Well, for a long while I've been thinking about gathering some capital to buy stocks and trade on the side, but I do not know where to start (or how much I should start with). Everyone I have been consulting is rather risk-averse (diversify, buy blue chips and banks, etc.), but I still have some doubts. So:
A) What would be a good starting capital for a private stock trading venture out of my own pockets? I planned around 3,000$ would be a good start (Canadian, but still).
B) Even with a small amount, is it still better to diversify my stock wallet or should I hit it big first by speculating on a few eggs in my basket and diversify later as my capital grows?
C) What about penny stocks? Buying 1c stocks and reselling it when it hits 2c or 3c seems easy, although risky if the said stock is to disappear after a short while. Thoughts?
And yes, I am a newb in this, so KISS. I want to learn, but I need to grasp the basics first. :P
Buy an index fund or ETF.
Quote from: Barrister on March 03, 2010, 04:35:04 PM
Buy an index fund or ETF.
Okey. And why?
Index fund I get, but from what I read on them it is not very flexible. It's merely a fund attached to a stock market index and whose performance attempt to mirror the latters. So basically, if I take an index fund linked to TSX, for example, its performance climbs and falls more or less as the TSX index varies, right?
And what is an ETF? What are the differences?
The nice thing about index funds is they allow you to diversify without paying some dickhead fund manager half your earnings.
Quote from: Admiral Yi on March 03, 2010, 05:13:16 PM
The nice thing about index funds is they allow you to diversify without paying some dickhead fund manager half your earnings.
So, I guess I have to pay a basic fixed price to buy one, or are these variable?
How are returns on these calculated?
Quote from: Drakken on March 03, 2010, 05:16:25 PM
So, I guess I have to pay a basic fixed price to buy one, or are these variable?
How are returns on these calculated?
Variable. Market price.
Not sure I understand the second part. Do you mean how are dividends distributed? The fund owns a trillion shares and they get paid the dividends on those trillion shares. They split that up by the number of shares of the fund and give you your portion. They keep a tiny bit for themselves.
Quote from: Admiral Yi on March 03, 2010, 05:21:39 PM
Quote from: Drakken on March 03, 2010, 05:16:25 PM
So, I guess I have to pay a basic fixed price to buy one, or are these variable?
How are returns on these calculated?
Not sure I understand the second part. Do you mean how are dividends distributed? The fund owns a trillion shares and they get paid the dividends on those trillion shares. They split that up by the number of shares of the fund and give you your portion. They keep a tiny bit for themselves.
Yes. Remember I am a newb in this. :P
So I guess it means I have to pay x amount per share, price fixed on the exchange. Can they be resold on the market if the price increases, akind to a share? Is there room for speculation?
What is it that you want to do?
Really, your choice of strategy is more or less determined by how much risk you want to take. Do you want a Las Vegas style 'get rich or bust' strategy, putting up your $3000 and knowing you risk losing it all, or do you want to more conservatively grow your wealth - but with no possibility of huge returns?
The basic equation is simple: if you want big returns you must take big risks. There is effectively no way to guarantee returns without risks, or everyone would be doing it. Your risks are (somewhat) less if you study the hell out of the market, but even the experts get fooled. Everyone and their kid sister is peddling advice on how to make big returns without risks, but they are pretty well all lying. They will take your money for advice and you will still be screwed.
Myself, I stick my cash that I don't need in a mutual fund with reasonably low fees that tracks the Canadian, US and international stock markets, and forget about it. I have some in cash equivalents (GICs) earning a pitifully low interest, so that I'm not wiped out totally if the market crashes.
I use ING, because I can do everything online, and the fees seem low. There are probably even better options out there.
Quote from: Drakken on March 03, 2010, 05:27:55 PM
Yes. Remember I am a newb in this. :P
So I guess it means I have to pay x amount per share, price fixed on the exchange. Can they be resold on the market if the price increases, akind to a share? Is there room for speculation?
Yup. As an example, I bought some shares of SPY, which is one of the index funds that tracks the Standard & Poors 500 index, back in March at $83 something. I could sell them now at 112.30.
You could speculate through options. Buy calls if you think the price will rise, buy puts if you think the price will fall.
I think most markets also offer shorter term pure bets. My buddy up in Toronto used to make one day bets on the movement in the Canadian market. I think Tamas does something similar. Ask him for details IF YOU WANT TO LOSE ALL YOUR MONEY VERY QUICKLY.
If you want to invest in individual stocks, start with something you know. A company or industry you know a lot about. Like the kind of company you work for, for example. Then check out the numbers on those companies. If you have a good idea about what does what in that kind of business, then you should be able to tell who are the stronger companies.
Pay attention to the price/earnings ratio and dividend rates and stuff. It's not that hard to figure out once you know what the numbers mean. The P/E ratio, for example, is probably the most important number for most people. It just means the total value of the stock compared to the annual earnings of the company. A P/E of 15 means the total value of all of the shares of stock the company has out there owned by everyone is 15 times the current annual earnings of the company. The lower the better (generally) because that means your share of stock represents more earnings. That's just one example. Try out one of those sandbox trading games. You can trade fake money and see how it works.
Day trading like Yi said is bad and hard to do successfully. I prefer to trade in companies I know are strong because I did research on them. And I don't generally make short-term trades. I've never bought a stock and sold it the same day.
One thing I like to do is do most of my stock buying on days that the market is tanking. If Bernanke says something about raising rates or Obama makes a speech about banging banks around or bad unemployment numbers come out and the Dow goes down 150 or 200 points---That's the day I am buying stocks. That's pretty much the only thing I do that resembles trying to time the market.
Quote from: Drakken on March 03, 2010, 05:02:19 PM
Quote from: Barrister on March 03, 2010, 04:35:04 PM
Buy an index fund or ETF.
Okey. And why?
Index fund I get, but from what I read on them it is not very flexible. It's merely a fund attached to a stock market index and whose performance attempt to mirror the latters. So basically, if I take an index fund linked to TSX, for example, its performance climbs and falls more or less as the TSX index varies, right?
And what is an ETF? What are the differences?
ETF is basically the same thing.
Why? The reasoning goes (which I am persuaded by) is that vanishingly few people can outperform the market year after year. Most mutual funds don't outperform the market. So why do you think you're smarter than 90% of people out there? The market over the long term tends to outperform many other investments. So invest in an index fund so you can invest (indirectly) in the entire stock market at once.
Also there's the issue of expense rations. Many mutual funds charge you a noticeable percentage of gains just because they manage your money. Individual trading, you're paying fees that can quickly add up. Since an index fund / ETF is so simple, the fees are very low. So you're making money by not giving it to financial experts who, many times, can't even outperform the market to begin with.
The only thing I would add is, go with what you know. Invest in companies or sectors that you are interested in. You will be more inclined to do the due diligence or research that is required to make informed investment decisions.
Quote from: Malthus on March 03, 2010, 05:34:08 PM
What is it that you want to do?
Really, your choice of strategy is more or less determined by how much risk you want to take. Do you want a Las Vegas style 'get rich or bust' strategy, putting up your $3000 and knowing you risk losing it all, or do you want to more conservatively grow your wealth - but with no possibility of huge returns?
The basic equation is simple: if you want big returns you must take big risks. There is effectively no way to guarantee returns without risks, or everyone would be doing it. Your risks are (somewhat) less if you study the hell out of the market, but even the experts get fooled. Everyone and their kid sister is peddling advice on how to make big returns without risks, but they are pretty well all lying. They will take your money for advice and you will still be screwed.
Myself, I stick my cash that I don't need in a mutual fund with reasonably low fees that tracks the Canadian, US and international stock markets, and forget about it. I have some in cash equivalents (GICs) earning a pitifully low interest, so that I'm not wiped out totally if the market crashes.
I use ING, because I can do everything online, and the fees seem low. There are probably even better options out there.
I intend to go fractal, step-by-step growth of my capital both by increasing my capital out of my own pockets punctually and raking in my gains to expand and diversity my wallet.
My planned strategy is to put 2/3 of my starting capital in something long-term and low-interest, yet time-limited plans (triennal, perhaps) so I could reap some profit after a while and rethink my investments, and use the remaining 1/3 for speculation into riskier venues. I assume that this 1/3 is at risk, but would make the bulk of my profit dynamics, while the remaining 2/3 lie in safer investment plans. To keep in simple, I could put this 1/3 into index funds, with the benefits BB explained to me, while this 2/3 sit in some 3-years investment plan out of sight, out of mind.
(Of course, this sharing of my capital can be changed. Perhaps 2/3 in index funds, and the remaining 1/3 in something more long-term).
Bear in mind that, in fact, I opt to add capital in regularily, perhaps a 1K per year as a minimum after the first investment. Basically money I don't need and that could put into good use somewhere else.
My main problem, of course, is where to start. I am with Desjardins currently, but the problem with them is that I feel they'll attempt more to sell their own investment plans to me, and rip me of a share of my profits whenever I make a transaction through them.
And also, there is the whole issue of taxation on capital. How much does our Big Government steal.. .errrrr tax you of money due to your money invested?
Quote from: Drakken on March 04, 2010, 10:33:12 AM
Quote from: Malthus on March 03, 2010, 05:34:08 PM
What is it that you want to do?
Really, your choice of strategy is more or less determined by how much risk you want to take. Do you want a Las Vegas style 'get rich or bust' strategy, putting up your $3000 and knowing you risk losing it all, or do you want to more conservatively grow your wealth - but with no possibility of huge returns?
The basic equation is simple: if you want big returns you must take big risks. There is effectively no way to guarantee returns without risks, or everyone would be doing it. Your risks are (somewhat) less if you study the hell out of the market, but even the experts get fooled. Everyone and their kid sister is peddling advice on how to make big returns without risks, but they are pretty well all lying. They will take your money for advice and you will still be screwed.
Myself, I stick my cash that I don't need in a mutual fund with reasonably low fees that tracks the Canadian, US and international stock markets, and forget about it. I have some in cash equivalents (GICs) earning a pitifully low interest, so that I'm not wiped out totally if the market crashes.
I use ING, because I can do everything online, and the fees seem low. There are probably even better options out there.
I intend to go fractal, step-by-step growth of my capital both by increasing my capital out of my own pockets punctually and raking in my gains to expand and diversity my wallet.
My planned strategy is to put 2/3 of my starting capital in something long-term and low-interest, yet time-limited plans (triennal, perhaps) so I could reap some profit after a while and rethink my investments, and use the remaining 1/3 for speculation into riskier venues. I assume that this 1/3 is at risk, but would make the bulk of my profit dynamics, while the remaining 2/3 lie in safer investment plans. To keep in simple, I could put this 1/3 into index funds, with the benefits BB explained to me, while this 2/3 sit in some 3-years investment plan out of sight, out of mind.
(Of course, this sharing of my capital can be changed. Perhaps 2/3 in index funds, and the remaining 1/3 in something more long-term).
Bear in mind that, in fact, I opt to add capital in regularily, perhaps a 1K per year as a minimum after the first investment. Basically money I don't need and that could put into good use somewhere else.
My main problem, of course, is where to start. I am with Desjardins currently, but the problem with them is that I feel they'll attempt more to sell their own investment plans to me, and rip me of a share of my profits whenever I make a transaction through them.
And also, there is the whole issue of taxation on capital. How much does our Big Government steal.. .errrrr tax you of money due to your money invested?
You are Canadian, right?
If so, you can invest up to $5000 per year tax-free in a TFSA account.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/menu-eng.html
Also, depending on what your income is and your plans are, you can save taxes by investing in an RRSP. I do that, because in my tax bracket, it makes sense (you pay taxes based on your income when you withdraw it).
Quote from: Malthus on March 04, 2010, 11:06:48 AM
You are Canadian, right?
If so, you can invest up to $5000 per year tax-free in a TFSA account.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/menu-eng.html
Also, depending on what your income is and your plans are, you can save taxes by investing in an RRSP. I do that, because in my tax bracket, it makes sense (you pay taxes based on your income when you withdraw it).
Yes, I am Canadian. *coughs* :cry:
I already invest in a RRSP plan via Royal Bank through my job, around 1400$ per annum matched by my company (So 2800$ per annum in RRSP).
I'll definitely go for CELI/TSFA as a tax shield. Great for accumulating capital, I must say. However, I have seen that many banks put adninistration fees that basically eats up any tax savings I might earn for its use.
Sound advice here. You should not shy away from more specialized ETFs, though. And if you are an adventorous gambler like me, be careful. And only do short-term trading if you really, really enjoy the thought of doing it. Here is why:
For example, I have been monitoring commodity stuff plus some stucks for 2.5 weeks now, and it's been quite a roller coaster. Just today I decided to battle in the trench warfare of today's pre-news undecided enviroment, and not only I mis-calculated the hopeful small-scale correct move twice in oil and gold in one day, when the big move happened, I was not in the market. <_<
But the two days before that were wonderful, too bad this one extraordinarly bad one took them all away. And I am sure today's fall will be bulled back, I'll just have to keep an eye out for that.
So, in 2.5 weeks of the above rollercoaster ride, I stand at having a profit of about 5% of the cash which I have on my account but did not invest to serve as a hinterland for my margin trading. That's actually sort of nice of course, except that the other half of my savings is also standng on about 5%, and that was achieved by buying an India ETF and forgetting about it :P
And needless to say, even if I would spend a month with this and would close it with 5% profits, that would be a quite decent average, and it would be more than enough to keep me going. But there is no point in doing it if you do not like the info-mining, chart-browsing, hard decisions, stress that goes with it.
Quote from: Drakken on March 04, 2010, 11:21:34 AM
Quote from: Malthus on March 04, 2010, 11:06:48 AM
You are Canadian, right?
If so, you can invest up to $5000 per year tax-free in a TFSA account.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/menu-eng.html
Also, depending on what your income is and your plans are, you can save taxes by investing in an RRSP. I do that, because in my tax bracket, it makes sense (you pay taxes based on your income when you withdraw it).
Yes, I am Canadian. *coughs* :cry:
I already invest in a RRSP plan via Royal Bank through my job, around 1400$ per annum matched by my company (So 2800$ per annum in RRSP).
I'll definitely go for CELI/TSFA as a tax shield. Great for accumulating capital, I must say. However, I have seen that many banks put adninistration fees that basically eats up any tax savings I might earn for its use.
Yup, it's a delightful perk tax-wise, isn't it?
I'm maxed out - I put $5,000 in last year and $5,000 in this year, recently.
I put it in an ING mutual fund, because it was easy to do on-line and the fees are low. As of today, it is worth $11,045.76.
I'm reasonably happy with ING. Though I'm totally open to other recommendations. I use TD for my chequing and credit card, but not for investing - fees seemed hefty to me.
Quote from: Tamas on March 04, 2010, 11:41:18 AM
Sound advice here. You should not shy away from more specialized ETFs, though. And if you are an adventorous gambler like me, be careful. And only do short-term trading if you really, really enjoy the thought of doing it. Here is why:
For example, I have been monitoring commodity stuff plus some stucks for 2.5 weeks now, and it's been quite a roller coaster. Just today I decided to battle in the trench warfare of today's pre-news undecided enviroment, and not only I mis-calculated the hopeful small-scale correct move twice in oil and gold in one day, when the big move happened, I was not in the market. <_<
But the two days before that were wonderful, too bad this one extraordinarly bad one took them all away. And I am sure today's fall will be bulled back, I'll just have to keep an eye out for that.
So, in 2.5 weeks of the above rollercoaster ride, I stand at having a profit of about 5% of the cash which I have on my account but did not invest to serve as a hinterland for my margin trading. That's actually sort of nice of course, except that the other half of my savings is also standng on about 5%, and that was achieved by buying an India ETF and forgetting about it :P
And needless to say, even if I would spend a month with this and would close it with 5% profits, that would be a quite decent average, and it would be more than enough to keep me going. But there is no point in doing it if you do not like the info-mining, chart-browsing, hard decisions, stress that goes with it.
Personally, that kind of play isn't for me.
I'm more of a "gradual accumulation over time" kinda person. I put stuff away into investments I don't have to watch all the time.
Yeah I can perfectly understand that. I may very well get bored/overstressed with it in time.
It's just that right now I have the time to do it, the interest, and altough losing a bigger amount of money would certainly hurt very much, it would not "knock me out" so I feel the timing is right to try my hands at this.
Quote from: Tamas on March 04, 2010, 01:14:59 PM
Yeah I can perfectly understand that. I may very well get bored/overstressed with it in time.
It's just that right now I have the time to do it, the interest, and altough losing a bigger amount of money would certainly hurt very much, it would not "knock me out" so I feel the timing is right to try my hands at this.
I'm in between the two of you. I have my main retirement savings, which is the vast majority of my investment money, in the 401k, IRA, etc and not actively traded by me. Then I have a much smaller lump of cash that I don't mind losing and I use that for doing trading on my own. It's more of a hobby or entertainment thing. Incidentally, my "fun" account has done WAY better than the "safe" stuff over the period of time I've been doing it.
Quote from: MadImmortalMan on March 04, 2010, 01:45:20 PMIncidentally, my "fun" account has done WAY better than the "safe" stuff over the period of time I've been doing it.
That's because you pay closer attention to it, i.e. "it's fun". I'm not a "buy and hold/forget about it" type investor. I'm in it for capital creation not capital preservation.
Quote from: citizen k on March 04, 2010, 04:12:44 PM
Quote from: MadImmortalMan on March 04, 2010, 01:45:20 PMIncidentally, my "fun" account has done WAY better than the "safe" stuff over the period of time I've been doing it.
That's because you pay closer attention to it, i.e. "it's fun". I'm not a "buy and hold/forget about it" type investor. I'm in it for capital creation not capital preservation.
It is, I assume, due also to a good heaping of luck.
Many attempt to do better than the market generally; few succeed, over the long haul. "Paying attention" only marginally increases most folk's odds. Often it has the reverse effect, as players are drawn in by a buying rush when times are good and panic sell when times are bad, leading to a "buy high and sell low" strategy that so often seems to be the result of attempting to time the market.
Not saying expertise makes no difference - my wife worked in the industry and nicely saved our collective bacon this last recessionary go-around.
But generally, excessive fiddling with accounts is a money-losing strategy for most; for one, every trade has a transaction cost that adds up; for another, there is the buy-high-sell-low effect.
I've also got significant savings that are not producing anything at the moment (and more to come as I finish paying my car). Oh, and absolutely no idea about the markets other than my Econ 101 class at Engineering School.
ETFs sound like something I should get into though. Which should I buy and which are to be avoided? :unsure:
Quote from: Malthus on March 04, 2010, 05:44:22 PM
Quote from: citizen k on March 04, 2010, 04:12:44 PM
Quote from: MadImmortalMan on March 04, 2010, 01:45:20 PMIncidentally, my "fun" account has done WAY better than the "safe" stuff over the period of time I've been doing it.
That's because you pay closer attention to it, i.e. "it's fun". I'm not a "buy and hold/forget about it" type investor. I'm in it for capital creation not capital preservation.
It is, I assume, due also to a good heaping of luck.
I wouldn't assume that at all. MiM is a smart fellow. Now if it was Jaron's portfolio, I would attribute it to "a good heaping of luck". :lol:
Quote from: Malthus on March 04, 2010, 11:49:56 AM
I'm reasonably happy with ING. Though I'm totally open to other recommendations. I use TD for my chequing and credit card, but not for investing - fees seemed hefty to me.
But how do you actually make it?
Sign with ING, accumulate the money in one of their monthly interest account until you have the money, transfer the capital in a TSFA linked to a investment plan of your choice, and voilà?
Quote from: citizen k on March 04, 2010, 06:20:45 PM
I wouldn't assume that at all. MiM is a smart fellow. Now if it was Jaron's portfolio, I would attribute it to "a good heaping of luck". :lol:
It's not a commentary on MiM's smarts; it's a commentary on the nature of the market. Plenty os super-bright folks who make it their business to live and breathe the markets go bust taking on lots of risk.
No matter how smart or skilled, risk is risk.
Quote from: Drakken on March 04, 2010, 06:23:29 PM
Quote from: Malthus on March 04, 2010, 11:49:56 AM
I'm reasonably happy with ING. Though I'm totally open to other recommendations. I use TD for my chequing and credit card, but not for investing - fees seemed hefty to me.
But how do you actually make it?
Sign with ING, accumulate the money in one of their monthly interest account until you have the money, transfer the capital in a TSFA linked to a investment plan of your choice, and voilà?
At ING you are limited to the products they happen to sell; it is pretty easy, you set up an account with them (you have to send 'em a cheque and sign some stuff), you can then transfer cash into a savings account with them or direct from your bank, and put cash into TSFA accounts - either savings accounts, GICs, or their mutual funds.
I presume, but do not know, that you can simply declare any account that meets the federal criteria a TSFA account, and put what you like (within the criteria) in the account. I'm just lazy, so I just buy the ING products. I dunno if they are the *best* products or not; they looked okay, but I don't have any real way of knowing other than seeing their simplified prospectus and looking under 'fees'. ;)
Here's the link:
http://www.ingdirect.ca/en/save-invest/taxfreesavingsaccounts/index.html
Quote from: Iormlund on March 04, 2010, 05:57:21 PM
I've also got significant savings that are not producing anything at the moment (and more to come as I finish paying my car). Oh, and absolutely no idea about the markets other than my Econ 101 class at Engineering School.
ETFs sound like something I should get into though. Which should I buy and which are to be avoided? :unsure:
What you might want to do first is see what brokerages operate in Spain. Then see which markets those brokerages allow you to trade in, and the fees. That narrows down your choices somewhat.
Quote from: Drakken on March 03, 2010, 04:20:04 PM
Well, for a long while I've been thinking about gathering some capital to buy stocks and trade on the side, but I do not know where to start (or how much I should start with). Everyone I have been consulting is rather risk-averse (diversify, buy blue chips and banks, etc.), but I still have some doubts. So:
A) What would be a good starting capital for a private stock trading venture out of my own pockets? I planned around 3,000$ would be a good start (Canadian, but still).
B) Even with a small amount, is it still better to diversify my stock wallet or should I hit it big first by speculating on a few eggs in my basket and diversify later as my capital grows?
C) What about penny stocks? Buying 1c stocks and reselling it when it hits 2c or 3c seems easy, although risky if the said stock is to disappear after a short while. Thoughts?
And yes, I am a newb in this, so KISS. I want to learn, but I need to grasp the basics first. :P
A) Minimum investment amounts are usually dictated by brokerages/banks/mutual funds due to admin costs of serving you. Or lot sizes of stocks. Other than that, there really is no lower limit.
B) The real question is how much risk you are willing to take, and what do you want to accomplish with the investment. If you want to gamble, then gamble on one or two stocks. If you want to be stable, then diversify.
C) Just remember, it is equally easy for a 4c stock to become 1c in a few hours ;)
Some random thoughts on investing.
1. Do everything online.
2. Start reading the news daily.
3. Live below your means.
4. Remember: high risk, high return; low risk, low return.
5. Anyone who tells you otherwise is lying.
6. Don't lend money to friends and relatives, or in fact any individual.
7. Your investment strategy should help you achieve your overall objectives in life.
8. Always keep at least 3 months of expenses in cash, preferrably more.
9. Don't start business partnerships with anyone and expect to make money by doing nothing except contributing capital.
10. No one can beat the market in the long-run.
11. Diversification is an effective means to reduce risk.
12. Fees and expenses matter hugely.
13. Never buy life insurance.
14. All get-rich-quick schemes are scams, and there is no exception to this.
15. A camel can beat a financial professional in picking stocks.
16. Default risk is real.
17. No one is interested in your financial well-being except yourself.
18. Never grant discretionary mandates to anyone, especially your spouse.
19. Financial professionals always have their own interests in mind, not yours.
20. Long-term investment is no gurantee of success.
21. Never invest on margin.
22. Pay down debt before investing.
23. Avoid trading odd lots.
24. Automation is your friend - set up your accounts so that you pay your bills automatically, and stash your money away automatically.
25. Figure out what your risk tolerance level is, and invest accordingly.
26. Passive investing beats active investing most of the time.
27. Allocation of asset classes matter hugely.
28. Stock dividends matter - the value of a stock is the discounted value of its future dividend stream.
29. Take advantage of all tax incentive schemes.
30. Never listen to financial advice from anyone. Including me.
Okey, let's take this one as an example.
As one big egotistical bastard who doesn't care about the environment, but rather in business venues, one field that interests me is the Oil sand industry in Alberta.
Looking on ETF lists, I found this one that I found interesting: Claymore Oil Sands Sector ETF (TSX-CLO).
http://cxa.marketwatch.com/tsx/en/market/quote.aspx?symbol=CLO
As instructed, I checked the P/R ratio, but it is not available over the market watch. The latest available dividend rating, however, is 0.073. Does it mean that, last time, it payed 0.073 of the funds exchange value per share to shareholders?
However, I checked the price history and its current price is rather low at around 16.60, while it reached as high as 30.00 in mid 2008. So even with a 1000$, I could directly buy betw. 50-75 shares, depending on the price at the time of the purchase. This volume is rather lower to the average number of shares sold daily of this ETF, though. Would it be considered an odd lot?
As I know that Alberta has huge reserves of Oil sands and the economy is picking up, both in Canada and the US, demand for oil from Alberta will certainly increase and, with time, thrive again. That makes it interesting in my eyes as a long-term investment plan.
Am I raving mad or something? I just want to understand what I am reading. :unsure:
1. Do everything online.
- Found that my bank does offer direct transaction accounts. So I'll take this one and follow my judgement.
2. Start reading the news daily.
3. Live below your means.
- Already do, that is why I can usually muster around 500$ per month in savings.
4. Remember: high risk, high return; low risk, low return.
- Always on my mind. But how is risk evaluated? What indicators must I keep watching?
5. Anyone who tells you otherwise is lying.
- Gotcha.
6. Don't lend money to friends and relatives, or in fact any individual.
- I don't lend, except at usury rates.
7. Your investment strategy should help you achieve your overall objectives in life.
- What if my objective in life is to hoard as much money as I can and get rich?
8. Always keep at least 3 months of expenses in cash, preferrably more.
- Thank God my GF pays half. ;)
9. Don't start business partnerships with anyone and expect to make money by doing nothing except contributing capital.
- Wouldn't that be tieing yourself to the success of one venue anyway? I can see giving loans or buying shares, but not to the point of a business partnership. :unsure:
10. No one can beat the market in the long-run.
- What does that mean? Simply that one day, it is inescapable that I will sell at loss?
11. Diversification is an effective means to reduce risk.
- Yep. Not all eggs in one basket.
12. Fees and expenses matter hugely.
- Hence why I'll follow your advice and follow my own judgement, rather than some broker or advisor.
13. Never buy life insurance.
- As in life insurance policy, or don't invest in the life insurance policy?
14. All get-rich-quick schemes are scams, and there is no exception to this.
- As we have had two huge investment scandals in Quebec last year, this issue is saillant. Gotcha.
15. A camel can beat a financial professional in picking stocks.
- Yep, doesn't beat randomness.
16. Default risk is real.
- Again, what signs or indicators should I be watching to detect these, if possible.
17. No one is interested in your financial well-being except yourself.
- Already selfish. Gotcha. :)
18. Never grant discretionary mandates to anyone, especially your spouse.
- I wouldn't even give her a check.
19. Financial professionals always have their own interests in mind, not yours.
20. Long-term investment is no gurantee of success.
- I don't understand this one. Do you mean that the interest return won't be worth the wait over long-term?
21. Never invest on margin.
- I invest only with money earned with the toil of my sweat, no borrowed money.
22. Pay down debt before investing.
- I'm still paying my student loans, but these are accounted in my monthly expenses.
23. Avoid trading odd lots.
- Does that mean I should get weary of stocks daily volume under 100 ?
24. Automation is your friend - set up your accounts so that you pay your bills automatically, and stash your money away automatically.
- Gotcha.
25. Figure out what your risk tolerance level is, and invest accordingly.
- Gotcha.
26. Passive investing beats active investing most of the time.
- That I seem to gather from the Malthus vs Tamas debate.
27. Allocation of asset classes matter hugely.
- Don't understand that one.
28. Stock dividends matter - the value of a stock is the discounted value of its future dividend stream.
- When I have a dividend ratio (like the above 0.073 for CLO), how should I read it? What would be the formula?
29. Take advantage of all tax incentive schemes.
- Hence the TFSA offer we have for yearly investment under 5000$.
30. Never listen to financial advice from anyone. Including me.
- Well, not as in follow slavishly advice like a drone. After all, I am my own master. ;)
Quote from: Drakken on March 05, 2010, 01:05:01 AM
Okey, let's take this one as an example.
As one big egotistical bastard who doesn't care about the environment, but rather in business venues, one field that interests me is the Oil sand industry in Alberta.
Looking on ETF lists, I found this one that I found interesting: Claymore Oil Sands Sector ETF (TSX-CLO).
http://cxa.marketwatch.com/tsx/en/market/quote.aspx?symbol=CLO
As instructed, I checked the P/R ratio, but it is not available over the market watch. The latest available dividend rating, however, is 0.073. Does it mean that, last time, it payed 0.073 of the funds exchange value to shareholders?
However, I checked the price history and its current price is rather low at around 16.60, while it reached as high as 30.00 in mid 2008. So even with a 1000$, I could directly buy betw. 50-75 shares, depending on the price at the time of the purchase. And this volume is rather close to the average number of shares sold daily of this ETF.
As I know that Alberta has huge reserves of Oil sands and the economy is picking up, both in Canada and the US, demand for oil from Alberta will certainly increase and, with time, thrive again. That makes it interesting in my eyes as a long-term investment plan.
Am I raving mad or something? I just want to understand what I am reading. :unsure:
http://www.claymoreinvestments.ca/etf/fund/clo
This is what you are looking for. The average P/E of the companies in the index 18.5, which is slightly on the high side. But I have no idea how they calculate it, e.g. whether it is weighted or it is just a simple average of all P/Es of the stocks the fund owns.
Dividend - the dividend is distributed quarterly. So if I understand correctly, in the last quarter the fund distributed $0.073 for each fund unit. On an annual basis, that's about 1.76%, which is on the low side. In HK at least, some funds distribute the dividend in cash, while others actually distribute additional fund units. You better check.
Quote from: Monoriu on March 05, 2010, 01:28:39 AM
This is what you are looking for. The average P/E of the companies in the index 18.5, which is slightly on the high side. But I have no idea how they calculate it, e.g. whether it is weighted or it is just a simple average of all P/Es of the stocks the fund owns.
So, basically, for each 1$ of net income, investors are ready to pay 18.50$? Does that mean that small investors like me are disavantaged because of our limited number of shares?
Still, if for each dollar they are ready to pay 18.50$, at 16.xx dollars it seems rather advantageous currently at below the 18.50 threshold, or I read it wrong?
Quote
Dividend - the dividend is distributed quarterly. So if I understand correctly, in the last quarter the fund distributed $0.073 for each fund unit. On an annual basis, that's about 1.76%, which is on the low side. In HK at least, some funds distribute the dividend in cash, while others actually distribute additional fund units. You better check.
I'm trying to find that information over the investor's home page, but I find nothing specific about this information. Any tips on where to look?
Also, that means that if I invest 1000$, at the current dividend yield I would gather around 17,60 per quarter, have I got it right?
Quote from: Drakken on March 05, 2010, 01:43:47 AM
Quote from: Monoriu on March 05, 2010, 01:28:39 AM
This is what you are looking for. The average P/E of the companies in the index 18.5, which is slightly on the high side. But I have no idea how they calculate it, e.g. whether it is weighted or it is just a simple average of all P/Es of the stocks the fund owns.
So, basically, for each 1$ of net income, investors are ready to pay 18.50$? Does that mean that small investors like me are disavantaged because of our limited number of shares?
Quote
Dividend - the dividend is distributed quarterly. So if I understand correctly, in the last quarter the fund distributed $0.073 for each fund unit. On an annual basis, that's about 1.76%, which is on the low side. In HK at least, some funds distribute the dividend in cash, while others actually distribute additional fund units. You better check.
I'm trying to find that information over the investor's home page, but I find nothing specific about this information. Any tips on where to look?
Also, that means that if I invest 1000$, at the current dividend yield I would gather around 17,60 per quarter, have I got it right?
Dividend - no. If you invest $1,000, you'll get $17.6 per YEAR. This assumes that the dividend rate will remain unchanged, which is usually not the case. You also need to check if you need to pay taxes on that $17.6. My guess is yes.
Small investors are always disadvantaged, but that has nothing to do with the P/E ratio. As I said, I have no idea how they calculate the ratio. A simple example. The fund can own shares in 2 companies, A and B. 90% of the fund's assets are in company A. 10% are in company B. Company A's P/E is 14. Company B's P/E is 5. You can display the fund's P/E as (14+5)/2 = 9.5 (which is a good deal). Or you can do 0.9*14 + 0.1*5 = 13.1 (which is a much more realistic picture).
Quote from: Monoriu on March 05, 2010, 01:52:21 AM
Dividend - no. If you invest $1,000, you'll get $17.6 per YEAR. This assumes that the dividend rate will remain unchanged, which is usually not the case. You also need to check if you need to pay taxes on that $17.6. My guess is yes.
Right, my mistake. It's per annum.
Quote
Small investors are always disadvantaged, but that has nothing to do with the P/E ratio. As I said, I have no idea how they calculate the ratio. A simple example. The fund can own shares in 2 companies, A and B. 90% of the fund's assets are in company A. 10% are in company B. Company A's P/E is 14. Company B's P/E is 5. You can display the fund's P/E as (14+5)/2 = 9.5 (which is a good deal). Or you can do 0.9*14 + 0.1*5 = 13.1 (which is a much more realistic picture).
Here are the weighting of all shares in the ETF. All are in the Energy sector:
SUNCOR ENERGY INC 8.47 %
CONNACHER OIL & GAS LIMITED 8.32 %
IVANHOE ENERGY INC 8.31 %
CANADIAN NATURAL RESOURCES LTD 7.20 %
IMPERIAL OIL LTD (I/L) 7.13 %
CENOVUS ENERGY INC 7.12 %
UTS ENERGY CORP 7.04 %
BLACKPEARL RESOURCES INC 6.66 %
CANADIAN OIL SANDS TRUST 6.60 %
BAYTEX ENERGY TRUST 5.98 %
PETROBANK ENERGY & RESOURCES 5.76 %
OPTI CANADA INC 5.76 %
OILSANDS QUEST INC 3.85 %
HUSKY ENERGY INC 3.34 %
NEXEN INC 3.11 %
PENN WEST ENERGY TRUST 2.91 %
ENERPLUS RESOURCES FUND 2.45 %
So what I can do tomorrow, as an exercice, is search the P/E of each share contained in the fund, weight them, and and see where it is at. With Excel, it won't take me very long. :)
So, if the weighted P/E of each share is lower than the P/E of the ETF, it's good right?
Quote from: Drakken on March 05, 2010, 01:57:21 AM
So, if the weighted P/E of each share is lower than the P/E of the ETF, it's good right?
I don't really understand what you mean. Another problem with the fund's P/E (in this case 18.5) is that I don't know if it is updated or not. The stock prices change every trading day, but I'm not sure if the figure of 18.5 is updated daily. If you do the exercise, the result should be more reliable. If your figure is different from 18.5, there could be a number of reasons, e.g. the firm is not honest, the figure is not updated, etc.
Quote from: Monoriu on March 05, 2010, 02:05:31 AM
I don't really understand what you mean. Another problem with the fund's P/E (in this case 18.5) is that I don't know if it is updated or not. The stock prices change every trading day, but I'm not sure if the figure of 18.5 is updated daily. If you do the exercise, the result should be more reliable. If your figure is different from 18.5, there could be a number of reasons, e.g. the firm is not honest, the figure is not updated, etc.
Simply, that the fund's multiple can be based solely on the fund's performance, but without taking in account what multiple each share part of the fund would perform if grouped together.
So if, say, the ETF's multiple is 18.5, but collectively the shares' weighted multiple would be below that, let's say at around 13.1, it would be a good deal to buy them. Yes, the fund's value on it own would be on the high side, but the multiple's value of the aggregated shares in the fund would make it more attractive, yet more cost-effective to just buy the lot via the ETF rather than each individually.
Of course, I don't speak investors' investobabble yet... so I hope you get what I mean. It may be overly simple for you, but for me it is a huge learning step. :)
As the TSX is now closed we have a fixed rating... but checking it tomorrow I will see if the multiple gets updated as the price per share evolves.
In the meantime, what good stock market and financial simulator would you recommend me to practice and learn?
Quote from: Drakken on March 05, 2010, 02:30:39 AM
In the meantime, what good stock market and financial simulator would you recommend me to practice and learn?
I don't think there are good simulators out there. Best way is "role-play" it - say, you pretend that you actually invest $ into that energy fund (without actually investing). You then track the price movement of that fund every day or every week. You then see the result in a few months or whatever to see how you did.
Quote from: Drakken on March 05, 2010, 02:14:28 AM
Quote from: Monoriu on March 05, 2010, 02:05:31 AM
I don't really understand what you mean. Another problem with the fund's P/E (in this case 18.5) is that I don't know if it is updated or not. The stock prices change every trading day, but I'm not sure if the figure of 18.5 is updated daily. If you do the exercise, the result should be more reliable. If your figure is different from 18.5, there could be a number of reasons, e.g. the firm is not honest, the figure is not updated, etc.
Simply, that the fund's multiple can be based solely on the fund's performance, but without taking in account what multiple each share part of the fund would perform if grouped together.
So if, say, the ETF's multiple is 18.5, but collectively the shares' weighted multiple would be below that, let's say at around 13.1, it would be a good deal to buy them. Yes, the fund's value on it own would be on the high side, but the multiple's value of the aggregated shares in the fund would make it more attractive, yet more cost-effective to just buy the lot via the ETF rather than each individually.
Of course, I don't speak investors' investobabble yet... so I hope you get what I mean. It may be overly simple for you, but for me it is a huge learning step. :)
As the TSX is now closed we have a fixed rating... but checking it tomorrow I will see if the multiple gets updated as the price per share evolves.
I don't understand what you mean. Regardless of whether the P/E that you calculate is higher or lower than 18.5, you won't get a "good deal" out of it. It just means that the company's way of calculating the P/E is different from yours.
Mono is wrong, there are several brokerages out there offering demo accounts you can fool around with, usually with a 15 minutes delay on stock prices, but thats a non-issue for you.
As for oil sand. Would not those sites need the price of oil to be quite higher to make them profitable? I remember that when oil price peaked people said at least now it is profitable to work with oil sand fields.
Quote from: Monoriu on March 05, 2010, 02:36:52 AM
I don't understand what you mean. Regardless of whether the P/E that you calculate is higher or lower than 18.5, you won't get a "good deal" out of it. It just means that the company's way of calculating the P/E is different from yours.
Gotcha. So if there is a difference, I will take that in account without judging if it is better or worse. After all, it is only one indicator.
So what would be a good average for P/E to aim for when I search for a decent share to stake in? I know it depends of the share price, but what would be an "acceptable" multiple, or an "acceptable" dividend yield?
Quote from: Tamas on March 05, 2010, 02:39:37 AM
As for oil sand. Would not those sites need the price of oil to be quite higher to make them profitable? I remember that when oil price peaked people said at least now it is profitable to work with oil sand fields.
Yes, the cost of producing oil from oil sand is rather prohibitive, and it becomes interesting profit-wise only when the oil price peaks. That is why Alberta was suddenly hit with a deficit when the crisis arrived and the oil price fell down.
However, with the recession past us and as demand for oil increases back again, chances are good the oil will peak again within a reasonable time frame. Hence why I like the fact that I could seize the chance while the price is still rather low and keep it, let's say, for 1-2 years and see.
You're wasting your time looking for market inefficiences Drakken. The P/E of a fund is the price per share divided by the total earnings per share.
There's different ways to look at P/E. A high P/E could mean that the market thinks earnings will increase in the future (since P/E is calculated on past earnings) or it could mean risk is very very low. Utilities used to have high P/Es because they delivered the same dividend year in year out (might have changed since deregulation).
I think it's more intuitive to look at the inverse of P/E, because earnings per share is like the percentage yeild that we're already used to looking at with bank deposits. For example your coal sands fund's E/P is 5.4%
Quote from: Drakken on March 05, 2010, 02:46:01 AM
Quote from: Monoriu on March 05, 2010, 02:36:52 AM
I don't understand what you mean. Regardless of whether the P/E that you calculate is higher or lower than 18.5, you won't get a "good deal" out of it. It just means that the company's way of calculating the P/E is different from yours.
Gotcha. So if there is a difference, I will take that in account without judging if it is better or worse. After all, it is only one indicator.
So what would be a good average for P/E to aim for when I search for a decent share to stake in? I know it depends of the share price, but what would be an "acceptable" multiple, or an "acceptable" dividend yield?
P/E is a tool, but one that we need to be very careful with. You don't go "P/E = <14 = must buy". Say, there are two large banks, one with a P/E of 10, and the other has a P/E of 30. Are you better off with buying the apprently cheaper one? Not necessarily. People aren't stupid, the market isn't stupid. The one with a high P/E may have very good prospects, so that its earnings will increase substantially in the next set of financial statements. In that case, the P/E is expected to come down significantly. The reverse can be true of the "cheaper" one.
Having said all that, historically, the P/E of the general market tend to be between 10-20. The average is somewhere around 14-16.
When it comes to P/E, there are also two versions - historical, and forecast. Historical P/E is just based on past information, which may or may not be relevant to the future. Forecast P/E are just guesstimates, but some could find them more relevant.
In HK right now, the "average" dividend yield of stocks tend to be between 1-5%. Stocks with 4-5% dividend yields tend to be stable cash cows (e.g. utilities). Few stocks can have a dividend yield above 5%. The yield is affected by a large number of factors - e.g. special one-off dividends, extreme volatility in share prices, etc. I'm sure there are stocks out there with a 10% dividend yield. Just be careful - that could be because management had nothing else to invest and distibuted a one-off special dividend that could not be repeated in the future.
Quote from: Monoriu on March 04, 2010, 09:01:08 PM
Some random thoughts on investing.
1. Do everything online.
2. Start reading the news daily.
3. Live below your means.
4. Remember: high risk, high return; low risk, low return.
5. Anyone who tells you otherwise is lying.
6. Don't lend money to friends and relatives, or in fact any individual.
7. Your investment strategy should help you achieve your overall objectives in life.
8. Always keep at least 3 months of expenses in cash, preferrably more.
9. Don't start business partnerships with anyone and expect to make money by doing nothing except contributing capital.
10. No one can beat the market in the long-run.
11. Diversification is an effective means to reduce risk.
12. Fees and expenses matter hugely.
13. Never buy life insurance.
14. All get-rich-quick schemes are scams, and there is no exception to this.
15. A camel can beat a financial professional in picking stocks.
16. Default risk is real.
17. No one is interested in your financial well-being except yourself.
18. Never grant discretionary mandates to anyone, especially your spouse.
19. Financial professionals always have their own interests in mind, not yours.
20. Long-term investment is no gurantee of success.
21. Never invest on margin.
22. Pay down debt before investing.
23. Avoid trading odd lots.
24. Automation is your friend - set up your accounts so that you pay your bills automatically, and stash your money away automatically.
25. Figure out what your risk tolerance level is, and invest accordingly.
26. Passive investing beats active investing most of the time.
27. Allocation of asset classes matter hugely.
28. Stock dividends matter - the value of a stock is the discounted value of its future dividend stream.
29. Take advantage of all tax incentive schemes.
30. Never listen to financial advice from anyone. Including me.
I agree with almost all of this. Am I: turning into Mono? :(
;)
I suspect where whe disagree is in the extent to which we wish to live below our means. I certainly do, but not to the same extent as you appear to.
For example, I was reading an article the other day about why a house is a lousy investment. What the writer had to say had some truth to it - houses cost money in lots of ways (taxes, heating, repairs) which have to be off-set against the capital appreciation - but the writer never mentioned the fact that, unlike a pile of stock certificates, you can *live* in the house. In short it may be a lousy investment but it also covers an expense you would need to incur in any event ...
My personal investment strategy is aimed at paying down real estate debt and taking advantage of tax incentives. I set up a system to automatically skim a certain amount out of my account every month into my ING savings account, and from there I split it: half goes to quarterly extra-payments on mortgage, half goes into RRSP, TFSA and RESP accounts.
By far the most significant aspect of my investment plan is skimming the money out *automatically*, so I get used to living with an apparently lower income.
'Set up an automatic savings system" is just about the only bit of financial advice that is good for pretty well everyone.
So, a good plan would be either to
A) Open a TSFA account with the bank which offers the best bang for the buck and regularly inject money in the account and buy the ETF or fund I want to invest in and happens to be compatible with TFSA?
Or
B) Open a Direct Brokerage Account with my current bank, without any intermediary, and just buy the ETFs or stock I wish to invest in?
Or
C) Both at the same time?
As a small investor, I can easily place money in a TFSA and seldom max out, because my net income is rather small great to begin with. However, can more than one fund, stock, or ETF can be included in the same TFSA? Are TFSA flexible as far as type of investments are concerned?
Quote from: Drakken on March 05, 2010, 11:47:36 AM
So, a good plan would be either to
A) Open a TSFA account with the bank which offers the best bang for the buck and regularly inject money in the account and buy the ETF or fund I want to invest in and happens to be compatible with TFSA?
Or
B) Open a Direct Brokerage Account with my current bank, without any intermediary, and just buy the ETFs or stock I wish to invest in?
Or
C) Both at the same time?
As a small investor, I can easily place money in a TFSA and seldom max out, because my net income is rather small great to begin with. However, can more than one fund can be included in the same TFSA? Are TFSA flexible as far as type of investments are concerned?
Many of your TFSA questions answered:
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/menu-eng.html
I honestly don't know off the top. I do know that you can have as many TFSA accounts as you want, as long as you don't go over your limit.
Quote from: Malthus on March 05, 2010, 11:58:25 AM
Many of your TFSA questions answered:
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/menu-eng.html
I honestly don't know off the top. I do know that you can have as many TFSA accounts as you want, as long as you don't go over your limit.
I'm strongly inclined to go toward a self-directed TFSA, then. I don't want to take TFSA with plans that are decided for me. I want to take it slow, a first lump sum of 1000$, plus 200-300$ per month in investments I choose.
The thing is, though, I still have my student loan to repay. Like I said to Mono, it repayment is covered in my monthly expenses, so any net income I invest is after loan repayment. Aside of that, no debt: no mortgage, no credit card debt, no liability. And any money I want to invest is money earned, not from margin.
If I wait until I repay my loan, however, I won't be able to invest before the age of 37. It makes no sense. :wacko:
Forget trading stocks, just put the money in a low fee no load broadly based mutual fund (eg, an S&P 500 tracker). Within a tax advantaged account to the extent possible.
$3k isn't enough money to effectively trade stocks: the fees will take too big of a percentage of your investment and the gain isn't worth the headache. If you really want to trade stocks with $3k, be honest with yourself that you aren't investing, but gambling.
Quote from: alfred russel on March 05, 2010, 12:15:17 PM
Forget trading stocks, just put the money in a low fee no load broadly based mutual fund (eg, an S&P 500 tracker). Within a tax advantaged account to the extent possible.
$3k isn't enough money to effectively trade stocks: the fees will take too big of a percentage of your investment and the gain isn't worth the headache. If you really want to trade stocks with $3k, be honest with yourself that you aren't investing, but gambling.
I fully accept that part of my money will be in speculative venues - even if not day trading.
Not all of it, of course, but some of it. My first priority is to build up some capital, hence our talk about the TFSA. And from that capital, a certain % will be placed into riskier securities while the rest is left to stu and mature.
Even through direct brokerage? Of course brokers on the stock exchange floor extract fees for the trades they do, it's normal, but I thought going the self-directed way cut through the other administrative fees that I would usually pay to both bank and intermediary brokers if I dealt through the bank.
Quote from: Drakken on March 05, 2010, 12:18:59 PM
Quote from: alfred russel on March 05, 2010, 12:15:17 PM
Forget trading stocks, just put the money in a low fee no load broadly based mutual fund (eg, an S&P 500 tracker). Within a tax advantaged account to the extent possible.
$3k isn't enough money to effectively trade stocks: the fees will take too big of a percentage of your investment and the gain isn't worth the headache. If you really want to trade stocks with $3k, be honest with yourself that you aren't investing, but gambling.
I fully accept that part of my money will be in speculative venues - even if not day trading.
Not all of it, of course, but some of it. My first priority is to build up some capital, hence our talk about the TFSA.
Even through direct brokerage? Of course brokers on the stock exchange floor extract fees for the trades they do, it's normal, but I thought it cut through the other administrative fees that I would usually pay to both bank and intermediary brokers.
Imagine you are so smart you can beat the stock market by 5% a year. That would make you one of the savviest investors in the world.
If the average stock market returns are 10%, then with a 10% return on $3,000 you would get $300. With a 15% return, you will get $450. For a $150 extra gain, I would question whether it is worth your time to even bother trading stocks.
But there are a few other factors: if you are paying $7 a trade (dirt cheap, and about the lowest I know of), then every position you take and then exit will cost you $14 (plus there will be a spread that will cost you, but we'll ignore that). Even if you enter a new position every month, that will be $168, more than wiping out your extra profit. Also, your gains will be considered active trading gains, which are both immediately taxable and at the ordinary income rate (passive gains aren't immediately taxable and are taxed at the lower cap gains rate--at least in the US).
So even assuming that you are one of the great investors of our era, you lose. If you are just another person without any great investing knowledge? You don't get any extra gains, but you still have the fees and the tax disadvantages.
Well, you can buy an ETF and forget it for a year, even. Yet, you are investing in an area, as broadly or as specialized, as you want.
My advice:
1) make sure you have $10k put aside (or six months living expenses) in a money market account.
2) pay off all credit cards or other debt that has a high interest rate (this excludes a mortgage and possibly a student loan, depending on the terms)
3) put aside money in safe investments such as CDs for living expenses that are coming up (a down payment for a house, tuition for a master's degree, etc.)
4) max out all tax advantaged retirement accounts with investments in broad based mutual funds with low fees (this should contain a mix of stock and bond funds, depending on your age--probably mostly stock for you)
5) With any left over money, continue investing as in #4
Quote from: Tamas on March 05, 2010, 12:37:17 PM
Well, you can buy an ETF and forget it for a year, even. Yet, you are investing in an area, as broadly or as specialized, as you want.
But why not a no load mutual fund? I know it isn't much money, but why even spend the extra fees to buy an ETF?
Well, I dont pose to be an expert, especially since I live in an other country.
By the way, to counter my own point: it seems my pension fund has made some pretty neat profits, especially considering the nosedive it took during the recession panic time. Basically what option you have with your mandatory pension is to choose between a few (usually3) portolios at your bank of choice, one very conservative (state bonds and such) and very stockmarket-oriented, and one in between. I am in the riskiest of course, figuring I have about 40 years left, and as I said it has been paying off very nicely, so maybe there is nothing wrong with an "autopilot"
Quote from: alfred russel on March 05, 2010, 12:43:07 PM
Quote from: Tamas on March 05, 2010, 12:37:17 PM
Well, you can buy an ETF and forget it for a year, even. Yet, you are investing in an area, as broadly or as specialized, as you want.
But why not a no load mutual fund? I know it isn't much money, but why even spend the extra fees to buy an ETF?
Don't ETFs have maximum annual fees? One such ETF had a maximum annual fee of 0.650%.
Quote from: alfred russel on March 05, 2010, 12:40:23 PM
My advice:
1) make sure you have $10k put aside (or six months living expenses) in a money market account.
2) pay off all credit cards or other debt that has a high interest rate (this excludes a mortgage and possibly a student loan, depending on the terms)
3) put aside money in safe investments such as CDs for living expenses that are coming up (a down payment for a house, tuition for a master's degree, etc.)
4) max out all tax advantaged retirement accounts with investments in broad based mutual funds with low fees (this should contain a mix of stock and bond funds, depending on your age--probably mostly stock for you)
5) With any left over money, continue investing as in #4
So, in short, if you do not have income that classes you at least in the "middle" middle class, don't bother.
But the thing is, I don't want to let my savings stu in some checking account with abysmally low interest rates, like your common Joe. I want it to grow. But I need to work with my income as it is now.
My personal income (30K gross) would class me in very low middle class, but I have next to no passive (I just have my student loan, but as I said, the repayment is accounted in my expenses already). I'm living low, but comfortable lifestyle.
So already 1) is out (10K?! That would be saving for years at my current income and I'm 30 already), and I'll never be able to max out at 4).
Quote from: Drakken on March 05, 2010, 01:05:44 PM
Don't ETFs have maximum annual fees? One such ETF had a maximum annual fee of 0.650%.
Basically all my personal investments that are in stocks are in two mutual funds with Vanguard: one is an index fund tracking all US stock, the other is an index fund tracking all international stock excluding the US.
Here is a close analog to the US stock index fund:
https://personal.vanguard.com/us/funds/snapshot?FundId=0085&FundIntExt=INT
The annual expenses are 0.18%. Quite a bit lower than your ETF--even if it has low fees too. Also, when you buy into the vanguard fund it is completely free. For the ETF going through a broker, you are going to have to pay a fee (maybe a low one of $7 or so, but why even pay that?).
Quote from: Drakken on March 05, 2010, 01:12:51 PM
So, in short, if you do not have income that classes you at least in the "middle" middle class, don't bother.
But the thing is, I don't want to let my savings stu in some checking account with abysmally low interest rates, like your common Joe. I want it to grow. But I need to work with my income as it is now.
My personal income (30K gross) would class me in very low middle class, but I have next to no passive (I just have my student loan, but as I said, the repayment is accounted in my expenses already). I'm living low, but comfortable lifestyle.
So already 1) is out (10K?! That would be saving for years at my current income and I'm 30 already), and I'll never be able to max out at 4).
The problem is that if you don'thave $10k (or a decent size as a cushion), what happens if you lose your job or you get sick (or even total your car)? The money may not be there if it has been put in the stock market--you could end up with nothing at all and a big pile of bills.
Just because you put the money in a money market doesn't mean you won't have passive income--not too long ago money markets were returning over 5% a year--a lot more than most stocks in recent years.
And why would you be upset you can't make it to #5? Who wants their investment income to be taxable?
Quote from: alfred russel on March 05, 2010, 01:19:14 PM
Quote from: Drakken on March 05, 2010, 01:05:44 PM
Don't ETFs have maximum annual fees? One such ETF had a maximum annual fee of 0.650%.
Basically all my personal investments that are in stocks are in two mutual funds with Vanguard: one is an index fund tracking all US stock, the other is an index fund tracking all international stock excluding the US.
Here is a close analog to the US stock index fund:
https://personal.vanguard.com/us/funds/snapshot?FundId=0085&FundIntExt=INT
The annual expenses are 0.18%. Quite a bit lower than your ETF--even if it has low fees too. Also, when you buy into the vanguard fund it is completely free. For the ETF going through a broker, you are going to have to pay a fee (maybe a low one of $7 or so, but why even pay that?).
That's pretty well what I do - my cash is in an ING fund (Streetwise Balanced), no-load.
If you feel like gambling, learn to play poker seriously instead. You'll scratch your gambling itch much more effectively that way, and get a lot more return if you put your mind to it.
You may also learn that in stochastic processes, quality of results is not strongly connected to quality of decisions in in the short term, something that might save you huge amounts of money once you actually have it. Gambling with $3000 in the stock market seems like a recipe to grind it down to nothing quickly but surely.
Quote from: DGuller on March 05, 2010, 01:33:31 PM
If you feel like gambling, learn to play poker seriously instead. You'll scratch your gambling itch much more effectively that way, and get a lot more return if you put your mind to it.
You may also learn that in stochastic processes, quality of results is not strongly connected to quality of decisions in in the short term, something that might save you huge amounts of money once you actually have it. Gambling with $3000 in the stock market seems like a recipe to grind it down to nothing quickly but surely.
You know I am already playing poker and studying it seriously, although I reaped my winnings from NL10, took a break, and restarted at 2NL to rebuild my bankroll from scratch. But that's a hobby, not something to build up my wealth - at least not yet.
And like I said, it's not as if I wanted to gamble all my capital into risky ventures like some microfish schooling around. I'm perfectly willing to build the bulk of my capital on steady, low-risk growth over a few years. Just that I do not want to wait until I'm 55 to have at last a sizeable capital to experiment.
Currently, for me the moment is ideal because, while I have a low income, I have lower passives as well: no house, no child, no car, no debt aside my student loan at a reasonably young age. I'm the type of miser Mono would like.
Drakken, if you want to make more money, the best way isn't to focus on how much passive income you can squeeze out of $3k. You can write in complete sentences, which means you are more articulate than many in your age group that are making a lot more money. You could pursue a more lucrative career.
Quote from: alfred russel on March 05, 2010, 01:27:11 PM
The problem is that if you don'thave $10k (or a decent size as a cushion), what happens if you lose your job or you get sick (or even total your car)? The money may not be there if it has been put in the stock market--you could end up with nothing at all and a big pile of bills.
Just because you put the money in a money market doesn't mean you won't have passive income--not too long ago money markets were returning over 5% a year--a lot more than most stocks in recent years.
And why would you be upset you can't make it to #5? Who wants their investment income to be taxable?
I have already around 1500$ in my account right now, just in case something happens. And I live in Canada, where healthcare is cheap and I'm far qualified for employment insurance if something happens.
The problem is, that time and money is wasted by letting my unused money in a checking account doing nothing. Hence why I search for investment both flexible and easy to liquidate if prices are high or if a problem happens.
And thanks to you, I am learning about the possibility of putting it into money market right now, at a much higher yield that most stocks and checking accounts doing nothing. I didn't do it before because I didn't know they existed.
My first priority is building up. To me, reach #4 would be the ultimate short-to-middle-term goal. I'll be proud when I'm able to max out the 5K limit per year of a TFSA of my choosing, for example.
Quote from: Drakken on March 05, 2010, 01:12:51 PM
Quote from: alfred russel on March 05, 2010, 12:40:23 PM
My advice:
1) make sure you have $10k put aside (or six months living expenses) in a money market account.
2) pay off all credit cards or other debt that has a high interest rate (this excludes a mortgage and possibly a student loan, depending on the terms)
3) put aside money in safe investments such as CDs for living expenses that are coming up (a down payment for a house, tuition for a master's degree, etc.)
4) max out all tax advantaged retirement accounts with investments in broad based mutual funds with low fees (this should contain a mix of stock and bond funds, depending on your age--probably mostly stock for you)
5) With any left over money, continue investing as in #4
So, in short, if you do not have income that classes you at least in the "middle" middle class, don't bother.
But the thing is, I don't want to let my savings stu in some checking account with abysmally low interest rates, like your common Joe. I want it to grow. But I need to work with my income as it is now.
My personal income (30K gross) would class me in very low middle class, but I have next to no passive (I just have my student loan, but as I said, the repayment is accounted in my expenses already). I'm living low, but comfortable lifestyle.
So already 1) is out (10K?! That would be saving for years at my current income and I'm 30 already), and I'll never be able to max out at 4).
This game is all about managing risks. I keep a "cushion" of cash in GICs; every month, one comes due. True interest rates are horrible right now, but if I'm ever in trouble it is nice to know there is money around. It took me a long time to build it up, because I was doing other things at the time.
Sadly, dealing with one's own finances is often not much fun; it's more of a heard-headed look at stuff like fees and comparative rates. For example, paying off debt is a boring but often lucrative financial move - I make extra payments on my mortgage for this reason: it has a guaranteed return.
Think of all these things as part of a balanced portfolio. Having cash in it serves a good purpose, even if rates suck. For growth, it is far better if you don't have much money to go with a fund that has low fees (and check carefully for various sorts of hidden fees) - it's the fees as much as anything that will kill ya; trading in stocks for small amounts is pointless if you have to pay a transaction fee each time.
Best of all, concentrate on increasing revenue.
If you're good at poker, a measely amount like $3000 will be put to much better use there, as your bankroll. Poker income doesn't scale up well, so you get your best returns while investing small amounts. Your $3000 invested in the market will take its sweet time to compound to anything worthwhile.
Of course, the key is that you have to be good. However, if you are good, it's not unreasonable to turn your $3,000 into $10,000 for the year, which is a much better return for the effort.
Quote from: alfred russel on March 05, 2010, 01:48:35 PM
Drakken, if you want to make more money, the best way isn't to focus on how much passive income you can squeeze out of $3k. You can write in complete sentences, which means you are more articulate than many in your age group that are making a lot more money. You could pursue a more lucrative career.
An even better idea. An extra ten thousand or two per year pretty soon adds up to real money, a bit more than a reasonable return on $3,000.
Quote from: DGuller on March 05, 2010, 02:00:11 PM
If you're good at poker, a measely amount like $3000 will be put to much better use there, as your bankroll. Poker income doesn't scale up well, so you get your best returns while investing small amounts. Your $3000 invested in the market will take its sweet time to compound to anything worthwhile.
3K$ in poker, right now, at my income level? No, it's scared money.
750$, ultimately, I can live with it if I lose it. And I have a rakeback deal. At 25NL it's 30 buy-ins. Hell, even 500$ would be fine if 25NL is my lowest limit I allow myself to grind at.
Quote from: alfred russel on March 05, 2010, 01:48:35 PM
Drakken, if you want to make more money, the best way isn't to focus on how much passive income you can squeeze out of $3k. You can write in complete sentences, which means you are more articulate than many in your age group that are making a lot more money. You could pursue a more lucrative career.
If it can be of any interest, I am tired of working in a job I love, yes, but which I feel I have no chance of advancement. Yes, it's been only almost three years, but I feel it is long enough.
So much, in fact, that I am thinking to go meet my boss and actually ask him, point blank, whether or not there is advancement possible at my position, even if it means moving to Toronto or Vancouver. Because I won't be pulling data tables from surveys all my life, that's for sure. And how can I have chances of advancement if I don't express my interest in actually moving up?
But the fact that I've stopped my Master's Degree to work full time feels like a hindrance to me, even though the positive corollary is that, as college graduate, I am qualified for any administrative job which doesn't require prior specialized knowledge.
Quote from: alfred russel on March 05, 2010, 01:19:14 PM
Quote from: Drakken on March 05, 2010, 01:05:44 PM
Don't ETFs have maximum annual fees? One such ETF had a maximum annual fee of 0.650%.
Basically all my personal investments that are in stocks are in two mutual funds with Vanguard: one is an index fund tracking all US stock, the other is an index fund tracking all international stock excluding the US.
Here is a close analog to the US stock index fund:
https://personal.vanguard.com/us/funds/snapshot?FundId=0085&FundIntExt=INT
The annual expenses are 0.18%. Quite a bit lower than your ETF--even if it has low fees too. Also, when you buy into the vanguard fund it is completely free. For the ETF going through a broker, you are going to have to pay a fee (maybe a low one of $7 or so, but why even pay that?).
The expense ratio on IVV (an S&P 500 tracker ETF) is 0.09% or half the expenses of Vanguard. If you buy it through Fidelity there is no brokerage fee.
Quote from: The Minsky Moment on March 05, 2010, 03:46:47 PM
The expense ratio on IVV (an S&P 500 tracker ETF) is 0.09% or half the expenses of Vanguard. If you buy it through Fidelity there is no brokerage fee.
The Vanguard fund is a broader fund than the S&P500, and if you have more money the expense ratio falls to .09%.
That isn't very relevant to this discussion, your ETF may be better for Drakken, I just wanted to defend Vanguard. ;)
Quote from: The Minsky Moment on March 05, 2010, 03:46:47 PM
Quote from: alfred russel on March 05, 2010, 01:19:14 PM
Quote from: Drakken on March 05, 2010, 01:05:44 PM
Don't ETFs have maximum annual fees? One such ETF had a maximum annual fee of 0.650%.
Basically all my personal investments that are in stocks are in two mutual funds with Vanguard: one is an index fund tracking all US stock, the other is an index fund tracking all international stock excluding the US.
Here is a close analog to the US stock index fund:
https://personal.vanguard.com/us/funds/snapshot?FundId=0085&FundIntExt=INT
The annual expenses are 0.18%. Quite a bit lower than your ETF--even if it has low fees too. Also, when you buy into the vanguard fund it is completely free. For the ETF going through a broker, you are going to have to pay a fee (maybe a low one of $7 or so, but why even pay that?).
The expense ratio on IVV (an S&P 500 tracker ETF) is 0.09% or half the expenses of Vanguard. If you buy it through Fidelity there is no brokerage fee.
Is it available through Canadian markets? Don't see IVV after a quick market search.
Quote from: Drakken on March 05, 2010, 04:47:40 PM
Is it available through Canadian markets? Don't see IVV after a quick market search.
My broker allows me to buy and sell in certain overseas markets (Toronto, London, Hong Kong, Tokyo, Paris, and Frankfurt) for an additional fee. I'm guessing you have similar options.
Whether you want to assume the currency risk is another question.
Quote from: alfred russel on March 05, 2010, 04:15:53 PM
Quote from: The Minsky Moment on March 05, 2010, 03:46:47 PM
The expense ratio on IVV (an S&P 500 tracker ETF) is 0.09% or half the expenses of Vanguard. If you buy it through Fidelity there is no brokerage fee.
The Vanguard fund is a broader fund than the S&P500, and if you have more money the expense ratio falls to .09%.
That isn't very relevant to this discussion, your ETF may be better for Drakken, I just wanted to defend Vanguard. ;)
The broader Vanguard index is actually available in ETF form under "VTI" with an expense ratio of .07% :)
Needless to say the correlation with the S&P is very high.