Good News from our Sponsors

Some of you may have noticed the new 'sponsors' displayed on the right hand side of this blog.

I encourage you to check them out as some of them have recently introduced great promotions.

Questrade, the online discount brokerage, offers a number of free trades and great commission rates. If you feel inspired to join this firm, please use the Referrer ID 'TRADER' (without the quotes) when filling out your Questrade application form.

Chapters Indigo also announced some price cuts to reflect the value of the Canadian Dollar.

You can also check out my list of recommended books on topics like Personal Finance, Real Estate, and Job Hunting by visiting my book store.

And while on the topic of blog features, you can subscribe to this blog with your favourite RSS feed reader by clicking here.

Living Small

How much room do you really need to live in?

Well, if you come up with a figure like 300 square feet, then this house is for you.



According to Radu's blog, Toronto's smallest house is up for sale for approximately $600 per sq. ft.

GStock

Would you trust a supercomputer to perform stock trades on your behalf?

Well, you don't have to go that far but you can have one help you with your analysis. GStock is a virtual supercomputer formed by many computers calculating a huge amount of investment strategies to give you timely buy and sell stock picks.

The site covers over 4,000 large and mid-sized US traded stocks. I just came across this site so I decided to give it a shot. Unfortunately, it doesn't currently cover several of the US stocks on my watchlist so I was disappointed but if you invest in American equities, you might want to check it out to see if your stock is covered.

Exit Strategies

After examining my trading activities over the past few years, I've come to the realization that my main downfall is the lack of an exit strategy in the event that I'm wrong in my analysis. I've been hesitant to place stop loss orders in the past since I suspect brokerages take advantage of such orders to grab 'cheap' shares. Nevertheless, stop losses can play an important role in limiting your downside.

I recently heard a trader say that you should have a minimum 2:1 reward-to-risk for every trade you enter so you only have to be right half the time to break even. Of course, that's easier said than done but placing stop loss orders are a great way to force you to stay the course with your trading system and getting rid of some of the emotions involved in trading.

Another thing that has limited my gains is selling my winners too early. When I enter a trade, I have a target sell price in mind. That's all fine and dandy but what happens when it hits that target? That's right, I usually sell it. Like they say, you can never go wrong taking a profit but sometimes I'm right and I sell at or near the peak while other times, the share prices goes through the target price and the really big returns just begin.

In addition to being sure to limit my losses going forward, I'm going to have to develop a more concrete exit strategy. I have a few ideas that come to mind that I will have to refine over the next few weeks but while I do that, I'd also be interested in hearing about your strategies.

Price Drops Across Canada

With the steep rise in the value of our Canadian Dollar, the media is having a field-day filling up the news hour with stories about cross-border shopping and the question as to when prices will finally drop in Canada to reflect the Dollar's strength.

Sure, prices in Canada should eventually drop but somehow I doubt they will drop to American levels. In fact, I suspect U.S. prices will increase to those levels currently found in Canada so be sure to take advantage of the "deals" across the border if you have the opportunity to do so.


Useful Links for Cross-Border Shopping:
How to Import Vehicles into Canada
Tax Exemption for Cross-Border Shopping


In other news, the Government of Canada recently launched a website to inform families of recalled food and children’s products.

S&P/TSX Canadian Dividend Aristocrats Index

Standard & Poor's launched a new index to track Canada's most consistent dividend-raisers.

The S&P/TSX Canadian Dividend Aristocrats Index is composed of Toronto Stock Exchange listed Canadian companies that have increased dividends annually for at least seven years. The index consists of 35 stocks, with each stock weighted based on its indicated dividend yield of each component stock.

The index includes all of Canada's six big banks except CIBC, which didn't increase its dividend in 2003.

S&P stated that based on back-testing, the index has produced yields ranging from 3.1 per cent to 4.2 per cent over the past five years.

The Lazy Investor - Part 2

Every since Derek Foster's Stop Working: Here's How You Can book hit store shelves in 2005, there have been critics of his early retirement strategy and questions surrounding its feasibility and the luck involved.

To follow-up on my previous post, The Lazy Investor - Part 1, in which I reviewed Foster's latest book, The Lazy Investor: Start with $50...and no Investment Knowledge, I thought it would be appropriate to present an interesting article I came across a few days ago that helps answer some of those questions.

Ellen Roseman's October 10th article in the Toronto Star provides some additional insights after her discussions with Foster.
What follows is an excerpt of Roseman's article, "Retiree, 34, helped by windfalls":

Last Thursday, he drove from his suburban Ottawa home – where he lives with a stay-at-home wife and four young children – and pulled out a stack of paper.

These were all his discount brokerage mailings going back to 1999. But since they weren't filed – or even unfolded – I wasn't going to sort through eight years' worth of transactions.

Meanwhile, the statements didn't tell the whole story. His investing career started in 1990, when he was 20. (He's now 37.)

Luckily, he'd prepared a summary. So, here's what I can tell you about Foster's strategy.

While he talks about saving and investing $200 a month over 12 years, that's just a baseline or minimum amount. He also added some windfall money (such as income tax refunds, GST credits, Christmas commissions while working at retail jobs and a pay-equity settlement).

He started with mutual funds, but now holds only dividend-paying stocks and income trusts. He's looking for companies whose products you use every day and whose shares you can hold forever.

Over time, he traded less and less. But in 1996, he borrowed money from his broker to buy Philip Morris, the U.S. tobacco manufacturer. Despite a $60,000 gain in a year, he sold the shares, fearing the company was vulnerable to lawsuits, and bought them back again later.

Still fond of leverage, he has more than $130,000 worth of stock bought on margin in his account (about 25 per cent of its current value).

He's been buying U.S. stocks that have become cheaper because of the falling U.S. dollar, such as Bank of America, Johnson & Johnson, Pfizer, Starbucks and Wal-Mart.

Why use borrowed money? Doesn't that make his strategy more risky? Well, Foster needs a tax break. His self-published books have brought in $150,000 in revenue he'd like to offset. (Interest paid on an investment loan is tax-deductible.)

And, as a self-described "control freak" who makes up his own mind, he's not afraid to take big stock positions. For example, he owns 1,000 Wal-Mart shares, now worth $45,000 (U.S.) and 700 J&J shares (worth $46,000).

Gutsy and confident, skeptical of conventional wisdom, Foster is not a typical investor. But he doesn't pretend to be. "Retiring at 34 is exceptional, as I state in my book," he says.

"However, this strategy is the surest way to early retirement without undue risk, and if readers follow this strategy and retire 10 to 15 years earlier than they thought, it's a success."

The Lazy Investor - Part 1

Self-proclaimed as Canada's youngest retiree, Derek Foster recently published his second book on his 'no thinking strategy.' I had a chance this weekend to read his latest book, The Lazy Investor: Start with $50... and no Investment Knowledge so here's a quick book review.

Compared to his first book and national bestseller, Stop Working: Here's How You Can!, Foster concentrates his efforts this time on describing how to start investing in dividend aristocrats with a small amount of cash through DRIPs and SPPs. Foster takes you through the steps to acquire that all important first share and also provides different strategies to help teach your children about the importance of money. The book also provides an update on Foster's investments and thoughts on the future of income trusts.

While I found the original Stop Working book more inspirational (probably because it introduced me to new investment strategies at the time), I would still recommend The Lazy Investor for Canadians interested in learning about investment / early retirement strategies that you probably will never hear from the so-called "financial experts."

Derek Foster's two books would make an excellent Christmas gift for anyone you think might benefit from learning a thing or two about personal finance.

Click here for "The Lazy Investor - Part 2"

The Fed is Irrelevant

Jim Rogers, author of Hot Commodities: How Anyone Can Invest Profitably in the World's Best Market, was recently interviewed on Bloomberg and stated that the Fed is irrelevant.  This obviously caught the anchorwoman offguard. If you want a good laugh while listening to some good financial insights, take a few minutes out of your weekend to watch it.

Breaking Even on SLW

Today's jump in Silver Wheaton passed through my exit price target that I set a few weeks ago.


So I am now out of SLW and I didn't lose any money on a 'bad' trade that was based on emotion as expressed in my initial post on the subject stock.

This sale continues the trend of late for me. The strategy hasn't fared too well for me but it has allowed me to grow my war chest should a dip occur as I suspect it will in the next few weeks. In fact, the start of that dip might be today at many of the Canadian stocks on my watch list surged forward in the morning only to collapse in the afternoon. SLW happened to take part of this market activity as shown in the intraday chart below.

File Sharing with Pando

With this being Thanksgiving, you will probably snap a few photos of friends and family when you get together this long weekend. But how do you share all those photos?

One of the easiest ways that I've found to do this is with a little piece of software called Pando.

Just download and open up Pando, enter your friend's email addresses, drag over the folder with your photos, videos, and other files (up to 1 GB at a time), and click on send.

No more worries about emails bouncing back for exceeding your friend's inbox limit.
Best of all, it's a free download.

Happy Thanksgiving!