Posts Tagged "money"
Iceland's Smoke Monster
While sad, it is worth pointing out that the volcanic ash emanating from Iceland is highlighting how some people are balanced on a knife’s edge when it comes to their finances.
I have read stories of how some people (who until now have been stranded a maximum of 5 days) can no longer afford to stay in hotels while stranded and have taken to sleeping in the terminals, streets, or what have you. I realize that hotels can be more expensive in Europe than here, but regardless there are some issues here.
For those that have travel insurance or are covered under their credit card’s travel interruption features, they should be getting their money back. So if they have insurance and are leaving the hotels this means they didn’t have enough liquid cash or credit to afford dealing with these few nights of extreme inconvenience.
For those without any form of insurance, it’s slightly different as some may have decided they didn’t want to spend the money/credit they had in exchange for a hotel room.
One last note: anyone taking travel insurance now will not be covered for interruptions due to the volcanic ash as it is now an established problem that could knowingly cause future delays. Make sure you know what is excluded with your policy.
Read MoreChanges And Facebook Fan Pages
It’s been two weeks without a Lap Of The Blogs. I’ve been busy with filming some stuff for the W Network and regular programming will resume this week. In the meantime I’m going to be making a few changes in preparation for a bit of a change to my online persona. Don’t worry, nothing drastic…
1. Facebook Fan Page for the WhereDoesAllMyMoneyGo.com
I have a personal facebook page but I only accept friend requests from people I know for privacy reasons. I’m sure I also have friends on facebook who couldn’t give a rats ass about the NAV decay in leveraged ETFs. Therefore I will be removing the blog feed from my private facebook page and moving it over to a specific Fan Page for the blog.
If you want to keep up to date with new blog posts on WhereDoesAllMyMoneyGo.com please click here. You will now get blog updates on your facebook account.
2. Facebook Fan Page for Preet Banerjee
Since I will be potentially hosting my own show on the W Network, I will be gearing some new content to a more mainstream audience. Let’s be serious – most people won’t find what I write on WhereDoesAllMyMoneyGo.com to be essential reading. Sometimes it gets too technical for the casual investor. I’ll be creating a new blog in the future that is more mainstream (and keeping WDAMMG what it is – although that may get rebranded in the future as well). The new blog content will be fed to the Preet Banerjee Fan Page along with more personal updates and other mainstream content.
I’ll have other content, like photos from the TV sets and updates on what I’m going from time to time that may not be specifically money-related on that Fan Page.
If you would like to become a fan on facebook of “Preet Banerjee” click here.
Thanks everyone! The pages will be a bit sparse for the next 24 hours, but will slowly have content added.
Banerjee… OUT
Read MoreiPad Review
So the cat’s out of the bag: there is no iPhone Macro. I indeed purchased an iPad. Here is my review after having used it for the last few days.
iPad Models
There are six models to choose from, but the only factors of differentiation are memory size (16GB, 32GB, 64GB) and whether or not it has WiFi or WiFi + 3G. 3G just refers to the ability to connect to the internet when you are not in the range of a wireless network. Here are the prices in the US:
It should also be pointed out that if you want to take advantage of 3G services, you have to subscribe to a plan. Currently the only plans available are $14.99/month for 250MB of data or $29.99/month for unlimited data (this is through AT&T, the only service provider in the States). There are no contracts and you can activate the service right from your iPad – no need to call anyone or go into a store – and you can cancel anytime. Realistically, I can’t imagine these price points and non-contract feature will trickle through to Canada, but the Canadian pricing has not been officially released yet.
Do you need 3G service?
In my opinion, no. Think of it this way: do you have a laptop with wifi? It does the trick, right? Right. No need for the monthly costs. Stick with a WiFi only model and save some money now and forever. There are apps available that allow you to cache web pages for future offline browsing.
Do you even need an iPad, period?
Funny that you ask. Just yesterday I ran into an old colleague and he said he was due for a new desktop and laptop computer and was trying to figure out if he needed a laptop now that the iPad was available. After playing with the iPad he realized that it was capable of doing about 95% of what he needed a laptop to do while he wasn’t using his desktop. It would also be about 50-65% of the price of the laptop he was looking at getting. So to him, it makes sense. If you already have a laptop and desktop, you don’t need an iPad – it would be just for cool factor and nothing more.
What does an iPad do?
Where to begin. The entire interface is built on a touch screen which encompasses the entire front of the device. It really is just like a giant iTouch (aka iPod Touch). The main difference is that it’s much bigger which makes for a great experience. Any app you have for your iPhone or iPod Touch will migrate over once you plug it into your iTunes account, but the apps appear just as they do on your iPhone (i.e. small). You can double the size of these apps to use up the screen real estate, but they become pixelated. There is nothing different about them. The new iPad specific apps are gorgeous though, with much more functionality (hovering toolbars and pop-up windows).
One of the central apps will be the iBookstore application which is Apple’s ebook reader app. It is not available to Canadians yet (it’s turned off for Canadian iTunes accounts so far). However, you can download the Amazon Kindle app where apparently, the same books are cheaper anyways.
You can also plug it into your TV to watch movies and TV show you download from iTunes.
What doesn’t an iPad do?
Lots. And it was probably designed that way to get a lot of recycled sales for the 2nd gen models to follow.
It does not have a camera – so no video conferencing.
It does not have USB ports.
It does not work as a phone (out of the box anyways). You can simply get the Skype app and use it as a phone, but only as a speakerphone. I have a Skype Out account so I can make unlimited calls to computers and phone in North America for a whopping $2.95/month. But since Skype In accounts are not available in Canada, you can only receive calls from computers, not landlines. The iPad has become our new home phone line and we don’t have regular home phone service anymore.
So what’s the verdict on the iPad?
If you are looking for a new laptop and you already have a desktop for the heavy lifting applications, I recommend it. It’s pretty rare that someone needs a full laptop and a full desktop.
If you don’t want a desktop and are wondering about laptop versus iPad: get the laptop.
It wouldn’t replace a smartphone because it is too cumbersome, and isn’t a real, fully functional phone.
So essentially, it’s a cool gadget but you don’t need one. Having said that, it is a dream to use and to surf the web with. It’s very intuitive and the ingenuity of the app designers is pretty much unlimited these days. I’ve been using it for meetings for presenting powerpoint presentations to small groups of people, or individuals – and it is very useful in this capacity. It turns on instantly and you can pull up a presentation and have it running in literally 5 seconds.
It’s definitely a winner.
But you don’t NEED it.
Perhaps you should just wait for my contest to launch for a chance to win a FREE iPad. Stay tuned… :)
Read MoreMentally Spending Your Next Raise Before You Actually Get It
One thing I’ve noticed with some people is that they get progressively more stressed about money the older they are. That should come as no surprise. But it’s also no surprise that people tend to earn more and more money as they get older too. So shouldn’t things get less stressful?
One (of the many reasons) for this phenomenon is the tendency for people to mentally spend future increases in income ahead of time, which is similar to how people will tend to spend exactly what they earn now (if not more).
If you earn $50,000 (after tax) and you spend $50,000 after tax and you know that you are getting a $5,000 raise in the next three months how likely are you to use the increased income to better your financial situation? Do you commit the extra dollars to accelerating your debt repayments or funnel it towards savings and investing? Or do you plan on spending $55,000?
I’ll offer up a compromise: take half the increased take-home pay and put it towards savings or debt repayment and use the other half to scratch your itch to spend.
Something is better than nothing, but until you break the cycle of spending every penny you have coming in the door every future raise just means the knife-edge you are balancing on is higher and higher up from the ground.
Read MoreIs Your Brokerage's Bond Desk a Profit Centre?
Not a question a lot of people ask, but it’s an important one. As an investor, if you buy a bond from your advisor or discount broker you see the price you are offered, but how far off is that from the price the brokerage paid to get it for you?
Bond desks can either be run as profit centres or not. When I was at ScotiaMcLeod and I wanted to buy a bond for a client, I would call up the bond desk downtown and get the price for what was in inventory and it was nice to know that our bond desk was NOT run as a profit centre. Ultimately it means the client gets a better price and therefore a better return on their money.
Some bond desks, however, are run as profit centres which means that the bond traders have to take their cut and management expects them to generate revenue for the firm as well as providing inventory to the salesforce (the advisors buying and selling bonds for clients). This revenue ultimately comes out of the end investor’s pocket.
An investor who uses a brokerage whose bond desk is run as a profit centre might get a bond at 95 whereas that identical bond sold through a brokerage whose bond desk is not run as a profit centre would get that bond at a price less than 95. This is independent of the commission paid to the advisor which is a separate consideration.
I’m going to guess that this is not a question that many people think to ask a potential new advisor, but I think it is an important one.
Read MoreBuying ADRs to Avoid Stamp Duty
Coincidentally, I was talking to the portfolio manager of our index funds today and part of the conversation was surrounding tracking error and the use of ADRs and GDRs. In a post from last week I had mentioned how using ADRs and GDRs could be a source of tracking error, but there is more to that conversation lest you think you should always avoid depositary receipts.
One reason is political risk. For example, our global and emerging markets index funds try to hold the direct stocks on their foreign exchanges as much as possible, but for the case of Russian stocks there is enough concern that getting your money out of the Russian stock exchange might not always be feasible that using ADRs is preferable.
Another reason to consider using ADRs (or GDRs) is that you can avoid paying Stamp Duties. Stamp Duties are levied by certain countries for buying and/or selling stocks – it is simply a tax. In the UK, the stamp duty is 0.5% of the value of the transaction, and to give you an idea as to how much revenue is generated from stamp duties it was as high as 4.5 billion pounds in 2001 (so it likely isn’t going anywhere anytime soon).
By buying an ADR instead, you would avoid the stamp duty. So as long as you monitor the premium or discount to NAV of the ADR and deem it to be liquid enough it may very well be a superior option than buying the direct stock and incurring an instant tracking error of 0.5% off the hop.
Read MoreLeverage 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 a 6% investment – he would have $13,972 – almost $500 more. So in this case the leverage would’ve been the wrong decision.
2. What if the investment makes no money after 10 years?
Depressing, but a lot of investors guide themselves to a 0% rate of return by switching their investments around too much – always a step behind “the next hot pick” (but that’s another story!). Okay, in this case the “straight savings” (putting $1,000 per year) will give you, yep you guessed it $10,000! The leverage? Another no brainer – Greg’s loan for $7,531 doesn’t grow and that’s all he has at the end of 10 years. I think you can see that we’re getting further and further behind with the leverage…
3. What if the investment loses 10%?
We looked at a gain of 10% in Part 1, so let’s look at a loss of 10%. It would take real skill to lose 10% per year over 10 years – but I suppose it could happen if someone were really clueless… The straight savings will leave Greg with $5,862. Yikes! But if that wasn’t bad enough, the leverage would leave him with $2,626!!!
I think I have built a solid case for why you may want to think twice about leveraging. But there is SO MUCH MORE TO THIS STORY than just the examples I have given. From here on in it’s going to get even wilder (both in terms of potential and volatility). Near the end of the series on leverages, once I have shown enough case studies to educate you to the level of an average financial advisor (on THIS topic), I will show you some advanced leverage strategies that I use with my clients on a regular basis – but it is much more complex than the stuff we’ve just talked about – because I am not a fan of risk – and neither are my clients!
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