Damned if you do...

A few lessons in the madness of the stock market for me this morning.

I can't deny it -- the bitter side of me got a little bit bigger when I heard CanWest announce their plans to buy back their newspaper income trust for $9 a unit today.

I wrote earlier about my experiences with CanWest MediaWorks Income Fund.

I bought my units at the IPO price of $10, watched them sag below $8 and finally pulled the trigger and divested the lot at a little over $7.50 a unit -- only a few weeks before CanWest announced they were considering being gracious enough to buy back the assets for less than they sold them for.

Hopefully now I can pull the whole episode behind me, learn my lesson and move on.

After all, it could be worse. I could be a Royal Bank shareholder. Canada's largest bank posted quarterly earnings today, and despite the fact that profit was up, the stock got hammered. It's down nearly 3%.

Apparently 14% profit growth pales in comparison to TD's and BMO's numbers, posted earlier this week.

Talk about a tough act to follow. Some people are just really hard to please... :)

Hold the phone

I generally keep things investing-flavoured around here, but another side of my personal finances is on my mind at the moment.

My cellphone has died. Being a man, I'm apparently genetically predisposed to fall for all manner of technological doo-dads, but I really must say, when it comes to souped-up cellphones with cameras, colous, Internet access and ringtones, I could honestly care less. It's a purely utilitarian device for me: If I can use it to talk to people I want to talk to and it doesn’t cost me very much, it's my kind of cellphone. Anything else, and it's not.

You'd think it would be possible to get a no-bones cellphone in this country, but it's not. Canada's cellphone oligarchy has milked the country to full effect, working the system to the point where you have to sign up for long-term contracts and all sorts of bells and whistles you're unlikely to ever use, much less need.

Wireless number portability was a step in the right direction (indeed, it was a step the rest of the free world had already taken) but the fact of the matter is still that Canadians pay the highest cellphone rates in the world.

I'm actually not too put off by the monthly plan that I have, but I'm amazed by the headaches I'm undergoing trying to get a basic replacement unit. The carrier I've been with for more than three years is pushing me to sign up for another multiyear contract, so I'm tempted to switch carriers out of spite. My job has a better-than-average chance of relocation to a new city every once in a while, and the last thing I need to to have to pay Ted Rogers $30 a month for the privilege of having a useless cellphone.

I'm narrowing down my choices and it's looking like, thanks to Fido, this whole debacle won't actually end up costing me very much. But if anyone has any suggestions for a bare-bones, no contract cellphone plan in Toronto for around $30 a month, I'm all ears.

BMO throws another curve

Earnings season begins again for banks, and first up on the docket is the one I own. Bank of Montreal.

You remember BMO, don't you? They're the bank that announced, at the end of April, they expected to lose $450-million thanks to some dodgy natural gas trades. The stock got hammered. Then it turned into $680-million. The stock got hammered further still.

Today's number? $671-million. Only, that's not a commodities loss. That's a quarterly profit.

It seems the bank's other divisions did so well that they were more than able to shoulder BMO Capital Markets' loss, and actually increase quarterly profit by 17% overall.

The net result? BMO's stock goes from about $72 before the fiasco to under $70 today, despite the fact that quarterly profits turned out to be higher than they were when everyone thought they were a quiet, boring little risk-averse bank.

BMO essentially created their own headache, cleaned it up and took the hit in public perception, despite the fact that they actually ended up looking better, on paper, than they were before. There's a lesson in there somewhere about how efficient our market really is. But I'm not sure what.

Buy and hold -- to a point

My investing strategy, in general, is to buy solid companies with long-term growth potential, ideally at reduced prices after the market has temporarily punished them. I'm a long-term investor. But that's not to say I'm afraid of locking in some short-term gains if and when they present themselves.

Since I've become a more serious investor, I've amassed a portfolio that now holds a handful of different equities, and I have plans of adding new ones as soon as I can save up enough capital. But in that same time period of stock-buying, I've only actually made one stock sale -- my CanWest MediaWorks Income Fund holding, which I sold a while back because the business's fundamentals no longer looked attractive to me.

I guess that makes me a buy and hold investor. Which I guess is a fair description. Slow and steady, in my experience, is the best way to win the race in the end. But that's not to say I like every aspect of the concept. Taken to the extreme, you end up constantly buying stocks throughout your life, almost regardless of price or what happens to them after you buy, and then selling all your positions to finance your retirement.

Dollar-cost averaging via a DRIP into a solid equity like a Canadian bank would probably work well over the long term. But that's not to say I'd be averse to locking in gains and sitting on the sidelines for a while if I think a holding has had a particularly frothy run. While I'll always stay a long way away from things like day-trading, I don't think it's heretical to say it might be a wise idea to lock in unexpected gains when you come across them.

I know, I know -- this sounds suspiciously like market timing, which is a taboo subject for a lot of long-term investors. But honestly, the whole concept of a stock one should keep buying, no matter the price, seems a little antithetical. If we're supposed to be diligent investors and do our homework before jumping into any given stock, how is that achieved by doing something mindless like constantly pouring money into a holding, regardless of price?

Buying and holding is a sound investing rule in principle. But like any other rule, there are exceptions.

The end of an era

I'm in the process of transfering to a new high-interest savings account.

Netherlands-based ING Direct deserves credit for literally starting the high-interest savings account movement in Canada. When they set up shop a decade ago, Canadians really weren't very well-served by the Canadian banking oligarchy. Banks, to my teenaged eyes, were basically places where you could go to borrow money, or keep your hard-earned cash safe against things like theft and fire. But looking at my monthly statements every month (where the service charges for accessing the money outnumbered the interest payment I got at the end of the month) banks certainly didn't seem like a particularly useful tool to build wealth with.

For introducing the breakthrough concept that a bank should pay you somewhat-significant monthly sums for the privilege of holding your money, ING deserves accolades. Because in the 10 years since then, a host of other players have crowded into the market -- most notably, even the Big Five. (Although their offerings fall predictably short of the mark, in my opinion.) Won over by their no-nonsense, generic Scandinavian pitchman, I've kept whatever savings I could accumulate over the years in an ING account.

So I'm generally well disposed towards ING for getting the savings ball rolling -- the orange savings ball, as it were. But it really needs to be said: ING seems to be getting a little complacent, and away from what they do best -- offering a simple way to save with a great savings rate. All of the players, ING included, try to distract consumers with a bunch of flashy bells and whistles like same-day transfers, points, and temporarily-inflated rates to lure you in. But all these things distract from the central issue: which interest rate gives you the opportunity to grow your money the quickest. And maybe it's because they seem to spend more than the other players on marketing, but ING has simply fallen behind when it comes to offering the best savings rate.

Even a cursory look at the posted rates shows ING is lagging behind. I can count no fewer than a half-dozen no-fee places to park my money that have a better rate than ING's current 3.5% and are just as easy to access and transfer money online. That's why I'm saying sayonara to ING and moving over to PC Financial. Loblaws is my primary grocery store, so I'm seriously considering moving over my everyday chequing account and accumulating PC points while I'm at it.

Rest assured, if ING wakes up in the near future and offers me a rate better than the 4% PC Financial has offered, I'll welcome them back with open arms. But until then, I'm ignoring the smoke and mirrors. Banks have zero loyalty to me, so I don't really see why I should have any to them. It's one of the joys of living in a capitalist system.

Lenders can try to confuse me with semantics all they want. At the end of the day, it comes down to simple arithmetic: 4 > 3.5.

BRK.B -- My very own index fund

It's May. It's the advent of spring, a time when this young investor's fancy turns to Berkshire Hathaway's annual general meeting in Omaha, Nebraska.

I bought a single Baby Berk share a little over a year ago for about $3100 U.S. My reasons, at the time, were that I was looking for exposure to the U.S. market, but mainly, I'm such a fan of the Buffett investing philosophy, I thought having that share in my portfolio would be a good benchmark to hold myself up against. I still really like the way the Oracle of Omaha thinks about investing, but the more time goes by, the more I like my stake in it for new reasons.

I think of it as a sort of actively managed, diversified U.S. equity fund.

I know it's foolish to ignore U.S. equities and they've historically been the real driver of the global economy. But today, the negative job numbers, housing stats, growing federal debt and quagmire in Iraq make me really worried. Worried enough that part of me wants to get out altogether. To be sure, there will be winners and losers even in a down market as there always, are, but I'm rarely smart enough to predict which will be which, so I'd have to go with an index fund and buy the whole market. And that exposes me to the downside risk that I'm convinced is coming.

But via Berkshire, I'm basically getting a stake in a holding company that takes positions in large-cap U.S. companies it thinks will outperform over the long-term. And it's run by the best fund manager in the business. About 50% of Berkshire's revenues come from solid industries like insurance, but there's also a hefty stake in stalwarts like pharmaceuticals, utilities and manufacturers. Not to mention blue-chip retailers and consumer goods like Dairy Queen, Microsoft, Wal-mart and Coca-Cola. And the company has even started to invest internationally.

I guess what I'm saying is, when the bad times inevitably come to U.S. equities, I trust the companies Warren Buffett likes to outperform the market as a whole. It's not like he doesn't have a track record at this. The stock's up 3600% since 1987. That's six times better than the NYSE over the same period. The company's sitting on $46-billion in cash -- enough to buy Bank of Montreal outright and then some, for Pete's sake.

It's nice that the stock's up 17% since I bought it, but I never saw it as a short-term position. I'll be holding on to my stake in Berkshire Hathaway for a long, long time.

Exit strategies

Dubya could use one in Iraq right about now. And if you've ever put a buy order on a stock in your life, you'd be well served to give some thought to one yourself.

I'm talking about exit stategies. If you're anything like me, most of your investing thought process is dedicated to the buy side. Should I buy this stock? Why? At what price? If you've done your homework, chances are you won't end up buying far more stocks than you have an initial interest in -- because let's face it, there's no such thing as a good stock to buy at any price.

It strikes me that making money in the stock market is 50% due to buying the right stock at the right time. But what about the other side? Unless you sell it at the right price, all your hard work on the front end is wasted.

It's for that reason that for every stock I buy, I like to have a general guideline of at what point I'd consider selling the stake. I mean, if I buy a stock because I think it's undervalued, I'm doing so because I think at some point Mr. Market will fully value it. My exit strategy is all about finding out at what point that will happen, and what I'll do when it does.

That's why for most -- but not all -- of my holdings, I have a general target in mind of when I'd like to sell it. If I pull the trigger on an attractive stock at $10, but I think it's true value is somewhere closer to $15, then chances are if and when it hits that point, I'll get out.

Of course, a lot can happen that might change my projected exit strategy. The main one being when the underlying business's situation has changed. If I thought it was a $15 stock but two years later it's performance is even better, I'd consider holding it until it reaches $20, or whatever else. But If I bought it at $10, planned to hold it until it hits $15, but it's prospects take a turn for the worse when it's trading at, say, $11 or $12 (or $1 or $25, for that matter) you'd better believe I'll get out when the light turns yellow.

As with anything else, exit strategies aren't, and shouldn't be, written in stone. But it's sensible planning to give some thought to how and why you might divest your holdings every time you find yourself buying into a new position.

Trading note -- Bring on more bank fees, I say

Made my first stock purchase in a while last week. I'm pleased to say that like 99% of Canadian investors, I'm now a happy owner of bank stocks. I put $3200 into BMO shares. Yes, yes, I know that BMO's currently trading at an all-time high -- but we're talking about the big banks here, people: the old rules don't apply. I'm not expecting my shares to skyrocket overnight so I can cash out in a few weeks time, but in terms of buy-and-hold Canadian dividend investing, the banks really are no-brainers. I'm confident my tiny stake in BMO will do what I hope it will -- slowly grow over time, giving me dependable capital gains and a steadily increasing dividend payout.

That'll probably be the last position I'll be instigating in Canada for a while now, because barring a major market correction, the whole TSX looks a tad pricey to me. As per my asset allocation targets, my next purchase will probably be to pad up my international holdings -- most likely via an emerging market ETF since I currently have no exposure to that sector.

Ch-ch-ch-ch-changes

Alternate title: A moving post

With apologies to David Bowie, from whom I borrowed the title of his seminal 1972 rock anthem as a hackneyed segue, I want to talk about the costs associated with moving into nicer living accomodations.

My girlfriend and I currently live in a 1-bedroom apartment that hovers somewhere between "milk-crate-bedecked-student-accomodation" and "Volkswagen-Passat-clad-yuppie-pad" depending on how motivated to clean and or decorate the walls either of us happen to be at any given moment. Since we've both apparently recently figured out that we haven't been full time students for over two years, we've decided to test out the condo marker -- the condo rental market, that is -- to see what life is like for mid-20s urban professionals with a modicum of disposable income to spend.

We've found a nice place in a mid-sized, newish building with all the amenities (a patio, a gym, parking included) we were looking for. We'll be signing the lease imminently, the net result of which will be about an extra $200-$300 more in rent, per month, for each of us. In and of itself, that's an entirely manageable increase in monthly spending to accommodate -- expecially considering I was worried I've been cheaping out for a little while and not taking the time to smell the roses that life has to offer. (That shouldn't be a problem now as my rooftop patio allows or my own personal rose garden should I want it.)

But it's the other, ancillary costs that come with a move that can really add up. Because you're not really just signing up for an extra $250 a month. You're signing up for an extra few hundred square foot of space -- which you're probably going to want to plonk a $1000 worth of sofa into. And those extra cupboards in the kitchen need a slow-cooker and a pasta-maker to fill them up, for the low low price of a few hundred bucks.

I've never really been one of those people who gets drawn into "keeping up with the Joneses" but doing the math in my head, I think we're both going to be out as much as $1000 upfront in moving-related expenses, what with moving fees and a smattering of new furniture to be purchased.

They say buying a home is one of the most expensive things you'll ever do. I may not have a huge mortgage to worry about just yet, but in my experience -- so is moving into a bigger apartment.

Taxes -- Finished!

Sat down last weekend for my annual March/April tradition of filling out my income tax form and I'm pleased to report that it gets less painless every year.

The net result is a nice little refund for me (Thank you, RRSPs!) but what I really wanted to focus on is an obscure clause in last year's budget I had forgotten about that came up in my favour:

Line 363 -- Canada Employment Amount
Under proposed legislation, employees are eligible to claim an employment amount. Claim the lesser of $250 or the total of the employment income you reported on line 101 and line 104 of your return

For 99% of employed, tax-paying people, this means a $250 tax credit. I remember this news at the time of the 2006 federal budget but I had forgotten it until I sat down to file my return. As best as I can tell this was a Conservative attempt to reward any and all Canadians who have a job for being productive members of society. Seems like an obtuse way of going about it, but who am I to knock a gift horse in the mouth. Every little bit helps.

Postscript:Just a note that my net worth this month has hit another milestone by crossing through the $30,000 barrier. Doesn't really mean anything in and of itself, but I'm pleased with my progress and my long-term plan's progression. Slow and steady…slow and steady….