Owner: wheredoesallmymoneygo.com URL:http://www.wheredoesallmymoneygo.com Join Date: Wed, 25 Jul 2007 20:37:01 -0500 Rating:0 Site Description: One of the premier personal finance blogs for Canadians. Written by a Bay Street professional. Site statistics:Click here
Learn more about Life Insurance than your Insurance agent knows Part 1 2007-08-13 16:32:14 That's a bold statement I know, but I'm going to tell you an analagous (but fictitious) story of how life insurance came about and how it was designed. Once we get through the series, you'll know more than 75% of life insurance agents out there - but best of all, it won't be boring! To start we have to get a basic understanding of the machine that is life insurance - allow me to tell a story...Let's go back a few hundred years... In a pub there was a frequent visitor named Lloyd who was a wealthy man, and always looking to make more and more money. Everyone in the town knew of Lloyd's wealth and they would come to him to ask for his money for business transactions, for loans, or just to plain beg!One day, a farmer came to Lloyd and said, "Listen I have a problem. It is July and my crops are due to be harvested in August. We've had a fantastic year this year and we will earn more selling this year's crops than for the last 5 years combined."Lloyd retorted by s
Learn more about Life Insurance than your Insurance Agent knows Part 7 2007-08-18 19:59:37 In Part 7, we will take a look at the change spawned by infuriated policy holders (infuriated by the amount of money the insurance companies were making on the investment pools inside whole life policies!). If you like, you can access the earlier parts in the series by clicking here: Part 1, Part 2, Part 3, Part 4, Part 5, Part 6.This is the time when people started to "buy term, invest the rest" - a strategy where people would buy Term life insurance (closer to the pure cost of insurance and much cheaper) and take the extra amount that would've gone to the whole life premium and invest it themselves. The concept is that these savings would grow at rates that were available in the market (and what the insurance companies were enjoying) and it would grow enough that they would become "self-insured" as they became older. They would still have the coverage early on through the term policy, but would later shed their insurance coverage (and premiums Read more:Agent
Learn more about Life Insurance than your Insurance Agent knows Part 6 2007-08-17 10:50:34 In today's post, we'll discuss how the high interest rates of the 1980's created lots of change in the types of insurance that were sold thereafter. This is Part 6 in the series, and you may want to read the other articles by clicking on the following: Part 1, Part 2, Part 3, Part 4, Part 5. So the first thing you might be thinking is "What do interest rates have to do with insurance policies???" - well let's revisit the graph from Part 5.If you remember, the overpayment in the early years is directed into an investment portfolio which is predominantly fixed-income in nature. The rate of return on fixed income investments are very closely tied to prevailing interest rates. During the 1980's interest rates were incredibly high - around 20% at the peak!! What the insurance companies do when they are figuring out the insurance premiums for whole life is factor in the expected death of the "life-insured" along with their current age first. Read more:Agent
Learn more about Life Insurance than your Insurance Agent knows Part 8 2007-08-22 21:58:22 In Part 8 in the series we are going to talk about applications of whole life insurance. To read earlier articles in the series you can click on the following: Part 1, Part 2, Part 3, Part 4, Part 5, Part 6, Part 7.Whole Life insurance policies (which fall under the umbrella of "Permanent Insurance") are used for expenses that you are only going to have when you die, and will always have no matter when you die. I realize that sounds trivial, but lets look at an example of when you WOULDN'T need a permanent insurance solution. A lot of people buy insurance to cover the mortgage balance - the reasoning being that if one of the breadwinners die, the remaining family will not have to substantially change their lifestyle because of a financial requirement to do so. But you might not have a mortgage balance when you die - especially if you live to 80 (hopefully you will have paid off your mortgage by then!). So this is a perfect example of an insuranc Read more:Agent
Notify your insurance company if you start driving less and save money on your Auto Insurance 2007-08-22 20:18:50
I thought I would throw this one in there because I had a client call up today and this fit her situation exactly. She mentioned that she had a new job and was now taking the train to work. I asked if she had notified her auto insurance company
as your premiums are based partly on your driving habits. Since the mileage she was going to be putting on her car is now decreased the chances of her getting into an accident decrease as well - which means they should be charging her less. It might only save you a few bucks per month, but over time it ALL adds up! :)
Stumble It!
Get a refund for seeing a movie when the audience is packed full of dumb kids... 2007-08-21 20:01:28
I've done this a couple of times, and I know others would be willing to if they knew. We've all gone to see a movie
and had to sit next to a bunch of young kids who seem like the last thing they want to do is see a movie, but rather talk on their phones and generally cause a nuisance. Now if you're like me, this drives you absolutely up the wall! And it's not necessarily limited to kids, but anyone really. I've sat next to people who constantly check their blackberries, and in the dark theatre the bright screen is incredibly distracting. I'm sorry, but when I go see a movie I want to be "IN" the movie and distractions "from outside the movie" pull you out of that entirely.Well, if you've had it up to HERE (right now I'm pointing at my neck with all four fingers), you can leave during the first 30 minutes of the show and ask for a credit or get your money back entirely. Alternatively, you could go out and ask to speak
Learn more about Life Insurance than your Insurance Agent knows part 10 2007-08-28 08:28:11
Welcome to Part 10! Today we are going to explore why someone would consider "over funding" a Universal Life Insurance policy. If you would like to skip back one article, click here to go to Part 9. If you would like to start at he beginning of this series (highly recommended if you haven't read it before!) then click here to go to Part 1.Remember from the last article that a Universal Life insurance policy is like a Whole Life insurance policy in that there is an insurance component AND an investment component. Whereas with Whole Life the goal of the investment component is to lower the cost of insurance over the course of one's lifetime by taking the over-payments early on and investing them - eventually growing them enough to pay for the "underpayment" later on, with Universal life the policy holder has the ability to adjust the amount of the overpayment, and also direct the actual investment allocation of the investment account. There a Read more:Agent
Learn more about Life Insurance than your Insurance Agent knows Part 9 2007-08-27 22:38:16 In Part 9 we are going to look at how Universal Life Insurance came about and how it differs from Whole Life Insurance. If you would like to start at the beginning of this series on Insurance, click here to go to Part 1. If you would like to go back to the previous article, click here to go to Part 8.One issue I haven't mentioned is the tax treatment of the investment account inside the Whole Life Policy. It is a TAX SHELTERED environment - which means whatever happens inside this account is protected from taxation so long as funds are not drawn out for other use. Since the majority of investments in this investment side account are fixed income, they normally would be taxed on an ongoing basis, but since it is tax sheltered - there is no tax on the annual gains. A tax sheltered environment helps investments grow at a faster rate than in a taxable environment.Now, if you were to pull money out of the policy for whatever reason - all bets are off and it triggers a tax Read more:Agent
Site Enhancements (?) 2007-08-27 22:00:46 Okay guys, I've made a few tweaks to the site but if anyone has any changes they would like to suggest, I'm all ears! Basically I've added a full list of ALL POSTS in the Archives landing page so that you don't have to sort through each category post by post. I do also recommend using the search function on the site if you want to type in a keyword and get a list of all articles that mention those words. Additionally, I've increased the number of articles displayed per page to 3.Remember: finance I know, blogging I do NOT. :) Stumble It! Read more:Enhancements
What is an "Exchange Traded Fund" (ETF) ? 2007-08-27 09:25:17 An "Exchange
Traded Fund" or ETF as they are more commonly referred to, is kind of like a mutual fund that trades on a stock exchange and can be traded like a stock. But there is more to it than that (naturally). ETF's do not have active management - rather, they are funds that hold all the stocks in a given market (or index) in the same proportion that they exist in that market (or index) - so if the index (or market) goes up 10%, your ETF goes up 10%. If the index falls 5%, your ETF falls 5%. Think of it like a mutual fund without the mutual fund manager.Normally, a mutual fund manager would pick and choose which stocks or bonds to hold in their fund. They would eliminate the stocks they think will under perform the market and allocate more money to stocks they think will outperform the market. By doing this, they hope to "beat the index". Historically however, it has been cited and often quoted that 75% of mutual fu
What are "Dividends"? 2007-08-26 22:33:50
Quite simply, a dividend is a payment made to shareholders that represents part of the profit that a company makes. Since the shareholders own the company, they own the profits too. The company's directors and managers determine how much of the annual profit they would like to pass on to the shareholders and how much of the profit they want to retain in the company for future use. So for example if a company earns a $100 million profit, they might decide that they want to keep $70 million for future use and give $30 million to the shareholders. In that case the dividends are paid to the shareholders proportionate to the amount of stock they each own. If one person owns half the stock, they would get half of the $30 million dividend.But of course there's more to it than just that. :) You might ask why they don't give ALL the profits back to the shareholders though dividends... There are numerous reasons - but the main reason is that the directors a
Closed-End Mutual Funds versus Open-End Mutual Funds 2007-08-30 18:41:27
I'm sure many people didn't even know there was a difference, and further, if you own mutual funds - do you know if they are open-end or closed-end? Does it matter? Yes!MOST mutual funds out there are open-end mutual fund trusts. That means that the mutual fund "manufacturer" (like a Fidelity, or AGF, or Franklin Templeton) can constantly sell new units of the fund to investors - i.e. the fund is not "closed to new funds". In contrast a closed-end fund's manufacturer does not accept new money from investors to give to the mutual fund manager.So let's look at the open-end version in a little more depth: the mutual fund manufacturer can sell new units and investors can redeem units on a constant basis. Some days that means there is a net increase of funds to the fund manager, and some days that means the fund manager has funds taken away from the mutual fund. This CAN lead to some interesting problems. When mutual funds Read more:Closed
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A Link to a GREAT RESP primer (Registered Education Savings Plan) 2007-08-30 09:19:46 The Canadian Capitalist - who also runs a personal finance blog - has written a fantastic summary of the up-to-date (for 2007) RESP rules along with a general description of how RESPs work. RESPs are RegisteredEducationSavings
Plans - a tax-sheltered account that is designed to assist in the accumulation of funds for your children's future education costs. There are some unique rules and perks associated with these accounts - so you'll want to read up on this for sure. If you are interested in learning more about RESPs - this is a great post to start with. Many thanks to Canadian Capitalist - I subscribe to his RSS feed and read his blog daily.CLICK HERE TO VISIT THE CANADIAN CAPITALIST'S POST ON RESPs If you found this article of interest, please consider subscribing to my RSS Feed. If you want to learn more about what an RSS Feed is, click here. Thanks! Stumble It! Read more:primer
Learn more about Life Insurance than your Insurance Agent knows part 12 2007-08-29 10:50:17
So at last we are at the end of this 12 Part series! Once you have finished reading this article, I'm sure you will know more about insurance than most insurance agents out there - and at least enough to know when they are trying to dazzle you with smoke and mirrors... :) If you would like to start at the beginning, click here to go to part 1. If you would just like to go back one article to Part 11, click here.So I promised that I would end the series by discussing how YOU can determine how much insurance you require, rather than being "told and sold". By no means does this mean that I am done commenting and educating on insurance, it just means I am done with this "primer" on insurance. I will keep on posting on insurance in the future, as well as many other topics - so make sure to subscribe to my RSS feed (link at bottom of page) if you like what I have to say.Okay... So how much life insurance do you need? Unfortunately I have come across way too ma Read more:Agent
Learn more about Life Insurance than your Insurance Agent knows part 11 2007-08-28 22:35:19 Part 11 in the series will discuss an important financial strategy known as an "Insured Retirement Plan" or IRP. If you would like to go the beginning of the series on "Learning more about Life Insurance than your Insurance Agent
knows" click here to go to Part 1. If you would only like to go back to Part 10, click here.I alluded to the opinion that I have that UL (Universal Life) only makes sense for certain strategies - the Insured Retirement Plan (IRP) is one of these such strategies. Before I go into the mechanics of how the policy works, I will explain the net effect: when set up properly an IRP allows you to accumulate funds in a tax sheltered environment and then USE those funds without triggering ANY tax consequences whatsoever - in effect a TAX FREE RETIREMENT.Okay, sounds to good to be true right? Well there's lots of fine print to be sure, but these policies are set up all the time - especially with high income earners.&nbs
The Fund Company that might change the Mutual Fund industry in Canada FOREVER? 2007-09-22 14:01:33 There is a new Mutual
Fund company in Canada
that is causing quite a stir. Not because of the heavyweight management team put in place, not because of superior investment performance but more because of an innovative new way to structure mutual fund corporations. It is so unique, in fact, that they have a patent pending on the structure and as of the time of this writing, there are no other companies offering such a product.To cut to the chase they, have made it possible to choose what type of income you receive from your mutual funds. At first glance you may think, "So what? I can do that just by choosing the fund based on what it invests in...". BUT with their structure you make TWO choices. 1) Pick the fund you want to invest in based on the fund's investment mandate (i.e. Bond fund, Dividend fund, Growth fund, etc.) and then 2) Pick the type of income you want to receive (i.e. Capital Gains, Return of Capital, Dividends, or Compound Growth).If you unde Read more:industry
Recommended Articles from August 2007-09-21 21:48:25
I've noticed that most blogs will periodically list the top posts at the end of a month for anyone who missed out on catching them the first time by. This is a little late in coming but the following are some articles for August
that I think are worth looking at:Closed-End Mutual Funds versus Open-End Mutual Funds discusses the differences between the two major types of mutual funds out there. Seeing as how most people use mutual funds I think it's important to look at this article - there are many advantages of Closed-End funds over Open-End funds, yet most people invest in Open-End funds.Limited Partnerships with a Flow Through Share Structure for Investment Tax Credits is an introduction to higher risk investments in the natural resources industry which offer tax credits for every dollar you invest. The tax credits are offered by the federal government to exploration and development companies and the partnership flows them through to the investor since the Read more:Articles
Why you need to take advantage of the Loonie being at Parity NOW! 2007-09-20 10:31:03
You will probably see a lot of hoopla tonight on TV (or even now on the radio) about the Loonie finally reaching parity with the US dollar. The Canadian Dollar touched $1.0001 USD today (at the time of writing - it may have touched or even closed higher by the end of the day).There is a reason as to why you might want to take advantage of this RIGHT NOW. According to analysts, it will take about two years before the marketplace catches up and starts to appropriately price items to reflect the breaking of this psychological barrier. Even now when you look at books at a bookstore you will see two prices - one in US dollars and one in Canadian dollars, and the Canadian price is still around 25% MORE than the US prices!This pricing mismatch means that either prices will come down slowly here over the next two years (which means we are overpaying if we purchase goods in Canada) OR prices will rise in the US (which means the bargain of shopping THERE decreases over t
Mutual Fund Corporations versus Mutual Fund Trusts 2007-09-19 22:22:32
Most mutual funds are set up in a trust structure, but for those of you who invest in mutual funds AND have non-registered investment accounts, you may want to look into Mutual
Fund Corporations because they offer some interesting tax advantages. First off, this may seem like a technical, high-brow concept - but it is not that complicated in actuality. I'm going to give you the rundown first and then explain the how and why.A mutual fund trust and a mutual fund corporation behave and act in almost an identical fashion - each is just an investment portfolio managed on the behalf of many investors who pool their money together and give it to a mutual fund company. In fact more and more mutual fund companies are offering the same mutual fund as both a trust and as a corporation. The difference comes in the added tax advantages afforded by the mutual fund when setup as a mutual fund corporation. In essence, it allows for you to switch between funds of the sa Read more:versus
Investment Styles: Value versus Growth 2007-09-18 12:42:37
As you can imagine, everybody seems to have their own take on how to invest wisely but if we take a step back and look down from a very high level - many people could fall into one of two broad camps of investment STYLES (there are more than this, but these are two of the most popular broad categories). These two "camps" are VALUE investing and GROWTH investing.I have heard that value investing is "buy low, sell high" and growth investing is "buy high, sell higher" and I think that is a pretty good description to give you a basic understanding - although if you are taking a finance exam don't select this answer as it's more of a funny analogy than anything else! :)Value
Investing: Value investors are generally looking for stocks that are "temporarily" undervalued by the stock market. In other words the investor has looked at the balance sheet and earnings statements, looked at what management has discussed in the annual repor Read more:versus
, Styles
, Growth
Toyota to start providing Auto Insurance in Canada 2007-09-17 09:00:06
The Globe and Mail reported this morning that ToyotaCanada
is looking very heavily into providing Auto Insurance through its car dealership network - effectively creating one-stop shopping for retailers' automotive needs. It looks like this won't be happening until 2008 at the earliest.The question that seems to be on everyone's minds is whether they will operate the insurance company at break even (or at a loss) in order to boost car sales. If they are using this as a tool to increase sales than it could be possible that they will be a source of very low insurance premiums for your auto insurance! If, on the other hand, they are operating the insurance arm as a profit-centre then will it have much of an impact on sales? I think in either case it is probably a positive thing.Toyota has such a strong brand and they have to ensure that the Toyota brand gets transferred to their insurance operations - which means high quality, good value and excellent customer
Save an Extra 10% on Department Store Purchases? Is it really worth it? 2007-09-16 19:51:10
I was at a department store today and while I was waiting in line to pay for my purchase a poor couple were persuaded into signing up for the store's charge card in exchange for an extra 10% off their purchases that day. The really sad part is that they were buying a few pairs of socks - maybe the total value was about $20 - so 10% off of that means $2 in savings.The woman was initially very adamant that they not sign up for the card, but the husband was persuaded by the dangling carrot of the extra 10% off - his rationale was that they could pay it off before any interest accrued and then cancel the card. I think many people make the same rationalization. And while some may actually pay for the purchase and then cancel the card - probably an equal amount of people do not end up paying off the balance, end up paying 28.8% in interest on the balance and maybe even more will start increasing the balance on the card.So what started as an attempt to save 10% on your sma Read more:Extra
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Off Topic: BlogRush - A Free Tool to Increase Blog Traffic 2007-09-15 19:22:20 They say that a fifth of all blog readers have their own blog - so if that's the case then this post really only applies to one fifth of the people reading it! :) I heard about a new traffic generating service called BlogRush. Basically it generates a dynamically updated list of blog posts from many other blogs and lists them on your website. Your readers may see a blog post in the list that is of interest to them and then they can click through and read about it.The benefit to me (or anyone who adds this feature to their blog) is that every time someone sees the list, it generates a credit to my BlogRush account. For every credit I will have a blog post listed on someone else's BlogRush list they have on their website - so readers of other blogs may find their way to my blog. Basically it will help blog authors increase traffic - and there is no cost to either myself or my readers. (Blog Authors: the links I have to BlogRush are referral links - they wi
Help spread the word? 2007-09-13 23:12:32
A very authoritative Canadian Finance Blog has provided a link to the 12 part series on life insurance entitled "Learn more about Life Insurance than your Insurance Agent knows" (written by yours truly). That blog is called "The Canadian Capitalist" and is one that I personally read everyday - I would highly recommend diversifying your surfing on personal finance by adding his RSS feed to your list! Please click here to visit The Canadian Capitalist.Also, I forgot to mention that EverythingFinanceBlog mentioned us on September 4th for the posting entitled "Save money on life insurance... BIG money!" which talks about how you can reduce your premiums significantly if you keep re-qualifying your medical assessment before the term expires. Click here to visit the EverythingFinanceBlog.I'm hoping that the readers of this blog are getting a better appreciation of personal finance through reading through the posts I submit - I'm tryin
What is "Short Selling" or "Shorting a Stock"? 2007-09-13 22:39:21
There are a few variations of terms associated with this concept so first let me throw out the common phrases and then explain what it actually is..."Short
a stock" (Short is used as a verb)"Short position" (Short used an an adjective)"Short Selling" (Short used as an adjective)...are the three most common uses of the term "short" as it relates to investing. Okay great, but what the heck does it mean?!Shorting
a stock means selling shares of a stock THAT YOU DO NOT OWN. You would only do this if you expected that stock TO DECREASE IN VALUE. Eventually you have to "cover your short position" by buying the stock later (hopefully at a lower price than what you sold it for). This is a backwards way of buying low and selling high in that you actually start out by selling high and then buying low. Confused yet? :) Keep reading...Let's use an example: Let's say that company ABC's shares are trading at $50.00 per share to Read more:Stock
$2 Billion Lawsuit against Car-Makers for "tinkering" with natural market forces... 2007-09-28 15:18:44
I seem to be writing in two's lately. I wrote that guest article for the Million Dollar Journey on Convertible Bond Arbitrage as a two part series, I wrote two consecutive articles on illegal broker activities, and now this article follows on the heals of yesterday's article citing a 10% drop in prices by Porsche on it's Canadian lineup due to the strength of the loonie...You see, a law-firm and four plaintiffs in Ontario have launched a Class-Action lawsuit against
Honda, GM, Chrysler and Nissan alleging that they have "tinkered" with natural market forces in order to essentially gouge the Canadian consumer. As you know, even until this day, it would be cheaper to buy a car from across the border. There are a few modifications necessary - like installing a daytime-running-light circuit, and modifying the odometer and speedometer to read in km and km/h respectively, etc. (I don't know the actual and complete list - you'll have to look that up if you ar Read more:Lawsuit
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Porsche Canada drops prices by 10%+ for 2008 2007-09-27 13:10:58 PorscheCanada
announced two days ago that they are dropping the prices on their 2008 model lineup by 10% or more (depending on the model) over the 2007 versions. Why? Because with the Canadian dollar now at par with the US Dollar, it is cheaper to cross the border and purchase the same car from the States.The Toronto Star has a great article on this, and even though Porsche has dropped prices it STILL makes more sense to buy a Porsche in the States - in other words, the prices should be the same as in the States and that would require a much more significant price drop! :) Doesn't really matter - I still can't afford a Porsche...CLICK HERE TO READ THE TORONTO STAR ARTICLE If you found this article of interest, please consider subscribing to my RSS Feed. If you want to learn more about what an RSS Feed is, click here. Thanks!
Convertible Bond Arbitrage Part 2 of 2 2007-09-27 12:53:48 As mentioned yesterday, Part 2 of the two part series I wrote as a guest author for another personal finance site is up today. The articles are on Convertible
Bond Arbitrage
and you find the second part by CLICKING HERE. If you would like to start from the beginning, you can find Part 1 here.If there are any visitors coming FROM the Million Dollar Journey: Welcome! Please click on The Archives in the navigation menu, and if you scroll down to the bottom of the archives page, you will find a list of ALL articles I have written for this blog so far.Thanks everyone - I hope you are enjoying my writings.Preet If you found this article of interest, please consider subscribing to my RSS Feed. If you want to learn more about what an RSS Feed is, click here. Thanks!
Convertible Bond Arbitrage Part 1 of 2 2007-09-26 11:38:42 Hi everyone! FrugalTrader of the Million Dollar Journey has graciously asked me to guest author an article on his personal finance blog. It's all about Convertible
Bond Arbitrage
and is split into two parts. Part 1 appears today in his blog and Part 2 will appear tomorrow.I highly recommend reading both parts as this strategy is a very thought provoking one - especially for experienced investors. It is an advanced level topic - so if you are not yet comfortable with the basics, you may want to bookmark it for later. Part 1 is a description of a basic convertible bond - but Part 2 (tomorrow) is where it REALLY gets interesting!Click here for a link to my guest post on The Million Dollar Journey If you found this article of interest, please consider subscribing to my RSS Feed. If you want to learn more about what an RSS Feed is, click here. Thanks!
Front Running: Another illegal broker activity 2007-09-25 15:56:41
You would think that after two consecutive posts on illegal
broker activities we might just have had a compliance presentation at work... and you would be right. :) But nonetheless: Front
running is another bad behaviour that carries stiff fines from the regulators but there is almost no way of knowing when your broker is doing it. Fortunately not many brokers can get away with it as this is another activity that is monitored by internal surveillance teams and the broker's branch manager as well.It basically involves the broker entering in trade orders for their own account before entering similar orders for his clients. For example, if a broker owned 5,000 shares of Microsoft and his overall client base owned 50,000 shares and news came in overnight that would lead to a change in share price then whoever acts first will either gain the most (if buying more shares) or lose the least (if selling shares).A broker's duty is to call and inform all his or her clients of
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