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….

A charitable solution

What with tracking the minutiae of my financial life around here, it's easier to get superfocused on the monitoring and accumulation of assets than it is to think about how I want to dispense them.

I've been thinking a lot about charity of late and I've decided that I'd like to start getting more seriously involved in donating some of my money, and hopefully some of my time, to charitable causes. I suppose being relatively young, I have a built in excuse for not giving much back -- it's hard enough to get a start in life without giving away a chunk of your meagre salary. Thus far, my only significant charitable contribution was the $10 a month I donated to Amnesty International for several years when a pledge-girl won me over on the street (what can I say? Hiring cute girls with nice smiles to fundraise anywhere near me is a surprisingly effective strategy…)

But I've decided that just doesn't cut it anymore. Sure, I'm still saving for a house, but as my cash pile grows, I want to start spreading it out to people and causes I believe in.

The question is, how much? An arbitrary number I've come up with in my head as a start point is $1000. I must admit it's a daunting number to look at (it's about 3% of my after-tax income) but I think it's the minimum threshold for making a tangible amount of difference to the world around me. I toyed with the idea of donating that in one fell swoop to one organization, but the more I think about it, not only would that be harder for me to swallow from a financial perspective, but I think I'd feel better about spreading it around to more places and people I believe in in smaller packages.

To that end, I made my first $100 contribution yesterday. I pledged a colleague who's doing a charity run to raise money for prostate cancer. He seemed very grateful for the pledge, as it brings him closer to his goal. I have a few ideas for more causes to support but I'm open to hearing suggestions. (Long term, I'd love to set up or help fund some sort of scholarship for high school students, but that's going to require a bit more capital and time to get off the ground I think.) In the meantime, If you know of any worthy causes that have a relatively painless way for me to send them some money, feel free to make your pitch in the comments section.

Carnival time

Thanks to Lazy Man and Money for hosting the Carnival of Personal Finance this week.

What blindly filling out my March Madness bracket taught me about investing

Diversify your holdings...
I know nothing about college basketball, and only marginally more about the stock market. That fact alone tells me I don’t want to be hitching the entire wagon of my stock portfolio or bracket to any particular equity or team. Sure there’s a slim chance you’ll look like a genius -- just don’t count on it.

...But make sure your portfolio has a solid core to build on
Despite the fact that I’ve signed up for approximately 972 separate NCCA pools this week, the final stretches of all my brackets look remarkably similar. Sure I may have brief flirtations with Holy Cross, Virginia Commonwealth University, Marquette and Old Dominion in the early rounds, but at the end of the day it’s still coming back to my blue chippers in the end -- Georgetown, North Carolina, Ohio St., Texas, UCLA, Kansas, and maybe a little Florida action in there for good measure. So similarly, while I allow myself to play around on short-term penny stocks for quick gains, in 30 years’ time I know I’m more likely to still be gazing lovingly into the eyes of those Royal Bank shares than I am to be thanking my lucky stars I put it all into Spider Resources Inc. when I was 25.

Act on facts. Not emotion.
We all, at times, go through phases where we’re sweet on a particular company. We read the breathless press release about how some startup has reinvented the wheel. You gawk at that impressive 400% earnings growth. You want to take those voluptuous sales estimates out for dinner. You want to bring their amazing product home to meet your mother. But really, just as in sports, some stats can easily be played around with to conceal the truth of the matter -- that tech startup you like, or that Brazilian centre you’re thinking of drafting in the third round of your fantasy draft, is a stiff. Stay away. I don’t care how many rebounds he racked up in a crappy European league, and it doesn’t impress me that the company tripled their EPS from 2 cents to 6. If it doesn’t have steady earnings and a nice dividend or the ability to consistently run a pick on an incoming point guard, I’m not interested. (Editor’s Note: OK. So maybe I know a little more about basketball than I’m letting on)

Invest for the long term
Don’t sweat it when it’s four minutes into the first half of round one, and the team you’ve picked to win it all is down by 8. There’s still time. Relax. Have faith that the team you blindly picked out of a hat will come through. You might even consider going double-or-nothing (or buying a few more shares) when your jackass friend starts to insult your intelligence at half-time. You did your homework, right?

A good company does not necessarily make for a good stock
I’m told Florida is, hands down, the most talented team in this tournament. But that doesn’t necessarily mean they’re the best. If they can’t play as a cohesive unit on the court, all the talent in the world won’t let them advance. So similarly, just because you’re in love with a particular company, and you think they have a great market share and competent management, doesn’t mean they’re a good stock. Maybe they were a great buy in 2002 when you first noticed them. But if their P/E is already 35 or something, I think you’ve missed the boat. Wait for a correction. Or take that team next year when they’ve learned their lesson in overconfidence.

When in doubt, go with companies that have steady earnings
I like my college basketball hotbeds the way I like my quarterly earnings reports: dependable and bland. And what’s the blandest state of the union? The answer is obvious...

Kansas will clearly win it all. Go Jayhawks!

Afternoon smile

Dilbert made me laugh today.

I won't reproduce the image due to copyright reasons, but do yourself a favour and click the link.

CDIC insurance

I notice that the Canada Deposit Insurance Corporation has launched a phalanx of public-awareness ads, hoping to educate the public about what CDIC is and what they do.

For those who don't know, CDIC is an arm of the federal government that insures the savings Canadians keep in their bank or other CDIC-covered financial institution in case they fail or go bankrupt. In essence, it's the government's way of ensuring that we put our money to work in banks or other investments, rather than keep it under our mattress where it's not contributing to the Canadian economy.

CDIC coverage typically applies for amounts up to $100,000. It's a nice feeling -- knowing that should anything happen to your financial institution, you would be reimbursed up to $100,000 is nice to cling to in an age where we all watch our investments fluctuate in the short term. I suppose it's a no-brainer idea for the government to implement, since the benefits are obvious while the costs are unlikely to every come into practice. But part of me questions the wisdom of having it. It seems like an empty promise.

Firstly, if we ever got into a situation where one of Canada's national banks or major insurance conglomerates went bankrupt, since the economy is so inter-connected, the negative impact such an event would have on the finances of every single Canadian would be certainly comparable to a hundred thousand dollars per person. I suppose I'd feel good about having that $100,000 in cash to hold on to while my mortgage went haywire, the value of my home plummetted, my cash was inaccessible, my stock portfolio tanked, and/or my life insurance ceased to exist, but I doubt I'd be able to see that at the time.

And secondly, I wouldn't be getting $100,000 cash in real terms anyway. An event like that, I suspect, would put the economy into such a tailspin that inflation would zoom up to ridiculous, developing-world levels, at least temporarily. So even if I was one of the lucky few who had $100,000 cash and zero other possessions to lose their value, the buying power of that cash would be drastically less than the $100,000 you think of it as.

Maybe I'm being a little overly-melodramatic here, but to me CDIC insurance is nothing more than a stamp that says "don't worry, this isn't sketchy. You can put money here." It's more of a general database of legitimate financial institutions than a promise that's worth anything more than the paper it's printed on.

Like anything else, I suppose, it's a nice little security blanket. Although if I ever need to put it on I suspect that'll be the least of my problems.

Pot pourri

Some Monday morning personal finance miscellany:

A - I found myself nodding my head even more than I usually do at Rob Carrick's piece in ROB over the weekend. Don't get me wrong, I like bitching about the banks as much as anyone. But considering how stellar they consistently are as investments, Rob proposes what we've all thought at some point: why not make Canadian banks the only thing you hold in your stock portfolio.

2 - I'm familiar with the concept of 'vice investing' where you buy companies that profit off of our dirty little secrets. Traditionally, things like tobacco, liquor, gambling and guns are included under the vice umbrella. But an interesting Marketwatch article suggests another oft-overlooked vice industry. It turns out there's a sensible way to blow your paycheck at a strip club.

iii - We Canadians are only two days away from long-overdue wireless number portability and I don't know about you but I've been waiting a while for this. American readers may not appreciate how huge this is since they've had this ability for years, but until now, Canadians were unable to take their phone numbers with them when they switched phone companies. That sounds like a meaningless factor, but I know for a fact it's something the phone companies have been preying on for years, knowing that most people won't want to go through the hassle of changing a phone number, so they'll stick to a cellphone plan that's gouging them. Here's hoping this will be the first step towards Canada getting cellular rates that are halfway comparable to places elsewhere in the developed world.

Financial porn?

Some people have soap operas. Others gorge themselves on Sunday afternoon football.

Me? I've got my debt shows.

They're all over the dial of late, from W network's Maxed Out, to Life'sSlice's Till Debt Do Us Part, these shows focus on how out-of-control people's spending habits have gotten in today's day and age, and to varying degrees they offer help, whether in outright debt relief or at least an action plan that the subjects themselves can hopefully use to get out of their habits.

I watch these shows religiously every time I catch them on the dial. Some people's attitudes toward credit cards and their obsession with acquiring materialistic crap they neither need nor can afford simply astounds me. I guess I'm a bit of a voyeur that way. But there's a steady stream of shows to give me my fix. One blogger, admitting to her obsession with keeping an eye on the pfblogosphere even though she wasn't a contributor, recently described it as being like "financial porn" for her -- a rather apt description I thought. And one that could also apply to my obsession with debt-related reality television.

There's even a big screen documentary coming out that I'm anxious to see, although as of yet there appear to be no Canadian theatrical release for Maxed Out a documentary about the predatory nature of the US credit industry.

Looks like a good one.