Articles filed under 'Personal Finance'
Got this email from a fan. And since none of the current writers are Canadian, I thought I’d throw this out there.
BTW, RSP stands for “Registered Retirement Savings Plan” and seems to be a Canadian 401k. I’m sure a lot of the standard retirement plan advice would apply, but we’re looking for a Canadian perspective.
Hey InvestorGeeks
My name’s Gavin Adamson. I write occasionally for the Globe and Mail
and this time I’m writing a piece about what part online - DIY
investing plays in RSP building.
Not sure if any of you guys have an online RSP account, but if you do,
I’d be interested to speak with you. Here I’m looking for a chat about
what sorts of tools/data research you use to make RSP decisions. Do you
use your online brokerage site research and tools? Are they good?
If you don’t have an online, RSP account, or you’re not interested, I’d
appreciate an announcement on your site that I’m looking to speak to
someone. They can get in touch with me at my website
Thanks a lot
Gavin
Saturday, Jan. 19, 2008
by Jason
Fingers crossed.
He should moderate his language, open the possibility of a rate cut, and send the markets higher.
I hope he keeps his mouth closed, talks about inflation and the US dollar, and keeps rates right where they are.
Wishful thinking? Perhaps. However, I just have a vibe that he isn’t the soft touch that people think he is. My impression is that he just might suprise a few people.
Time’s up Bernanke! - are you made of steel or of butter?
Good luck,
Phil
PS In what is becoming a theme, here is another idiot piece by Ben Stein, and here is another piece about bankruptcy and an instant 7000 people out of a job. Of course, you need to make up your own minds.
This post is for entertainment purposes only. No part of this post should be construed to constitute investment advice. The author is not an investment professional and assumes no responsibility for any investment activities you undertake. Prior to undertaking any financial decisions, you should contact an investment professional.
Monday, Aug. 6, 2007
by Phil
The consumer is tapped out. After consistent 25 basis point increases to the Federal Funds Rate, we are finally starting to see the effects on the stock market.
Yesterday morning we saw three headlines that caught my attention. The first detailed Sears’ guidance for this quarter – a reduction from $2.12 to from $1.06 to $1.32 per share. These revisions are, at best, a 30% reduction and, at worst, a 50% reduction from their previous optimistic estimates.
Notably, declines were across all categories. If you follow the theory that the consumer is on thin ice, then it is hardly surprising to find big ticket items are not being purchased. Sears is having trouble selling new stainless steel fridges and widescreen TVs because consumers do not feel confident about their financial situation. The only sector that wasn’t hit as hard was women’s apparel and footwear – suggesting stressed housewives may be engaging in retail therapy.
Yes, I’m still an InvestorGeek! It might seem like only Jason and Christian are blogging lately, but I don’t mind being the guest that drops in once in a while. I’m sure many of you have watched or heard of the new Mark Burnett-produced game show called “Are You Smarter Than A 5th Grader“. If not, you can read a quick description here.
I was inspired after reading Canadian blogger, Tony Hung’s short diatribe on who’s really smarter - the kids or the adults? Tony, if you don’t know, is an editor at the prominent new media site, BlogHerald. I’ve had the privilege to meet him, and trust me, he’s one smart dude! But I digressed since the question remains, who ARE the smart ones? What does it mean to be smart? Is it just about random trivia or knowledge? After all, adults were able to create a show like that to make money! Aha…. now that money comes into play, that’s my lame segway to discussing financial smarts! (more…)
Saturday, Mar. 3, 2007
by Vince
My original version of this blog entry has been deleted because I did find some errors in my spreadsheet. I saw them when I was explaining what I thought I had found while doing my calculations. The new calculations are not as I thought they were, but still some interesting things can be extracted from it.
I was reading a blog entry where one couple in Seattle had a hard time trying to find a place where they could take out a mortgage for 15 years. One woman in another blog commented that 15 years is a bad idea, and better would be a 30 year mortgage because it lets you buy more house.
Comments like, “ooh better get a 30 year mortgage than 15 year mortgage” raise my hackles! I don’t believe such comments and decided once and for all to figure out what the numbers are.
There are two variations to this scheme:
1) Get the same mortgage, but invest the monies
2) Get a bigger monies for the same amount that you would pay monthly.
Ok, so I created an Excel spreadsheet that anybody can download to verify if I am right or wrong. Folks, please verify my spreadsheet because I want to know if I accounted for everything, because I found out something very very interesting.
I made the following assumptions for variation 1:
- 300,000 mortgage
- 30 year mortgage at current rates (5.75%)
- 15 year mortgage at current rates (5.52%)
- Interest only mortgage at current rates (5.53%)
- Renting at 2,000 per month
- Income of 90,000 with tax rate of 25% with interest paid deducted from yearly income.
- 1.5% of 300,000 charge per year for maintenance, etc
- 9% return on alternative investments
- 5% return on the price of housing
- The difference in monthly payments are invested into alternative funds
For variation 2 I made the following assumptions:
- 300,000 mortgage for the 15 years
- 530,000 mortgage for the interest only
- 420,000 mortgage for the 30 years
- 30 year mortgage at current rates (5.75%)
- 15 year mortgage at current rates (5.52%)
- Interest only mortgage at current rates (5.53%)
- Renting at 2,000 per month
- Income of 90,000 with tax rate of 25% with interest paid deducted from yearly income.
- 1.5% for yearly fees of the original price of the property.
- 9% return on alternative investments
- 5% return on the price of housing
- The difference in monthly payments are invested into alternative funds
Running the numbers I decided to sell after 10 years. At that time I decided that I would buy another house using the same prices.
Here is what I found for variation 1:
It does pay to get an interest only mortgage and invest the monies. At year 10 you pocket with the interest only 374,000, and the 15 year mortgage 323,000. This means you get 50,000 more by investing. However, this implies that you will invest the monies and get 9%. Granted both returns I searched and found on the Internet so they are averages over a time span of about 35 years.
If you only invested half the monies that the interest only gives you then you will be at a disadvantage. If you invest none of the monies then you will be at a massive disadvantage. In other words you will see the same amount less per month whether you use interest only or 15 year mortgage.
The tax advantage of the interest only vs the 15 year mortgage in year 10 is barely 200 USD, which in my opinion is nothing to write home about.
Here is what I found for variation 2:
Variation 1 was not what the original blogger was talking about. Variation 2 where you buy more house for your money was what the original blogger talked about. This means you would be investing nothing, and doing the numbers for this variation the results are not good.
Yes you can afford more house eg 530,000 vs 300,000, but after ten years it means you pocket less money 292,000 vs the 15 year mortgage 322,000. What I found particularly interesting about this variation is the associated risk. Your tax advantage in year 10 is greater (400 USD), but you have more costs since a more expensive house has higher taxes, etc. Additionally if you purchase a higher priced house there is a greater liklihood that you will not be able to sell your house.
Conclusion:
In my original blog entry, which I deleted, I said that the money you pocket is greater by paying off the mortgage. When I fixed my calculations for Variation 1 it was not the case, but it was the case for Variation 2. Though, what is extremely important to realize is that interest only or long term mortgages only apply if in the long term the markets and housing prices go up. If during the 10 year period you don’t get the required returns you are buggered. For example I did the calculations when both the investments and housing prices only increased by a mere 2% per year over a 10 year period. At that point the money that you pocket goes way up for the 15 year mortgage, and for the others you are left straddling quite a bit of debt.
So in the end it might cost more per month, but it is better to get a 15 year mortgage…
Tuesday, Feb. 20, 2007
by Christian
The following is a paid review. See the notes at the bottom for more information.
Looking for a place to store your hard earned (or not so hard earned) money? Savings-Accounts.com is site that shows the interest rates available at the most popular US banks.
According to the list, HSBC is the best bet with a 6% rate on “new money”. But hurry, you only have until April 30th to get the “promotional rate”. Bank of America and E*Trade are also decent with 5.1% and 5.05% repspectively. Your corner banks like Wachovia and Wells Fargo are offering just 0.25% and 0.50% respectively. The worst offer on the list is Key Bank, with a pitiful 0.15%.
I was listening to Bernake, and then Mr Sanders started the typical leftist propaganda. The Democrats are idiots who are going to self-destruct in about four years. My political leanings are center right liberal libertarian.
The tax cuts that Bush made have raised the hackles of Democrats. Democrats want to nullify the tax cuts. Yet I will argue that Bush was right to make the tax cuts.
I bet you are ready to pounce on me and say, “Only the rich benefit from the tax cuts and they pay so little.” Well, let me tell you a story about morality and being pragmatic.
Pictures can speak louder than words. So here is a shot of the performance of my E*Trade account.
Investors come in every shape and size, as well as risk tolerance. That last quality can really vary depending on whom you’re discussing the subject of investing. So let’s approach today’s rant in a way that should appeal to you whether you’re ultra-conservative or a daredevil risk taker.
One of the things to do during this holiday season after you’ve completed your shopping, should be to plan out your finances for next year. Most people I know put more thought and time into planning for their vacation than they do for their retirement. I’m guessing the majority of IG readers hold down a job somewhere so the first place to look at planning are your company’s offering of retirement plans. And I’m also guessing that most of us will not be able to say we spent a larger portion of our life taking vacations vs. being in retirement.
Retirement Plans Are Not Built Equally!
Complaints about one’s own retirement plan from disgruntled friends and family are common. My reaction is to ask them how much time they spent studying the features of their company’s offering? Too many people have the misconception that all plans are built equally. Throw that out right now! Ask for your company’s retirement plan prospectus and scrutinize it. Don’t say it’s boring, because you’re just giving yourself an excuse to fail. And if you can’t accomplish such a simple task, you really have no one but YOURSELF to blame for your future. (more…)
Monday, Dec. 4, 2006
by Vince
I was reading Steve’s article and thought “Steve you are a smart guy.” Steve is being smart because I think he is reading the market correctly and getting ready. I read the comments associated with Steve’s article and thought many are missing the message within the article. One comment that caught my eye.
