Category Archives: General Ramblings

Nearly Everything I Learned About Investing I Learned From My Father, Revisited

Happy belated Father’s Day to all the Dad’s out there. This is an older post that I have edited, expanded, and added to.

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.

knife for the peanut butter, 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.

More importantly, it is linked to the “use the right tool” section above: It is important to keep certain accounts separate, even if you don’t invest in individual stocks. We need to remember time horizons when investing, and use the appropriate vehicle.

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.

Creating an investing plan for yourself, deciding an asset allocation, and following the plan is far more important that finding the next Microsoft. The fact of the matter is that most of us will never find the next Microsoft early enough, nor would we sell it when it should be sold. But following an asset allocation plan is something that we all can do… easily.

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, which may hurt more than your tailbone.

For indexers, it is important to keep marginally informed, and take care of re-balancing when your holdings get out of whack by a decided percentage, or at decided intervals.

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.

I prefer Steve Martin’s version, though: “All I’ve ever wanted was an honest week’s pay for an honest day’s work.”

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.

Warren Buffet is very good at recognizing value in stocks and whole companies. But he has said that the majority of investors would be better off by buying a basket of index funds.

Check your base

Living on a farm, ladders were constantly in use. Whether it be for changing light bulbs, painting barn doors, re-shingling the roof, cleaning the eaves or picking cherries, we were always up on them. No matter how many times I would climb the ladder,  he used to always tell me to check the footing 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 (I put the brakes on at about 14 and change in June of 2007). The ladder started to feel wobbly, so I stopped climbing, re-checked my base, stockpiled cash, and had a nice cushion to fall on.

If the ladder starts to feel unstable, check the base, or grab another ladder. High stock prices may offer a great time to move some money into bonds, for example.

Don’t waste Your Money

Kids always go through phases and fads. Often these fads cost money. Whether it is video games, rap music, Pokemon cards or BMX bikes, the truth is that most of these things will be forgotten 10 years out.

My father’s words (and disappointed eyes when I wasted my money on something foolish) have had a lasting impression. I don’t often buy shiny things, and save a very healthy portion of my income.

Put your things away

Whether it was my toys when I was little, tools on the farm, or the jars and packages after making a sandwich, my father always insisted that I put things away when I was finished with them.

Not exactly investing, this mentality has left me with a very organized system for recording income, expenses investments, dividends etc. Good accounting practices are very helpful come tax season.

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

Dirty Marketing

Many years ago I worked as a concierge at an inn in Niagara-On-The-Lake. In that position, and due to the location, part of my responsibility was to be up-to-date on information about the various wines and wineries in the area. To help with that, every Friday a different winery representative would come to the inn, give us a tasting along with a short talk, and field any questions we had.

It was an enjoyable job which sparked an interest, and to this day I still follow the world of wines, though to a much lesser degree. A bit of news that I came across a couple of months ago really annoyed me, however.

Two wine companies are in a legal battle about the naming of their wines, and it is those names that irk me. One is called “Mommyjuice,” while the other is called “Mommy’s Time Out.”

I’m not denying that this is a key demographic. In fact, wineries across the board have realized that women 25 – 40 are target consumers, and this is why there has been a proliferation of reasonably priced wines with cute or stylish labels. Yellow Tail (a brand of Casella Wines) became an instant success with it’s artful wallaby, Vincor (itself a subsidiary of Constellation Brands) came up with Kumala, and Peller Estates created an entire subsidiary in Roundpetal to produce XOXO, Croc Crossing and others… all  to market to women.

I’m all in favour of the above. I think it is in a business’s best interest to locate potential buyers and market to them. Businesses that fail to do so alienate huge swaths of the populace.

My beef, however, is with the flagrant implications that “Mommyjuice” and “Mommy’s Time Out” create.

While being a stay-at-home mom is certainly a difficult and sometimes stressful job, and I take no issue with a parent enjoying a glass of wine at the end of the day, I find the implication that alcohol is the answer to be in poor taste. It is entirely possible to market to this demographic without the suggestion that the need for alcohol is in direct relation to their children.

In wine tasting lingo, a dirty wine is one that is poorly made, that gives off a foul or pungent smell. I define dirty marketing as much the same.

Disclaimer: I own shares in one of the companies mentioned in this post. I post the link not as a recommendation, but rather so readers can see what the bottles look like.

A 50% Service Fee!?

Consider this to be a “What not to do” lesson in personal finance.

I’m usually pretty much on the ball when it comes to our finances. But recently I had a slip-up that cost us 50% in fees.

We have most of our Canadian financial assets with one financial institution, which are spread over a number of accounts. The bulk of our cash savings are sitting in a high-interest account with the bank. I’ve also had my main credit card at that bank for about 13 years.

I have never had any problems transferring money or paying off my credit card because there are no fees to worry about when moving money from one account to another within the bank.

I applied for a new credit card in January with another financial institution, however, and recently set it up to make a monthly donation to a charity. When my first bill came in, I went online, set up a new payee, and paid off my credit card… all $10.00 of it… from our high-interest account. I checked my new card a few days later to confirm that the payment went through, and thought nothing more about it.

Last week I was going over my April transactions and noticed that right after my $10.00 credit card payment, there was a $5.00 service fee for a payment to an outside account.

Ouch!

Okay, I admit that 50% sounds worse than $5.00,  but it’s still a hard pill to swallow.

On one hand, I want to leave it as-is, as a bit of self-punishment; a 50% stupidity fee, of sort (I long ago read and knew about the fee, I had simply forgotten). More likely, however, I will call the bank and ask them to reverse the charge.

Hopefully they will allow me to leverage my very long history with them against my very recent stupidity.

Good Help Is Hard To Find

I enjoy meeting new people in casual environments. I don’t, however, enjoy meeting new people in a business setting when I am the customer. This is an area that I truly loath.

The rapport I have with the majority of my contacts is worth more than gold to me. I have written about the benefits of knowing my mechanic and jeweller before, and the same goes for knowing my barber, financial planner, and, until three years ago, my travel agent.

Three years ago my travel agent was transferred to a foreign branch. Since then I have struggled to find someone I can trust with my travel plans. The agent that was assigned my file promptly drew my wrath as she failed to book my requested tickets for 6 people. Her company lost out on about $8000 of business, and we were forced to pay a higher price at another company, as the early booking prices were no longer available.  

While my old travel agent understood my preferences and requirements for travelling, and always knocked off a few hundred bucks through “preferred customer” discounts, I can’t help but feel that I am merely dealing with commission based sales people now.

I met one the other day when I was trying to find out prices for July. I sat down prepared to give all information and then set her loose on the computer, but she starting tapping away as soon as I opened my mouth. “Well, at least I’ll hear several options,” I thought. Within one minute she piped up that she can book me on a flight, and the price is just shy of $2000.

That’s a ridiculously high price for such an advance ticket, and sure enough, it was Air Canada. I asked her to give me a quote for Korean Air flying through Inchon, which was apparently a very difficult question, as it took her 20 minute to search through the database, talk with her supervisor, and make a phone call.

Finally she gave me the quote I wanted to hear (about $1200), but said I couldn’t book the flight because it was too early. Hilarious.

With that kind of service, I’ll once again be searching for a new agent.

Don’t Be Like Ol’ Jim

I’ve been reading “The Adventures of Huckleberry Finn” recently. Aside from being a great book in general, I stumbled across a great little bit of How Not to Invest, shall we say, in a conversation between Huck and Jim.

They are talking about being rich, and Jim says he was rich once. He had 14 dollars, but lost it all speculating.

“What did you speculate in, Jim?” Huck asks.

“Well, first I tackled stock.”

“What kind of stock?”

“Why, live stock – cattle.”

Jim says he paid 10 dollars for a cow, but that it soon died. He didn’t lose everything, mind you, as he sold the carcass for $1.10.

He still had about 5 dollars left, so he invested it with a “bank”. The bank was actually just a one-legged farm hand who promised 4 dollars interest at the end of the year for every dollar invested. Jim invests 5 dollars and is promised 35 dollars in one year’s time.

Jim figures the 35 dollars is a sure thing, so in order to “keep things moving” he decides to buy a boat for 35 dollars from his friend, Bob, on credit and promises to pay in a year.

It’s unclear if Jim planned to re-sell the boat and invest the proceeds in something else or what, but it is essentially moot, as the boat was stolen that night. The next day the one-legged farm hand announced that his “bank” had gone bust, leaving the investors with nothing.

If you’re keeping track, as Huck was, you will note that Jim still had 10 cents in cash. What did he do with it? He had a dream to give the 10 cents to his friend, Ballum, to invest for him, because Ballum is said to be lucky.

Ballum takes the money and gives it to the poor because he heard a preacher say that whoever gives to the poor is bound to get his money back a hundred times over.

Of course, no money ever came back to Jim, and he was left with zero. In fact, he is 35 dollars in the hole to Bob, but nothing is mentioned about that.

It isn’t surprising that Twain would insert some commentary on investing in his books. He is well-known to be a social commenter, and was a fantastically terrible investor (he apparently lost about the equivalent of 4 million in today’s dollars by investing in a typewriter that never came to market… he had to go on a 9 year speaking tour to regain his fortune).

What is somewhat surprising is how relevant his words still are today. There are, unfortunately, countless Jims in the world making investments in sickly stock and bad banks, countless Jims misusing credit, and countless Jims giving their money to managers based on past performance.

So don’t be like Jim. You never know where you’ll end up.

We’re Back… with a Giveaway

The Absence

It’s been a whirlwind three months. And they’ve been a great three months.

I took an unplanned (but understandable) break from blogging for a while due to the birth of our first son. He was born in mid-December, and is doing smashingly well. The last month of my wife’s pregnancy, and the first couple months of his life have found me without much Internet time, except for answering emails from family and friends, and looking up baby info. Somehow, diapers, dishes, laundry and back massages seemed to take priority.

I would like to give a special thank you shout-out to Arjun at Investing Thesis for sending me an email making sure I wasn’t on my deathbed. I appreciate the concern.

It’s still a pretty busy schedule, but I’m starting to get into a groove of managing my business and family. As such, I think it about time to add blogging back into the routine.

Things will probably still be sporadic, but I am aiming to get about two posts per week.

The Giveaway

Aside from teaching in the public school system, I run a growing and, in my terms, successful private teaching business. My students are from all walks of life, and a good number of them are working adults. I also have company classes where I go into a boardroom to teach employees business based communication.

Having this kind of student base means that I am gifted many schedules, day planners and calendars  each January. I have my one preferred schedule that I have been using for 5 years, so the majority of the items that I receive I pass along to others. This year I thought I would pass them onto you.

The Giveaway is simple. Just leave a comment below indicating that you would like to receive one, and I will contact you for address details. No bonus ballots for subscribing to the blog (though I would appreciate it) and no bonus ballots for linking to this post or adding me to your blogroll (though I would appreciate that as well).

As it is already February and I want to get these out, the giveaway is first come first serve. Feel free to indicate if you have a preferred prize. In total I have 12 items to give away. None of the companies are sponsoring this… it is merely that one or more of my students have a connection to the company in question.

They are (items crossed off have been claimed):

  1. A desk planner from BNP Paribus (European Bank) featuring daily planning from 7 a.m. to 9 p.m., some memo space, and a colour atlas in the back!
  2. A standing desk calendar from Otowa Electric Co. featuring beautiful colour photos of lightning.
  3. Two simple monthly desk calendars from Oracle Japan.
  4. A pocket schedule from Yuasa Tech Engineering Co., with a simple monthly design, memo pages and an address book.
  5. A pocket schedule from Kokusai AM (Japanese fund company) featuring monthly and daily scheduling space.
  6. A simple daily schedule from Mitsubishi Technos (machinery and equipment) featuring graph paper and address book. Japanese national holidays are written in English as well!
  7. A yearly and daily pocket schedule from Kajima Corporation (construction company).
  8. A yearly and daily pocket  schedule from Singapore Airlines featuring an index of all national holidays in the world!
  9. A monthly and daily pocket schedule from Mitsubishi UFJ (Japanese bank) including memo paper.
  10. A yearly and small daily schedule from BNP Paribas (European bank) including large memo area and address book.
  11. A monthly and daily pocket schedule from JR Kyushu (Japanese rail company) with memo pages, address book, and a map of the train routes of Kyushu!! (This is the schedule I’ve been using every year since 2007. I love the layout)

Remember, the majority of these items are in Japanese, but what a great conversation starter!!! Imagine whipping out your Kokusai AM schedule to set up a meeting, and your counterpart says “Where’s THAT schedule from?” Or imagine when someone sees the amazing photos of lightning from Otawa Electric on your desk, and you can say “Oh, yes. Quite nice, isn’t it. An acquaintance from Japan sent it to me.”

If it sounds like I’m touting the benefits, it’s because I am… I have a newborn, and need all the space I can get. ;-)

Do Canadians Understand Their Fuel Consumption?

I’ll start by saying that among the mix of personality traits that I have, one is exceptionally “type A.” That particular trait is a continued habit of collecting my personal economic data, and boiling it down to something that I can comprehend.

Having a number that is broken down and comprehensible is very important to me. I could look at receipts and see that we had, say, $2000 worth of expenses last month, but unless I break that down into categories, it is somewhat meaningless to me. Without categories, I would be lost as to where our money is going.

I feel the same lack of understanding when talking to family or friends from Canada who talk about their fuel consumption. They tell me numbers, yet I have no idea what those numbers mean in real terms.

I first became aware of this difference when I was talking to my father a couple of year ago. He asked me how my car was on gas and I told him I get about 15 km to the litre. He was surprised, saying that wasn’t very good. I was surprised that he would say that for such a fuel-efficient car (which was 10 years old, to boot!). We quickly realized that we were talking in different languages. My father’s brain had taken my kilometres per litre and input it into a Canadian calculation of litres per 100 km. To him, my 15km/litre sounded like 15 litres/100km.

Fair enough. Two countries, two ways of calculating fuel consumption. If it was that easy I wouldn’t have a problem. But my question is, can someone who thinks about litres per 100 km really understand their fuel usage?

To be precise, I average 15.1 km/litre from September to June (July and August is all over the board and depends on my A/C usage). Knowing that, I find it very easy to ball-park my cost for going from A to B. For example, I live 7.4 km from job 1, and 8.2 km from job 2.  A round trip to and from job 1 costs me pretty much one litre of gas; a round trip to and from job 2 costs me just over one litre. In my monetary terms, that means that for each job, I am paying roughly 120 yen ($1.50) for my transportation.

Reversing the calculation for the standard Canadian way (here is a good post on how to do it), I can see that I use 6.6 litres per 100 km of driving. But that number doesn’t really help me out when trying to figure out the cost of a trip to the downtown core 4 km away. Maybe it’s just getting used to the number and mental calculation, but for me, kilometres per litre is a more digestible and practical number.