# Advices for a young investor atypical situation



## patmanz (Jul 26, 2010)




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## Belguy (May 24, 2010)

Have you looked at the model portfolios on the following website?

www.canadiancouchpotato.com

Alternately, you might consider a portfolio that includes 15 or so good dividend paying stocks that have a history of increasing their dividends.

Many are predicting that the stock markets are in for a long period of basically sideways movement and dividend paying stocks pay you to wait.


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## slacker (Mar 8, 2010)

The only advice I'll offer is to be careful if and when you choose to purchase investments in US dollars. (e.g. a Vanguard or other US product)

A lot of brokerages charge you up to 2.5% for exchange Canadian dollars for US dollars. So if you buy $100,000 worth of investments in US dollars, you could be paying up to $2500 on the purchase. There's something called Norbert's Gambit that will allow you to exchange for much less cost.


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## andrewf (Mar 1, 2010)

I'm curious why you have so much cash.

Will the ETFs be in a registered (RRSP/TFSA) account or non-registered?


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## patmanz (Jul 26, 2010)

Belguy said:


> Have you looked at the model portfolios on the following website?
> 
> www.canadiancouchpotato.com
> 
> ...


Would you recommend divident ETF like the iShares Dow Jones Canada Select Dividend Index Fund (XDV) ?

What about replacing the bonds part of my portfolio with XDV or similar ?


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## patmanz (Jul 26, 2010)

andrewf said:


> I'm curious why you have so much cash.
> 
> Will the ETFs be in a registered (RRSP/TFSA) account or non-registered?


Non-Registered, I will have about 25k in a registered account. TFSA can be maxed too.

Regarding the cashflow, its nothing illegal i assure you


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## patmanz (Jul 26, 2010)

Belguy said:


> Have you looked at the model portfolios on the following website?
> 
> www.canadiancouchpotato.com
> 
> ...


Yes i did, the canadiancouchpotato website provided me with many goods info.

Regarding the actual strategy, i am torn between using TD e-fund and going the iShares ETF route.

I did the math and for me, they both have MER of 0.33%
Is there any comparative of pros/cons of both ?


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## Cal (Jun 17, 2009)

andrewf said:


> I'm curious why you have so much cash.
> 
> Will the ETFs be in a registered (RRSP/TFSA) account or non-registered?



I was thinking the same. Not that it was anything illegal, but why wait for the cash to build up so much to begin to invest it. Perhaps it is from a recently completed business transaction?


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## m3s (Apr 3, 2010)

slacker said:


> The only advice I'll offer is to be careful if and when you choose to purchase investments in US dollars. (e.g. a Vanguard or other US product)
> 
> A lot of brokerages charge you up to 2.5% for exchange Canadian dollars for US dollars. So if you buy $100,000 worth of investments in US dollars, you could be paying up to $2500 on the purchase. There's something called Norbert's Gambit that will allow you to exchange for much less cost.


Personally I would rather buy the Vanguard Europe Pacific ETF in USD as opposed the the iShares MSCI EAFE Index Fund in CAD Hedged. Questrade allows me to exchange CAD-USD when I want and trade in USD for $4.95 USD (instead of automatic exchange fees with the big banks every single trade)

Hedging is likely a waste of exchange fees in the long run

http://www.canadiancapitalist.com/a-tour-of-etfs-ishares-msci-eafe-index-fund/


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## m3s (Apr 3, 2010)

patmanz said:


> Regarding the actual strategy, i am torn between using TD e-fund and going the iShares ETF route.
> 
> I did the math and for me, they both have MER of 0.33%
> Is there any comparative of pros/cons of both ?


Unless you're going to constantly invest a small amount... I would prefer to buy ETFs from a discount broker (Questrade). Just buy in larger chunks at fewer intervals and ETFs are easily far cheaper

If you calculated they cost the same for you, I'd still go with ETFs as the calculation will tip towards them over time. It would be a hassle to switch later

I'm also skeptical of TD e-series as a brilliant marketing scheme, rather than an industry norm. Why isn't anybody else offering the same. Considering their disclosure in fine print "the absorbing of MER expenses may be discontinued at any time . . . without prior notice" Why not just go with ETFs


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## davext (Apr 11, 2010)

check your messages, I just sent you one.


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## patmanz (Jul 26, 2010)

Cal said:


> I was thinking the same. Not that it was anything illegal, but why wait for the cash to build up so much to begin to invest it. Perhaps it is from a recently completed business transaction?


its the profit from the last two years of operation, at the time it was a one man show so you can only imagine that it was mostly 80/100h work week without a second to think about investing.


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## patmanz (Jul 26, 2010)

mode3sour said:


> Personally I would rather buy the Vanguard Europe Pacific ETF in USD as opposed the the iShares MSCI EAFE Index Fund in CAD Hedged. Questrade allows me to exchange CAD-USD when I want and trade in USD for $4.95 USD (instead of automatic exchange fees with the big banks every single trade)
> 
> Hedging is likely a waste of exchange fees in the long run
> 
> http://www.canadiancapitalist.com/a-tour-of-etfs-ishares-msci-eafe-index-fund/


many people tell me to use USD EFT to invest in international and us market instead of CDN hedged.

However, i am kind of scared about the fee's of the actual CDN/USD conversion.


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## patmanz (Jul 26, 2010)

mode3sour said:


> Unless you're going to constantly invest a small amount... I would prefer to buy ETFs from a discount broker (Questrade). Just buy in larger chunks at fewer intervals and ETFs are easily far cheaper
> 
> If you calculated they cost the same for you, I'd still go with ETFs as the calculation will tip towards them over time. It would be a hassle to switch later
> 
> I'm also skeptical of TD e-series as a brilliant marketing scheme, rather than an industry norm. Why isn't anybody else offering the same. Considering their disclosure in fine print "the absorbing of MER expenses may be discontinued at any time . . . without prior notice" Why not just go with ETFs


i agree 100%, my plan is to initialy do a big purchase of ETF and then, buy some more at each quarter with my profit.


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## m3s (Apr 3, 2010)

patmanz said:


> many people tell me to use USD EFT to invest in international and us market instead of CDN hedged.
> 
> However, i am kind of scared about the fee's of the actual CDN/USD conversion.


The point of doing the non-hedged is to avoid redundant currency exchange fees over the years I thought


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## tinypotato (Jul 27, 2010)

Hello,

I recommend the use of ETF's over other products such as TD eFunds, etc. A side benefit is it will allow you to transfer your accounts to another institution in the future (if you should decide to change). Most, if not all, brokerages will allow you to hold ETF's such as iShares (but with TD eFunds I believe you are stuck with TD Waterhouse? I am no 100% sure of this)

Just my 2cents..


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## slacker (Mar 8, 2010)

@patmanz: don't be "scared" about the exchcange fee. Utilize Nortbert's Gambit:

http://www.financialwebring.org/forum/viewtopic.php?t=198

It'll cost you 2 trades, and the risk spread for the duration of the trade.


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## patmanz (Jul 26, 2010)

slacker said:


> @patmanz: don't be "scared" about the exchcange fee. Utilize Nortbert's Gambit:
> 
> http://www.financialwebring.org/forum/viewtopic.php?t=198
> 
> It'll cost you 2 trades, and the risk spread for the duration of the trade.


i read about this method, i will probably 'practice' with about 1k or so before doing it with a larger chunk !


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## m3s (Apr 3, 2010)

That's pretty cool. If you use limit orders and give it a few days you could easily make money rather than lose lol

Even if you lose a bit, it's a capital loss unlike exchange fees lol


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## andrewf (Mar 1, 2010)

patmanz said:


> Non-Registered, I will have about 25k in a registered account. TFSA can be maxed too.
> 
> Regarding the cashflow, its nothing illegal i assure you


My question was why do you have so much cash when you have debt, and why are you not deploying it somewhere? Cash has a negative real return.


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## patmanz (Jul 26, 2010)

andrewf said:


> My question was why do you have so much cash when you have debt, and why are you not deploying it somewhere? Cash has a negative real return.


I am guilty of not taking the time, worked 80h week for the last two years and taking care of my wife. 

In the meantime the account grew considerably so i am starting with this rather large amout


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## kcowan (Jul 1, 2010)

A carollary of *pay yourself first* is *pay attention for your savings*. Unless we are in deflation, cash is costing you at least the yield on a GIC.


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## Cal (Jun 17, 2009)

Sooo....you have now hired someone so you don't have to work crazy weeks like that. And you now have time to alot to using the cash to pay down debt, and to invest to grow.

I don't fully understand this statement:
'Monthly Investment Contributions: $10,000+'

Is this money coming from the business into your personal account?

I would use some of the 25K to fund your RRSP, TFSA and pay down the condo.....


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## Max (Apr 4, 2009)

If you are paying 1.6% interest, I wouldn't be in any hurry to pay down debt until the interest rate rises (I assume at that rate it is a variable mortgage).

You should of course max out your TFSA first and consider maxing out RRSP.

Pay down debt only to the extent that you expect to earn an after tax return of less than then interest rate on debt. Although you have to factor in certainty of return as well. Certainty of return on debt is 100%.

Aside from the decision of what vehicle to use first for your investments, what you really need to know seems to be what to invest in. No easy answer there. Just continue doing research until you find something that makes sense to you.


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## patmanz (Jul 26, 2010)

Cal said:


> Sooo....you have now hired someone so you don't have to work crazy weeks like that. And you now have time to alot to using the cash to pay down debt, and to invest to grow.


I still work like crazy but i have more time to take actions on this.



Cal said:


> I don't fully understand this statement:
> 'Monthly Investment Contributions: $10,000+'
> Is this money coming from the business into your personal account?


Absolutely not, 10k+ is the amount i plan to invest monthy, still in the corporate unregistered account.



Cal said:


> I would use some of the 25K to fund your RRSP, TFSA and pay down the condo.


I just bonified my weekly mortage payement by 20%. Regarding the RRSP or TFSA, what should come first in term of priority ?


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## patmanz (Jul 26, 2010)

Max said:


> If you are paying 1.6% interest, I wouldn't be in any hurry to pay down debt until the interest rate rises (I assume at that rate it is a variable mortgage).
> 
> You should of course max out your TFSA first and consider maxing out RRSP.
> 
> ...


this is pretty much my sweetspot:

40% fixed income (bonds)
60% equities (20% us, 20% cdn, 20% international)

The choice between ETF and actively managed mutual funds seem to be a no brainer, depending of the ETF i pick, the total MER of the portfolio is between 0.30 and 0,.40% compared to 2%+ for mutual funds...


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## GeniusBoy27 (Jun 11, 2010)

Okay ... 2 things that would be helpful.

1) What's your approximate income that you're reporting yearly to CRA?
2) I presume you're investing inside your corporate account? Which means that cash is invested inside the company?

They would have different foci. On my own cash side of things, depending on your tax bracket (TFSA then RRSP/house). At your age, I'd be investing high on the equity, if you can take the risk, and looking at the current volatility in the market.


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## InfiniteSeries (Aug 1, 2010)

patmanz said:


> Hi all,
> 
> I'm in a somewhat atypical situation for a young investor and am looking for advice. I have my own ideas about what to do, but I'm open to more experienced input.
> 
> ...


Debt 150k on a space where all you really 'own' is the airspace? Get rid of the condo, buy a home on a few acres outright from a Bank thats having trouble selling it. Will you have to make a longer commute to work (assuming you are employed)? Likely...but you'll whistle on the way to work.

You're in a position to carry no to very little long term debt, have max potential leverage (within conservative boundaries if you like) and little monthly overhead. A pertinent question would be why you've not taken full advantage of said, given your age?


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## andrewf (Mar 1, 2010)

I think this might be a case where MoneyGal's question of "Are you a stock or a bond?" might be particularly pertinent. A lot of your net worth takes the form of expected future earnings. Are those earnings safe, predictable, etc (ie, bond-like)? More likely, based on your description, those earnings are risky and uncertain (ie, equity-like). So to balance your portfolio, you should look at holding more debt-like investments than your risk-tolerance might otherwise suggest. I sure MG can pipe in with better explanations/further reading that I've provided here.


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## MoneyGal (Apr 24, 2009)

Thanks for the shout-out! The line "Are you a Stock or a Bond?" comes from the title of one of Dr. Moshe Milevsky's recent books. (I linked to the Amazon.ca page for the book.) That book is totally worth a read and the whole theory of human capital is very worthwhile to think about, especially for young investors.  (Actually, young PEOPLE.)


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## InfiniteSeries (Aug 1, 2010)

"Are you a stock or a bond"?

Thats one way to enslave to group-think, I grant you. My post was meant to invert the paradigm a bit. With the readers kind permission I'll play devils advocate for a bit.

What if you chose to be neither?

What if the concept of 'risk' as presented is invalid, and only a means to lining anothers pockets/eating your lunch? If you are conned into not playing a game, the opponent wins by default.

What if the concepts inherent in 'Economics' and 'Sociology' (the horns of the ongoing dilema, upon which modern 'man' is constantly skewered) are completely false? 

What if the primary concepts and terms used to explain 'the markets' are also blatant falsehoods?

When one goes down that road, then one tends to see what most choose not to see, out of fear/conformity/lazyness. 

At 29, should the individual actually beginning questioning rather than accepting things in books and articles at face value, he or she will be light years ahead of all peers in a few short years. I'm a little slow, so it took me nine years once I started 'un-learning' to 're-learn'.

Question everything you have come to know, from the first moment you could have known it. Then you'll know what to do with your money...and a great deal more.

Until then, listen to someone who has CONSISTENT returns over 20% a year (in 'bull' and 'bear' environments). You'd be surprised how small that field is, anywhere in the world. Pay what they ask for service...because the cost is far less than the cost of missed opportunity over 20-30 years. You'll know when to drop em...when your eyes and picks outperform them on a regular basis. 

I don't take investment letters anymore, but Hulbert used to rank them. Perhaps 'Market-Watch' still does. Something for you to check into.


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## MoneyGal (Apr 24, 2009)

Well, much as I think it would be *great* if human capital thinking actually *was* the dominant paradigm and my espousing it could be characterized as being "enslaved to group-think," I humbly suggest that your comments indicate you aren't familiar with the "stock or bond" dichotomy, which (apparently) isn't what you think it is, because it absolutely does not follow any well-trod, mainstream road.


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## chaudi (Sep 10, 2009)

i would play the loonie, 370k US will always be worth at least 370k US. 375k CND? who knows. 
You look at what you can buy in the world right now with 370k US, versus what you can buy in Canada for 375k CND, that says it all.

Interactive brokers offers cheap currency trading. If you watch the loonie you'll find it's much more predictable then stocks that always have a feeling of volatility.


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## InfiniteSeries (Aug 1, 2010)

MoneyGal said:


> Well, much as I think it would be *great* if human capital thinking actually *was* the dominant paradigm and my espousing it could be characterized as being "enslaved to group-think," I humbly suggest that your comments indicate you aren't familiar with the "stock or bond" dichotomy, which (apparently) isn't what you think it is, because it absolutely does not follow any well-trod, mainstream road.


Human capital thinking was the dominant paradigm, prior to subversion. It is the predicate of all concepts of personal consiousness, base liberty and property. Which is why all those who deny personal conscience are actually enemies of the state...but I digress.

I've been active in the markets since before the apparent highs at the beginning of the decade, so I think we can dispense with any snide undertaking that I am unfamiliar with anything touching upon them. My comment was not an attack on you, but on a meme (and indeed a series of memes) that I find does all newcomers to the markets a grave injustice....while costing them a pretty penny.

Additionally, I do take the path less travelled...and that has made all the difference.


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## andrewf (Mar 1, 2010)

I'm not really following what you're saying. You're making an impassioned rant, and not a critical analysis. Saying that you've been investing for ten years means nothing to me. It sounds like an appeal to authority to me, and not an argument. There are plenty of people who work in the industry who I think are idiots (NB: I'm not calling you an idiot, just saying time in the market proves nothing).


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## HaroldCrump (Jun 10, 2009)

InfiniteSeries said:


> Human capital thinking was the dominant paradigm, prior to subversion. It is the predicate of all concepts of personal consiousness, base liberty and property. Which is why all those who deny personal conscience are actually enemies of the state...but I digress.


Actually, I don't think human capital thinking necessarily implies, or is dependent upon, a belief in personal, individual conscience.
On the contrary, it is the _social_ consciousness that is effective.
Human capital, in any given society, at a particular epoch, cannot be developed in isolation of social consciousness.
Human capital aggregates up to social capital.
While it's ok for one person to focus on his/her own human capital development, it requires a certain level of social consciousness to succeed and in turn impacts/furthers social development.

Similarly, I don't see it as tied to the concept of private property.
Again, on the contrary, it should foster the concept of social property in the long run.


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## InfiniteSeries (Aug 1, 2010)

If you are a supporter of Divine Right, given other euphamisms, then I suppose political 'isms' are your thing. They are not mine. I only entertain the proper understanding of philosophy...that which may be geometrically or mathematically proofed. All else is merely opinion, generally in the employ of those paying the opinionists' way.

Socialism, Fascism, Communism...nothing but Divine Right under different terms and slogans. One notes the same old parent (Behind the Dictators, LH Lehman, 1942.). Lafayette and a plethora of others were quite correct as to the tools and tricks of clerics.

For the moral, there is no such thing as 'human capital' or 'social property'...there is only the capital generated from the valid thought and action of the individual, to the sole ownership and sole benefit of said. Those who bank on 'human capital' en masse, ply a trade on its relative ignorance and espouse/promote even greater ignorance. Left handed Shaivism/Romanism. From the first wave of Roman-tics under Von Geothe to the latest iterations of counter enlightenment across the globe...a thing contrary to all proper conceptions of base liberty and property.

As the product of a certain brand of clerical thought seeded throughout Canada, yours is a very much expected discourse.

If you wish to converse more on the subject Mr Crump, we should take it elsewhere rather than hijack a nominally financial thread. Agreed?


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## InfiniteSeries (Aug 1, 2010)

Andrew...I'm not selling anything, nor holding myself out as a guru...so your contention that I'm undertaking sophistry (appeal to authority, or any other falacious arguement) is, itself, suspect. Is it not?

I merely hold out an historic validity, and I question everything placed before me. If you don't understand, then you and/or other(s) will undertake the interrogative for the valid or they will not, based on character and curiosity. I'm not about to write a book on this thread illustrative of the lessons of history. :~)

If you don't get what I'm saying, perhaps you are not meant to at this point in time?

My time in the markets means nothing beyond illustrating that I well understand all the terms. And I will agree with you, there are plenty of folks in the industry that are idiots. Thats why they have very large salaries and only bet small/hedge/arb. If they were really any good, they'd parley relatively small salaries to large positions, and quickly. 

I am more concerned with those who are not idiots, who understand very well what a market is...and yet sell snake oil to the masses. The tv and publishing houses are full of alot of the former (idots) and a few of the later (well informed sophists).


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