Which Financial Tool is Most Important for Success?

Let's discuss this calmly shall we?

Which financial Tool is THE most important for your financial success?

Is is tithing? ( giving 10% of your income to church or charity)

Is it saving? (taking a preset portion of your income and hiding it away where you won't use it for other purposes other than savings and/or investing for the purpose of securing a future income streams)

Is it investing?(And no, investing is not necessarily the same as saving....but the two are very much connected)

It is reducing your personal COST of LIVING? ( mastering how to lower your monthly bills such as housing, utilities, insurance and food costs )

Is it paying off and down all debt? ( for this illustration I am lumping together all kinds of debt....both mortgage debt as well as consumer debt)

Is it putting aside funds for your own, your spouse's and your children's education?

Is it about "Asset Allocation" .....( deciding precisely where and what investment product you put your money into)

Is is about having sufficient funds set aside separately just for emergencies?

Is it about saving cash to finance a prepaid vacation, so that you won't be tempted to use debt to pay for a vacation?

Is it about delaying the purchase of a home and renting for more years so that you may build up a greater nest egg?

Is it about refusing to finance a car by saving up and paying cash for a second hand modest vehicle?

It is about learning to live without credit cards?

Is it about learning to live without the trendy "stuff" that your friends and neighbors seem to say are "sooooo important for appearances"?

Is is about being aggressive in business opportunities/investment opportunities when we find them?

Do we work hard to make our money work hard?

How much risk is reasonable?

Have your given someone else control over your finances? How trustworthy is that person or organization? Can that person or organization be trusted to protect your best interests?

Are we investing in ways that limit and/or reduce our taxes?

Have we done a will to protect our assets for future generations after our passing?

Are we reading something daily/weekly/monthly which will add to our personal arsenal of accurate financial information?

Are we getting to know people who have succeeded financially and humbling ourselves to learn and listen from their example?

Are we reading books or listening to audio books regularly written/recorded by those who are well respected in the arena of personal finance and/or investing?

When we  come up with "unknowns" do we write down our questions and seek out the answers? Or are we content to live in ignorance because we have become comfortable with living passively?

Are we teachable......or do we live as if we have "arrived" and no longer need to learn more about personal finance?

Or is it all of the above? Who is going to lead us into wisdom in these arenas of life?

It is possible to get God's wisdom, as He gives wisdom to those who ask it of Him, according to the scriptures "who giveth to all men liberally".

May God's Spirit use these questions to stir up some good and important discussions in your home and family.

The more you talk and read about personal finance, the more questions you may have. But don't get overwhelmed.... Don't get discouraged. Becoming educated about personal finance is a journey......not a one stop destination.It is going to bear great rewards for you and for your future descendants who may, depending upon your choices, be able to learn simply by following your excellent example.

Peace,
C.













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Another Potential Win for Canadian Investors

Was happy to notice a wee blurb in Monday May 2 ,2016's Globe and Mail
entitled "The investment industry's growing unrest over hidden fees" by Clare O'Hara.( section B--pages 1 and 7)

There is more hope on the horizon for those Canucks who still insist on purchasing mutual funds. The
"hidden" commissions that "financial advisors" earn for the period of time that a consumer holds units of a certain mutual fund will, Clare asserts, in the near future become more restricted, AND/OR much more transparent.

After all, why should there be so much murkiness in the "investment product" industry?
Since when are investments now known as mere "products "??

Since when are "investors" merely treated as "financial product" consumers?

It used to be....or at least it "felt" more that way when I was young, that investments were something
that held "unlimited " potential. The mystery and the myriad of ways in which a potential financial investment could grow or morph or produce multiple income streams was a beautiful and alluring "unknown".

Now it seems that banks and financial investment companies are determined to
"capture and control" every single aspect of an "investment". No more surprises....only more legaleze, and more ways for the investment industry to make money off the backs of hard working and naive "investors".....They don't even call us "investors" any more. We are merely "consumers" who are being sold "products".

By the way, we prefer to be called "investors"....no matter what the amount we are able or willing to "invest".

Anyway, pardon the rant..... This post is intended to be positive.
If even the investment industry is ready and willing to admit that there needs to be changes that "help" individual investors, then we are indeed poised for greater gain.

Tony Robbins,through his book  "Money, Master the Game" , exposed much of the murkiness in the USA's mutual fund industry and explained how so many many fees and hidden costs are bound up in the American mutual fund industry. The fees and extra charges are so complex, hard to find, and so "murky" that few, if any, invididual investors even know how much in fees that their investments are actually costing them at the end of their investing life. Those hidden fund fees and charges can eat up the majority of any potential profit that an individual investor may earn over their lifetime by holding mutual fund units."Mutual Fund Buyers beware"......was Tony's timely advice.

Yes, Tony's book was written for the States. But maybe Canada listened in on the conversation and has begun to take some preventative measures.
If Canada's mutual fund industry is willing to play a little more fair and transparently, then maybe, just maybe, you won't have to run and hide from mutual funds any more and stop picking stocks for yourself. Maybe.... just maybe.. maple syrup toting DIY investors might start trusting the advice of the "professionals" again.

Clare's article sheds a few good Canadian rays of light on the matter.
Happy investing, friends,
May you live long and prosper.

C.
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Is Optimism ALWAYS the best thing to have???

I've been reading the book entitled "Warren Buffet Invests like a Girl.....and WHY You Should too"
written by Louann Lofton.

Within Chapter 2...... I found this quotable bite:

"While optimism in most parts of our lives is something to strive for, in investing it can poison your judgment and outlook." 

         (pg 22 last paragraph)

I just thought that sentence was a treasure I couldn't keep to myself.

It kinda sums up what I have found to be one of my own gender's downfalls on a regular basis. You see, many women have been socialized, raised up and reared to be smiling nurturing and optimistic....in order to be good moms and wives. However, if we are ever going to make head way as a gender in the capital markets of the globe, we are going to have to give ourselves permission to be ruthlessly honest and
cuttingly critical.

I'm not talking about being "mean" for the sake of just being a jerk. I'm more talking about being able to critically analyze investment vehicles with the same accuracy and demand for results that "men" typically command.

Men don't feel that same compulsion to wear an empathetic smile at all times, that many of us women have been raised to wear.

We  girls need to take the time and effort it takes to develop a seasoned and critical financial eye....being able to confidently analyze balance sheets and financial reports with panache and no undue levels of
compassion. Businesses are created to turn a profit, not to be a dumping ground for gullible investors.

So ladies, I just want to challenge myself and y'all as well, to develop the emotional integrity and knowledge base that we will need if we are going to....as the bible describes "inherit the land"....in the world of capital markets and investing.

Don't feel like you must be perpetually encouraging all the time. Give yourself permission to
take a step back, do your due diligence and research, and when the situation calls for it, be able  and willing to publicly call a lemon of an investment, .....a really REALLY bad idea....without apologizing for being forthright and bold.

Have courage friends,

Peacefully productive,
Carla.

Are STocks keeping up with Inflation?

Jus' thinkin' aloud again....
I must say that I have always been more interested in equities than in owning chunks of debt instruments, such as bonds.

But there is a looming threat called "inflation" which is something for which we may just not be prepared.
It's all well and good if our stocks are increasing in "numeric value" representing real capital gains. But if
the average loaf of bread is going to rise to $8 a loaf then, the REAL TIME VALUE of our portfolios must be re-assessed to reflect and hedge against this type of threat of inflation. Large numbers of dollars don't really mean much if it is going to cost a lot more just to get around town, buy your food and support the roof over your head. REAL increase must reflect an increase in REAL buying power....not just the dizzying knowledge of growing numbers on your investment statements.

One of the things I love about stocks, is the proverbial "drip" plans in which one can re-invest any dividends payable and they magically produce more shares to own....without any pesky commission fees.

But how is it going to affect long term investors, if the underlying stock prices do not rise with inflation and the cost of living? Is it possible that a drip will lose "real time value" simply because the share prices do not keep up with the cost of living? I am wondering if even many blue chip companies might be affected by this predicament. For a blue chip company can have a steady positive cash flow and  pay out reliable dividends and still their share price may not be rising as fast as inflation.

It's all well and good to invest long term in equities with the added cushion of DRIPS helping you to accumulate a larger portfolio, but if in the long term those equities do not represent real "BUYING POWER" in which you can tap into into your retirement years....what is the point?

Stocks have to carry clout, and the only way they will continue to carry weight in the eyes of investors, is whether they can be sold at an undetermined point in the future for real dollars,.....real dollars that buy real food, pay for real real estate, and support a decent lifestyle.

I'd be more than eager to hear your thoughts on this matter, my most intelligent readers.
God bless.

Carla

Canadian and American Finance Authors

I don't know about you...but I latched onto that catch phrase "Readers are Leaders" and so it has become a habit to inhale books just as often as I can.

Therefore, in case your reading list, particularly in the realm of finance and investing, has become a little stale, permit me to share with you some of the finance authors that I have dabbled with in reading their books or speeches over the past decade. If any of them have also piqued your curiosity and provided meaty motivation, please go for it and share your feisty opinions in the comments section.
 Peacefully productive,

Carla.

Derek Foster "Aka, the Lazy Investor" has published several investing books written for the common folk. 
    to see his titles, go to his website www.stopworking.ca

The Millionaire Mind by Thomas J. Stanley

The Millionaire Next Door by Thomas J. Stanley and William D. Danko

The Richest Man in Babylon by George S. Clason

The Wealthy Barber by David Chilton

Robert Kiyosaki ----a large number of books....too many to list...check out his websites by googling him....or start with his breakout book  entitled "Rich Dad Poor Dad".

Donald Trump and Robert Kiyosaki wrote a book together called 
"Why We Want You to be Rich: Two Men One Message"

Napoleon Hill's "Think and Grow Rich"

Tony Robbins new book "Money, Master the Game"

Tim Ferriss---lifestyle hacker/author of the breakout book "The Four Hour Work Week"

Gail Vaz Oxlade--personal/family finance coach from TV seminars (Canada centric eh)
all major book sellers will carry her books.

David Bach--check out his website --www.Finishrich.com

How to Write a Covered Call

So you've decided to expand into trading options, instead of just buying or selling stocks.
One of the simplest ways to start out in the options market is through
selling covered calls. So permit me to summarize in really simple language, what the process entails to start
writing covered calls.

When you are "writing" covered calls you are actually "selling to open" a covered call.

A covered call is different than a plain ole "call option" because you actually literally own at least 100 shares of the stock that you are writing the call on.

So the first step to being able to write a covered call is by purchasing at least one hundred shares of a stock that has "options trading" available on it.

Covered calls can only be written on chunks of 100 shares at a time. One hundred shares is considered
"one contract" which you are going to write the covered call option on. There is a fee that your brokerage will charge you based on how many contracts you are going to involve in your covered call option. If you own 500 shares you could potentially write 5 contracts for covered calls.

Next you need to choose a "strike price" at which you are going to sell to open your covered call at.
The "strike price" is the price at which you give your covered call option buyer the right, but not the obligation, to buy your shares at. I suggest you pick a "strike price" that is just a little bit higher than the price that you originally paid for the shares. That is called a "near the money" covered call.
You can ask a higher premium for a covered call that is "near the money" than one that is way priced out of orbit.

You need to also choose an "expiry date" at which the call option will expire. Usually the farther into the future that the expiry date exists, the higher the premium you can ask. Once the expiry date has passed, the buyer of your call option no longer has the right to buy your shares anymore.

You are going to have to decide what price of premium you are going to ask buyers to pay for your covered call option. This premium will be estimated upon the most recent "bid and ask" prices posted for covered call options. An example of a covered call option premium might be $1.25 per contract. To discover what your earnings will be from "selling to open" a covered call sold at $1.25 for one contract, you would simply multiply the premium $1.25 by 100 and that will give you the sum of $125.00 which is the total premium that will be paid to you. Be sure to calculate and inquire of your brokerage as to what commissions and/or fees you will incur from selling to open covered calls. There will most likely be higher fees if the buyer chooses to exercise their right to buy your shares at the agreed upon strike price.

Newbie and beginner investors usually face much higher commission fees than investors with larger portfolios. The sad truth is that large portfolios usually have their commission fees waived because of the largess of their account balance. Therefore, if you are going to do an options play, and you are a small time investor, you will want to keep accurate track of all commissions/fees because they will definitely bite a significant chunk out of any profits you earn from writing covered call options.

The "premium" is the price that you are asking buyers to pay you for the privilege of  owning your covered call option. If you are not sure if you are willing to part with your shares, then you are not ready to be selling covered call options. Last I heard, there is about a 25% chance that most covered call options are actually "exercised" or "assigned". When a covered call option is "exercised" or "assigned" it means that the buyer of your covered call option is exercising their right to buy your shares at your agreed upon "per share" price.
Those who sell covered call options are prepared for the possibility that they may be forced to sell their shares. Therefore, selling covered call options are only a good idea for those who are not personally or emotionally attached to permanently owning their shares.

Well, that's about all.... those are the basics, written in my own casual language. The rest of the process is just about waiting to see if a buyer is willing to buy your covered call option, and then waiting for the deal to          "settle". Be blessed and prosperous.

C.


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Let's Discuss Processing Equities

So you wanna be an equity investor...you want to buy/sell stocks.

What are the ideas that you use to screen out the losers and pluck the winners?
Or do you just utilize strategies such as options trading to make money on the
ups and the downs of both the winners and losers?

Well, let's just keep it simple for today. Let's assume we want to pick winners, stocks that aren't going to
lose your hard earned money and have more than a safe bet on earning you some ca-ching.

P/E---Price to Earnings Ratio .Warren Buffet is said to prefer under valued common stocks with a price to earnings ratio under 20. I suppose it depends on how you play.

Market Cap: Is it harder to topple the biggest companies? Does it make sense to screen out the firms that are less than 1 billion in market cap? Or do you prefer to bet on smaller companies that can dodge and weave a little faster than the big wigs? Perhaps it can be compared to whom you prefer to do your banking with. Do you prefer the 5 biggest national banks? Or do you prefer a smaller local credit union, that has an affiliation with your neighborhood? Betting on the bigger players has an appearance of greater safety, but is by no means a guarantee of a fail proof investment terrain....

Does the Stock have Options available. Simply, does the stock have a derivatives market within it? Can you buy/sell puts/calls based on the ups and downs of the stock price? For some, using options is a key component of their income producing strategy. For some investors, they refuse to buy/sell stocks that don't carry an options market with it. They use options as insurance against falling stock prices, as well as  cash flow management strategy.

Dividend. Canadian investment author/inspirational speaker Derek Foster has made more than a pretty penny by advocating a modest investment strategy that focuses on the buy and hold strategy of
owning solely dividend yielding high quality stocks. His advice combined with a very frugal lifestyle permits those who are disciplined investors, to potentially live off their dividend stream once their portfolio has reached a certain saturation point. Huge stock market players such as Warren Buffet doesn't pay out a dividend on his Birkshire Hathaway shares, preferring to use the profits to reinvest back into the development/growth of the company. Even though he doesn't pay dividends...Warren's Birkshire Hathaway stocks never fail to find investors willing to part with their moolah, because he has a proven track record of increasing the innate value of the shares when held over the long term. By the way, if you want to boost your financial education with some good old fashioned stock market basics, just get all of Warren Buffet's books available at any public library or community college. There are more than a few investors who cut their teeth just by following Warren's strategies.

Which Stock Exchange are you going to invest in? Within Canada, the US or overseas?
Conservative investors may tend to prefer to invest within their own country, unless of course they don't trust their own national business climate. Countries with a less than stable political environment may provide a higher than normal level of risk, but also higher potential returns.

Which criteria you use to select your investments will have a huge impact on your returns.
I like to always bet on the D word....that is discipline. Nothing works without it....not even a winning stock.
Respect your assets, and the time it takes to acquire them. Losing them can be done in a millisecond.
Take the common warning..."buyer beware" multiply that by one million and that's how cautious you need to be in investing. Well, on that note...have a brilliant and peacefully productive day.

Carla



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Let's Discuss Tony Robbins New Book "Money- Master the Game"

Ok, I'm still chugging through the book, both in paper form and via the audio version of it.

At this point, I am not quite as thrilled with it as I first was, simply because I feel like I am being sold mutual funds and financial advisors. Is this book an ad for STronghold financial, High Tower, and Vanguard Index Funds???

I hope I am simply jumping to conclusions and maybe I've missed some of the better chapters, but please Tony don't tell me you're just going to sell me this stuff. I want to learn facts, accurate information, and strategies.

That's kinda why I still appreciate Robert Kiyosaki's books, because although his tone is somewhat snide and aggressive at times, at least you feel like you are getting an honest analogy of the modern economy and investment horizon. I'd rather be told the truth from a "mean man" than be coddled into compromise by someone who is nicey nice.

Anyway, as I said before, I hope I am wrong and I've simply not read the best parts of Tony's book yet.
Have you read or listened to any of it yet? What were your impressions?

Peaceful productivity.
Carla


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Let's Chat About Mutual Funds

In Robert Kiyosaki's book entitled "Unfair Advantage--The Power of Financial Education", the author and some of his advisors discuss the pros and cons of buying/selling mutual funds versus other paper assets.

To be frank, Robert is pretty brutal in his analysis of the weaknesses inherent in owning mutual funds.

The common local Canadian-ish thinking in favor of mutual funds is, in essence somewhat patronizing because many folks invest in mutual funds simply because they don't trust themselves to pick their own stocks, bonds or other paper assets.
The idea behind giving your hard earned money into a mutual fund manager's control is because the investor "hopes"  that the fund manager understands the stock market better than the average Jane/Joe ........thus minimizing risk and hopefully steering your money into a nice blend of "safety and growth."

One alarming paragraph that I am going to quote directly from his book "Unfair Advantage--The Power of Financial Education" is from page 134, third paragraph from the bottom of the page:
"Today, there are more mutual-fund companies than there are publicly traded companies. This is how insane diversification has become."

That sentence above speaks volumes as to the state of affairs in the mutual fund industry. Perhaps it is EASIER to set up a mutual fund company than to set up an actual "profitable" publicly traded business. Or is it that mutual funds are just so much easier to SELL to the fearful and "ignorant" public than REAL products and services???

And yes, Robert, I do get the point. I do appreciate Robert's honesty. There is perhaps more potential in gains for those who control the mutual fund companies, than for those who actually invest in the mutual fund companies by purchasing mutual funds units. The fund managers are paid well through fees collected internally from within the fund and these fees are known as the "Management Expense Ratio" or "MER" for short. So even if the mutual fund, as a whole, loses money, the managers may still walk away with millions of dollars gleaned in fees.

Another frightening aspect which Robert's advisor Tom Wheelwright mentions in the same book at the top of page 130 , is that mutual funds are taxed twice. I am hoping this refers just to American investors, but I will have to do some more research as it applies to us Canadians. Robert says that mutual fund investors are taxed when they sell their mutual fund unit due to capital gains tax, BUT he also said that mutual fund investors are ALSO taxed whenever the fund managers generate capital gains within the fund even if it doesn't reflect in a price increase in the value of your mutual fund units. So, theoretically, Robert exclaims, it's possible to pay capital gains tax based on what your mutual fund manager decides to sell from within the fund, even if your actual mutual fund units have LOST value after the date you purchased them. I might also add, that we would also be taxed for any distributions that the mutual fund pays out to the owners.....so that would potentially be a third form of taxation. I wonder if there are any safeguards in that taxation dilemma?And again, just how does this apply to Canadian mutual funds??? 

It seems to me that fear and a lack of confidence play a big part in the investments many folks decide to ultimately choose. Robert is certainly right on this one point....namely that"ignorance is NOT bliss" when it comes to financial knowledge, and that the time and effort it takes to educate ourselves financially is time WELL SPENT.

If you are a financial guru, accountant, financial planner, or just like to pretend you're a financial/investment expert, I welcome your comments to my blog. Let's have a lively discussion on the good, bad and the ugly/pretty side of mutual funds....and Yes, you mutual fund managers are permitted to have your say too ")

Peaceful productivity.

Carla


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Dividend Mantra: Interview With Derek Foster, The "Idiot Millionair...

This is one blogger's interview with the Canuck investor Derek Foster. Enjoy!

Dividend Mantra: Interview With Derek Foster, The "Idiot Millionair...: While some of you may not have heard of Derek Foster before, he's fairly well known in Canadian circles as someone who escaped the r...

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Which Staples Carry you through?

After reading a book by newbie millionaire Alan Corey entitled "A million bucks by 30"
I found it interesting to read about the specific food staples that the author relied upon when he had decided to radically reduce his cost of living. According to Alan's own recollection he lived virtually on about $2 per day for food costs which appeared to included the following basics:

• day old bagels bought at half price 
• industrial peanut butter( what is that?)
• oatmeal with milk and raisins
• ramen noodles
• water.

I'm not sure what other items he consumed to supplement that rather simple diet, but he did succeed in radically cutting down his grocery and restaurant bill. It was his drastic discipline that allowed him to take calculated risks in entering the real estate market . He kept his goal clear and concise, namely to be able to own at least $1 million in assets by the age of 30.  And yes, little quirky Alan Corey accomplished his goal.

I know I repeat this often, but what precisely are your goals? Have you written them or it down? Maybe it is just one simple goal. Maybe it is a goal that you have made with regard to your children's education. Maybe you have made a goal that you want to accomplish spiritually with regard to helping and blessing others.
I have read repeatedly that  a human being is infinitely more likely to accomplish a set goal only if they have written down that goal on paper.

Feel most welcome and invited to share your thoughts about this process in the comment section. I treasure your time and appreciate your input.
Peace, Carla.


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