July 31, 2009, 5:37 am

Discouraging News about SP 500

by: The Financial Blogger    Category: Investment, Market and Risk

On This Friday, my post won’t be too long as the chart will speak for itself (a picture is worth a thousand words.) 😉 One of my friends working on a trading floor sent me the following chart comparing 2 investors adding $10,000 to their investment account every January 1st from 1994 to 2008.

One person can’t stand market fluctuations, he decides to invest all his money into Certificates of Deposit. His annual yield is far from being astonishing, but he sleeps well at night.

The second investor thinks stock markets always go up and is willing to get negative yield from time to time. Hence, he invests his $10,000 in the S&P 500 every year.

So if both investors started investing $10,000 on January 1st from 1994 to 2008, who has the biggest nest egg today? The answer might surprise you:


Stocks vs Certificates of Deposit (1994 – 2008)


When I saw this chart, I was speechless. While my research shows that you would have been better off with a well diversified portfolio (i.e. investing in Canadian, US and International markets), it is still scary that a simple Certificate of Deposit can beat the most important stock market over 15 years….

On second thought, I am quite sure we will be getting a whole new perspective once these recent times have been factored in… Stats are made this way; they serve the one who puts them together…

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July 30, 2009, 5:00 am

Looking at My Financial Goals for 2009

by: The Financial Blogger    Category: Personal Finance

checklistAt the end of December 2008, I decided to write a post about my financial goals for 2009. Because I am a person with many goals in life and I am always starting new projects, I don’t want to set goals and then forget about them. (Although it is so much easier to quit half way and start something else!) There is one trick I found in order to achieve my goals: I follow up on my progress regularly to know hom I am doing. Then I determine what needs to be done next in order to achieve my goals. As time goes by, I am often reminded of my objectives while looking towards the next steps to achieve my financial goals.

When I wrote my post back in 2008, I tried another trick: make a commitment in public. I just didn’t write it down and post it on my fridge at home; I wrote my goals down and made them available to the world through a post. While the “world” won’t read it, I still made a big commitment to all my readers (which now includes a few family members and good friends too!).

While having goals is one thing, making a public commitment is another. Following up on them and actually assessing where you are at is the most important part of the process. Technically, I should have looked at my financials goals in June, 6 months after making my commitment. Life being what it is, I just didn’t have much time back then 😉 So let’s see where I am at:

Make the top 10 financial planners in Montreal

Unfortunately, I don’t have updated numbers for the whole island yet. They usually come at the end of summer as our financial year finishes on October 31st. However, I do have the results for the 32 financial planners doing business downtown Montreal. Out of 32, I am top 4 in all categories (Net growth for investments and credit, references to other departments and insurance as well). Back in May, I was part of the top 10 in terms of percentage of my objective. I believe I am in line to make the top 10 financial planners in Montreal on October 31st. The funny part is that I did one simple thing to make it happen: take the time to give proper financial advice to my clients. This is the most basic but often forgotten principle of personal finance for an advisor: work in the best interest of your client.

Double income from my web company

This was another important part of my financial goals: allowing my wife to stay at home. Doubling income seems like quite an achievement, but I must say that it is easier as a small start-up. We are multiplying our effort and websites in order to make it happen and I am proud to announce that we already achieved our goal at this time. However, we are still re-investing most of our profit so it still doesn’t show in my personal finances. The time will come for that…

Finish my MBA with honours

This MBA became quite a pain in the last 6 months. I have the feeling that the University now owes me a part of my life! While I literally burnt 2 years of my life doing this MBA, I would still rather finish it with a mention! While my motivation to achieve this goal dropped faster than the stock market in October 2008, I am still awaiting 3 course marks before knowing the final result. I may end with only A’s on my final report card. I am quite confident on 2 out of 3 classes. We still have to wait for the final result on this one!!!

Get my wife to (finally) stay home

That just happened 2 months ago! While I never ended up achieving my $1,500 project, we still took the decision that she stay at home. While I can’t technically afford it yet, it creates additional motivation for me to succeed in my both my financial planner job and my online company. I love creating urge, it is the best fuel you can ever get into an engine to make it work. Critical situations boost my creativity level and I become smarter all of a sudden 😉

So I am glad to see that I am in line to achieve all my financial goals for 2009. While I cannot start working on my 2010 goals yet, I will be able to enjoy my vacation in August without too much worry 😉

image source: sewpixie

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July 29, 2009, 5:00 am

Bad Reasons for Not Taking Vacations

by: The Financial Blogger    Category: Career

vacationI’m leaving on August 9th for vacation and I just can’t wait!!! Every morning you wake up, eat, take a shower and get ready for another day at work. While I really like what I do at work (I feel very fortunate to love my job!), it is nothing compared to spending time with my family or traveling. “The worst day on vacation is better than the best day at work.”

Sadly enough, there are people not taking their vacation. Although they are entitled, they are not taking the time off. I just can’t believe it… The worst part is they all have good reasons:

I’m going to lose my job:

Unfortunately, we are living through a strong recession and it may not be the ideal situation to be away from work. I read a survey saying that 50% of workers in England would not consider taking time off this summer. The recession is that bad, they prefer to be at work in order to react if there is a “surprise reorganization party”. I just can’t imagine leaving work thinking that I could never come back to my desk. This is a horrible thought…

On the other side, do you really think you can avoid being laid-off by being there all summer? If the powers that be have to cut expenses, your manager won’t think “I will not lay him off this summer, he is working…. I better wait for Christmas vacation… mwhahahaa”. I know that human resources departments are evil, but still….

They can pay my vacation days back:

Some employers offer to buy back untaken vacation days. So if you need more money to manage your budget, not taking vacation has a double effect as the expression goes “if you’re not making money, you’re spending it!”:

#1 You are getting additional money from your employer

#2 You don’t spend additional money on vacation

While this technique seems quite appealing from a money management point of view, it has a dramatic influence on both your mental and physical health. You are working all day, rushing yourself through traffic, diving into a pile at work and under constant pressure to deliver. What is so bad about taking a few weeks off to relax, read a good book or simply to clean up your house?

I feel guilty taking days off:

Some people think that they are too important; the organization can’y survive without them. They think the company won’t run if they are not there to manage their files. Some think they have too much work on their desk to leave for 2 weeks (“who will take care of my clients when I’m not there? Brad? Come on! He can’t even find the coffee machine!”). Finally, others may think they will be seen as the guy who abandons their colleagues.

I have shocking truth to tell all those people: it is only happening in your mind! I actually once thought that I was managing too many files at a time to leave from work. That my clients would cry and all the deals in progress would collapse during my absence. Funny enough, I took 6 weeks off when my wife gave birth to our second child. After all, being present during the arrival of a child was still more important than work 😉

Some things went sideways while I wasn’t there and they had to ask 2 people to take over my job. However, when you look at the big picture, 3 weeks after I left, everything was running smoothly and I didn’t have to deal with any major issues when I came back. I realized that I seemed indispensable for the company for a good 2 to 3 weeks. After that time frame, my department was running as if I never existed. Nobody is irreplaceable for an organization… It may hurt your ego but it is the truth 😉

For most people, taking a few days off to disconnect from work will increase productivity and motivation when they return. Hence, you are better off leaving for 2 weeks then come back with a brand new outlook. One thing is for sure, I am taking my vacation no matter what!

image source: Kenzoka

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July 28, 2009, 5:00 am

Financial Quotes from Stock Market Pros and Philosophers Part 2

by: The Financial Blogger    Category: Investment, Market and Risk

stock-marketYesterday, I had provided a few famous quotes that you might have heard regarding the stock markets. Simple rules helping investors to make good trades (or trading in the hopes of making a profit 😉 ).

Don’t try to catch a falling knife

I think this quote speaks for itself. If you try to catch a falling knife (i.e. stock), you may be lucky and catch it on the sweet spot and not get hurt. However, 80% of the time you will cut yourself… maybe losing a finger in the process 😉 It is better to wait for signs of stability before buying a dropping stock. If you don’t wait, you might pay a higher price than necessary.

You’ll never go broke by taking a profit

As we have a tendency to fall in love with our holdings, it is hard to sell them when they are showing a profit. Driven by greed, most investors think they can get an additional 10% out of their stocks before selling them. Hence, they wait and hold their sell orders in the hope for even more profit. You are better off with a “profit rule” or asset allocation methods that will help you manage your portfolio objectively. Take profits when you are making money.

Don’t fight the Fed

Among several experts, this is one of the best suggestions I have heard. When the FED wants to slow down inflation, it will use everything in its power to make it happen. If you think that the FED will fail, you don’t have much hope of becoming a good trader. As the FED dropped the rate to the lowest in its history, you can be assured that the economy will arise from the ashes. Short selling the market right now may be quite a dangerous game… Have you ever heard of Russian roulette?

Economists are good to predict recessions. They announced 8 recessions out of 3.

Unfortunately, economists do their best with what they have. However, the USA is a big playground to cover. It has happened several times in the past where experts thought we were going into a recession and it never happened. I think that we still need to listen to what they say (they are definitely not that bad 😉 ), however, we might not sell all our stocks when they predict we are going into a recession. It would actually be too late anyways as the stock market as a leading indicator moves 6 to 9 months before the beginning of the recession and swings back to positive ahead of an economic recovery as well.

Financial Analysts are as reliable as meteorologists…

This is my quote ;-). I always say meteorologists are on target 50% of the time. The funny part about financial analysts is that you will usually find 50% of them agreeing on something and the other 50% thinking the other way. Predicting the future has always been a wish for many people. However, it is still a dream in many fields….

So that’s it for me, have you heard of any other great financial quotes?

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July 27, 2009, 7:28 am

Financial Quotes from Stock Market Pros and Philosophers

by: admin    Category: Uncategorized

imageWe hear so many things from the stock market and how to trade that many investors are getting confused. I’ve completed some research and picked a few good lines to keep in mind when you trade stocks. Some must be followed religiously; others may be taken lightly:

The trend is your friend

This quote comes from momentum traders. According to them, one must not try to go against the market trend. In doing so, one will probably buy too high or sell too low. The problem is that you can only surf the trend for so long. One day or another, the trend will change and you will hit the wall…

Sell in May and Go Away

According to statistics, there is less profit to be made during the summer months on the stock market. Theory being that many investors sell their stocks at the end of spring and reinvest in the stock market in the fall. I’ve already given my opinion on this one by telling you not to sell in May and to avoid the market timing methodology.

The more certain the crowd is, the surer it is to be wrong

This explains how the stock market can be psychotic. When everybody is convinced of something, chances are that they are completely wrong. There is a psychological concept that describes when a group of people agree on one point, it is almost impossible to change their minds as they convince each other the “group” is right. This is the perfect indicator that when everybody sells, this is probably the right time to buy 😉

Occasionally, successful investing requires inactivity. (Warren Buffett)

Patience is king when you want to make serious money on the stock market. When Canadian Bank stocks were dropping faster than rain, was there any rationale to it? Nope. So being patient with these stocks was the right approach. If you did sell them back in December, I suggest you don’t look at them today… it might ruin your day!

Don’t marry your stocks

One must not fall in love with his holdings. The market doesn’t care if you love a company. Therefore, you might see your “favourite” stocks plunging because advantages in their fundamental characteristics are not there anymore.

Price is king, but volume is the power behind the price.

The price of a stock is really important as it will determine your profit or loss. However, if there is no volume, the price is subject to wild fluctuations. While I don’t think it affects general trends (i.e. when the market went up from March to June, it wasn’t just a high volume of transactions), I do think this is applicable for small caps and penny stocks. It is pretty hard to determine the fair value of a stock that jumps and plummets by 10% weekly. This is what happens when there is minimal volume to support a price and few makers in its market.

I actually have more quotes, so I’ll keep a few for tomorrow 😉

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