What I'm Reading
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Saturday, May 13. 2006
So one of my regular viewers has posted this question - what is my motivation for giving out financial advice? That's an excellent question. Why do I blog about financial matters? Am I trying to hype up a stock that I own, so it will go up? Am I being paid for recommending a service from a certain financial institution? Do I like to brag about success? No. No. And No.
I don't recommend stocks, services, or mutual funds in order to hype them up and profit from them. I just recommend things where I think it can make you some money because that's where my money is at. I always disclose whether I currently hold a certain stock or mutual fund that I'm recommending so there's no conflict of interest. In addition, you get the mutually assured destruction guarentee. This means that if buy a fund or stock that I hold, then it means we're in it together. If you get absolutely destroyed by it, then I get absolutely destroyed by it as well. If it brings riches and glory, then I get riches and glory. Obviously this isn't reason enough to own a stock or a fund because you have to do the research before acting, but it does have the Chan Stamp of Approval™.
Anyway, I write not to brag about success, but I write to educate people because investing is a lot easier than it appears. There's a lot of free money to be had that people aren't aware of. From experience, a lot of people that I know who are in their early 20s don't have a lot of knowledge or experience about investing, so this blog is a perfect venue for this sort of thing since they're my primary demographic.
My initial motivation for writing articles about investing came from an experience I had with a colleague at work. He asked, "Chan, when do you think you'll have a networth of $100,000?" I told him I had no clue because I was still a student, and $100,000 seems very distant. However, I did ask him when he thought he would reach the $100,000 mark. He said he wanted to reach that goal by the time he was 30 years old. I then asked him how he was going to reach that goal, and he said that he was investing his money.
This answer intrigued me, so I dug a little deeper. I asked him how he was investing his money. He said that he currently had $25,000 in a bank account, and he was making 0.5%. He seemed pretty smug about it because he said most banks don't even give interest any more, and he was getting 0.5%. So, he thought he was a savvy investor because he was getting interest. At this point, I was ready to curl up into a ball on the ground and die. I was shocked that he believed money sitting in a bank account getting 0.5% even counted as investing. From that point on, I heard the war cry to educate people my age about REAL investing.
Continue reading "Ask Chan - What's Your Motivation For Giving Out Financial Advice?"
Wednesday, May 10. 2006
Alright, so we have our third installment of our popular Newbies Guide To RRSPs series. For those that are just joining us, Part 1 covered why RRSPs (Registered Retirement Savings Plan) are even important. We saw that if you put even as little as $100 into your retirement savings, and your money grew at 7% a year, you would have $2,100 by the time you retired. Part 2 of our series covered a super low-risk investment option called GICs (Guarenteed Interest Certificates). The advantage of GICs is that there's close to no risk, and your investment can grow safely at a steady 2%-6% a year depending on what interest rates are like.
Now, I will introduce a more risky investment vehicle known as mutual funds. Chances are, you've probably heard of them, but you may not know exactly what they are.
What Are Mutual Funds?A mutual fund is essentially a collection of cash, GICs, stocks, and bonds that's managed by a professional. People collectively put money into a mutual fund and they own shares of the mutual fund. Mutual funds are a very popular choice, and there are trillions of dollars invested in mutual funds. The majority of Candians and Americans have some sort of money invested into mutual funds.
Buying a mutual fund is a lot like buying stock in a company. A mutual fund has a price that changes every day, and you can buy shares of it. So for example, if a mutual fund's price is $10/share and you have $100 to invest, you can buy 10 shares of the mutual fund.
What Are The Advantages of Mutual Funds?
Jim Cramer, one of the stock analysts that I follow, says that an investor should have $10,000 in mutual funds before they consider going out and investing in individual stocks. Basically, that first $10,000 that you put in mutual funds is a learning excercise, and hopefully it helps you build your confidence and knowledge as an investor. Mutual funds was my first investment, and I learned quite a bit from them.
Continue reading "Newbies Guide To RRSPs - Part 3 Mutual Funds"
Monday, May 8. 2006
I have a general dislike of cellphones, so I like to take pot shots at them whenever I can. My perception of cellphones is largely impacted by annoying friends that do dumb things with them.
These dumb things include:
In either case, Sweden has finished a study that suggests that people who use cellphones too much have a heightened risk of developing brain tumours.
From the article, "Long-term cell use raises brain tumor risk":
Researchers at the Swedish National Institute for Working Life said they looked at the mobile phone use of 905 people between the age of 20 and 80 who had been diagnosed with a malignant brain tumor and found a link.
"A total 85 of these 905 cases were so-called high users of mobile phones, that is they began early to use mobile and/or wireless telephones and used them a lot," the study said.
"The study also shows that the rise in risk is noticeable for tumors on the side of the head where the phone was said to be used," it added.
Kjell Mild, who led the study, said the figures meant that heavy users of mobile phones, for instance of who make mobile phone calls for 2,000 hours or more in their life, had a 240 percent increased risk for a malignant tumor on the side of the head the phone is used.
"The way to get the risk down is to use hands-free," he told Reuters.
Let that be a lesson to the rest of you!
Sunday, May 7. 2006
You might have noticed the website was down for a good chunk of the weekend. The computer that hosts this website had a catastrophic hardware failure; one of their hard drives failed. In either case, it looks like I lost data from Friday and Saturday, so one of my blog articles was lost, and all of Natalie's comments for the last two days were lost (I did read them though!). Anyway, kind of frustrating. They said they knew that the hard drive has been bad for quite some time, but they didn't bother replacing it. Grrr.
Anyway, I finally got the website back up and running now. The server seems to be a bit flaky still (not in the delicious sense). Sorry for any inconvenience this may have caused.
Saturday, May 6. 2006
I've been following this interesting court case that was being argued in the Supreme Court of Canada. The heart of the case - Say you host a house party where guests bring their own booze. A guest gets drunk and leaves the party and decides to drive. While he drives, he gets into a horrible car accident. Is the host of the house party responsible for the drunk driver's actions?
The Globe and Mail has an article that covers this which is entitled, "Hosts Not Liable For Partygoer Driving Drunk."
The Supreme Court of Canada has ruled that two hosts of a New Year's Eve party were not responsible for the havoc caused by a guest who drunkenly drove away from their house and caused crippling injuries to a teenage girl.
In a unanimous decision the court upheld an Ontario Court of Appeal decision that said the two were not liable for the pain and suffering of Zoe Childs, when the car she was riding in was rammed by Desmond Desormeaux on Jan. 1, 1999, causing her to become a paraplegic. Her boyfriend was killed.
Mr. Desormeaux had been drinking at a "bring your own bottle" party hosted by Julie Zimmerman and Dwight Courrier in a suburb of Ottawa. Mr. Desormeaux went to jail for his crime, but he had no car insurance to pay Ms. Childs. She sued the hosts, claiming they should have stopped him from getting in his car in a drunken state.
The top court said the couple, who did not directly serve alcohol to Mr. Desormeaux, could not have foreseen the possibility of an accident that would injure Ms. Childs.
"I conclude that as a general rule, a social host does not owe a duty of care to a person injured by a guest who has consumed alcohol . . ," Chief Justice Beverley McLachlin wrote for the court. "A person who accepts an invitation to a party does not park his autonomy at the door. The guest remains responsible for his or her conduct."
I completely agree with the ruling that the judges made. It would be very unjust to blame one's stupid choice on someone else like the party hosts. If the party hosts were liable, then that's injustice because we end up with a society where people aren't responsible for their own actions. In addition, if the party hosts were held liable, then where do we draw the line? Could the liquor store that sold booze to the drunk driver be liable as well? How about the car manufacturer for building the car?
Anyway, I'm somewhat surprised that this had to go all the way up to the Supreme Court. I may be naive, but common sense immediately tells me that the party hosts aren't liable. One my friends said that it probably had to go to the Supreme Court to settle the issue once and for all since there have been similar claims. This sets precedence in the law.
The other interesting I read was about how this ruling could affect us if party hosts were indeed found liable. The article suggested that if you were holding a wedding reception at a party hall, you would have to get insurance for every one of your guests because each of one of them can potentially drink too much and drive, and therefore become a legal liability. That would dramatically increase the cost of throwing a wedding, or any party that may involve alcohol.
In either case, sound reasoning prevails this time.
Wednesday, May 3. 2006
In the last two weeks, I've been making adjustments to my stock portfolio since it's a new quarter, and we're in a new economic environment. So, it was time for some spring cleaning for the old portfolio.
In April, this is what the portfolio looked like when broken down by sector:
As you can see, the portfolio was horriblely heavy in technology stocks. Jim Cramer, a stock analyst that I follow, says that a diversified portfolio should have at most 20% per sector.
You might ask, what's the harm of having say 60% in tech if it's doing REALLY well? You might say, Chan, your alternative energy stock, Ballard, has been doing super well, why don't you put 100% into it? My response is, remember the dot com bubble? A lot of people had 100% of their money in technology stocks, and when the bubble burst, they lost everything. By diversifying, you limit your potential gains, but you also limit your potential losses. As Jim Cramer says, "diversification is the only free lunch" in investing. You never want to have all your eggs in one basket.
Also, it should be noted that the portfolio shown above is just my stock portfolio. I also hold investments in mutual funds which act as a fallback position just in case my stock picks crap out. I don't list them because they're not as exciting. So, I am actually more diversified than what the graphs show above, but still, I'm overweighted in tech. (Mutual funds will be covered in another article later).
In the last week, I've been tweaking my portfolio, and now it looks like this:
As you can see, I've added natural resources to my mix. Technology is still overweight, and I hope to bring it down some more by the end of the month.
Anyway, the reason why I've added natural resources is because oil prices are at a historical high right now, and I believe it's only going higher as summer approaches. Demand for oil goes even higher during driving season. People think that oil companies are ripping customers off by charging crazy high prices for oil, but that's simply not the case. The simple fact is that demand for oil worldwide has gone up. China in particular is thirsty for oil, and they're scouring the globe to secure supplies, and as their economy grows, their oil need grows as well. On top of that, rebels in Nigeria have been blowing up pipelines which reduces oil output in the world.
Iraqi oil exports are down this year, compared to last year. I read a stat that says Iraq is exporting only 50% of what it was exporting before the war started. That's taking a lot of oil off the world markets.
Also, remember also how Hurricane Katrina hit the Gulf of Mexico last year and it damaged a bunch of oil platforms? Well, a lot of those are still offline.
To make matters worse, we have a crazy government in Iran pursuing nukes, and the threat of sanctions will further drive oil prices up. Every time their president says, "Death To Am-ree-ka", oil prices move up. If the UN actually has the balls to impose sanctions on Iran, then oil prices are moving even higher.
So, demand for oil is higher this year, and supply is lower. It doesn't take an economics degree to figure out that oil is going to be expensive this year, and it's not because of the evil oil companies charging high prices.
Rather than whining about high oil prices, I decided to be proactive about it, and invested in a company that refines oil. Whatever profits they make will be passed on to me as a shareholder. So hey, if oil's going to be expensive this summer, you might as well make some money off of it.
Anyway, the Spring clean-up still isn't done. I hope to bring tech down to 25% of the portfolio, and take some out of alternative energy as well. I'll probably add a health care stock to the mix since the sector has been taking a huge beating which means the stock market is throwing a sale on health care stocks. Natural resource is the hot sector right now, so money is just pouring into it, and it's being moved out of less exciting sectors like health care. So, I intend to be a scavenger and see what the bulls have left behind in health care.
You might have notice that the blog has been a bit heavy on investment articles, but a lot of people seem really interested in them right now. A lot of people have been asking me about how to start investing, so I intend to write more in this area for the next little while. If you absolutely hate the topic, drop me an e-mail and request something else. I follow what the viewers want to read.
Standard disclaimer as usual. I'm not responsible for any money you may make or lose if you choose to follow the opinions stated above. Opinions of investment strategies and of stocks can change dramatically over time as the stock market is in a constant state of flux, and these opinions are subject to change without warning. Please consult a financial expert before pursuing investment options.
Tuesday, May 2. 2006
Firstly, I'd like to apologize for the lack of blog updates and e-mail responses. My internet was down for two days due to some software problems, and I've finally fixed the issue, so I'm back online. Dang Windows.
Anyway, last week I was ranting on about what I was going to do after I graduate, and there has been several important developments since. The first big one is that the dream co-op job that I was interested in doesn't hire this term. It looks like they did all their interviews and such long before this new term started. That was kind of unexpected. I could wait for the Fall to try to apply again, but that's wasting a lot of time. So, this was the only co-op job that I really wanted, so this door is firmly shut.
Also, on Tuesday, I met with the war council, which consists primarily of my supervising professor, and we talked about the end game for my master's degree. This was the first time in 6 months that I've seen him because he has been on sabbatical.
In either case, I told him about my two potential paths. A) Graduate at the end of summer and find a job. B) Go into co-op to find a job. He eluded to the fact that at this point, a co-op job or a real job really has no difference for me, except the co-op job will pay much less, so he didn't understand why I was interested in doing co-op. He also said that his other grad students did co-op only because they lacked communication skills or technical skills, and that they would have problems trying to find work out there; however, I shouldn't have any problems since I've got a fairly solid skill set. He also nicely said that I was using co-op and academia as a crutch, and I should get out there. This was exactly what I needed to hear, and a gentle prod to just graduate and go into the real world.
He also suggested that I was thinking too small for dream jobs. He said to dream bigger, and to not let things like geography dictate where I ended up. The reality is, it would be fairly unlikely to find a job in town that would make full use of my academic potential. He said to dream big while I was young and not tied down by anything.
So, the end game plan is to finish the two courses that I'm currently taking, and write up my thesis all in the same term. It's going to be a blitz to the finish line.
At this point, the 5 year plan is completely out the window because I have no visibility of where I will end up. I have visibility of 4 months ahead, and that's it. Everything else is variable. It is both freaky and exciting at the same time.
This is going to be an interesting transitional period. In either case, thank you all for your prayers and comments. It really helps.
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"Hard is not hopeless."
--David Petraeus (1974-present), American General
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