Excel(lent) post

It should be painfully obvious at this point that I'm no numbers whiz. Which is why I love programs like Microsoft Excel, because it enables me to actually track how my investments are doing without having my head explode.

I know my way around the program, but I'm eternally grateful to The Dividend Guy for this link where he provides a handy formula for precisely calculating what the future value of your investments might be if you stay on your current track - provided you can hit your performance assumptions, that is.

UPDATE: I had originally credited Canadian Capitalist for the above, before CC graciously pointed out I had mis-linked to a Dividend Guy post. Apologies all round. Don't let the fact that I read them both (and am apparently inept) take away from the fact that they're both great. :)

In theory...

When it comes to actively managed mutual funds, I'm a little like that emotionally crippled girl you broke up with in college: don't tell me to trust you, and don't you dare tell me it's all going to be OK, because I've been down that road before and I got burned. Burned bad.

As such, I've developed something of an [un]healthy hatred for management fees and expenses being skimmed off the top of my investments. I mean, I don't really need to pay somebody else to lose money for me - I can do that quite easily myself. That predilection for lower fees goes a long way towards explaining my man-crush for ETF's. Ever since I found out about the little beauties, I've been a fan of them not only as a way to easily diversify, but limit my expenses along the way.

Since a few people in my life have gotten the mistaken impression that I somehow know what I'm doing with money, they've started to come to me for advice, and when they do, I generally stick with the tried-and-true "buy low, sell high" or some such platitude.

Still, if they keep me talking, it doesn't take much before I inevitably start extolling the virtues of ETFs. My girlfriend and my sister are two people I often find myself having investing-related conversations with, as both of them have company-sponsored mutual funds through their work, and neither of them has the faintest idea about what they're invested in.

While I love ETFs in general, it's really hard to extol the virtues of how they pay off over the long run when the mutual funds those two have accidentally invested in keep setting the world on fire. The one has 12% growth year-to-date, and the other's not far off that impressive clip. Oh, and neither has anything to do with oil and gas.

I know Moneysense's oft-repeated stat that 80% of all mutual funds don't match the index they track over the long run. But with returns like that in the short term, it's like I'm talking to a wall.

Two very rich walls, actually.

See you in Omaha in 2007

Well, I did it. I took the plunge and bought one of Warren Buffett's Berkshire Hathaway Class B shares yesterday. Technically, my tax return hasn't come in yet, but I just got tired of waiting so I dipped into my savings to buy one. I promise to replace the cash when the rebate comes in, mom. :)

So I'm the proud owner of a single BRB.B. Truth be told, I don't really expect it to gain that much in the near or mid term, but it should serve as a nice reminder of the Buffett investing philosophy I'm trying to emulate - not to mention being a neat conversation starter the next time I'm out with fellow stock market nerds.

Just keeping you posted. Full disclosure, and all that jazz.

Grasping at straws

Any time a hedge fund goes sniffing around a company, I've learned to take notice. So my Spidey sens was tingling today, when I read that San Francisco-based hedge fund ValueAct Capital Partners LP has doubled its stake in health sciences company MDS Inc.

This is only of note because we have a tattered history, MDS and I. During my long, circuitous route towards gainful employment in journalism, I've had a variety of gigs which could passably claim to be writing related, and in roughly 2002, I actually worked at MDS Sciex for a time, doing technical writing. (Editor's note: Incidentally, if you're currently trying to calibrate the nebulizer on a MDS-built mass spectrometer by reading the instruction manual, and you're left with the distinct impression that the writer doesn't have the foggiest idea what he's talking about, my apologies. He didn't still doesn't.)

Given that my job could literally have been done by a monkey with a typewriter (if he had any sort of predilection for technology) and since I was just getting my feet wet as an investor, the downtime on that job gave me a lot of resources to do some independent research on my employer.

My rating? Buy, buy, buy. I remember gleefully coming home and telling my dad why he should buy stocks in the company, since my expert analysis had deduced that at a little over $20 (where it was trading at at the time) it was undervalued. Wisely, my dad ignored the suggestion. The stock, of course, proceeded to do basically nothing for the next four years, and the rest, as they say, is history.

By doubling their stake in MDS now, through, it appears that ValueAct is hoping to squeeze a little more shareholder value from the company, just as I had misguidedly hoped to do all them years ago. A few analysts have suggested good on them for trying, but the low-hanging fruit has already been plucked.

That's beside the point, I say. The real important thing to remember here, is that I was right. Just, four years early.

At least, that's what I'm telling myself.

Unreal estate

My hopes of one day actually owning a piece of Canadian land took yet another turn into pipe-dream territory today, with news that the Canadian Real Estate Association is now predicting the real estate party is going to continue for at least another year.

The CREA has originally forecast that the party would slow a little in 2006 as interest rates rising modestly might scare new home buyers away. But their revised 2006 forecast is now calling for a 1% increase in resale homes. The agency suggests activity might ebb a little in 2007, but even then I have my doubts. In addition to the increase in demand, they're predicting an increase in values. The CMHC had similar projections in January, I recall.

Not surprisingly, the West is leading the way again, with Central Canada lagging behind.

Back to the stock market for me, I guess. Gotta build up the nest egg to be able to pounce with a down payment when the market eventually corrects itself. I hate to hope for other people to lose money, but from where I'm sitting, it's about the only way I'm ever going to get myself a stable place to live.

Budget briefs

Some scattered thoughts on the first conservative government federal budget in 13 years:

All in all, I think I'm generally satisfied. Promised tax relief came through, without any major slashing of spending in programs near and dear to my heart.

I don't really have an opinion on whether Canada needs more or less of a military presence, but regardless, I was pleased to see defense get a $5.3-billion injection. No matter what our armed forces are doing, I want them well paid, and more than adequately-supplied. That money should help.

On the highly-publicized GST credit, I must say I'm not overly impressed. Abolishing it altogether would have made a statement, but reducing it by 1% doesn't seem like it will have any impact on Canadians' wallets. There's a bunch of different estimates floating around about how much it will mean to the average Canadian, but no matter what the number ends up being, it'll come in too incrementally to have a major impact on most people. As much as I'd love to believe those hard-working single mothers are going to take the penny they'll now save on every disposable dollar they spend and put it into a GIC the minute they get home, I somehow doubt it. I suspect this move was more about optics than really putting money in Canadians' pockets.

I don't like the $1.3-billion Ottawa has pledged to spend to build a subway extension only uppity York students are going to use, but transit funding did provide me with one nice little surprise. High marks for the public transit tax rebate proposal. By 2007, people who buy a Metropass every month (like me) can claim up to 15.5% of that as tax deductible. In my case, it'll add up to a nice little credit of $185 a year. Well done. It's a fiscally sound policy and it'll go further towards helping the environment than most of the half-baked proposals I've heard bandied about. There might just be hope for these Tories yet.

I'll have more to say once I've digested the contents a little.

A little perspective

An excerpt from a recent conversation I had with a friend completing her MBA:

I know I'm supposed to be buying into the theory that the party can just keep on going forever, but sometimes I think the entire global economy is on the verge of collapse. The stock market is full of speculators, we're in debt up to our eyeballs, and white collar crime is at an all time high. I'm tempted to buy a few acres of land up north, bury gold bullion in it and camp out while I wait for the system to crumble around me.

Ordinarily I'd dismiss the above as the nonsensical ramblings of a stressed out student at exam time, but the thing is, if she'd put her plan into action about two years ago, she's be sitting on a tidy return right now, as precious metals and real estate have been very hot in Canada for the last little while.

Your plan is to head for the hills, and the herd follows you up there? Now that's irony.

One last tax question — I promise

I live with my girlfriend. After as little as six months in some jurisdictions, that makes us common-law spouses in the eyes of the law. I'm already covered under her company's generous benefits plan, but for my own purposes at the moment, I'm trying to get a clearer picture of the tax implications of our arrangement.

I've been under the impression that marriage (or at least, common-law living) had its fair share of financial advantages. We're a long way away from things like spousal RRSPs, but there's a part of the Ontario tax credits section which allows for pooled income. I'm no tax expert - that much should be obvious by now - but I think, since we've decided to file as common-law this year, that it's going to end up costing us (me, at least) money.

Essentially, what seems to have happened is that instead of being taxed as one low-income earner (me, as I was a student for part of last year) and one middle-income earner (her) we're taxed as a single middle-income unit. It makes no difference on her return, but on mine, it seems as though I'm punished for having a well-off "spouse" to the tune of a rebate that's $200 less.

Does that seem plausible? I've always laboured under the assumption that the governement "wants" you to get hitched, buy a house, fill it with stuff and buy insurance to protect it. But unless I've crunched the numbers wrong, it seems I'm going to get back $200 less than I'd otherwise be entitled to because I' decided to shack up with a woman who makes more than me.

If that's the case, would it be "illegal" for us to file as individuals? Something doesn't add up here.

Two things

On the subject of this week's news that an analyst has slapped a "sell" rating on Dell computers for the first time in a decade, two things strike me.

Number 1, kudos to Citigroup analyst Richard Gardner. People say main street investors act like lemmings, but having monitored the buy and sell ratings from investment houses, I sometimes think it's the analysts who have the herd mentality. The cynic in me says it's their job, essentially, to encourage people to buy shares. Sometimes, I suspect that impulse trumps a lot of the fundamental analysis. At the end of the day, the amount of flak an analyst might take for taking a contrarian view on a stock just isn't worth the hassle to them. I have no idea if what Gardner is saying is correct. But I respect him for not drinking the corporate Kool-Aid and going against the flow. He's backed up his opinion with honest research, so right or wrong, I can admire his efforts.

Secondly, if this does pan out, and Dell shares drop to the low $20s, I for one would consider buying in. It's a market leader, an established company, it's got modest earnings growth and decent cash flow. I'd have to dig a little deeper into the numbers before taking the plunge, but on the surface, at $20 Dell sounds like a solid prospect for a budding value investor.

Net worth

I'm excited to report that I've been given a lucrative job offer, which I'm going to take. It's a short-term contract (aren't they all?) but it means I won't have to move away, for the time being. Since I'll be staying where I am now at least until September and the money's good, my frugal lifestyle should make my expenses stay pretty low, so I really want to start rocket-powering my net worth. I want to build an umbrella for when it starts to rain. And in my industry - print journalism - when it rains it pours.

I haven't completely crunched the numbers just yet, but I suspect that my net worth at the moment is something around $11K or $12K. The summer is coming, fun times with friends will be had, but I'm determined not to blow all my money. So my goal (and I want you guys to hold me to it, come September) is to have $20,000 saved or invested by the end of September, 2006.

In personal finance as in life, I've found the best way to get where you want to be is to take baby steps in the right direction, not giant leaps to the finish line. So while you're holding me to account, set yourselves some goals as well, and try to take positive steps in your life this summer. You don't have to swing for the fences. A couple of singles one after the other will do.

$20K. $8,000 saved in four months. That's peanuts to some people, but I'll be impressed if I can get there. Heck, I'll probably be impressed with myself if I can even get halfway there.