Author: Mike Holman

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Announcements

Will There Be A Stimulus Check In 2012?

Worldwide economic recession is happening and it is hurting a lot of businesses because of cost-cutting. In the United States of America, there have been talks about giving out stimulus checks to help the economy.  Many people are wondering if there be a stimulus check in 2012?

Stimulus check definition

According to experts a stimulus check is defined as a check that the U.S government gives to its taxpayers so that the consumers will spend the money in order to help generate sales and income in businesses like retailers, manufacturers, real estate and the like. The amount on the check depends on the income tax return filed by taxpayers. Accordingly, those who are joint taxpayers will receive twice as much as other taxpayers will receive in their stimulus check.

Will there be a stimulus check in 2013?

Why is the government doing this?

America had been hit hard by recession in 2008 and a lot people lost their jobs and businesses closed down because of poor income.  The economy was on a downward slope so a lot of people tended to avoid spending and only buy what they needed and not what they want. Certain business sectors and even real estate crashed  And the solution is to give out stimulus checks to the taxpayers to stimulate the economy.

Why does the government see this as one of the solutions?

By giving money away money, they will have more opportunity to spend and in return, it will stimulate economic growth. This is one of the attempts to help fix recession and the increasing unemployment rate.  But a point of concern is raised if the government spends too much and increase the debt load which will also bring a negative effect on the economy.

Stimulus check look-back

In 2008, stimulus checks have been given in order to help the economy in the midst of the crisis. About 120 million households were given up to $600 per person. Then in 2009, about $250 stimulus checks were sent out to select groups. During that year, the stimulus check was given to each person receiving Social Security and SSI because of the very low inflation that year.

In 2010 and 2011, there was a proposed stimulus check of about $250 million that was intended to be given in the first quarter or 2010, but it never happened.

Who can get the stimulus check?

According to reports, in 2010 and 2011, there are selected groups that are intended to be given a stimulus check. This includes people who receive Social Security or SSI.

Categories
Investing

2011 Portfolio Investment Performance – Not Too Bad

I like to calculate my investment return each year, so I can see how I am doing.

My investment return for 2011 was -1.8%.  While this kind of performance won’t secure my retirement any time soon, I was lucky that the numbers weren’t any worse.

There were two reasons, I did reasonably well.

  1. Low Canadian exposure.
  2. Over weight in cash for a good part of the year.  This wasn’t exactly planned and it cost me money last year.  This year, my mistakes worked to my advantage.

Low Canadian equity exposure

I’m not a believer that Canadians should have a lot of money invested in Canada.  In my mind, this is kind of like buying your employer’s stock.  If they go down – you go down too.  Diversification is my number one goal and that includes having a lot of money outside Canada.

It may seem that it is safe to own Canadian dollars if you live in Canada, but what happens if the Canadian dollar falls and the price of any imports goes up accordingly?  How will you handle that scenario?  I handle it by keeping less than half of my retirement portfolio in Canuck bucks.

My portfolio is loosely based on the Canadian Capitalist’s sleepy portfolio which returned -1.2% this year. I’ve made a few changes from his portfolio and this is what my desired allocation is:

Asset class ETF Target (%)
Bonds XSB 20
Real return bonds XRB 5
Canadian equity XIU 11
US equity VTI 32
International equity VEA 32

Overly high cash allocation

In actual fact, I never had less than about 25% in bonds/cash and had over 50% bonds/cash for most of the first half of the year.  There were two reasons for this – I neglected my portfolio in 2010 and never reached my desired equity allocations, so I started 2011 with too much cash.  Then I did a sizable transfer in to my discount brokerage account at a time when the market seemed pretty high.  I knew I should just buy, but I couldn’t do it and waited several months.  As the market fell, I kept buying.

At this point in time, my portfolio asset allocation is as follows.

Asset class ETF Target (%)
Bonds/cash XSB 27.8
Real return bonds XRB 4.5
Canadian equity XIU 10.7
US equity VTI 29.6
International equity VEA 27.3

 

The next step

I’ve recently made a couple of extra RRSP contributions (hence the higher cash level).  I will likely make one or two more contributions in the new year and then I will do some rebalancing.  I plan to be more active in 2012 and stay on the asset allocations.

Past returns

Here are my returns from the last six years:

Year Return(%)
2006 14.7
2007 4.1
2008 -17.0
2009 20.24
2010 7.3
2011 -1.8

My annualized rate of return over the six years is 3.87%. At that rate, $100,000 invested six years ago would now be worth $125,560.
The rate of inflation over the last six years has been pretty low at just under 2%, so my annual real return is about 2%, which isn’t great, but isn’t bad either.

Stay the course, regardless of your investment style and save a lot

I’ve done two things well with my investments:

  1. Stay the course – I haven’t sold anything in the last six years and I’ve had more or less the same plan.
  2. Make lots of contributions – I make regular contributions, and some extra when I can.  My investment savings rate is about 20% of our gross income.  This will likely go up now that my mortgage is paid off.

 

Categories
Announcements

2011 Stock Picking Contest Results

At the beginning of the year I entered into a stock picking contest with some other bloggers, as I do every year.

Once again I decided to short gold which didn’t work out all that well, although it was better than last year.

Here are the results:

Rank Site YTD Return (%)
1 Dividend Growth Investor 15.36
2 Million Dollar Journey 3.12
3 Intelligent Speculator -4.90
4 Money Smarts Blog -9.55
5 Where Does All My Money Go -17.04
6 My Traders Journal -19.00
7 The Financial Blogger -21.73
8 The Wild Investor -33.34
9 Beat the Index -44.08

 

Categories
Announcements

LinkStuff – Happy Holidays Edition

I would like to wish all you readers a Happy Holidays, Merry Christmas, Festivus or anything else you want to celebrate in the next little while. 🙂

I’m looking forward to having a bit of time off during which we’ll be visiting family and hopefully getting the little ones out skating.

I’ll resume posting at some point in January.  Have a good one!

On with the links

Mike from the Oblivious Investor made a pretty huge change to his investment portfolio. Hopefully Vanguard will offer this kind of product in Canada some day. It’s hard to argue with the simplicity.

Morris R from Self-Publishing 2.0 makes the interesting observation that we are reading less and watching videos more.

I thought this story was neat – Amazon hires thousands of seasonal workers and they all live in RVs.

Million Dollar Journey says that cash is king. I can’t say I disagree. Another benefit of having lots of cash is that you don’t have to worry about bounced cheques or having enough money to pay a large bill.

Blunt Bean Counter had a good article about an easy way to track your spending.

Michael James argues that pay parity is not a valid negotiation argument.

Boomer & Echo how to know if your investment loan tax-deductible?

Categories
Announcements

LinkStuff – I Am Debt Free Edition

After roughly 12 years of being a home owner, we made our last mortgage payment ever which means that we are now debt free!  I don’t think our lives will change all that much as we still have some savings goals to deal with – RRSP, TFSA etc which should suck up some cash.

Regardless, it’s a great feeling.

On with the links

If you are interested in business and entrepreneurship – I wrote a review of the book “Built to Sell” by John Warrillow.  It covers how to make your business less reliant on you and easier to sell.  A similar topic to E-Myth Revisited, which I also reviewed.

I was interviewed by BrighterLife about RESPs.  Surprised?  You can read all about it at: What happens if your child doesn’t go to university?

Canadian Couch Potato in partnership with PWL Capital is giving away some free financial advice. You have to make a charitable donation, but it is for a great cause.

Jennifer Stewart is trying to cut down on excessive kid toys and is asking for RESP gifts at Xmas for her child.  I think this is a great idea, since most kids end up with way too many toys.

Facebook has admitted it made a mistake by not allowing residents of Effin, Ireland to put their hometown on their profiles. Check out the video on the article – funny song.

The Oblivious Investor came up with a good point about investment planning in Asset allocation is not a goal.

Rob Carrick has some good advice – Get your debt to zero in 2012.  Sorry Rob – already done. 😉

I’m heading to Asia in the new year and while I’m not a fan of flying – as long as I don’t have to sit near any RIM employees, I should be ok.  Bizarre story!

A lot of entrepreneurs have grand delusions dreams about owning their own business.  One man decided that working for “the man” isn’t so bad after all.

Canadian Capitalist says an easy solution to high mutual fund MERs is to invest in lower cost products.

Blunt Bean Counter had a good article about individual pension plans.

My Own Advisor figured out the top Canadian REITs.

Michael James came up with a better standard for explaining investment costs.

Million Dollar Journey talks about tax considerations for the self-employed.

Boomer & Echo explains ADRs (American Depository Receipts).

Categories
Personal Finance

Canadian Tire MasterCard Rewards Card – A Strange Duck

Michael L has had a Canadian Tire Mastercard for some time.  He was under the impression that it paid out one percent in rewards for non-Canadian Tire purchases.  After doing some analysis on his Canadian Tire credit card statement, he concludes that his actual rewards are only about 0.86%.

Read Michael’s analysis of the CT Mastercard rewards program.

With no help from Canadian Tire, he figures out that the “1% reward” is only calculated after following a rounding down formula as follows:

  • Less than $10 – Purchase amount rounded down to nearest dollar
  • $10 to $100 – Amounts rounded down to nearest $10.
  • Greater than $100 – Amounts rounded down to nearest $50.

 Since there is absolutely zero information about the card or the rewards on the website, I called Canadian Tire financial services this week and the rep confirmed exactly what Michael had figured out.

With this rounding method, you can end up with odd situations like the following:

  • Someone making a single $135 purchase will get 0.74% in rewards. 
  • Someone making three $45 purchases (totalling $135) will get 0.89% in rewards.
  • If you make 21 purchases all for $6.43 each (totalling $135) you will receive 0.93% in rewards.

I can understand that companies will favour in-store purchases with extra rewards and it’s very common for rewards cards to pay higher amounts for more use, but I can’t understand the logic behind this particular calculation.

It’s difficult enough to figure out the various rewards cards and determine which is the best for you without this kind of nonsense as well.

This is one rewards credit card I won’t be considering.

Categories
Announcements

LinkStuff – Winter Is Coming Edition

It’s getting a lot colder these days – I know because I’m still riding my bike to work and I can feel it!

As much as I like commuting on the bike, by this time of year I’m not too disappointed when I have to stop because of snow or ice.

Anyone out there into winter riding?

On with the links

Michael Lesauvage took a close look at his Canadian Tire Options MasterCard and found that the rewards rate is significantly less than 1%. Read the post to find out why – unbelievable.  I’ll be talking about this card next week.

Fabrice Taylor of the G&M explains why he likes Home Capital as an investment. This article explains why investing for dividends isn’t always a good move.

George Athanassakos of the G&M says that economically, there is a fine line between Greece and Canada. Very interesting.

Financial Uproar brought up some good points in maybe you shouldn’t be an entrepreneur. It’s not all it’s cracked up to be.

Phil Taylor talks about the benefits of public education vs private education, using himself as a pretty good example in should I stop retirement contributions to pay for private school?  Couldn’t agree more.

The Oblivious Investor answers what to do with a windfall.

Michael James explains why calculating investment returns can be tricky.

Boomer & Echo finishes off their excellent financial planning series with Create your final financial plan. Well worth reading the whole series.

Canadian Capitalist wonders why Ally bank isn’t more popular?  Why indeed?

Categories
Personal Finance

PC Financial PC Points At Loblaws – Worth It For Rewards Alone?

Most people who are interested in personal finance tend to be better at some areas than others.

In my case, I love reading about investing strategies, which include rebalancing methods – but I will often not bother rebalancing my own accounts for years at a time, which sometimes can be a drag on performance.

On the other hand, I’m pretty good at making contributions to said investment accounts.

If you have to choose between making larger contributions to an investment account or being an efficient rebalancer – I can tell you that larger contributions will make a far bigger positive difference than any rebalancing method.

I tend to focus more on items that make more of a difference, rather than somewhat mundane decisions about which rewards credit card pays out the highest return on gas purchases at a particular service station.

That said, sometimes you have to look at some personal finance basics and see if there is room for improvement. Making an extra $40 per year by switching credit cards doesn’t sound like a great deal to me – but over five to ten years, that difference will add up.

Our bunch of bank accounts

Right now, we have too many bank accounts and credit cards. Part of this is from a desire from my wife to have some of her own accounts in order to maintain a credit history. Fair enough.

I’m not interested in having five different rewards cards for different situations. Yes, you can certainly maximize your rewards by having multiple cards, but I just don’t have the time or the interest.

What I want is one rewards card/system and that is it. I want the single best card for our spending habits and I don’t care if it’s not the best card for any given spending category.

I just want one card.

Right now we do most of our spending on a CIBC Dividend VISA card which seems to have decent rewards of up to 1% cash back. I’m going to be looking at that card in more detail as well as for better alternatives, but that’s our card for now.

Our other “rewards card” is a PC Financial account that pays us grocery money (literally) for using the card at Loblaws.

What I want to do is analyze the PC Financial “grocery” rewards card and determine if it offers up enough rewards to justify having a separate account which needs to be topped up monthly.

Just to clarify – the PC Financial is an excellent no-fee bank account and the PC points are a nice bonus. In our case, we only have this account for the points, so I want to make sure the cash value of the points is high enough to make the separate account and card worthwhile.

PC Financial reward card Fees

There are no fees – easy enough.

How does the PC Financial reward card work?

It’s basically a no-fee bank account. If you use the PC bank card at stores that sell President’s Choice products, you can earn PC points which can be redeemed for groceries.

We do a lot of shopping at Loblaws, so we use this card a lot.  PC points are worth one tenth of a cent each. So if you use the minimum allowable amount of PC points of 20,000, you will get $20.00 worth of groceries.

How do you get PC points?

There are a number of different ways to get PC points, but the only one relevant to me is the points you get from making purchases with the card.

You get five PC points for every dollar you spend on your bank card at participating stores where President’s Choice products are sold.

This is a bit disappointing as I can do the math in my head and determine that the PC points rewards are only worth 0.5% of your purchase amount. I had expected at least 1% to compete with the top reward credit cards.

In case you are wondering, we’ve been using this card for at least five years and this is the first time I’ve sat down to analyze the rewards benefit. 🙂  Oh well, this “mistake” has probably only cost us about $50 per year.  Not exactly noticeable.

Conclusion

Ok, so this bank account is not very worthwhile for us and we will stop using it. I know the CIBC dividend card has better rewards and we can remove one bank account from our pile.

As mentioned, the PC Financial bank account is a great product if you are looking for a no-fee bank account.  I’ve had a separate no-fee PC account for several years which was my unofficial “business” account and it has been great.

In our case, we were only using (or mis-using) it for the rewards, which by themselves are not good enough to justify having the extra account.