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tuyop posted:Why? Are bond prices plummeting? That would be a Good Thing. A side point, but bonds (and the bond market) are the most mysterious thing to me in all of finance. If anyone has a good source for learning more about them, I'd be all ears...
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Nov 13, 2013 23:21
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Lexicon posted:A side point, but bonds (and the bond market) are the most mysterious thing to me in all of finance. If anyone has a good source for learning more about them, I'd be all ears... Yeah I really don't have a good grasp of bonds as well and I tried very hard to focus on the part in The Four Pillars where he discusses how interest rates, price, volume, maturity and risk all tie together to produce something that bonds give people who buy them. 
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Nov 13, 2013 23:37
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tuyop posted:Why? Are bond prices plummeting? That would be a Good Thing. Because the current political and economic situation around the world is basically a recipe for low yields, really high volatility*, and just generally a very high exogenus threat because of government policy. *When government lets go of their low-interest policy, yields will spike and bond values will poo poo the bed, all at once. It's like owning a ticking bomb.
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Nov 14, 2013 01:02
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Franks Happy Place posted:*When government lets go of their low-interest policy, yields will spike and bond values will poo poo the bed, all at once. It's like owning a ticking bomb. Sure, but it seems unlikely to happen any time soon - the yield curve on US T-bills is generally a decent bellwether and it's basically flat for the next 2 years and slightly rising to year 5. Also, it's not so much the low interest environment disappearing as it is the massive amount of bond buying the US gov't is doing to prop up the economy. When they stop doing that the impact will be as you say, and much more succinct than slowly rising interest rates. The gov't stopping the bond buying program is a reality, many are expecting things to start happening this coming spring. But even if you don't buy into that, which is fine, remember that bond prices only matter if you're selling or buying them. If you hold to maturity, assuming no credit risk (using the T-Bill example again), you'll get your investment back, and additionally, the bond will continue to pay you on schedule. In an ETF with a basket of bonds, the manager would be making intelligent decisions about whether to sell or hold certain issues in the situation you are describing. It's just a bit of complicated math to get your answer (loss of principal on sale versus higher rate on newer opportunity) It'll definitely happen sooner or later (your scenario - it's a definite), but it's not a reason to not hold bonds - remember they always pay coupon at redemption and they always pay you interest payments as per schedule, regardless of what happens (again, I am removing credit risk from the equation for simplicity, and ignoring callable bonds too). In the right mix, bonds are a fine thing to have in a portfolio, especially one that is long term in design. Saltin fucked around with this message at 14:57 on Nov 14, 2013 |
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Nov 14, 2013 01:31
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Bonds are a little mysterious to me too. I only have bonds through some funds, but they have wildly difference performance. Of course, apples/oranges, etc. These are the 2 funds I have in my portfolio:  Top holdings: Sears Hldgs 6.625% 2.23% Fmg Resources August 2006 Pty 144A 7% 1.9 Goodyear Tire & Rubr 8.25% 1.74 Chrysler Grp Llc / Cg Co-Iss 8% 1.65 Nrg Engy 7.625% 1.61 Valeant Pharmaceuticals Intl 144A 6.5% 1.46 Ally Finl 7.5% 1.38 Cascades 7.75% 1.3 Quiksilver 6.875% 1.29 Bombardier 144A 7.5% 1.22 Sears  Please don't go belly up.. please don't go belly up..  Top holdings: Canada Govt 1% 6.54% Canada Hsg Tr No 1 2.05% 5.76 Province Of Ontario 1.9% 3.78 Quebec Prov Cda 4.5% 2.97 Canada Hsg Tr No 1 2.6 Ontario Prov Cda 3.15% 1.96 Quebec Prov Cda 5.5% 1.93 Canada Hsg Tr No 1 1.7% 1.88 Alberta Prov Cda 1.7% 1.78 Bank of Nova Scotia 6.65% 1.77 slidebite fucked around with this message at 01:53 on Nov 14, 2013 |
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Nov 14, 2013 01:47
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Saltin posted:But even if you don't buy into that, which is fine, remember that bond prices only matter if you're selling or buying them. If you hold to maturity, assuming no credit risk (using the T-Bill example again), you'll get your investment back, and additionally, the bond will continue to pay you on schedule. In an ETF with a basket of bonds, the manager would be making intelligent decisions about whether to sell or hold certain issues in the situation you are describing. It's just a bit of complicated math to get your answer (loss of principal on sale versus higher rate on newer opportunity) So does that mean that if you hold a bond ETF for as long as the longest maturity within, you can't possibly lose any principal (assuming no credit risk, like you say)? I just wish I understood the math more. I understand the price/yield inversion on principle, but it's harder for me to fully comprehend the portfolio implications.
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Nov 14, 2013 06:00
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Lexicon posted:So does that mean that if you hold a bond ETF for as long as the longest maturity within, you can't possibly lose any principal (assuming no credit risk, like you say)? Realistically many bond ETF's are being rebalanced once in a while, so losses and gains from par value are inevitable.
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Nov 14, 2013 13:20
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Have there been any studies that prove that ETFs outperform their passive index fund counterparts? They tend to have a slightly lower MER but I have this niggling doubt that ETFs are a way of reintroducing commissions into the portfolio of conservative, passive investors.
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Nov 14, 2013 16:27
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TheOtherContraGuy posted:Have there been any studies that prove that ETFs outperform their passive index fund counterparts? They tend to have a slightly lower MER but I have this niggling doubt that ETFs are a way of reintroducing commissions into the portfolio of conservative, passive investors. Most of the discussion re: ETFs here has been in relation to passive index fund ETFs. For a beginner investor there is no reason to buy anything other than index. Also if you are paying $29.99 for a trade, you should probably not be buying ETFs yet. Stick to low MER index based mutual funds like the e-series people here love so much. Once you've got enough captial to enjoy $9.99 flat trades (50k at Waterhouse, for example), you should be using ETFs instead because they are amazingly liquid and often offer even lower MERs.
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Nov 14, 2013 16:36
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Saltin posted:Most of the discussion re: ETFs here has been in relation to passive index fund ETFs. For a beginner investor there is no reason to buy anything other than index. If you are paying 29.99 for a trade, find a new broker. You can buy ETFs for free at Questrade. I don't understand why anyone would pay $30 for a trade in this day and age.
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Nov 14, 2013 16:38
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TheOtherContraGuy posted:Have there been any studies that prove that ETFs outperform their passive index fund counterparts? They tend to have a slightly lower MER but I have this niggling doubt that ETFs are a way of reintroducing commissions into the portfolio of conservative, passive investors. Um, index ETFs are passive. They have commissions not due to some grand conspiracy, but because they trade as securities. Trading has transaction costs.
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Nov 14, 2013 16:42
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I think he might be talking about inverse or leveraged funds. Risk and reward go hand in hand, you should also be able to get up charts to see their performance. This would all be 'betting money' though, and your retirement portfolio should mostly comprised of low risk equities. Hey Saltin or anyone, say we're looking at the risker end of the portfolio. Putting together something low risk and low return to see us into retirement, I'm increasingly on top of.. but how about some of that betting money? The leveraged ETFs? Actual stock trading? What's your thoughts here?
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Nov 14, 2013 17:01
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Lexicon posted:Um, index ETFs are passive. They have commissions not due to some grand conspiracy, but because they trade as securities. Trading has transaction costs. Oh, I'm not suggesting that there's a conspiracy. I've just noticed that I see a lot of ads in MoneySense for ETFs and not very many (any?) for index mutual funds. I'm just wondering if the performance matches the hype. The only reason I mentioned commisions is because the seminar I was at failed to mention commissions and speaker went from a very analytical to very flowery when he started talking about ETFs.
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Nov 14, 2013 19:08
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Tony Montana posted:Risk and reward go hand in hand A general point that I like to keep in mind always: high reward implies high risk, but high risk does not necessarily imply high reward. If you ask your idiot brother-in-law to pick stocks for you, you are taking a large risk without a corresponding expectation of reward.
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Nov 14, 2013 19:55
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You have to understand a sector, the players and the influencing economic forces pretty well (not to mention the actual companies) before you get investing in individual equities. I focus on Resources in this regard and have done pretty well, though it is a belly churning proposition to be honest and the sector has been pretty dead money in the last year and a half. The best result I've had is holding a met coal company (WTN) that was bought out by Walter Energy a few years ago (my average share price was about $1.50 and I got $11.50 a share when the buyout was announced). Buying a mid-tier coal producer during the downturn got me a lot of "wtf you're nuts" type of responses, but I knew they were well run, had great access to rail and seaborne port, and could produce at a price that was viable for the time. I also made out well with Teck Resources (TCK.B) during the downturn when everyone thought they were going to default of the debt they incurred to buy Fording Coal. Turns out the banks love to lend to assets, and the $5 stock went back to $40+ (Teck is a very well lead and run company, but the recent year and a bit sees them trading between $27 and $29 recently). Take wins like that with a grain of salt too - they all centre on the downturn in 2008 and taking advantage of the opportunities it presented. It was probably a once in a lifetime thing. On the flip side I've lost five figures in the last year and a half (so far) on a start up Potash company that has a world class resource but not enough money to develop it (yet). It's like a soap opera this stuff. Anyhow, it is a betting game, but it's more like poker than something silly like roulette- you have information available that can actually increase your chances of making a good bet and before you lay the money out you have to understand and process that data as best you can. It is a lot of work sometimes, and even after doing it, you can still crash and burn. Also it should only be a very small percentage of your overall portfolio if it is retirement oriented. Saltin fucked around with this message at 22:42 on Nov 14, 2013 |
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Nov 14, 2013 22:38
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Yeah no, the market is smarter than you. Gambling is fine but that's all it is.
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Nov 14, 2013 22:49
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Something I've heard the fund managers do is always keep a chunk in cash, in the case we have another correction like 2008. Then you use that cash to buy stock 'on sale'. If you had it in your ETF, you shouldn't be selling a chunk of your ETF in the downturn.. you should wait it out and wait for the rally. Aussie banks (I'm sure Canadian and others) are offering 4% on savings accounts as an introductory rate. I got to the end of the six months and just sent an email saying I want to stay with you, but I have to keep competitive, and they just said 'sure, sir' and bumped me back up to the 4% for another six months. I could just keep doing this, and I'm earning about the same returns as having it in bonds anyways.. but it's cash. What do you make of that?
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Nov 14, 2013 22:55
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tuyop posted:Yeah no, the market is smarter than you. Gambling is fine but that's all it is. I'd say it's gambling to exactly the same extent that poker is. It's highly stochastic, and the vast majority people will lose their shirts, but there are a few people who have a genuine talent and can make money reliably over time. Most people shouldn't do it.
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Nov 14, 2013 22:58
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Tony Montana posted:Aussie banks (I'm sure Canadian and others) are offering 4% on savings accounts as an introductory rate. I got to the end of the six months and just sent an email saying I want to stay with you, but I have to keep competitive, and they just said 'sure, sir' and bumped me back up to the 4% for another six months. I could just keep doing this, and I'm earning about the same returns as having it in bonds anyways.. but it's cash. What do you make of that? If they keep doing it, hey, awesome for you.
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Nov 14, 2013 22:59
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A quick Google and no.. Canadian banks are offering more like 1.5%. Gosh, I had no idea there was such a difference. Cash and bonds are the same level of risk - if I come out with the same return, may as well have it in cash and not pay trade fees to move it in case we have a 2008 replay. Hehe, diversification is so much fun.. market goes up, I win. Market goes down, I win. I was thinking about property again and surely the biggest sin in pouring all your cash into a property as an investment vehicle is the lack of diversification. Sure the market has been doing crazy things, but you're in one market.. you've got one asset and all your value is pinned to that. It's like having your ETF and nothing else, scary! I've also got a ton of books on Options, I'm reading through The Four Pillars now. Investment and speculation are two different things.. but actual stock trading does look so interesting. Anyways.. first things first, get this long term financial freedom plan finished and in effect, then we can have a go at Wall Street.
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Nov 14, 2013 23:11
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^ So I'm guessing inflation must be a fair bit higher in Australia than Canada/USA/Europe then? I would think it must be to support an interest rate like that, even if introductory. Nostalgia: I remember getting 4-5% at ING Direct in the mid-2000s. Ah, those were the days.
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Nov 14, 2013 23:19
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Lexicon posted:Nostalgia: I remember getting 4-5% at ING Direct in the mid-2000s. Ah, those were the days. Hahaha yessss back when I was in University and saving my money for the first time in 2006/2007 that 4.5% was pretty much the best thing ever invented.
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Nov 14, 2013 23:22
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In Adelaide, my home town in the south is it totally normal to pay $4.50 for a cappuccino before I left. A single adult movie ticket is $20. The Canadian and Australian dollars are at parity (basically). In Perth, the Western capital, the home of the mining boom.. the inflation is legendary. $10 a beer. $25 for a very basic pub chicken schnitzel and chips. Yeah, now I'm in Italy and I pay 1.20 Euro for a coffee and ate a meal out, had a drink and dessert for under 10 Euro.. I think from personal experience Australia certainly is experiencing inflation. edit: Does that sound right? What do you guys pay for a cup of coffee in a cafe? How about a basic meal in a pub? Something that could be masking it is you're right above the US, so for instance petrol prices would have a lot to do with us shipping everything in. You've got fairly close access to the mighty machine of the US economy. Tony Montana fucked around with this message at 23:32 on Nov 14, 2013 |
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Nov 14, 2013 23:26
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Saltin posted:On the flip side I've lost five figures in the last year and a half (so far) on a start up Potash company that has a world class resource but not enough money to develop it (yet). It's like a soap opera this stuff. KRN? I was short KRN at about $7 but got tired of waiting so covered at a small profit. Patience was never my strong point.
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Nov 14, 2013 23:27
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Tony Montana posted:edit: Does that sound right? What do you guys pay for a cup of coffee in a cafe? How about a basic meal in a pub? Something that could be masking it is you're right above the US, so for instance petrol prices would have a lot to do with us shipping everything in. You've got fairly close access to the mighty machine of the US economy. Depends if you're in bizarro-land Vancouver, or elsewhere in the country, but in general, you're probably looking at $2 minimum for a decent coffee, and $3-$4 in latte territory. A basic pub meal is guaranteed to be at least $10, if not $12-$14. The USA proximity doesn't help as much as you might think - our retailers largely suck, and love to engage in cross-border arbitrage - and Canadians, a docile lot, are apparently are willing to pay whatever price a vendor asks. Plus we have quite a few tariffs still, which are mostly a holdover from the days when a lot of manufacturing actually used to go on here. It's nice to be able to drive there to shop though - groceries and clothes cost a fraction for what is arguably equivalent or better goods in many cases. Oh, and don't get me started on dairy.
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Nov 14, 2013 23:50
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Kal Torak posted:KRN? WPX
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Nov 15, 2013 00:17
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Tony Montana posted:edit: Does that sound right? What do you guys pay for a cup of coffee in a cafe? How about a basic meal in a pub? Something that could be masking it is you're right above the US, so for instance petrol prices would have a lot to do with us shipping everything in. You've got fairly close access to the mighty machine of the US economy. Yeah the US-CAN relationship is kind of weird. Our gasoline is much more expensive than theirs because of taxes, but we're the largest supplier of petroleum to America by a factor of nearly two. Fuel is cheapest here in Alberta at around $1/litre but service costs are huge. A regular oil change is like $80. Adult movie tickets are 10-13 bucks with most theatres offering a "cheap night" where you can get a ticket for $7. Beer in Alberta is like $30 for a 24-pack, at a bar it's around $5 for domestic but in Montreal I once paid $14 for a Heineken at a club on top of a skyscraper (err, tall building). Worth it. If you save your money at 4% it'll still take like 18 years to double, my bank is offering a 2.5% promotional rate which almost reaches past inflation rates.
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Nov 15, 2013 03:28
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http://www.milliondollarjourney.com/top-canadian-discount-brokerages-with-u-s-dollar-usd-rrsps.htm Million Dollar Journey does a new wrap-up of the best Canadian Discount Brokerages that let you buy USD poo poo in your RRSP. Questrade rolls in at number 2.  (not that this is a problem for people who just want to buy some US market TD eseries ETFs but yeah)
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Nov 18, 2013 15:42
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PSA: how not to pick a bank: in accordance with gimmicky bullshit like concert tokens or free movie passes. Scotiabank blazed the latter trail - now TD is getting into the game with some stupid concert thing: https://musicaccess.tdlivemusic.com/event/list
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Nov 19, 2013 23:06
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So I started putting 300 dollars a paycheck into a TFSA, I want to trade stocks eventually, but looking for something short term to dump the money into for some growth until I accumulate a decent amount of cash(5k+). What would be my best bet?
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Nov 19, 2013 23:09
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DariusLikewise posted:So I started putting 300 dollars a paycheck into a TFSA, I want to trade stocks eventually, but looking for something short term to dump the money into for some growth until I accumulate a decent amount of cash(5k+). What would be my best bet? Canadian couch potato model portfolios. Don't gamble (read: buy "stocks").
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Nov 19, 2013 23:11
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Lexicon posted:PSA: how not to pick a bank: in accordance with gimmicky bullshit like concert tokens or free movie passes. Scotiabank blazed the latter trail - now TD is getting into the game with some stupid concert thing: Scotiabank's "Richer than you think" motto applies to people who bought BNS mid June to mid July, but definitely not most of their customers. The only way to beat them is to join them.
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Nov 20, 2013 01:20
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Tony Montana posted:Risk and reward go hand in hand High risk means high potential reward. It also means high potential for losses. DariusLikewise posted:So I started putting 300 dollars a paycheck into a TFSA, I want to trade stocks eventually, but looking for something short term to dump the money into for some growth until I accumulate a decent amount of cash(5k+). What would be my best bet? melon cat fucked around with this message at 06:39 on Nov 20, 2013 |
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Nov 20, 2013 06:31
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melon cat posted:Hold it. You're missing something very important. Heh, Lexicon already pointed this out with the example of if you let your idiot brother-in-law pick your stocks, you're wearing plenty of risk with a pretty lovely chance of reward. It's the inverse of this premise that is usually more important for newbies though, that increased returns must carry increased risk. In the other investing thread a guy was going on about the bond market being bad and him noticing this and moving that segment of his portfolio into index funds, his logic being something like he couldn't see the economic climate changing. The Four Pillars taught me that Irving Fischer couldn't see the economic climate changing in 1928. Ok.. something more interesting. Bonds, we were talking about this before, I'm going to paraphrase from the Four Pillars a bit and you can all be my study group  Bonds (Govt Bonds for simplicity) are a loan from the Govt for a period of time. The Govt agrees to pay you interest on this loan, which is your interest rate, while the amount of the loan is the bond price. What is counter-intuitive here is that as the interest rate rises, the price falls and vice versa. This is important because highlights the concept of an equity's value being the promise of future income, so the price of the bond (it's initial value) fluctuates with it's potential to earn in the future (interest rate). Bernstein goes on to discuss how interest rates are a marker of societal stability - the lower the rate and the more confident the Govt is of the status quo. In a financial crisis or even significant bear market, you would then think of the interest rate rising as it's now risker to lend money (and the bond price going down). But this was before paper backed money and the ability for Reserve Banks to adjust the money supply (interest rate) directly to manipulate the economy. What you see in reality now is the opposite, in efforts to stimulate the economy and effect recovery a nation's Reserve Bank will lower the interest rate in a crisis. Take this simple graph of the Australian national interest rate and look carefully around 2008:  As the interest rate falls, the bond price goes up.. Bernstein tells us. The bond price is the price at which we would be able to sell our bond at, assuming there are buyers (aren't there always buyers in this market?). So does this mean in a crisis, your stock portfolio loses value and it's sale price decreases (don't sell it here! wait for the rally!) but your bond portion does the inverse? You could sell your bonds at an increased price, making profit and buy stocks 'on sale'? Is this diversification at it's finest? How am I doing? Tony Montana fucked around with this message at 12:10 on Nov 20, 2013 |
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Nov 20, 2013 12:07
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Tony Montana posted:How am I doing? The fundamentals are fine, of course, but the situation today is that interest rates cannot (realistically) fall any further and that much of the bond market is propped up by QE (this is true). There is a strong argument that given this, bond prices have only one way to go. Not that there is anything wrong with cheaper bonds if you are a net bond buyer across the next 25 years.
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Nov 20, 2013 13:23
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Saltin posted:The fundamentals are fine, of course, but the situation today is that interest rates cannot (realistically) fall any further and that much of the bond market is propped up by QE (this is true). There is a strong argument that given this, bond prices have only one way to go. This is the recovery from a economic crisis though, we're talking about a topsy-turvy scenario. You would think following the crisis would be world-wide recovery, with interest rates rising and the QE measures being slowly reverted (which I guess would be the time to buy your bonds, not now, but this is trying to time the market). That is not assured, of course, we could just as easily fall into another depression following 2008. Saltin posted:Not that there is anything wrong with cheaper bonds if you are a net bond buyer across the next 25 years. Right, the loss is only realized when you sell. If you hang onto the bonds and the interest rate climbs with recovery, making the price you paid for them more than current - it doesn't matter as long as you just collect the return and don't sell the bond. Is it an increased return? The price has fallen proportionally too, don't the two just cancel each other out? If they do cancel each other out, then there is no right or wrong time to buy a bond. They'll always have the same value and act in a manner different to your stocks - which is why they're recommended as part of a diversification strategy.
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Nov 20, 2013 13:48
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Question for anyone that uses PC and TD E-series. Is there a way to set up direct money transfers from online banking? The PC financial site doesn't seem to recognize my transit/account number, and their phone support straight up said they can't do it and you have to try to use email money transfers. I could have sworn that someone here had this working.
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Nov 22, 2013 02:29
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Demon_Corsair posted:Question for anyone that uses PC and TD E-series. Is there a way to set up direct money transfers from online banking? The PC financial site doesn't seem to recognize my transit/account number, and their phone support straight up said they can't do it and you have to try to use email money transfers. I've got it automated with ING. All it took was a cheque.
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Nov 22, 2013 03:21
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Lexicon posted:I've got it automated with ING. All it took was a cheque. How did you get cheques with a mutual fund account? Or do you move the money to your chequing first?
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Nov 22, 2013 03:26
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Demon_Corsair posted:How did you get cheques with a mutual fund account? Or do you move the money to your chequing first? I sent a cheque for ING along with the instructions to automate withdrawal. I buy eseries weekly from that account.
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Nov 22, 2013 03:32
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