Monthly Archives: July 2010

Another RBC Direct Investing RRSP Update

Back in May I gave an update after I moved all my U.S. securities held in my RRSP back into American dollars. Feel free to take a look at the original post to get the back-story.

I was quite happy in that email as it seemed my problem had been resolved after a quick 15 minute phone call. Well it looks like RBC was having some more growing pains than I thought, because after about 1 week there was no change to my account; there was still no book value listed for my securities.

So I called again and had another 15 minute or so chat with a call rep who said there was a record of my call, and the instruction to calculate my book value, but for some reason nothing was ever done.

He apologized and said my book value would show up in about three days. This was half-true… A book value was listed on my site in about three days. The problem is that it wasn’t the correct book value for my securities.

The thing was that I had bought a particular security 2 times, but only one of my purchases was listed as my book value. So last week I went through the motions again, calling them and having them re-calculate.

It finally seems that things are correct. Let’s just hope it stays that way.

Weekend Reading

I don’t know about where you are, but I’m melting here in Japan. We’ve had 35 degrees for the past few days. I’ve been enjoying the air conditioning and catching up on some articles. Here’s a few I enjoyed from the past week.
  1. Canadian Capitalist talks about the benefits to be had by investing a small amount of money over time.
  2. Preet at Where Does All My Money Go is giving away some great gifts as part of his blog’s three year anniversary. Not only is another iPad going to one lucky reader, but so is a Star Trek spork!
  3. Michael James on Money asks if buying a house makes one financially responsible.
  4. Mr Cheap at Money Smarts says that work kills a piece of his soul everyday.
  5. A guest poster at Million Dollar Journey wrote a couple of bond related articles… part 1 and part 2.
  6. Canadian Finance Blog talks about crafting a gas budget.
  7. Paddy Hirsch gives a whiteboard description of the Chinese currency peg.
  8. For Americans, Acrimoney has a post about converting an IRA to a Roth.
  9. Balance Junkie give a breakdown of the pros and cons of stocks and bonds.
  10. Larry MacDonald asks if Templeton was better than Buffet.

An article of mine was also featured in the Carnival of Personal Finance at Beating Broke. There are a plethora of articles on that site, so stop by if you have the time.

Hope everyone had a great weekend.

The Know Your Mechanic Rule

Warren Buffet has said many times in Berkshire’s annual report “if you don’t know jewellery, know your jeweller.”

I can vouch for this as true; a friend of mine runs a jewellery store and he has given me amazing deals.

Most of us don’t buy jewellery on a regular basis, however. And some of us might even get away with not buying it at all. For most of us, though, I think the Buffet statement could read “if you don’t know cars, know your mechanic.”

I would love to learn more about automobiles. As it stands, I have a decent understanding of what problem I have, but have no idea of how to fix it. I have been fortunate in that I have been going to the same mechanic for the past 7 years. He runs a small garage from the side of his house, and there is no one I trust more with my car.

Yesterday my car started acting up a bit, so I took it in to the shop today. He worked on the car for about an hour, tweaked a part, and gave me an oil change (he also gave me a short lecture for driving too far without a change, to which I sheepishly acknowledged I was at fault for) and only charged me for the new oil he put in.

As far as the part goes, he said it’s a bit of an expensive part, so he tried to McGyver it a bit, and said to come back if I have any problems.

I cannot think of any other mechanic that would do his best to avoid having me pay more. I think a good number would say the part is shot, order a new one, and charge the labour and shipping.

This is not the first time this has happened, either. I knew I was having trouble with either a spark-plug, or the fuel-line some time ago so I brought it in. He not only fixed that problem, but pulled my muffler off to patch a hole that he could hear. I think he charged me about the amount of the welding rod that he used.

It means, of course, that I bring him a little gift every time to thank him for the last time. Usually a brand of senbei crackers he told me he likes.

No matter what, I surely get more value than I pay for.

If you don’t have a great mechanic, you may have to build some rapport for a few years, but once you have a mechanic you can trust, you know that you will never be suckered into buying lemons or blood diamonds.

A Few Negotiation Strategies

Negotiation is a strange word, I think.

In a consumer sense, we often think of negotiation as getting a lower price for something we want. You’ve made up your mind that you want a particular house or car, and now it’s time to sit in the office and come to terms on a price.

On a larger scale, however, negotiations usually means trying to find a situation that is beneficial for both parties. Countries negotiate the terms of a treaty in order that both sides receive benefits. Is it different as a consumer? Are we too hardheaded when we want something?

Mr. Cheap, on the Money Smarts blog, was talking about negotiation tactics a few days ago and it got me thinking. He asked what are “ethical, effective negotiation techniques?”

Good question.

After some time thinking about this I still don’t have an answer.  I did, however, come up with some thoughts based on experiences, reading, or TV shows I have seen, and here they are:

Deal with someone who can deal

It’s almost pointless to go through all the motions of negotiation when the person is just sales-staff who is receiving an hourly wage. When it comes time to ask for a discount they will inevitably say they can’t (most likely true) and then they call over a manager who has no connection to you.

Building rapport is important as buyer or seller.  So I now seek out the manager straight away. This has helped me when buying suits, cars or electronics.

Be willing to trade down

This was something gleaned from a TV show I saw that was based entirely on buying electronics. No matter what the product is, there is a good chance it is available in a few colours, or with slightly different options.

Ask what the most popular colour is. Then ask yourself if you need that colour. You may be able to get a discount just by selecting the navy blue model rather than the black or silver.

If you don’t mind that colour, it’s a win-win situation. You get a discount, and the store moves a product that may otherwise have to go back to the warehouse.

See if there are any manufacturer incentives

As far as I am concerned, perks can be just as important as a lower price. While the store may have moved their price as much as they can/are willing to, sometimes the manufacturer will have some sort of extra incentive.

It could be free extras, multi-product purchase discounts, or rebates on purchases. I remember getting a booklet of free oil changes and tune-ups this way. When we furnished our apartment, we also got a massive discount by going with two products by the same manufacturer.

Compare prices and know what you want

Information is a powerful tool, and knowing what other stores are charging for the same product is almost a sure way to get the price knocked down. If you know what you want, drop by a few stores to see what the price is, or check the internet. Just mentioning a competitor’s price is usually enough for the manager to mark the product down plus a little extra.

At the same time, be willing to walk away if it is something you don’t truly want/need. I know this seems to contradict my point about being willing to trade down, but let me explain: be willing to concede on things you care less about, and fight for want you do care about. For example, aside from pink, I  don’t care what colour my cell phone is. But if it isn’t bi-lingual, I won’t consider buying it.

Do you want fries with that?

I’ve never worked in fast food, but the cliché fries question is the base of sales: it never hurts to ask.

This is not only as a seller, but works equally well when you have some rapport, and are the buyer. The worst thing that will happen is that they will say no.  Ask for some add-ons. Ask for a better price.

When I worked in sales, I was asked “what can you throw in for me” far more often than I asked “would you be interested in a ____ as well?”

I know some of these aren’t negotiation tactics so much as ways to save money, but hopefully they give you some ideas. If anyone has any other ideas, feel free to write them in below.

The Audit – Part II

I’m happy to report that this will be the last instalment in my series on the infamous audit of 2010.  After being reviewed, the CRA has decided that there is nothing unusual about my tax return, and has agreed with its calculations.

I am still left with unanswered questions, but I can only assume that my return was selected randomly. As I said before, it is a fairly simple return. Perhaps they just needed some time to check the validity of my claim that there is a tax treaty in effect.

In any event, I received a letter from them the other day, and it looks like all is in order. They do keep you guessing, however, with a header that states they may re-review my return at a later date.

For now, I consider the case closed.

Nearly Everything I Learned about Investing I Learned from My Father

My father is not an investor or “bank guy” by any means. But thinking back upon childhood and beyond, I realize that a good amount of the things that are important to investing, are the same simple life lessons my father tried to instil in me when I was young.

They are tidbits of wisdom that seem to have limitless application. Here’s a few that come to mind:

Use the right tool for the right job

Whenever my dad caught me trying to hammer something with the handle of a screwdriver, or unscrew something with a butter knife, he used to stop me and tell me to use the right tool for the right job. Taking the 30 seconds to grab a hammer was far better than breaking the screwdriver and being out the time and money that it would take to replace.

The same can be said about investing. We have a variety of products we can choose from, and several of them have their specific purpose. Use a TFSA if you want to save up for a car, not your RRSP. Use an RESP to save for your child’s education, not your un-registered account. There are benefits to using the right tool for the right job, and penalties for not.

Use a knife for the peanut butter, a spoon for the jam

I think this advice was brought to the both of us from either the Flintstones or Sesame Street, but my dad would repeat the jingle if we were going to make a peanut butter and jam sandwich. It’s a simple life lesson: be cleanly and organized.

If you are in the fortunate position to have “extra” cash to play with, or if you “have a hunch” that a stock is going to move, hey, more power to you. Take the plunge, if you see fit. But don’t get your ultra-risky speculations mixed up with your legitimate investments that should be the foundation of your savings.

Simply put, don’t take the money you are planning to use for a down-payment on a house and put it all in the latest IPO. If you can take a gamble, set up a separate account and keep only a small portion of your wealth there.

Do it right the first time

Nothing upset my father more than when he asked me to do something and I did it half-heartedly. Inevitably, he would make me re-do it. It taught me to put the effort into getting it right the first time.

This doesn’t always work with investing; we all make a bad decision from time to time. But if you can make the effort to make sound decisions, you won’t have to try to make up lost ground in the future.

Keep your head up

This was a hockey lesson. I remember forgetting this advice once, and skating full speed into another kid behind the net. My tailbone hurt for a week.

If you are a do-it-yourself investor, then you will have to keep on top of things, especially if you are investing in individual stocks. Buy and hold is a legitimate strategy, and one that I tend to follow. But if you are not reading up on your companies, then you may be left holding some useless Enron stock.

Another day another dollar

More than advice, this is something he would say (still says to this day, in fact) when he got home from work and I would ask how his day went.

I’ve said in another post that I view my human capital as my most important asset, and it really stems from this saying. As long as you can keep working, you can keep earning, which means you can keep saving. It also means that you can spend when you need to, knowing that you have this powerful asset in your portfolio.

Do as I say, not as I do

Probably the most frustrating to have to hear, but one of my favourites now, I would get this line thrown at me when I caught him in some sort of seemingly questionable situation where he told me one thing, but wasn’t following his own advice.

This is as important in investing as it is in life. There is a lot of good advice and wisdom out there from several people who know a lot more than you or me. It doesn’t mean that we need to do exactly what they are doing, especially when scale is an issue.

Falling from the top of a ladder hurts the most

Okay, I don’t know if he ever said these words exactly, but he used to always tell me to check the footing of a ladder before climbing, and then again on the first rung or so.

A solid base to a portfolio should be able to avoid (or lessen) the impact of a hard fall from market heights. This helped me when the market was approaching 15,000. The ladder started to feel wobbly, so I stopped climbing, re-checked my base, stockpiled cash, and had a nice cushion to fall on.  

 

I’m sure there are several more of these little gems that can be found. Feel free to add some in the comment section.

How Politicians are like Soccer Players

I love the World Cup, but am not a fan of how often play is stopped because some player has been shot by someone on the grassy knoll, hit by an invisible bus, or spontaneously contracted a flesh-eating disease from an opposing player.

If the referee buys the academy award in question, the villain from the other team will receive a penalty, and the previously injured played will miraculously recover in order to have a free kick.

I was confused these past two weeks: I thought I was watching the World Cup when in fact I was watching the election debates for the Japanese Upper House of Councillors.

As I’ve said before, the new Prime Minister here has been hinting at raising the consumption tax. As I’ve also said before, I think that raising the exceptionally low tax rates in Japan is the best hope to avoid a sovereign debt crisis in the future.

For the past two weeks the leaders of opposition parties have been crying foul, saying that the Japanese consumer cannot withstand a rise in taxes; they have been wallowing on the ground, appealing to the referees (who we will call the voters in this case) to penalize the DJP for such a brass declaration of war on the average person dwelling in Japan.

Please, if the taxes weren’t low enough all ready, surely the fact that we live in a perpetually deflationary environment should be enough to keep more hard-earned yen in our pockets.

The tactic seems to have worked, as the DJP lost their majority in the Upper House this past Sunday. (They still retain the majority in the more powerful Lower House, mind you).  This proves to cause delays in the policy changes that are proposed.

That being said, let me give you my take: they were only feigning disgust, much like any good FIFA player feigns injury. I think they will filibuster for a bit, and “negotiate” a lower than proposed tax as their free kick.

On one hand I respect Mr. Kan for being honest and upfront about taxes with an election so close. On the other hand, I have to question if it was such a good decision to make such a dangerous tackle during lost time.