Wednesday, February 28, 2007


Just wanted to point out that this site turns one year old this week. We’ve laughed, we’ve cried — we’ve had informative discussions on the benefits of putting dividend-paying equities inside or outside a registered retirement portfolio.

Thanks to everyone who’s stopped by. I’m positive I’ve learned more from you than vice versa, but I like to think I add something of value to this personal finance blogosphere.

After a bit of a self-imposed hiatus, I’ll be back to regular posting shortly, I promise.

Thursday, February 08, 2007

Selling at a loss -- more thoughts

In a recent post, Canadian Dream walked us through his thought process in doing one of the hardest things we ever do as investors: selling at a loss.

I'm not sure what's a worse feeling: thinking about the stocks you buy that you shouldn't have, or the stocks you should have bought but didn't. I'm guessing it's the former -- their presence in your portfolio is a constant reminder of a failure, so there' s a pride issue. The latter just means you missed a potential gain -- but buying a loser gives you an actual loss, which feels much worse for some reason.

It's a topic that's certainly pertinent to me. I wrote about my experiences doing it just a little while ago with CanWest MediaWorks Income Fund (CWM.UN).

Canadian Dream's turkey was Harvest Energy Trust (HTE.UN). In short, his reasons for dumping were a lot like mine were -- a string of bad news driving the unit price down, creating a suspiciously high yield and an inability to shake the nagging feeling that a suspension or cut of distributions was coming. After crunching the numbers, his gut told him to sell and get out with whatever he could grab on to. He's out around $500 for his trouble, oddly similar to the amount I lost in my little CanWest misadventure. I try to follow the general rule of not paying attention to the price of a stock after I've sold it (second-guessing never did anybody any good) but I was hard pressed not to notice the huge news about CWM.UN that came out this week, a few weeks after I'd gotten out.

After selling the units to the public in trust-happy late-2005 for a cool $550-million, CanWest is apparently hoping to take the assets back again at a price about $100-million less than they solid it for in the first place. Of course buyback news like that drove the unit price up by as much as 60 cents. That's 60-cents-per-unit-less that I could have lost in my initial, misguided investment.

So how am I feeling? Surprisingly fine. Aside from a general feeling of ill-will towards CanWest management in general, I'm not kicking myself too hard over this because I based my decision to sell based on a sound analysis of the information I had at the time. And that's all I can ever ask of myself. God knows I've had my share of good dumb luck -- doubling my money in three months on Nortel, for example -- to even out bad luck like this. My mistake here was in buying the trust in the first place when I knew the payout ratio was above 90%, not dumping them three weeks too early. Selling wasn't a mistake per se -- I just got unlucky on the timing. So I'm filing this under 'learning experience.'

Luck I can't control. But I can do my homework. As long as any losses have more to do with bad luck than my own incompetence, I'll sleep fine at night. And get better at this with time.

Tuesday, February 06, 2007

Stocks vs. Real Estate -- a stream of consciousness post

More and more, I find myself warming up to the idea of buying a condo in the near future, which means I've been spending a lot of free time thinking about the benefits of investing in the stock market vs. investing in real estate. It's an interesting internal debate for my conscience to be having with itself, since it appears to have brought two fundamental impulses of mine to the forefront -- and in many ways they seem diametrically opposed to each other.

I'm naturally debt-averse. This means that all things being equal, I don't like owing money to anyone -- ever. It's the reason I pay my VISA bill on time every month, it's why I'd never even consider buying stocks on margin, and it's the reason why my natural instinct, when presented with a mortgage balance of around $200,000, is to pay it off as fast as humanly possible. I suppose deep down that shows I'm a natural pessimist, convinced that my financial world is going to come crumbling down at any moment, so I cling for any solid ground I can find to stand on when bad stuff happens. It's odd because I'd consider myself to have a fairly optimistic outlook on life in general, but I can't deny I have a "sky is falling" attitude a lot of the time when it comes to financial matters. My hatred of debt is clearly a powerful force in my finances. But on the flip side…

I don't like putting all my eggs in one basket. I suppose as an extension of that pessimism, I like feeling the safety of having a lot of little piles of money, spread out across numerous sectors, bank accounts, and investments. That way, when any given one happens upon some sort of calamity, I don't get totally wiped out.

At the end of the day, these two impulses could be considered complementary, rather than contradictory. But within the context of the Canada Revenue Agency's Home-Buyer's Plan, which allows you to withdraw up to $20,000 from an RRSP towards the purchase of your first home, I'm having trouble reconciling them.

On the one hand, being able to cash out my nearly $12,000 in RRSP would allow me to make a bigger downpayment, which would mean my mortgage is smaller to begin with, which means I'm able to pay it off sooner. This makes GIV #1 happy. But I like the make-up of of my RRSP at the moment, and think it's well-situated to perform well both in the short and long term. So GIV #2, the spread-your-wealth-around part of me, wants to keep those equity investments, both because they'll give me exposure to better-than-real-estate growth potential, but also because they'll be separate from my home equity. Again, if things were to go sour in real estate for me, I'll feel better having those couple of grand in equities to fall back on down the line.

If I'm honest with myself, I suppose I don't actually want a condo, in and of itself. I have the same domestic instincts as most people. I'd like a back yard, a little patio: a well-used barbecue I can call my very own. All things being equal I'd probably prefer a little house for myself, but in Toronto, where I'm currently living, the housing market is so expensive that an above-average imcome can't really do it anymore. Which is why the city has talked itself into the concept of cube-style condo living. Ads like this just scream 'It's affordable! It's hip! It's urban! It's incredibly claustrophobic and hermetically sealed!' to me. So really, the only reason I'd buy a condo would be for the financial benefit of building some equity. A lot of things we buy we do so for emotional reasons, like a new car, new clothes, or a vacation. But for me, at this stage in my life, the urge to own is strictly a financial impulse. Too much personal finance blog-reading, I guess...

I guess where that urge to own comes from is people's general acceptance of the belief that real estate is inherently "safer" than other investing, because it's tactile, and long-term. We can touch it, we can see it, ergo, it's worth something. It's a concept one commenter in this MoneySense investing forum hit squarely on the head:

…With real estate most investors are very comfortable holding it for long periods of time, if they have to (or flipping it quick if they get lucky, usually less common). In the stock market, after a couple of statements of declining values, most new investors run for the exits, petrified that they will be left with valueless assets and an incredably huge debt. It won't happen, but the fear is real all the same and stock market investments can be sold at the click of a mouse. No listing, no staging, just one click and your out...

In other words, if I own a home and I see the real estate market crumbling around me, the last thing most people do is sell out of panic. Most think the opposite -- why sell now at a loss? I'll just wait a few years and get out then, but I'm in no hurry. I can live in this thing in the meantime. But with stocks, we see that statement lose 10-20% and we have to fight the urge to log on to our online brokerage and sell for whatever we can get, sometimes unsuccessfully. I definitely see a lot of myself in that.

I don't expect to come to any sort of decision on this subject any time soon, since I'm nowhere near buying because I haven't built up the 25% downpayment I mentally need before taking the plunge. But there are certainly some interesting big-picture thoughts swimming around my head at the moment.

A $200,000 rectangle of concrete on the 40th floor of a Toronto skyscraper isn't the kind of thing I'd want to be getting into blindly.

Friday, February 02, 2007

Net worth -- how do you count the 'stuff?'

Quick post to draw your attention to the fact that I've updated my net worth for January 2007 (you can see the graphic on the sidebar to the right)

NetworthIQ tells me I'm now worth $28,727 -- a $1,583 (5.83%) increase from the end of December.

Much as I'm pleased that the little line keeps pointing in the right direction (yay saving!) the reason I thought I'd make this a blog post in and of itself is because of a conversation I had with my girlfriend recently about getting renter's insurance.

We had a break-in a while back. Nobody was home and the only things taken were her jewelry (my iPod, laptop, camera and Xbox were all in plain view but were left untouched) and while it wasn't really traumatic for me, I can tell my girlfriend is still very edgy due to the whole "feeling violated" factor.

As such, she's big on getting renter's insurance. I'm open to the idea myself since it seems surprisingly affordable, but one of the requirements is that we obviously have to have everything in the apartment accounted for and possibly appraised.

My girlfriend asked me to ballpark the total replacement value of everyting we own and I said somewhere between $5,000-$10,000. Her guess was much higher -- something in the neighbourhood of $25,000. At first I thought she was way off, but now I'm not so sure. I know we wouldn't get back exactly what we'd paid for all the stuff -- just the replacement value of it all, but the more I think about it, we have a lot of little things adding up. Electronics alone, I'd say there's a few grand right there. A 35-inch TV, DVD player, Xbox 360 system, two laptops, one desktop, two digital cameras and two iPods. That right there would cost around $4000, minimum. Then you've got a couch, a bed, bedroom furniture, coffee table, chairs, kitchen's all adding up. And we haven't even gotten to the two complete wardrobes for upwardly mobile young professionals.

I think the real answer is probably somewhere between our two guesses. $10,000-$20,000 maybe? I have no idea. I guess that's the insurance company's job.

The reason I'm wondering about this stuff publicly is that right now I don't include any of it in my net worth calculations. If the insurer decides I've got $30,000 lying around in my couch cushions, I'll consider including it in future months. But for now, I don't want to artificially skew my numbers like that.

Thursday, February 01, 2007

New name, (hopefully) same results

One of my best purchases of 2006 would have to be the 220 units of Westfield REIT I added to my RRSP in August.

I was thinking of getting REIT exposure in general and was leaning towards the iShares REIT ETF (XRE on the TSX) when I came across Westfield. I liked Westfield's focus on office properties in Western Canada both as a way to gain real estate exposure in my portfolio, but also as an indirect play on Alberta's booming economy. As it turns out, both would have been solid investments (Westfield's gone from $13.91 to $16, a 14.8% increase, while XRE has gone from $14.35 to $16.80, a 17.1% increase before distributions.) I probably will move to the ETF eventually, but I really like Westfield's prospects in the short term, and as such I like its odds of beating the index for the next little while. The fact that they give me a slight discount for reinvesting my distributions into new units is a bonus at this point.

News came out yesterday that Westfield is changing it's name to Artis REIT effective February 15th.

I don't particularly know or care what's prompted the name change. They could call themselves World's Crappiest REIT at this point -- as long as the fundamentals are there and the financial results are pointing in the right direction, I'll stay invested.

DISCLOSURE: As if it weren't obvious, I own units in Westfield