Investing: How to invest in uncertain times

You know you have to do it. But, you’re not sure how to do it. No, I’m not talking about finally talking to the hot girl eyeing you in your condo, which you awkwardly smile at. I’m talking about investing – taking charge of your personal finances.

So how do you do it? It’s a question I get asked a lot by friends when I tell them about my relative investing success. Other questions follow. How did you get started? What should I invest in? What are you going to do with all that money? I made up the last one. Furthermore, when looking at the world economy, it’s in shatters. Words such as “austerity”, “bailout” and “contagion” (which was a kick ass movie) are constantly talked about by economists on TV, acknowledging our unstable global financial predicament. It’s all a lot to take in and you don’t know what it means. So I’m here to get you back to the basics of investing and help you take the leap in uncertain times.

1. Start small

Now John will make fun of you because you’re saving such a small amount. But he has a girlfriend who he panders to by taking her out for expensive dinners, so don’t listen to him.

Before you get concerned about chasing the huge returns, you have to start somewhere. You’re just new to the game. Like any game, it’s time to learn the rules in the beginning. So start small.

Firstly, starting small means a few things. It means setting aside a small amount, in the form of a pre-authorized contribution (PAC) into your investing account. You can contribute as little as $10, $25, or $50, from every pay cheque. It’s basically just one dinner outing every two weeks you’re letting go. As these savings build up, and trust me they will, you’ll soon have quite a storage of savings, the first success of starting small.

Next, it’s about investing small. Say you like a stock such as Microsoft, because you’re not into the whole Steve Jobs watching your investment from the grave thing, then buy shares in Microsoft (this is not investment advice silly, just a column). Buy a small position, a few couple hundred dollars investment in Microsoft, to get your feet wet. This will allow you to see the ebbs and flows of the market while you get invested in a company you like, with a good dividend yield (2.7%) for the technology space, which also happens to have a fairly scary looking CEO in Steve Ballmer. Mission accomplished.

2. Buy and hold

I know it’s hard but this is what you have to do. We have a tendency to think that we can time the market, getting in at the lowest lows and selling at the highest highs. Sometimes you’re able to do it  and that’s sweet, but it’s not the norm. A better strategy, is to take a buy and hold approach to your portfolio.

What buy and hold means is exactly that, you buy then hold your position through the rough times, like we are in now. The benefits are obvious. You get to forget about the daily price fluctuations. You’re able to rest easy because over time things tend to average out. Although the headlines are bad, money has to go into something, which it always does…so relax. If you play your cards right by picking stable, blue chip companies listed on the S&P 500 or NYSE, which have good dividend yields that compound over  investment over time, it will actually pay to wait. Quoting one of the greatest minds of our times, Albert Einstein, it was he who said: “The most powerful force in the universe is compound interest.”

3. Be realistic

Know that you’re not going to make a 10% return in a month. It’s rare and more indicative of a riskier investment. While these types of investments can be rewarding, it can put you at a disadvantage if it goes the other way. So, you have been warned.

Being realistic is also about having a purpose for what you want to do with your investment dollars, whether it be that vacation getaway, new tech toy, or bigger items like a partial down payment on a home or condo. It’s all about your time horizon, so if you have a short one, one to three years or a longer one (three years plus), be sure to keep this in mind when picking your investments. .

Conclusion

Talking about your finances isn’t the most sexy topic, but it’s a necessary one. If you follow these three steps: start small, buy and hold, and be realistic, it will put you in a better position for financial success as you get older.

5555

Ottawa-20111205-000645555. My work office is on the 5th floor of the building, and elevator number 5 was not working today on December 5. 555. But there is one more important five to consider: the five people, including myself, who were using BlackBerrys on my bus ride home. 5555.The fourth five of my day and the one which I want to talk about for a bit. (Picture at the right is one of my paintings I bought last summer)

I’ve wanted to write about BlackBerry and its parent company RIM for a while now but wasn’t really sure what to say. RIM has had a horrible year. If you pay any attention to what I call the big 3 in tech (Apple, Google and Microsoft) you would know that RIM this year has fallen far behind. Its share price is at its lowest levels in years and the buzz around the company is almost nil. It’s tough to say where the company will end up, especially while the other 3 are continually pushing new products which have consumer bases that are fanatical/evangelical about them.

But today on the bus showed me that people still care about BlackBerry. To see 3 people on the left of the bus with their BlackBerrys out and 2 others, myself included, with ours out on the right side, it was a telling reminder that the company might still have life. To be honest, the tech space is one of the most emotional spaces, arguably the most emotional place on earth to invest in. People wear their iPhones or BlackBerrys on their sleeves, display their MacBook Pro as the piece that differentiates them in a sea of PC users and their crappy Gateways (I had one which died on me badly).

When looking at my personal investing experience in junior mining small caps, much risker investing, where losses of 20% in a month are not uncommon should the slightest production hiccup occur, investing in the tech space is comparably safer. Also, by investing in companies worth millions rather than billions, you expose yourself to more risk.

So when looking at RIMs dramatic decline, it’s hard to say they have been that bad to dive over 60% this year, from a high of almost $70, to under $18 currently. Because if you go into what the company has been doing, rather than not doing you see a company making a recent $100 million dollar acquisition, having cash on hand, and trying to transition to what everyone believes is their last hope with QNX or BBX or whatever name the operating system for their new phones next year will be, is hardly a resume of a company on its way into oblivion.

With everything considered, whether BlackBerry and RIM get back to being number one in the smartphone game when it debuted or back into a favourable light with consumers and analysts as it was earlier this year, I’m just hoping that the iconic Canadian company gets back on solid footing. It’s hard to fight against the trend and popularity, where Apple and Google are so dominant in the tech space. However, to borrow from what Jim Prentice, a former Federal ministry leader in the Canadian government wrote so well in this piece for the the Globe and Mail said, I’m keeping my BlackBerry and cheering for RIM. And waiting patiently for my ordered PlayBook to arrive as well.

What Online Brokerage Do You Use And Why?

I’m sort of in a bind. I’m undecided of what to do with my current online brokerage that I use for trading, RBC Direct Investing. I want something with lower trading fees. Paying 28.95/trade seems ridiculous, especially as a young investor/student trying to save for school in the fall. So I’ve continue to snoop around to one of my favourites: Questrade, a Canadian online brokerage company.

Recently, a close friend of mine in Toronto, jumped onboard with Questrade. At $4.95/trade to never more than a max of $9.95, that is some serious savings. As well, another friend on Twitter was posing the same question as to what is a good online brokerage to get. I’m pretty stumped. The one big reason for keeping RBC is because I do all of my banking there and my heart is there. But common sense is telling me otherwise and go with the savings and Questrade.

So a quick question to you. What online brokerage do you use and why?

TFSA For The Win

Whether if you have a specific saving or investing goal, using the TFSA (Tax Free Savings Account) to get you there is your best choice. I was talking about this yesterday to a couple friends at brunch so I wanted to share some of its advantages to savings over an RRSP (Registered Retirement Savings Plan) account and why you need to get on board and start saving with it.

The TFSA account allows you to save up to $5,000 per year, without it being subject to being taxed. This is amazing. Note: More in-depth information to explain all the intricacies of the TFSA is available here. This is the opposite for Unlike the RRSP account which if you take out the money it gets taxed immediately. Ouch. I did this last year, when I took out quite a large sum of money (for an financial emergency). It was a bad idea for 3 reasons. Firstly, my investment was doing great and I had made a lot on my principal, so I probably should have left it there. Secondly, I was taxed on it. And thirdly, the money got added to my earned income for this year, thus increasing how much I had to pay in income tax. Brutal. My TFSA on the other hand doesn’t come with any of these many potential burdens, making it the ideal savings vehicle between the two.

Furthermore, as my previous experienced has proved, having money locked in, then getting taxed on it when taken out, wasn’t the best situation for me. If another financial emergencies arises, It is a lot more beneficial to have access to my money quickly without the fear of any tax penalty overhanging.

Since it was introduced in 2009, the limit to investing into your TFSA has now increased to a maximum of $15,000 (A new $5,000 can be added each year). If you do not fill up the $5,000 in space each year, it carries forward. Are there any more reasons you need convincing on?  I hope I spurred my friend on to at least consider it as a possibility.

She has a great, secure job and with her advancing in her career and coming into a higher tax bracket in the not to distant future, the TFSA makes a lot of sense, since it would be ideal place a portion of her earnings away from being taxed. The key here is to start small, with automatic deposits into a TFSA from your bank account on pay day. You won’t miss I thing. However, sorry folks, but the TFSA is only available for us Canadian residents over the age of 18. We gotta have something though…it’s cold up here!

Thoughts on LinkedIn IPO, future IPOs for Facebook, Twitter

I won a bet today with a friend. I said that we would get at least one social media company that went public this year.linkedin 2 It was an easy bet to win. Many of these social media companies, Facebook, Twitter, being the two big ones had been in the news for over a year with plans on going public. But today, LinkedIn, was the 1st to pull the trigger. I’m on all 3 sites (as a PR student it is quite necessary) and use them almost everyday, so I I’ll tell you what I think of all 3 of them as focus on Facebook and Twitter my views on them having an IPO (initial public offering or simply being listed on the stock market) in the future.

LinkedIn is an interesting case. Of the 3, it is the most professional and I appreciate that aspect. Apparently so do a lot of my peers. The past couple months it seemed every week,  I have been adding old colleagues at a feverish pace, to keep in touch with them all on LinkedIn. Besides this though, I haven’t used or rather dived into LinkedIn as much as I’ve liked to…yet. But it’s use is evident. It is a networking tool, with a global network, a key point in this new reality of economies being so closely tied together with each other more than ever.

I have heard that their groups, which I am a part of about 10 related to PR/communication, really makes LinkedIn a valuable source in organizing people for business development discussion. This is definitely something I want to explore more. When I put my investor hat on and seeing how LinkedIn quickly doubled from its IPO price of $45 to an intraday high of over $122/share, to a close of a healthy $94.25 with over 30 million volume, this is positive news for their company. Obviously it won’t do 30 million everyday but impressive nonetheless and good on them for this amount of initial support  for their target valuation.

Facebook is a different story. Their IPO will no doubt be a top news item, but  I’ve grown rather tired of Facebook, as a company, to be honest. Two big reasons are one being the growth of spam on that site, and  two the messaging system or Facebook chat.

Spam has gotten so bad I find myself filtering so many people, this filtered list is becoming the same size of my hundreds of friends. The messaging system, Facebook chat is a mess. It is that simple. Throw in the recent bad press of Facebook using world renowned PR firm Burston-Mueller to smear Google’s reputation, and you really see that maybe the movie “The Social Network” really wasn’t that far off in portraying the company. Not helping my career or other PR professionals when we have to deal with being labelled “spin doctors”, as the profession is so commonly wrongly described.  All of these types of "soft feelings” I’ll call them, because they pull on my emotional attachment  in regards to Facebook. Throw in their just insane valuation (roughly 70 billion market value) and I would have a hard time, going for this in an IPO situation.

Twitter I like a lot more. It has half as many people on its site (300 million) as of today that Facebook has. (Yes it was big day for social media if you’re following). It has become the most efficient way to break news, as evidenced by the story of a journalist Pakistan directly or indirectly breaking the news of the U.S. Navy Seals Team Six killing of Osama Bin Laden. It’s fun as well. Some of the people I follow strictly use it to ply their comedic antics and this is accepted and adds to Twitter’s fun factor.

Personal views are encouraged, which makes for great back in forth between celebrities, media personalities, and just regular people like you and I. Twitter has a broad appeal,  in both professional and personal use, making it a great blend, more so than LinkedIn which is more purely professional and Facebook which is more purely personal. This makes it a more attractive target for me if I were to pursue it in an IPO.

Being in the field of PR, it  is exciting to see how social media is growing and impacting everyone. In terms of these companies. whether they become sustained profitable entities, without the fear of  them imploding is anyone’s guess. I would rather invest, as I have done so, in hard assets (gold), dividend funds, and equities. Of course, those that made a quick double and then some on LinkedIn today would argue to the contrary. However, herein lies an obvious, although key point. Regardless of whether my predictions are right or wrong, for both my stocks I’m invested in or those that invested in LinkedIn today, you only make as much money in investing as the amount you of money you put on the line. As was proven today, with the 30 million shares traded, this has occurred in such an impressive manner, which LinkedIn hopes is just the start of great things to come for them as a company.

Financial Fun

A couple of clicks and I was done. I had just finish filling my dad’s TFSA account up with a diversified portfolio of stocks. That’s all it took. A couple clicks here and a couple clicks there. Now, I’m no financial planner either. Just a PR student who is pretty interested in investing. I hope for my dad’s sake that “pretty interested” means “knows what I’m doing” though. I guess we will find out in a couple of years.

I’m addicted to the stock market. Everyday I read the business section. Everyday I check my stocks. Everyday I think about my stocks. But its ok.  It’s great to have passion. As long as it doesn’t consume you. I still go to work, go to school, and volunteer, so I think I’m doing ok. But how did I get here? Let me tell you how finance became so much fun for me.

It started back during high school. I got involved in one of those pyramid scheme financial companies. I thought I was on my way to riches but it was definitely a scam. However, I learned a lot from it, the basics of personal finance and financial planning, which sparked an interest in me and made me do more research on these topics. After leaving the company, I started looking at finance more seriously, or so I thought. I ended getting into trouble with it first.

I got into a lot of debt. Credit card debt. The worst kind.Through my late teen years, I spent a lot and bought pretty much anything I wanted at the moment, until I completely maxed out my credit card with two grand on it. Paying 20% interest on a two grand card hurt for a while. After getting help from my parents, in the from of securing a LOC (line of credit), I had learned my lesson. Hmm this story was supposed to be fun. Sort of depressing right now. Anyways two important lessons were learned. No pyramid schemes. No bad purchases on credit cards. Now onto the fun.

The fun started with research. I looked at some financial blogs, like Canadian Capitalist, the Dividend Guy, and a few others. I learned new things from these sites and continued to do my own research. The financial world, is a vast one with so much information out there, so I stuck to areas I was interested in (technology stocks, dividend stocks, balanced funds, etc.) and learned a lot. Until I got into the area of precious resources, mining companies, specifically companies that mined gold. Now this is where things go really fun.

Gold has been the best investment of the last decade. Bar none. From 2000 – 2010, if you left your money in gold you would have made over a couple hundred percent profits. Yep, hundred. I’m not going to get into why that’s the case. There is enough information on the Internet why this happened and why precious metals are doing so well right now in this current economic climate. I just want to tell you about how was able to strike gold personally and realize some of these massive gains.

Primarily because of research done by a friend and then my own research, aka due diligence, pointed me to a specific Canadian gold mining  company, I invested into last summer. All in. So far it’s been a fun ride. I was able to take some profits off the table and buy my Sony Vaio laptop because of my investment.  Things are looking good and I hope to invest more. Obviously, I should probably diversify, as well as consult a financial advisor, with more knowledge on how to grow my money, but being young I am afforded a lot more risk at my age. As well, if your convicted of something, diversification for diversification’s sake is silly. Throwing money in an investment that doesn’t have legs just so your money is spread around, doesn’t make sense to me. Go with your gut, your goals, and do your due diligence and hopefully with all those combined you will end up being able to enjoy some financial fun.