Posts Tagged "google"
Leverage Part 2: The Dark Side!
So now that you are all hot and bothered about getting an investment loan (aka leverage), let me take you down a notch! (Trust me, it’s for your own good…) :) Okay, so let’s now say that Greg, who if you remember had learned that he would be $2,000 ahead by getting a loan, decides to calculate a few “what-if” scenarios… 1. What if the investment only earns 6%? In this case, the investment’s rate of return and the interest on the loan are equal. How much does Greg have at the end of 10 years? In this case the leverage will leave him with just $13,487 at the end of the 10 years. If he had made the annual savings of $1,000 into...
Read MoreLeverage Part 1: What is Leverage?
Leverage: Think of it as using “other people’s money” to make money more quickly. Probably another topic that is best explained with an example. Greg has $1,000 a year to invest for 10 years. Assuming a rate of return of 10%, at the end of 10 years he will have $17,531. BUT, we know from the post on the magic of compound growth that TIME has a large effect on growth. The philosophy is that if you could instead take all that $10,000 over 10 years and just put it in now, you will have more money than by putting it in over 10 years. Okay, let’s look at a simple use of leverage: Greg only has $1,000/year, so he can afford a loan payment of...
Read MoreWhat is a GIC?
GIC: Guaranteed Investment Certificate. In the US these are known as CD’s (Certificate of Deposit). This is pretty much as safe as you can get when it comes to investing. You buy a GIC at an advertised rate (say 4% as an example) and you earn 4% per year for the duration of the term. They are guaranteed in that it doesn’t matter what happens to the stock markets, or with interest rates after you buy the GIC, if you bought a 4% GIC, you get 4% annualized for the duration of the term you chose. (Term is just a fancy word for how long you want to hold this investment.) The only way you could lose out is if the bank went under – even then, your money is...
Read MoreUse our strong dollar to save on online purchases…
Our dollar has been hovering around $0.95 USD. So to figure out how much you pay for something that is listed in US funds, just divide the US price by 0.95. Now you have how much you will pay in Canadian funds. To take advantage of this you need to know that the price spread of an item (the difference between how much it costs in US funds and how much it costs in Canadian funds) is greater than the price spread between the loonie and the US dollar. (The price spread between the loonie and the US dollar is 5 cents divided by 100 cents). <– THAT’s the philosophy, but what you really need to know is that when you divide the US priced item by the...
Read MoreInflate your tires properly and save $432 per year!
The EPA (Environmental Protection Agency) says that for every 2psi (pounds per square inch) of under inflation in your car’s tires, you lose 1% in fuel efficiency. In a recent study (not to exacting scientific method, mind you) students at Carnegie Mellon University found that out of the 81 cars parked in a nearby parking lot, only 1 car had all four tires inflated to the proper tire pressure. Further, they found that on average tires were under inflated by 20% – which translates to about 7 psi. If you go by the EPA’s assertion, the average person is losing 3.5% in fuel efficiency. According to the mathletes at Carnegie that works out to $432 for...
Read MoreCan you Diversify too much?
This is a tricky topic to talk about. So please read the caveat at the bottom of this post! The wealthiest people in the world have, on average, made their fortunes on ONE stock… and that is usually the stock of the company they themselves founded and ran in the form of a small business that just kept expanding. But of course for every small business that becomes the next GOOGLE, there are countless more that fail and go under. This is the ultimate example of why you won’t get rich quickly by diversifying AND how you could lose everything quickly by NOT diversifying. Understanding this debate is understanding the trade off that you want to make...
Read MoreWhat is "Diversification"? There is more to it than you might think!
Diversification basically means not putting all your eggs in one basket. If you hold only one stock and that company went bankrupt, then you would have lost all your money. If you hold two stocks and one company goes bankrupt you have only lost half your money. And so on, and so on. But there is a BIT more to it than just that. If you held two stocks in companies like Sprint and Verizon and someone invents a device that makes phones obsolete, then both companies might go under. In this case you have diversified by holding two companies, but you picked two companies in the same industry! Further, if you held two mutual funds that both invested in large Canadian...
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