Sep 072017
 

Whoa, climate change? On a finance blog? Yep it’s come to this. First, lets get this out of the way. Is climate change real? Maybe, maybe not… Just kidding. It’s totally real and anyone who says otherwise has been reading too many blogs. I mean… well… this blog is fine.

Don’t believe in climate change? You are free to believe in whatever you want but the objective truth doesn’t change based on what you believe.

Anyway this article isn’t for climate science it’s about profiting from the inevidible!

 

You’re saying I can make an unethical buck profiting off the suffering of others?

Not exactly, we aren’t buying stock in cigarettes or leaded gasoline here. Based on my own research into climate change and seeing this emerging denialist attitude, it’s my opinion that the future planet is going to be warmer and there is nothing that you as an individual can do about it. Might as well watch the world turn to hell with a few extra bucks in your pocket.

Alright, I’m listening…

Before I start blindly listing energy stocks we need to define how the world will change as the climate warms. First, lets think of the worst case scenario where average temperature increase dramatically:

  • Hotter summers
  • Warmer Canadian winters (yay!)
  • Stronger storms
  • Rising sea levels
  • Water shortages (fewer glacial sources)
  • Crop failures/famine
  • Mass human migration away from the coast
  • Extinctions
  • Increased vegetation (from higher CO2)
  • Cats and dogs living together, mass hysteria!

Well that’s a scary list, except for #2. What kind of products and services might be in more demand in this new world?

  • Air Conditioners
  • Storm resiliency planning/construction
  • Storm recovery
  • Sunscreen
  • Moving/immigration services
  • Construction
  • GMO crops (resistant to climate changes)
  • Desalination
  • Energy efficiency
  • Green energy
  • Higher elevation land
  • Short shorts

As an engineer this list makes me excited. Lots of investment opportunity here. Finally lets rank them in terms of the greatest potential for short-medium term gain:

  1. Storm resiliency planning/construction
  2. Storm recovery
  3. Energy efficiency *
  4. Construction
  5. Green energy *
  6. Air Conditioners
  7. Sunscreen/short shorts
  8. Moving/immigration services
  9. GMO crops (resistant to climate changes) **
  10. Desalination *
  11. Higher elevation land

*These ones might have fantastic potential if a bright young person comes up with a miracle invention. Unfortunately we can’t rely on that for investing.

**If people weren’t so scared by GMOs this would be higher (especially those that don’t even know what GMO means)

Finally lets go through the points and identify some companies that provide these services:


1, 2, 4 – Storm resiliency planning/recovery/construction

 

Storms and flooding damaging coastal cities is one of the first things we’ll start noticing in the coming decades. Already Hurricane Harvey has flooded Houston and Irma is on its way. Lets find some companies involved in rebuilding and resilience:

Tetra Tech – TTEK – Consulting and Engineering services with lots of disaster planning and recovery services. Up about 19% in the past year

Ch2m (now Jacobs) – JAC – Also consulting and engineering with lots of resiliency work.

Continue reading »

Jun 192017
 

So you’ve read the articles, ETFs are getting saturated and you crave even more investment diversity. You want stability and a healthy return. Lets look at three investing alternatives. (Yes I am aware that #1 is available in ETF form. Shut up)

 

1 – Real Estate Investment Trusts (REITS) – riskiness: low

 

What is it?

A REIT is an entity that owns multiple investment properties and rents them for profit. About 90% of the income is passed directly to the investors, who own shares in the REIT just like any other company. To qualify as a REIT the company must have 75% of their assets tied up in real estate and pass 90% of their income onto the shareholders through a dividend.

Why would I want it?

High returns, real estate market exposure, and liquidity. A REIT is the easiest way to sort of own real estate. Their prices are tied to the housing market and not the stock market. Beyond that the dividend can range from 4% up to 10% with monthly payments. Steady income here we come!

Whats that? you don’t have $4 million to buy a commercial property? Well you can invest in a commercial REIT to get exposure to that market! Furthermore it can take months to actually purchase a rental property and fill it with tenants, but you could log into your brokerage account and buy shares in a REIT right now.

How do I buy into it?

Public REITs trade just like stocks. Log into your brokerage and buy shares.

What else should I know?

TAXES – this is a big one. Income from a REIT property is taxed when the income arrives at the shareholders instead of the company. What this means is your REIT dividend is taxed at your MARGINAL TAX RATE. You seriously need to keep this in mind because suddenly your 10% dividend is more of a 6.5% dividend after tax. But maybe you are thinking what I’m thinking… “What if I put this in a TFSA or RRSP?” Damn straight, it’s tax free! Use this to your advantage. Fill your tax havens with high-tax high-return investments like REITs to keep the high-return but negate the high-tax.

HOUSING MARKETS – Perhaps you’ve heard about the Canadian housing bubble. You may not own any real estate yourself but if you own REITs you will be affected by real estate prices; if this bubble pops your REITs are going to take a huge dump. Maybe this will never happen, maybe it will happen tomorrow, no one knows, but it’s something to be aware of.

 

 

2 – Peer to Peer lending – riskiness: medium

 

What is it?

You get to be the bank and loan money to a business! Lending Loop will let you can put up as little as $25 and you’ll be paid back with interest the duration of the contract. You take on the risk that they might not pay it back, but you collect interest based on the likelihood of that happening.

Why would I want it?

INTEREST. These loans range from 5% to 20%. As of this typing the highest yield is 18.4%, where else can you get an 18% yield? Nowhere, that’s where. Not even here, because you’ll still need to pay tax and Lending Loop will also take a cut. But after-tax yields of 10% are still very possible.

How do I buy into it?

Through their website. Similar to a brokerage you’ll need to sign up and fund your account before you can start issuing loans.

What else should I know?

TAXES – Much like REITs your interest income will be taxed at your marginal tax rate. Your 18% return will be closer to 10% after income tax and Lending Loop’s fees. To make matters worse, you can’t shelter these investments in a TFSA or RRSP (at least not yet).

RISK – Like anything, don’t put all your money into one loan, especially not one with a D rating, there’s a real chance you could lose your entire investment.

 

Continue reading »

 Posted by at 3:17 pm
May 272017
 

A penny saved is a penny earned? WRONG. A penny saved is MORE than a penny earned. The money in your pocket is post-tax, but if you (legally) earn another dollar it is pre-tax income. Assuming you get taxed 30% that means a dollar earned is actually 70 cents earned. Send your eyes to the informative chart below:

$1 SAVED $1 EARNED
Pre-Tax Value $1 $1
Post-Tax Value $1 $0.70

 

To put it another way, one dollar saved is $1.30 earned. So start being a cheap bastard and save your money whenever you can! I have a good idea to get you started. Learn some DO IT YOURSELF skills.

via GIPHY
I’m going to debunk a few myths related to DIY work:

  1. I don’t have time
    • Everyone has “time bandits” that can be removed or reduced and replaced with more productive work. Some examples:
      • TV/Movies – I hate the term “binge watching”. Are you really so boring you can’t find any better use of your time than the most passive activity besides sleep? Try to keep it under 1 hour per day, and understand that your TV hour is burned time.
      • Internet – Reddit, YouTube, Facebook, news, email. I’m guilty of most of these. Falling into a Reddit or YouTube wormhole that I come out of 2 hours later with nothing to show for it.
      • Commuting – Hard to get around this one sometimes, nut why not replace listening to music or news with self-improvement audiobooks? Or, if you take the train, regular books?
      • Family/friends – Forget those guys they’ve never done anything for you! (that was a joke, don’t forget those guys) But be aware that socializing with friends often involves spending lots of money and time.
      • Reading blogs – Blogs like this one are totally NOT a waste of time and you should read everything I write here because I’m awesome.
  2. I’m hopeless with tools
    • No you aren’t, you’re just unwilling to learn. Literally everyone started from zero skills. Some people are fortunate enough to have a teacher, but for the rest of us there’s the glorious internet! Here’s how to find out how to do almost anything:
  3. I don’t want to mess up my things
    • Start small. Don’t try to fix your car’s transmission without ever looking at an engine. A toilet, however, is not that expensive or complicated. If you do end up messing it up? That’s when it’s time to call the plumber/mechanic

And now for my list of reasons why you need to start fixing things yourself (besides saving money):

  1. Learn a practical, money saving skill
  2. Impress the opposite (and/or same) sex
  3. Social bonding with DIY-buddy
  4. Mental exercise and greater understanding of how your things work
  5. Personal satisfaction through achievement

The thing you fix yourself will seem more valuable than the thing you just paid someone to fix. Human psychology assigns more meaning to objects that were created with our own hands. If you appreciate your possessions more you’re less likely to purchase new possessions furthering the saving money cycle.

Apr 012017
 

Tired of paying for things? You’ve come to the right place. Here I’ll present a perfectly sound and reasonable plan for you to live for free. That’s right FREE. Let’s tackle the most common expenses:

FOOD

Food is expensive. A decent meal at Mcdonalds is going to cost us upwards of $10, three times a day, that’s $30/day! UNACCEPTABLE! Let’s start by never eating out ever again. That should reduce food expenses by around 2/3 according to my other food post (SAVING HACKS: COOKING). We can make better food than the disgusting poison they serve in restaurants anyway.

BUT COOKING IS ALSO EXPENSIVE. Yea I know. First let’s cut down on luxuries like condiments, spices, salt, sugar, meat, dairy, anything imported, and anything that absolutely requires heat. We can’t be bothered spending precious electricity on heating up food.

All we really need to not die is calories and vitamins. We can get calories from rice and vitamins from vitamin pills.

  • We can buy a ton (literally) of rice through Alibaba for $650. To get to 2000 calories per day we’ll need to eat 13 servings of rice. That’s 585g of dry rice per day and thus our ton of rice will last around 51 months, or 4 years. Thanks Alibaba!
  • Here’s a place that will sell 12,000 vitamin pills for $450. At one pill per day that’ll last us 32 years! Only $0.03 per day!

We’ve successfully gotten our food budget down to $176.50/year:

Rice and Vitamins

Fun and exciting animal shaped pills for intellectual stimulation!

BUT THAT’S NOT GOOD ENOUGH

The title of this post is how to live FOR FREE, not how to live for $0.48/day. Forget everything I just taught you about rice and multivitamins. It’s time to get free food!

We could grow food, but that takes too long and we’ll be dead before harvest time.

We could steal food, but people these days put locks on their doors.

We could live off sunlight, but we’d get too hungry when it’s cloudy.

The solution? GARBAGE. There’s literally tons of food thrown away every year! You only need to find a trash can and get digging!

trash-can-clip-art

Delicious

SHELTER

Houses are expensive. Rent is expensive. But how expensive is it really? A quick search of Kijiji shows the cheapest rentals go for about $300/month. Clearly that’s too much. We can get almost two years worth of food for that! Continue reading »

Mar 212017
 

I’ve been getting a lot of similar questions lately. What are bonds? Why should I care? Why are you wasting your time on this silly moose website?

I’ll answer some of those questions. Turn on the thinking part of your brain…. now… and here we go with bonds!

Not that kind of bond

Not that kind of bond

What is a bond?

A debt issued to some entity where YOU act as the issuer and collect interest. (You loan money and they eventually give it back plus some extra)

 

Wait what?

You give the government or a corporation some money, say $1000, and they promise to pay you interest, say 6%, over a specified time frame, say two years. At the end of the two years you’ll get your $1000 back plus $60 interest for a total of $1060.

Bonds are issued by governments and corporations to gain access to cold hard cash for various long term projects like World War II. Corporations prefer bonds over direct bank loans because bonds offer more flexibility. Banks are strict on what you spend their money on and won’t give you anything more till you pay back the first loan.

Governments typically don’t take loans from banks and thus will normally issue bonds to raise cash or cover a deficit. Alternatively the government can just print more money but that’ll weaken the currency on the open market and thus weaken the country.

 

How is this different from a GIC? Also, what’s a GIC?

A Guaranteed Investment Certificate(GIC) is an investment sold by a bank that provides a guaranteed return over a specified time frame.

GICs are normally issued by banks, not corporations or governments, and as the name implies is guaranteed. The word guarantee is a strong statement, but these banks have been pretty reliable these past few centuries. Bond values can change over time(more on that later) and thus their value is not guaranteed. A bond can also be SOLD at any time whereas a GIC is completely locked up for its duration.

 

Why should I buy bonds?

You’ve probably heard that people need 30% bonds and 70% stocks. There are reasons for that:

  1. Diversification – During wild market fluctuations bonds will normally do the opposite of stocks and owning both will make your portfolio less volatile. Some bond funds during the 2008 crash gained 11% while stocks fell 20%
  2. Stability – Bond prices may rise and fall slightly but they are seriously more stable than stocks. Check out the graph below.
  3. Income – Cash payouts from bonds remain fairly constant even if the bond price dances all over the place. Most bonds payout twice a year and can be used as a reliable source of passive retirement income.
Stocks vs Bonds

Stocks in Red vs Bonds in Blue. Bonds are low risk low reward which is a good thing

Ok I’m convinced, how do I buy bonds?

The easiest way to buy individual bonds is through your brokerage. Questrade offers zero commissions on bond trades. You will normally call the bond department of the brokerage to place an order. Government bonds can be purchased through the Government of Canada website. They’ll even mail you a fancy bond certificate! (Update: Canada Savings Bonds are being discontinued in November 2017. Dangit)

 

How else do I buy bonds?

ETFs – You guessed it, bonds also come in ETFs! With a bond ETF you can buy a small fraction of 1000 different bonds at once rather than a single bond. You can buy them just like a stock through your brokerage and can easily target a bond market, like government or corporate.

Vanguard’s Canadian Aggregate Bond ETF holds 770 different bonds, mostly government, it has an annual dividend (or distribution as they call it with bonds) of 3.3% which is paid monthly.

 

What else should I know?

  • Relationship between bonds and interest rates – Maybe you’ve heard that such a relationship exists. Well it does. And to put it simply, if the government reduces interest rates, bond prices go up, and vice versa. It’s an INVERSE relationship and one of the main reasons bond prices fluctuate.
  • Relationship between bonds and stocks – You should know this already, typically bonds will fall (slightly) when stocks rise and vice versa. Another INVERSE relationship.
  • Bond strategy – Infiltrate the Russian compound and steal the intel without alerting the guards…. wait…. wrong Bond again.
  • Bond strategy – Bonds are your safety net. A conservative profile will be mostly bonds. If you’re under 30 you should hold about 15% in bonds, gradually increasing that to at least 60% at the start of retirement. Thus if the market crashes you’ll at least retain some of your capital within the bonds.

 

Why would interest rates matter?

It will make sense with an example. Let’s say you buy a bond at $1000 paying 5%. You will eventually get back a total of $1050. But the next day interest rates rise to 10%. You decide to sell your first bond and buy a new one that gives 10%. Unfortunately you can’t find a chump to buy your sissy 5% bond when they can just as easily walk across the street and get 10%. The only solution is to lower your selling price to artificially give a 10% return.

You manage to sell your $1000 bond for $954.55. Had you kept it you would have earned $50, but the new owner will earn $95.45 ($50 plus your discount of $45.45) which is 10% of $954.55. Summarized below:

5% interest 10% interest (new owner) Difference
Value at purchase $1000 $954.55  -$45.45
Value at maturity $1050 $1050
Total interest $50 $95.45 +$45.45

 

Whoever issued the bond pays the exact same no matter who owns it. But as you can see the $45 was transferred between owners because of the interest rate change.

There! You’re now smarter! You can smugly talk about interest rates affecting your investments!

 

Feb 252017
 

In the game of building wealth you either earn more or spend less. Not everyone can easily earn more, but anyone can spend less. I’d wager that if you are reading this right now you eat food. Did you know you can make your own food? If you want to get serious about building wealth you’d better start. It might be the easiest and most effective way to save money.

20160130_102608

Gourmet homemade breakfast: Two fried eggs with onion and spinach, everything bagel with peanut butter and jam, and tomato juice. Total cost ~$1.50 Estimated restaurant cost $5

“But Mr ProfitMoose, I’m a terrible cook, I burn spaghetti!” Ignorance is a terrible reason to not do something. What you are saying is “I can’t follow basic instructions”. Whatever you want to cook, just type it into google with “recipe” and you’ll be inundated with cooking instructions. Other reasons NOT to cook:

  • Don’t know what to cook? – Cook what you normally get from restaurants, or search google for “easy recipes”
  • Don’t know what spices to add to make it good? – Follow the recipe
  • Always missing ingredients? – Go to the grocery store with a shopping list
  • Don’t have time? – You have time to read finance blogs
  • Don’t like washing dishes? – Get a dishwasher (the machine not a person). Or suck it up and just do them. You’re an adult (presumably)
  • Constantly burn food? – Set a timer on your phone
  • Scared of burning your house down? – Get a fire extinguisher and smoke detector
  • Someone does your cooking for you? – Well lah dee dah. But is this person going to be with you at every meal time your whole life?

“Whatever Mr ProfitMoose, I choose to ignore your fancy logic and reasons. I still don’t like cooking” You need someone to hold your hand. What about getting everything delivered right to you? The latest trend are companies like Chef’s Plate that will deliver everything you need to cook a specific meal in a refrigerated box right to your door(although it can be expensive). Why not learn how to make a few of these meals then buy the ingredients yourself?

Modified Kraft Dinner dinner: Kraft Dinner + Extra Macaroni + Italian Sausage + Frozen Mixed Vegetables + 2 Avocados + Pineapple + 1 can of Black Beans + Mustard Greens + Garlic + Random Spices = Delicious. Estimated cost per meal for 5-6 meals ~$3. Estimated restaurant equivalent cost ~$10

“Well Mr ProfitMoose, I’d rather put cooking time into things that make me MORE money” Cooking has so many benefits beyond saving money:

  • Learn a practical skill
  • Impress the opposite (and/or same) sex
  • Social bonding time with a cooking partner (see above point)
  • Know exactly what you’re eating (compared to more mysterious restaurant ingredients)
  • Custom flavours (add as much garlic as you want!)
  • Custom portion sizes
  • Supercharge your healthy eating
  • Personal satisfaction through creation

I see too many friends and colleagues eating out for every meal yet saying they don’t have time to cook. What if you spend 2-3 hours cooking meals for the next 6 days? (including buying groceries, cooking, and cleaning). Spread out over 6 days that’s about 25 minutes per day, and I’d guess that the time spent in a restaurant (including travel time) is more than 25 minutes (unless you only get delivery).

FINANCIALS OF COOKING

Lets make up some rough numbers for cooking and eating out, starting with eating out:

  • $9  – Breakfast sandwich + coffee/tea
  • $12 – Lunch
  • $3  – Afternoon snack
  • $15 – Dinner
  • $3  – Evening snack
  • $42  –  DAILY TOTAL

The average employers budgets a daily food allowance of $50 for travelling employees, so I’d say my estimate is good. What about cooking yourself? I’ll make up some numbers based on my typical meals:

  • $0.15/cup – home brewed coffee or tea
  • $1  – bagel with creamcheese and 2 eggs
  • $4  – two sandwiches (from $3 loaf of bread, $5 meat, $0.50 tomatoes, $1 lettuce that makes roughly seven sandwiches)
  • $1.50 – yogurt, fruit
  • $4  – dinner ($3 spaghetti, $3 sauce, $3 ground beef, $7 assorted vegetables and potatoes on the side that lasts four meals or more)
  • $2  – mixed nuts or toast/fruit
  • $12.65 DAILY TOTAL

DIFFERENCE: $29.35

So based on my estimates you can save an average of $30 per day by cooking everything yourself. Let’s be conservative and cut that in half to $15/day, or roughly $100/week. That’s $5,200 per year. That alone will nearly fill your TFSA! Now lets invest it at 7% return for 30 years:

  • $100/week
  • 7% return
  • 30 years
  • Result: ~$510,000

Half a million seems like a good enough reason as any to start cooking. And you’ll live longer to enjoy it if you are eating healthy.

 Posted by at 7:17 am
Oct 152016
 

 

Be sure to read Part 1 before continuing

What to hold in a frozen investment account:

Remember that in your frozen account there is no rebalancing, no buying, no selling, no withdraw. You can take no action until you return to Canada and unfreeze. Good thing you are read this before you leave Canada and it’s not too late! Your ideal frozen funds should have these characteristics:

  • No dividends
  • No re-balancing required
  • Steady, reliable growth
  • Low fees
  • Allocations: 15% Canadian equity, 40% US equity,  25% International equity, and 20% bonds

If you are under thirty I’d normally suggest 10% in bonds, but since you can’t re-balance it’s best to give your slower growing bonds a head start. In a few years your entire portfolio will be higher(probably), but the bonds will have grown at a slower pace, reducing their share of the total. Ideally that 20% will be closer to 10% or 15% where it belongs. (and yes that will keep shrinking, but there’s really nothing we can do about it if your account is frozen for ten years or longer).

I’ve come up with two options: One single balanced fund, or a set of three or four stable ETFs. Amix of both will also work well:

Continue reading »

Sep 152016
 

So you’ve finally decided it’s too cold here, or you’re sick of Tim Hortons coffee, or some beautiful person has stolen your heart and keeping it hostage in another country. Whatever the circumstance you’re exiting Canada for an unspecified amount of time. But what do you do with your massive swollen nest egg all tucked away in the Toronto Stock Exchange?

Option 1: Don’t Change Anything, Freeze Your Account

If your brokerage allows it you can keep your investment accounts as-is after you leave and potentially avoid:

  • Transaction fees
  • Account closing fees
  • Wire transfer fees
  • Currency conversion fees
  • Realized gains/loses from selling your investments
  • Lost growth during the lag time between selling in Canada and re-investing in your new country

That’s a lot of fees that can be avoided. But they might be pennies compared to the financial disadvantages. Normally if you leave your account it will become FROZEN, meaning you can’t do anything except watch what happens. Some of the implications of a frozen account include:

  • No rebalancing
  • Dividends sit as cash
  • Complex cross-border taxes
  • No access to funds if they’re needed

What about selling everything and closing the account?

Option 2: Liquidate Accounts and Re-invest in Your New Country

Depending on your brokerage, selling might be your only option (Questrade, for example, does not allow non-residents to hold a margin account). Taking your money with you has some benefits:

  • Lower taxes (maybe)
  • Access to better investments
  • Simplified tax reporting
  • Avoidance of jail time and/or $10,000+ fines (your Canadian investments might be considered offshore tax evasion)

Of course the tax benefit won’t matter if Canada is still taxing your worldwide income, and that’s the first thing you need to check:

Continue reading »

Aug 082016
 

Use this calculator to see how much your management fees are really costing you. What’s MER? It’s an acronym for Management Expense Ratio; it’s basically the total fees (as a percentage) that a mutual fund charges. More information on MER here: http://profitmoose.com/beginners/how-to-judge-etfs-and-why-i-paid-900-to-ditch-mutual-funds/

ALTERNATIVE OPENING: How much money can you make off your clients?
Continue reading »