40 a couple of weeks ago and aside from a couple hundred grand of RRSPs (which is largely in the money markets doing nothing) and a very nominal amount of TFSA investment, my wife and I have no material investments.

Between the two of us, we are sitting on an immense amount of cash - shit its half of my draw last year and I do pretty good.   My wife works full time and every penny she makes just sits in her checking account accumulating as our day to day expenses are put on our shared credit card and I take care of everything else.

We carry no debt (except the mortgage) and have access to hundreds of thousands in lines of credit.

I need to start investing for our retirement (I will have no pension) as I want to continue to travel quite a bit during our retirement but I just don't know what to do with the money.  

I have spoken to financial advisers but (a) it bothers me to give them 1.5% to direct my investments and (b) I always question their advise if they are in any way connected to a chartered bank - thinking they will push that institution's products.

Part of me wants to put a hundred grand on our mortgage but with interest rates so low I know that is a poor choice - shit, I'm at prime minus 0.6 I think so I'm paying just over 2%.   I think it actually makes more sense to borrow to invest at these interest rates than to pay of super cheap debt.

A goal of mine is to do something material with a good chunk or our excess cash in the first two quarters of 2017.

I know I should max out our RRSPs and TFSAs before we do anything - I'm sure my RRSP availability is $200K plus at this point and my TFSA will be close to $50K but that's boring.

I want to either (a) put a huge chunk on our mortgage, like 6 figures or (b) by a rental property in Mexico, Hawaii or Scottsdale.

Top up your Tfsa, then look hard at paying down your mortgage...depending upon your mortgage rate.  If I lived in your area, I'd be looking at a few real estate options.  I think you live in fairly modest accommodations.   Perhaps time to use the Alberta real estate downturn to upgrade your primary residence?  You'll take a hit on the price of your property, but since you're upgrading, you should be able to cut a sweet deal on your next place.  Secondarily, I'd look at Banff as an investment opportunity.  I hear they've opened up a new block of space for development...affordable housing...see if you qualify to snap up a new home in Banff.  Thirdly...Vancouver....buy something on the sunny side of Van.

Yes, maxing out our TFSAs is likely the most financially sound decision - its just trying to figure out what products to purchase.

Our primary (and only) residence is just fine for us - actually its more house than we really need for just the two of us.   We won't be upgrading our primary residence any time soon.  A rental home may be in the future but, honestly, I need to use the current income to make some more dependable investments prior to thinking about a rental house in a vacation destination.

While you take the time to decide on the right Tfsa portfolio mix, why not wheelbarrow some of your cash mountain over to your bank branch and dump it into a Tfsa simple interest bearing account?  Not only are you earning very little interest from your current savings account, you're also paying taxes on the income.

Probably a good idea - I do have a TFSA - its got like a nomial GIC in it.
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#62
(2017-01-02, 02:08 PM)HockeyHippy Wrote: P - you can do your TFSA investments through the investment arm, rather than a money market. If you choose, of course.

If I'm going to offer one bit of advice - talk to your spouse about this stuff. A lot. The biggest source of conflict between couples is money, and that conflict isn't solved by having lots of it. Some of my wife and I's biggest conflicts have been about differing approaches to finances, caused entirely by not fully understanding each other's motivations.

A lot of our financial decisions are motivated by our other goals. For example, I really want to have the flexibility to make huge life changes in a few years, which has guided our financial planning. But we needed to have that conversation first - if not, she'd be making different financial plans than me.

It's corny, and it seems like ridiculous "common sense", but this is the think most couples get hung up on.

Good advice for sure and, don't worry, the wife and I have already had some discussions about this and have met with financial planners together in the past.

We both have the same long-term financial goals which is essentially to keep out standard of living during retirement (i.e. ability to travel, etc.) and to retire as soon as damn possible. Unfortunately, goal #1 will be leading to goal #2 not happening until well in to my 60s.
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#63
Pay your mortgage down Pouz. Why have it if you don't need to, especially if the money is just sitting there.

My "investing" up to this point has been real estate. I have been lucky enough to pay off my mortgage, (I have a small house), and me and my father have invested in rental properties. We have 3 houses, 2 condos and a lot in a great neighborhood that needs a building on it. We still owe a tonne on all of them but they are paying themselves off and after building on the lot everything should be paid off in 10-15 years. That's all I have. I'm turning 40 this year so I would like to start other investments. I'll keep an eye on this thread and look for advice.
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#64
Most mortgages put a limit on how much you can pay onto your mortgage, usually about about 10% of the premium.

Then you might also be able to add 10% onto each payment and things like that.

At renewal, obviously it would be good to pay down your premium as much as possible.


As for investments obviously there are the RRSPS, RESPs, TFSAs which are standard investment vehicles. Not going to make you rich but definitely a good (must have) if you are not working for an entity with a pension.

As for stocks, I've always felt that you "need money to make money". Investing $100 or a $1000 here or there are not going to make you rich very often. 10% gains per year are not that much unless you are investing SIGNIFICANT money.
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#65
ETF's are more risky than stock. A Dow Jones industrial ETF simply tracks the Dow Jones, whereas a mutual fund is more diversely invested (if choosing the equivalent - US Equity Fund in that case) but the mutual fund will have some cash, some bonds and thus will not have your highs and lows but costs you more in fees. Same old story, higher risk, higher reward.

The TSX over the long run will average about 7.5% return on your investment so investing in a ETF that tracks the TSX (assuming there is one) or even the Dow will net you around that over the long run. So if your mortgage is 2.9%, the after tax return of 7.5% is going to be better than that but not risk free. Paying down your mortgage (barring any penalties) is risk free. Note investing through RRSP's and TSFA's make the 7.5% basically stands on its own and thus would be much better than saving 2.9%.

However, that said, any investment advisor (I'm not one) who is any good would recognize that you have frequently mentioned paying down some of your mortgage. This means you do not have the full risk appetite for using debt to essentially finance investing, thus they should advise you if that based on that paying down some of your mortgage would be a good idea as it will enable you to sleep better at night and that is worth more than extra return. Others it wouldn't bother them at all and thus an advisor would suggest investing over paying down (in general). There are other circumstances as we are entering a time when stock markets are near or at all time highs but the global economy isn't good, yet the USA is probably in the midst of a big growth phase plus the most unpredictable US president will be taking office - a lot of unknowns of what will happen.
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#66
(2017-01-02, 09:19 AM)Pouzar Wrote: This thread has brought up a little bit of shame for me as I'm not truly able to participate in it to the level I should be.

I'm a partner at Canada's biggest national firms (well, maybe 2nd largest right now), practicing in corporate finance with a specialty in debt finance and syndicated credit transactions - I speak with bank executives and CEOs and CFOs of some of the biggest issuers in the country on a daily basis and have advised lending syndicates on deals worth U.S$4 billion yet my knowledge of the financial markets isn't what it should be and my personal investments lack substance.

I turned 40 a couple of weeks ago and aside from a couple hundred grand of RRSPs (which is largely in the money markets doing nothing) and a very nominal amount of TFSA investment, my wife and I have no material investments.

Between the two of us, we are sitting on an immense amount of cash - shit its half of my draw last year and I do pretty good.   My wife works full time and every penny she makes just sits in her checking account accumulating as our day to day expenses are put on our shared credit card and I take care of everything else.

We carry no debt (except the mortgage) and have access to hundreds of thousands in lines of credit.

I need to start investing for our retirement (I will have no pension) as I want to continue to travel quite a bit during our retirement but I just don't know what to do with the money.  

I have spoken to financial advisers but (a) it bothers me to give them 1.5% to direct my investments and (b) I always question their advise if they are in any way connected to a chartered bank - thinking they will push that institution's products.

Part of me wants to put a hundred grand on our mortgage but with interest rates so low I know that is a poor choice - shit, I'm at prime minus 0.6 I think so I'm paying just over 2%.   I think it actually makes more sense to borrow to invest at these interest rates than to pay of super cheap debt.

A goal of mine is to do something material with a good chunk or our excess cash in the first two quarters of 2017.

I know I should max out our RRSPs and TFSAs before we do anything - I'm sure my RRSP availability is $200K plus at this point and my TFSA will be close to $50K but that's boring.

I want to either (a) put a huge chunk on our mortgage, like 6 figures or (b) by a rental property in Mexico, Hawaii or Scottsdale.

I would be maximizing the TFSA and RRSP accounts as well (RRSP first), but that's just me.  I'm not sure how they're boring, as you can still use these as investment avenues, and the returns are tax exempt.

There are other tax sheltered accounts that you may want to consider putting your money into once your RRSP and TFSA accounts are at the maximum deposit level.

One that I use is called a PAR account, which is an insurance policy that let's you deposit money and grow it tax free.  I've found it to be a worthwhile investment avenue.

As for the financial managers, I hear you.  I've always been skeptical as well and up until a few years ago have been very reluctant to use planners either.  Traditionally their returns are not great (3% range after fees), which I can beat on my own.  The planner I'm currently with has been great, and an exception to the norm.  He has returned us an average of over 7%/year (after fees) for the last 6 years (some years as high as 13%).  What's baffled me is that his solution is relatively simple and low risk.

I still hold funds to invest in personally, but have slowly transferred over a large share of my portfolio to him each year.
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#67
(2017-01-02, 12:12 PM)Pouzar Wrote: Can an argument be made for putting a whack (6 figures) on the mortgage (which is at 2.2% currently) over putting the money in a TFSA and RRSP combo?

It would feel pretty good to get the mortgage down from $550 to like $400K - we would be able to start putting an actual dent in the principal.

I've thought about this recently as well.  

In general I've never considered it because the ROR in equities exceeds the mortgage rate we're paying; but right now the market is at all time highs and I'm pessimistic about late 2017 / early 2018 so I've been deleveraging my risk position as of late.
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#68
(2017-01-03, 07:42 AM)art_vandelay Wrote:
(2017-01-02, 12:12 PM)Pouzar Wrote: Can an argument be made for putting a whack (6 figures) on the mortgage (which is at 2.2% currently) over putting the money in a TFSA and RRSP combo?

It would feel pretty good to get the mortgage down from $550 to like $400K - we would be able to start putting an actual dent in the principal.

I've thought about this recently as well.  

In general I've never considered it because the ROR in equities exceeds the mortgage rate we're paying; but right now the market is at all time highs and I'm pessimistic about late 2017 / early 2018 so I've been deleveraging my risk position as of late.

Rather than choose one or the other, why not both?  Every lump sum payment you make outside of your scheduled payments will go directly onto the principal.  You likely can only pay down a certain amount without penalty, but if you have money sitting there, put some towards your mortgage every month.  And put some of the rest towards investments.
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#69
(2017-01-02, 12:46 PM)HockeyHippy Wrote: Pouzar - I think everyone wants to get into investments, seeing the potential returns, but properly researching individual stocks is hugely time consuming. There's nothing wrong with that - if your life allows you that time.

If not, you might just want to look at a basket of index fund ETFs as an alternative to the traditional mutual fund approach. An index ETF (exchange traded fund) is a financial instrument that you purchase through your broker like you would a stock, that mimics an exchange.

So for example, DIA is the stock symbol for an ETF that simply tracks the Dow Jones Industrial average. It's simple, the commission is massively less than an equivalent mutual fund, and it can be easily liquidated without any weird fees like a mutual fund.

You won't get the returns on that sort of investment that the guys who are researching and putting tons of time into individual stocks will. But you'll do better than a mutual fund over the long haul, as you won't be paying commissions and fees. Really, it's a matter of how much time you have to put towards it.

With regards to the mortgage versus investment question - the traditional wisdom would suggest that your mortgage interest is so low, you should invest at a higher rate of return. But I for one have opted to consistently massively overpay my mortgage (2.49%), with an eye to getting out from under it early. I'll be done by mid 2018, which will leave our family with zero debt, at the tender age of 37. Financially, it's not the best strategy, but the flexibility I'll get from being at zero is well worth it. With zero debt, owning a house, having a fully funded pension and my wife's large investments, I'll have unmatched flexibility. So I'm taking the contrarian approach.

Great work, and congrats.  I don't think there's anything wrong with being debt free before 40.

I've never been much of a fan of ETF's, but that's only because my goal is to get a minimum ROR of 5%, and I find I can do better through dividend paying stocks.

My strategy is typically to follow about a dozen stocks or so, but really know 3 of them intimately and try to strike when the iron's hot.  I've taken my share of beatings over the years, but I seem to have more wins than losses so I consider myself happy with the strategy.
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#70
(2017-01-03, 07:52 AM)RyeRocks Wrote:
(2017-01-03, 07:42 AM)art_vandelay Wrote:
(2017-01-02, 12:12 PM)Pouzar Wrote: Can an argument be made for putting a whack (6 figures) on the mortgage (which is at 2.2% currently) over putting the money in a TFSA and RRSP combo?

It would feel pretty good to get the mortgage down from $550 to like $400K - we would be able to start putting an actual dent in the principal.

I've thought about this recently as well.  

In general I've never considered it because the ROR in equities exceeds the mortgage rate we're paying; but right now the market is at all time highs and I'm pessimistic about late 2017 / early 2018 so I've been deleveraging my risk position as of late.

Rather than choose one or the other, why not both?  Every lump sum payment you make outside of your scheduled payments will go directly onto the principal.  You likely can only pay down a certain amount without penalty, but if you have money sitting there, put some towards your mortgage every month.  And put some of the rest towards investments.

Like I said I've thought about it (especially recently), but when I'm borrowing under 3% for the mortgage and can make over 6% in the market (and even more so last year), I thought it made sense to take the higher return.

It's not a bad strategy though, just not one I've really pondered until December when the Dow's been flirting with 20,000.

I have deleveraged myself as of late (paid off the HELOC and have some USD, commodities, and Bitcoin), so it's possible I'll consider it in 6 months or so.
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#71
Great advise so far - thank you.

Do you guys believe there should be a different strategy to investing/paying of cheap mortgage debt depending on if the goal is (a) immediate returns to supplement current income and spending or (b) retirement savings?

Personally, given no pension for either the wife or I and the desire to maintain a fairly expensive travel schedule while in retirement, the goals for the wife and I are to accumulate wealth for retirement - we don't need any additional current income for our current day to day lives.

Given the foregoing, it does seem that my strategies should be (a) maxing out TFSAs and RRSPs followed by (b) paying down mortgage debt followed by © thinking of investments that create current returns.
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#72
I think everyone's strategy should be tailored to their own financial plan.

My strategy is similar to yours (I think anyway) as it's largely dedicated towards creating a comfortable retirement at an earlier age than most.

Our general rule is to maximize all tax haven avenues first (RRSP's, TFSA's, and RESP's), then look at a few immediate pleasures (trips, house upgrades, etc.), followed by additional investing (PAR account, real estate, alternate financial holdings such as gold and silver).

I think the first step for most should be to identify your financial milestones (I look at mine by age) and then create a financial plan on how to get there.
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#73
(2017-01-03, 09:44 AM)Pouzar Wrote: Great advise so far - thank you.

Do you guys believe there should be a different strategy to investing/paying of cheap mortgage debt depending on if the goal is (a) immediate returns to supplement current income and spending or (b) retirement savings?

Personally, given no pension for either the wife or I and the desire to maintain a fairly expensive travel schedule while in retirement, the goals for the wife and I are to accumulate wealth for retirement - we don't need any additional current income for our current day to day lives.

Given the foregoing, it does seem that my strategies should be (a) maxing out TFSAs and RRSPs followed by (b) paying down mortgage debt followed by © thinking of investments that create current returns.
I favour your plan above.  A couple of things...you're carrying a large mortgage.  If something unforeseen were to happen in the world, to you, or your wife, could the mortgage be carried?  If the mortgage rate doubled, or tripled in 5 years, could you carry?   Pay your debt down.

Secondly, the stock market is gambling. I personally favour keeping your nest egg, and play the certainties (debt, Tfsa, rsp)before gambling on the uncertainties (stock market).  

I think I read recently that the tsx has averaged a little over 4% over 15 years.  So that's a single percent or two over the boring and safer investments.  Is the extra return worthy of the daily risk of waking up one morning to find your entire stock market portfolio has taken a 20% hair cut?  Is it good stress, or bad stress, to enter a lifestyle in which you are gambling with your money, in a game you really don't understand, hovering over your keyboard watching your money on an hourly and daily basis, silently praying that nothing happens in the world that would affect your portfolio while you sleep?

Okay...I got a little preachy at the end there.
Courage, my word, it didn't come, it doesn't matter.
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#74
Preachy or not, lots of food for thought in there
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#75
I agree that the stock market is more risky than GIC's or government bonds.  The problem is that global governments and central banks have punished savers by reducing interest rates to virtually zero (and below zero in Europe), forcing people to seek a decent ROR in stocks.

When you consider inflation (especially considering real inflation instead of the data the government produces), you're barely getting ahead with GIC's, if at all.

Until interest rates are returned to more pragmatic levels, there are few choices for investors who look for a decent return on their money.
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#76
(2017-01-03, 11:02 AM)Arsenal Wrote:
(2017-01-03, 09:44 AM)Pouzar Wrote: Great advise so far - thank you.

Do you guys believe there should be a different strategy to investing/paying of cheap mortgage debt depending on if the goal is (a) immediate returns to supplement current income and spending or (b) retirement savings?

Personally, given no pension for either the wife or I and the desire to maintain a fairly expensive travel schedule while in retirement, the goals for the wife and I are to accumulate wealth for retirement - we don't need any additional current income for our current day to day lives.

Given the foregoing, it does seem that my strategies should be (a) maxing out TFSAs and RRSPs followed by (b) paying down mortgage debt followed by © thinking of investments that create current returns.
I favour your plan above.  A couple of things...you're carrying a large mortgage.  If something unforeseen were to happen in the world, to you, or your wife, could the mortgage be carried?  If the mortgage rate doubled, or tripled in 5 years, could you carry?   Pay your debt down.

Secondly, the stock market is gambling. I personally favour keeping your nest egg, and play the certainties (debt, Tfsa, rsp)before gambling on the uncertainties (stock market).  

I think I read recently that the tsx has averaged a little over 4% over 15 years.  So that's a single percent or two over the boring and safer investments.  Is the extra return worthy of the daily risk of waking up one morning to find your entire stock market portfolio has taken a 20% hair cut?  Is it good stress, or bad stress, to enter a lifestyle in which you are gambling with your money, in a game you really don't understand, hovering over your keyboard watching your money on an hourly and daily basis, silently praying that nothing happens in the world that would affect your portfolio while you sleep?

Okay...I got a little preachy at the end there.

  Investing in Blue Chip Stocks is not gambling.

   and it's simple 

   and the TSX is up a whole lot more than that. Take out the energy sector and '16 was a great year. CP and CN Rail gained about 45%. Scotiabank about a third. Bell flat but with divvie = about 7%.  Suncor up over 50% too. Dividend is also good, with SU

  Eg: Scotiabank pays a divvie of around 4.2%. In 1990 they were trading as low as $3.10 a share. Today they are over $75 bux.  Nice, and they are not a big mover. Do the math on 4000 shares with a dripped divvie of 4%. You'd be taking $35,000 a year in divvies. After tax dripped about $30g. Not bad return on your initial $13,000.
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#77
If it's not gambling why aren't you insanely wealthy just taking free money?
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#78
(2016-12-30, 11:54 AM)Stevie_Y Wrote: I am just getting into investments. It sounds like you are talking straight up stocks here but a friend sent me a great primer for anyone wanting to get into investing but doesn't know where to start (which is pretty much where i'm at). I am holding off on automatic payments (specifically to canada savings bonds) because of the fiasco going on with the gov pay system.

If anyone is interested here is the link: http://www.investopedia.com/university/beginner/

  Read 'The Intelligent Investor' - by Benjamin Graham. The library has it
 Learn to analyse the ratios on the Balance sheet, and interpret the earnings statements. It's not rocket science and you don't need to be an accountant.
 Get the Text for the Canadian Securities Course. Study the thing.. It teaches you how to do technical and value analysis.
 Go to ROB TV and listen to everything Sandy Robertson McIntyre says on investing.
 
 Don't tell anyone what you are doing. You will not be encouraged

 My ten cent's worth
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#79
(2017-01-03, 12:30 PM)Nuclearsun Wrote: If it's not gambling why aren't you insanely wealthy just taking free money?

 I'm doing ok, Nuke. Did you understand what I was trying to get across to you?
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#80
No offence but I don't pay much attention to your investment advise. When talking investments you tend to start impersonating Jim Cramer and talk in absolutes.

If investing in blue chip stocks is not a gamble then you should be dumping every available penny in to them and making yourself piles of cash.
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