How To Spend Less Money This Summer On Cooling

Summer does not give the homeowner a break when it comes to utility bills. You just go from having a heater to run to having central air or air conditioners to run. Your air conditioner does a ton of work in a home, from keeping it cool to helping keep the humidity down in your home.

When you don’t have central air and you need to have two or more air conditioners in your home, your electric bill can quickly add up. That will lead you to want to find ways to keep your home cool while keeping your bills down. Here are some ways to do just that.

Keep The Shades Drawn

When the sun is shining bright outside, keeping the blinds or curtains drawn can help you keep your home cooler (throughout). The sun is warm and it makes the things it shines on warm (OK, it’s really hot, but it feels warm this far away from it).

You can do the opposite when it’s colder outside but the sun is shining, open the shades and let the light shine in. You may not like the dark, but keeping the windows covered will keep the house cooler, and you can always just turn on a couple extra lights when needed.

Set A Decent Temp

If you prefer to let the light in or at least some of it, you can try to just set your thermostat at a specific temp that isn’t too cold. You want it to keep your home comfortable, as opposed to chilly. Instead of putting the air on 60-something, set it above 70. That will be enough to cut the humidity in your home and make it tolerable.

Throw on some shorts or a t-shirt if you’re up moving around. The more you move the warmer you can get, but you need to find a way to deal with that warmth that doesn’t mean turning the temp down, and thus making your utility bill higher.

Let Some Fresh Air In On Cool Nights

Turn your air conditioner(s) off at night and open the windows. Of course, there are some nights when it’ll stay over 80 degrees Fahrenheit overnight, but on the nights it’s less than that, open up the windows! Fresh air will do you some good.

The sounds of the bugs and frogs outside might be just the sound you need to help you sleep better as well.

Invest In Some Cool Stuff

Get some fans to help circulate the cool air you do have in your home. Wear lighter pajamas at night. Put away the flannel sheet sets. Invest in some cooling pillows (they do exist). And, if you spend much time with a laptop on your lap, get a cooling pad for it or you’ll feel like you’re sitting in direct sunlight even with the air conditioner on!

Tips on Living Affordably in Major Canadian Cities

A lot of people don’t really consider moving to the cities in Canada for financial reasons. Top cities across the country, including Toronto and Vancouver, are famous for being expensive. In reality, however, it is easy to live affordably in any major Canadian city. The growing economy and better living environment also make these cities perfect for families.

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Whether you’re already living in a city of your choice or you’re exploring the idea of moving to the country, these next few tips on living affordably in Canada will help you keep your monthly expenses in check. Let’s get started, shall we?

Live Close to Work and Use a Bike

Many – if not all – Canadian cities are friendly to bikers. Taking a bicycle to work is something that a lot of people do. Not only will you be healthier, but you can also save a lot of money on travel expenses. After all, driving your own car, especially on a daily basis, will quickly jack those living expenses up really quickly.

Finding a place closer to work is also a very good idea. There are a lot of incredible places available for rent regardless of the city you choose, so this too should be relatively easy to do. If you’re taking a job in Toronto, for instance, an excellent apartment in Toronto, Ontario, is your best option.

If you still need to take a car ride occasionally, rely on ride-sharing services and car-op. Services like Modo and Car2Go are very reliable, plus you now have ride-sharing apps like Uber providing you with more options and instant access to rides.

Be Smart About Your Expenses

Another important tip to keep in mind when you’re trying to keep living in Canadian cities affordable is to be smart with your expenses. For starters, you can save a lot on groceries by shopping at the right stores. Take advantage of coupons and deals too; there are apps and websites you can rely on to find the latest deals on everyday items.

Shop online whenever possible. Amazon and other online retailers also deliver to all major Canadian cities, so you can save even more by taking advantage of online deals. Shopping online is also a great way to save on larger purchases now that there are plenty of special offers (i.e. free shipping and bonuses) to use.

Buy Used Whenever Possible

One last great thing about Canadian cities is the lively second-hand market they have, both online and offline. Weekend markets are filled with a wide variety of items in great condition, from a barely-used microwave oven to a chic set of chairs to complete your living room. Craigslist and similar sites grant you access to even more preloved items to choose from.

These are all easy tips to implement, but they can help you save a lot of money and make living in the main Canadian cities affordable. Be meticulous about your expenses, keep track of the deals and special offers available, and it will be easy to keep monthly costs low without sacrificing comfort.

Colored Diamonds: What to Know When Making Your First Investment

Like the old song says, “Diamonds are a girl’s best friend.” These days, the beautiful and increasingly rare colored diamond can be an investor’s best friend, too.

Many investment counselors recommend including hard assets like diamonds in one’s portfolio.

Hard assets, which include things like oil, natural gas, gold, silver and real estate, can be an excellent inflation hedge.

Fancy colored diamonds have historically outperformed other hard asset classes. They’re recession-proof and they’re a good option for people looking for assets to hold on to for long-term growth.

Prices for the higher grade categories of colored diamonds have increased in the past 12 years, and the price for pink diamonds in the Fancy Intense color category has increased 1,000 percent for the same period.

Most people picture the traditional clear, colorless stone when they think of diamonds. But, diamonds come in a spectrum of colors — pink, blue, orange, purple, black and other shades. The colors are formed by trace chemical elements and particulates during the crystallization process: the presence of boron creates the blue diamond, while nitrogen produces orange and yellow ones.

The Argyle Diamond Mine in Western Australia is one of the world’s largest diamond producers. It’s the major source for the extremely rare and valuable pink diamond. Less than 1 percent of the Argyle diamonds are pink, making them highly desirable to collectors and diamond connoisseurs.

The Argyle supply of diamonds is being rapidly depleted and the mine is expected to cease operation in 2018. This in turn is driving global demand for colored diamonds — especially the pink diamond — and prices are expected to increase tenfold by the time the mine shuts down.

There are several key points to consider when investing in colored diamonds.

Grading A Colored Diamond

Color grading is one of the most important factors when appraising the value of a colored diamond. There are three criteria. Hue is the main color of the diamond: there are 27 hues. Tone refers to how light or dark the color is. Saturation, or strength of the color, is ranked in nine categories, from Faint to Fancy Vivid.

Physical Characteristics That Determine Value

Color diamonds are rated for clarity, which is a term that refers to the absence or presence of imperfections in the stone.

The price of a diamond is proportional to its carat weight.

The cut of a colored diamond isn’t a factor in pricing, but it does have an effect on color and carat weight. For example, the radiant cut produces a more even distribution of color.

Growing Your Investment’s Value

Setting an investment diamond into jewelry can increase its value. Higher demand for jewelry pieces drives up the resale price.

Although no two diamonds are alike, two that appear to be very similar can be sold as a pair at a higher value.

Authenticating Your Investment’s Grading

When buying a colored diamond, make sure that it has a grading report certificate from a reputable gemological organization.

Four Guidance Points to Building Successful Family Business Governance

A 2014 survey by PricewaterhouseCoopers found that 71 percent of family-owned businesses didn’t have procedures in place to resolve conflict issues.

Statistics such as these make it all the more imperative that family members in business together set up a clear and agreed-upon structural plan, a constitution for business governance as it were.

Items in this structural plan can include mission and vision statements, an employment policy, strategies to develop the next generation of leadership for the business, a liquidity policy, a succession plan, and information regarding any shareholder meetings.

Understandably, the details of what is relevant when it comes to successful family governance can change from business to business.  With that said, the below guidance points can prove useful for a wide range of family-run organizations. 

Independent Board of Advisors

Many family businesses have boards of directors comprised mostly or entirely of family members. Although boards of directors with this kind of composition can be successful, independent, non-family-related directors do bring value. 

Some family businesses ensure more balanced boards of directors through policies that limit the number of family directors.  Some also compliment their family board members with non-equity holding directors. If the governance structure doesn’t allow for outsiders on the board, setting up an advisory committee to the CEO that is composed of individuals recruited from outside the family may bring fresh perspective and expertise.

Avoiding Conflict During Management Changes

Policies that encourage meritocracy are certainly beneficial to any family-run company, especially when it comes to setting boundaries and avoiding conflict during times of management change.

The reality is that leadership change happens in most businesses.  Intelligently-run organizations understand this reality and plan ahead to make leadership transitions as smooth as possible.

To build on the previous point, outside directors and advisers can help make management changes smooth, after all non-family related advisors or directors can provide both the perception and the reality of objectivity during leadership selection decisions.

Regardless if a business is hiring new management from within the family or outside of it, new management should be in line with the organization’s culture and should be evaluated based on core leadership qualities like respect, integrity, quality, humility, passion, modesty, and ambition.


To prosper, businesses need to raise financing from time to time and if a company is still private, that usually means depending on a bank to provide a loan. Family-run firms that insist on maintaining a veil of secrecy over their affairs will find it difficult to raise the financing needed to grow.

The so-called “family premium” — the idea that family-owned and -led businesses are stricter when it comes to standards, capital distribution and governance — is typically only applicable to entities with high levels of transparency. Conversely, opaque firms trade at a discount because investors simply don’t know enough about that business, especially those firms with governance practices that may be questionable in other respects.

A Well-Organized CEO Succession

When examining large family-run corporations that have failed in the past, CEO successions, or rather failed CEO successions, have played an unfortunate pivotal role.  When considering the integrity of their own CEO succession process, businesses should ask three questions: one, how vigorous is their candidate selection process and does it allow for the inclusion of multiple candidates?  Two, will all family members who are significantly part of the business be involved in the selection of the new CEO?  Three, what is involved when it comes to integrating and developing the successor in his or her new role as CEO? 

The latter point should be particularly emphasized if a new CEO is being introduced into the business who is not part of the family.  After all, this will be a leader who will not only have to efficiently and successfully integrate into the company, it will also be someone who will need to integrate into the family business dynamic and navigate the occasionally choppy waters of inter-family relationships.

How to Improve Your Condo Without Spending a Fortune

Trying to improve a condo is a hard task, which takes a great amount of time and patience. Knowing what you have to do before you even take the first step will save you from a lot of financial, emotional and physical stress – so it’s worth familiarizing yourself with the details. Be smart about it, and consider following the seasoned tips and advice from Louie Santaguida, who’s been in the real estate industry for many years.


Plan Well and Think Ahead


Taking note of everything that you want to change in your condo is the most crucial step, as aimlessly trying to redesign and redecorate a room might cause more harm than good. If you keep the change open-ended, you have the chance of being able to improve upon it later on. Checking things such as the furniture, appliances, space and even the wiring involved is a must.


Keep It Simple


If you plan to make a lot of changes, make sure that they’re simple and don’t pose a great amount of risk. In the event that something doesn’t go as planned, you have the option to take a step back just as easily as you did stepping forward. If you try to amaze yourself with one big change after the other, you might even find yourself homesick. Completely redoing the layout of a room might prove to be overkill, especially if all you want is to have more space.


Re-purpose Rooms


Condo units that have neutral colored rooms are more open to repurposing, while moving furniture around your condo also gives you the opportunity to clean up. The dirt that has built up over time is hard to notice when you’re already used to looking at the same thing everyday.


Tidy Up


To expand on the previous advice, cleaning your home might seem like a basic task at first. However, a thoroughly cleaned interior will look a lot different compared to what you see everyday. Consider using a vacuum, power cleaning tools, and replacing carpets if you have any. You’ll notice how fresh everything looks afterwards – after all, there’s a reason why the phrase “good as new” was coined.


Get Rid of Things


Hoarding is something that can be very difficult to notice until it’s too late. If you find yourself having less and less room to wiggle in your condo, then it might be the time to throw some things out. Look at the items that you haven’t used in the past few months, and decide if you’re even going to use them in the future. If the answer is no, then consider storing them in your building’s storage area (if available). Your closet might be piled up with clothes that you never use; why not donate them to charity? The fewer clothes you have, the smaller the closet you’ll need, which ultimately gives your home more space for other furniture.

Three Things Your Business Needs In Case Of Emergency

There are some investments a business needs to make in order to save money over time. Those include things that help keep your business externally and internally safe. You want to protect your business from theft, but you also want to protect your assets, like computers and products. Theft isn’t the only thing that can “damage” your stock or your computers.

A power surge or a fire could have great consequences and severely damage your business and your livelihood. Taking all of these risk factors into consideration, here are some investments you should make for the safety of your business.

Protecting Your Power

When it comes to power outages all sorts of bad things can happen to a business. A power surge could damage all of your computers and even the microwave in the breakroom. That’s why it is important to plug everything in through surge protectors, and why it might be wise to invest in an uninterrupted power supply system of some sort.

A generator is also a good idea for a business, and you can get ones that will kick right on the moment the power goes out. This is especially important if you have refrigerators or freezers that help keep items your business deals in at certain temperatures. A grocery store with no backup system might go out of business with just one extended power outage.

Protecting From Fires

Don’t just rely on smoke detectors and fire extinguishers. Yes, your business does need these things, but you need more than them. With electrical equipment constantly plugged in and running, overheated can happen and can lead to fires, as can faulty wiring.

Since you won’t always be in your office/building, you need something that can protect from fires when no one is there to grab the extinguisher. Investing in a sprinkler system can be a wise idea. If you have a lot of electronic equipment you may want to look into a non-water system.

Security Protection

You also need security protection for your business, whether you deal with cash or just have a good deal of expensive equipment within the building. Retail stores can start their protection with a loss prevention department and doing regular inventory. You also want to put in some

kind of system that lets employees discreetly alert authorities in case of a robbery.

It’s also wise to invest in a security system that works when no one is in the building. This means having an alarm system you need to set each night when the last person is leaving the business. It may also mean having some security lights that stay on 24/7, even over the weekend when no one is around.

Your business is your livelihood, so invest money into keeping it protected.

Estate Planning for the Internet Age: Keeping Your Online Assets Secure

As paper continues to be replaced by plastic and more purchases than ever are made on the internet, families must increasingly plan for the future by taking a hard look at their “digital assets” and how best to protect them.

Online shopping and banking has become the norm in 2017 — Amazon is the nation’s ninth-largest retailer, according to the National Retail Federation, and a late 2015 survey from Bankrate showed that four in 10 account holders hadn’t visited a physical branch of their bank in the last six months, a trend that will only trail upward in the years to come.

Despite this shift into the digital sphere, many Americans tend not to consider the connection between their online presence and their estate. It’s a mistake that can have consequences for the loved ones who are left to sort through their affairs; the 2017 Identity Fraud Study released by Javelin Strategy & Research in February found that 15.4 million U.S. consumers lost more than $16 billion to fraud in 2016, and account-takeover losses increased more than 60 percent between 2015 and last year.

Much of that fraud now occurs without access to a physical bank card or checkbook, from ransomware and data breaches involving entire stores and hospital systems to the email phishing scams and cyberattacks that made last year a record year for fraud both on and off the net.

The problem becomes even more complicated when stolen data can’t be recovered because its owner is deceased. Online accounts that people might never consider in their estate planning can become a headache when hacked — your iTunes account is linked to your checking account, after all. Ensuring that your personal information is safe in the Information Age means covering your bases and making your accounts accessible to the right people.

While planning for the distribution of your estate after your death is never fun, it is the first and most important step to making sure your assets are used as you see fit after you’re gone. For most, that means divvying up property, giving power over for bank accounts and bequeathing the key to a safety deposit box. In 2017, it should also mean giving out passwords and setting out language in your will that establishes set guidelines for managing your online presence.

While a growing number of governments are enacting laws that clarify the rules for executors managing virtual accounts, the fact that most online accounts are governed by a terms-of-service agreement and subject to the privacy laws of the territory in which they’re headquartered means people should seek legal advice regarding their PayPal account just as they would about their house or car. Many of the most popular websites are based outside Canada, creating the potential for a conflict in laws that should be taken into consideration during the estate planning process.

Tools offered by a service that allow secondary access to an account are an easy way for people to ensure that their loved ones have access after their death. A prime example of this is Facebook’s legacy contact feature — a person can establish a legacy contact who has permission to manage his or her account after their death by taking a few minutes to change their account settings.

If these tools aren’t available on the platform or aren’t utilized, control of a decedent’s online accounts are governed by what is laid out in his or her will. Failing that, an account’s service agreement dictates what happens to the account, and generally, access is limited to the person who agreed to the service.

Imagine it: months after someone’s passing, a fraudster gains access to their still-active Amazon account, spending hundreds or even thousands of dollars before their grieving family realizes what has happened. It’s a scenario that can be avoided with the proper planning and foresight, and a consideration that shouldn’t be overlooked in the estate planning process.

Every company needs a money manager and so might every wealthy investor

The Canadian Dollar and MONEY.CA
Money in Canada

Managing an investment portfolio was relatively easy in the 1980s and 1990s, but there has been a significant increase in complexity over the past decade. The investment climate and markets is more volatile and demanding, and today’s low interest rate and returns don’t look like they are going to change anytime soon. To get better returns, the wealthy are adding non-traditional investments such as private equity, real estate and hedge funds to their portfolios, as well as diversifying globally, which just increases the potential complications.

It’s tempting then to turn the whole thing over to someone else to manage if you can get through the sheer volume of asset managers, products and strategies to pick someone. But even among wealthy investors, there is still a lot of confusion about whether they should have discretionary or non-discretionary investment portfolios. In other words, should you and your family manage the investments, or outsource the decisions to an individual or a firm of experienced professionals? For those who lack the investment experience, time or discipline to be involved with dayto-day decision making, discretionary investment management services are a popular option. Firms that provide this are called outsourced chief investment officers and should be licensed as portfolio managers with a provincial securities regulator such as the Ontario Securities Commission.

But not all discretionary services offered by the country’s myriad banks, brokers and portfolio managers are the same and there are at least eight important factors to consider when choosing one. Does the firm: Have the skill, experience and resources to evaluate and manage assets across public and private markets? Have an “open architecture” approach, or the ability to allocate capital without conflict-of-interest to any independent asset manager from around the world in areas such as direct lending, real estate, private equity and hedge funds? Have the ability to access “best-in-class” institutional quality traditional and alternative asset managers? Provide a culture centred on client relationship management and strong communication? Offer robust performance reporting along with relevant custom benchmarks? Allow for clients to meet or speak with underlying asset managers? Take tax considerations into account to optimize returns on an after-tax basis? Offer more than a one-size-fits-all approach that utilizes just one or a few asset classes, such as stocks and bonds?

If the answer to any of these questions is no, you should probably look elsewhere, or, at the very least, realize you’ll have to compensate for that lack of ability in some other way at your own expense and time. But if your family hires an outsourced CIO, you and the advising representative (a registered individual who can provide investment advice at a portfolio management firm) will start your relationship by discussing and documenting your unique investment objectives and constraints. Topics covered should include how much investment risk you are willing to take, the desired level of return for taking on that risk, liquidity needs, tax considerations, performance reporting and benchmarks, and the asset classes and markets you will allow your portfolio to be invested in. A written investment policy statement is then provided as a best practice that documents all of the above.

Your advising representative is then authorized to make all the necessary investment decisions (within the agreedupon guidelines) and will not require consent for individual transactions. This service, which also consists of regular communication through methods that best suit your family — whether it’s in-person meetings, webcam meetings, telephone conversations, emails and newsletters — forms an important part of the ongoing relationship. The relationship is of prime importance, since your investment objectives and strategy may need to change to provide a tailored fit as conditions within your family change.

Original publication: 

21 Questions with Value Investor Steve Nyvik

‘Risk management, when done poorly or not at all, can cost you a fortune’ – Steve Nyvik

My interview with P.J. Pahygiannis of

1. What is the best investment advice you have ever been given?

Risk management, when done poorly or not at all, can cost you a fortune. In other words, “Don’t put all your eggs in one basket.”  You should diversify away, to the extent reasonable, non-systematic risk (this being company-specific or industry risk).

So for common stocks, we limit the amount of company risk and the amount of industry risk through buying enough stocks which we diversify well by industry (that are not highly correlated to each other).

For example, if we invest the same dollar amount into each of 40 stocks, our risk is that if one company disappears, we’ve lost 2.5% of the value of our stocks. We want them diversified by industry as stocks within the same industry tend to move up and down to a similar degree (i.e., in other words, stocks in the same industry tend to be correlated to each other). This will help us to build a stock portfolio that becomes more stable.

2. What level of math is needed in order to understand the entirety of finance and investing?

If I can define the question in terms of “what knowledge one needs to be successful with investing,” the answer depends on the type of investing one is considering.

For example, if one is going to stick with large-cap market exchange traded funds, like the iShares S&P 500 ETF (IVV), one really doesn’t need a high level of math. An alternative to making a big lump sum purchase is when you establish an equity target between cash and the stock ETF, and you stick to that target over time.

If the stock market goes down, by sticking to the target, you are guided to top up equities to your target. Similarly, if the stock market goes up, you are guided to trim equities to bring your portfolio back down to your target. So in summary, by sticking to your target, you are buying stocks when they go down and selling when they go up. This technique helps you to make rational buying and selling decisions with the potential result of better risk-adjusted returns.

One will need to be mindful of commissions as well as managing foreign exchange costs. For small additions to equities each month, to manage commissions, you might choose a no-load diversified large-cap U.S. stock fund with a low MER that attempts to mimic the returns of the Standard & Poor’s 500 Index.

You might also allow some level of fluctuation so you are not trading all the time and find your profits go toward commissions. For example, if your equity target is 75%, then you might not rebalance and buy until equities drop to 70% of your portfolio value or you might not sell until equities rise to 80%.

If you are going to move beyond indexes to individual stocks, there is an opportunity for you to avoid the expensive stocks and the crappy businesses within the stock market index. And you can possibly generate even better risk-adjusted returns through equal weighting your stocks as opposed to market-cap weighting which normally occurs in market indexes.

As soon as you stray away from buying stock market indexes, you have to be mindful as to how to control non-systematic (e.g., company and industry) risk, and you need to be disciplined as to how you buy and sell stocks. For example, you should use a strategy to help you select stocks where there is a direct cause and effect relationship between the strategy variables and a stock’s price, and the stock variables you are using to select stocks should be statistically significant. This will help you to make more rational selections as opposed to being lured into buying sexy overpriced risky stocks.

But we’ve digressed a bit here. With selecting stocks, it is helpful to have an appreciation of statistics as well as grade 10 math (e.g., one should develop a comfort with financial ratios as to relative price attractiveness, profitability, liquidity, debt and efficiency. If you are going to attempt to try to calculate a company’s intrinsic value (which many investors don’t do), then you need to understand present value and some corporate finance to figure out a reasonable discount rate.

Your education should go well beyond that to also include business strategy and competitive advantage, economics with respect to economies of scale, industry structure and life cycles and the impact of interest rates, inflation and business cycles. You might also spend some time reading stuff on Warren Buffett and Benjamin Graham to develop an appreciation of value investing.

3. Is “value investing” (Buffett and Graham approach) a good investment strategy for long-term goals like investing for retirement?

To answer this question, one needs to have an understanding of the Buffett approach. My understanding is that Buffett seeks ownership in quality companies capable of generating earnings that are on sale, but he is not looking for just any type of company. He needs to be able to understand the business to model its cash flow and arrive at its intrinsic value. My understanding is that he limits companies for consideration to those where

  • The company has performed well in terms of return on shareholder equity (ROE) (net income/shareholder’s equity) relative to other companies in the same industry, that the company has consistently done so for at least the last five to 10 years.
  • The company does not carry an excessive amount of debt. For example, Buffett seeks companies with a low debt/equity ratio (total liabilities/shareholders’ equity).
  • The company has high profit margins (even better if they are increasing) and should be consistently high for at least the last five years.
  • The company has been public for at least 10 years. If it has not been around for at least that long, one may have less confidence in attempting to determine future cash flows or future dividends for discounting to arrive at its intrinsic value.
  • The company possesses some competitive advantages as opposed to being a commodity-type business where its products are indistinguishable from those of competitors’ products.  Any characteristic that is hard to replicate is what Buffett calls a company’s economic moat or competitive advantage. The wider the moat, the tougher it is for a competitor to gain market share.
  • The stock is selling at a discount of at least 25% compared to its intrinsic value.

To me, these look like very reasonable criteria in which to search for businesses.

4. What should I know before I start value investing?

Here is my brief checklist.

  • If you have debt, your first investment goal should be to pay it off as quickly as possible.
  • Once your debt is paid off, establish an “emergency fund.”
  • If not retired, you need to save every month and know the amount you are saving is enough so you can afford to retire.
  • Set and stick to an equity target (a percentage of your portfolio that will be invested in common shares).
  • Don’t put all your eggs in one basket.
  • When you invest, seek cash flow (dividend and interest income) – otherwise you are gambling.
  • For stocks, stick with large blue-chip dividend payers.
  • The best opportunity for outperforming is to buy when a quality investment (that is not impaired as to its future ability to generate earnings) is substantially down.
  • Patience.
  • If you can’t do it yourself, hire someone with experience who can.

5. How should one invest in a bear market?

A bear market is when investments go on sale. It is the time to be buying. Use your equity target to give you guidance as to how much to buy. For your living needs within three years, those funds should not be invested in common stocks. You want to avoid the pressure of having to sell when investments are down which can create permanent losses.

During a bear market, you might stick with the highest quality large-cap stocks that pay a good dividend (so you are paid to wait). These types of large companies are supported by their dividend yield and tend not to drop as much. They are much less risky but are also more likely to recover when the market recovers. Smaller companies, emerging market securities, cyclical companies and commodities are much more volatile and can drop to levels that you might not think possible.

Be mindful not to put too much into any one stock so you manage company risk.

6. What are examples of sustainable competitive advantages?

Competitive advantage may exist where a business is able to provide a customer with a product at a lower cost than competitors or provide better value to the customer at a comparable cost. When a company can sustain such advantages through time, this can result in the business generating a high level of return.

One would typically examine the competitive forces that determine industry profitability including: the bargaining power of suppliers, threat of new entrants, bargaining power of buyers, threat of substitute products or services and the rivalry among existing firms.

For example, for entry barriers, we might consider economies of scale, proprietary product differences, brand identity, switching costs, capital requirements, access to distribution, absolute cost advantages, proprietary learning curve, access to necessary inputs, proprietary low-cost product design, government policy and expected retaliation.

In Canada, the banking industry operates in an oligopoly market structure with the six big banks dominating over 90% of the banking business. As such, these banks don’t have to compete as intensively and can generate excess returns through time. Their returns through time have generally been better than the S&P/TSX Composite Index.

7. What are the absolute best, most crucial tips/ideas to succeed in long-term investing?

We should seek to own a portfolio of investments that generate enough income to meet our living needs without having to rely on those investments going up in price.

8. What are the essentials of due diligence when investing?

  • To know your clients – including their personal and family backgrounds, financial situations, financial goals, cash needs through time, liquidity requirements, investment experiences and risk tolerances.
  • To know your product – to understand the investment, to make sure that investments are suitable, that the percentage of investment is reasonable and that risk is controlled.

9. What kind of stocks would you rather avoid holding because they are riskier than others?

As most of my clients are retired or near retirement, capital preservation and the development of stable dependable cash flow from their portfolios to meet their needs are typically key objectives.

For common stocks, I focus on high quality income-generating businesses that:

  • Produce goods and services needed for our economy in good or bad times (like banking, insurance, pipelines, energy, electricity, telephone and television [telecom], food, etc.).
  • Are dominant where they operate.
  • Are profitable.
  • Don’t employ an excessive level of debt.
  • Produce a good dividend yield where the company income is more than sufficient to cover the dividends.

Stocks that don’t possess these attributes are those I tend to avoid. These include:

  • Small-cap companies.
  • High growth companies with high price-earnings (P/E) multiples.
  • Stocks that don’t pay dividends.
  • Stocks with very high levels of debt.
  • Poor businesses.

10. What are some investment lessons you learned in 2016?

In 2016, I had no exposure to materials and very little exposure to energy which were industry sectors that performed extremely well. Generally these sectors tend to be more volatile than the market, don’t typically pay decent dividend yields, and their earnings tend to be cyclical and vary from one year to the next.

I learned that in sticking with my investment philosophy, it means there could be times when I could underperform. But straying can mean introducing added risk to clients which my experience has found over the years not to be worth it. Fortunately though in 2016, there were other industry sectors, like the financials, that performed very well so that we were still able to generate good returns.

11. What discount rate do you use in your valuation?

I rely on relative valuations in screening to find stocks of interest. I’ll then look at research reports as to their indicated intrinsic value (which might be called price target or fair value) as opposed to trying to calculate them myself. Ideally I would like the stocks for consideration to have a market price with a good discount to its intrinsic value. The amount of discount can vary – like today it is tough to find good businesses selling at significant discount.

12. Which is more useful, earnings yield or P/E ratio? Why?

Earnings yield (earnings per share divided by stock’s market price) is basically the inverse of the P/E ratio. The P/E ratio equals stock market price divided by earnings per share. So they are equally useful.

13. With just public information, how can you be confident that your valuation is correct while the market is wrong?

Your thesis in investing in a stock may be correct, but because of the human behavior of others, your identified stock price can remain under its fair value for years. There is no certainty when it comes to investing. For this reason we must buy enough stocks under a strategy in order to get the strategy returns.

14. What are the key attributes of a great investor?

A great investor is someone who

  • Has spent a lifetime building up educational and professional investing credentials.
  • Has gone through a period of articling or training with a seasoned financial adviser.
  • Has been investing for more than 10 years.
  • Uses one or more stock strategies to identify stocks for selection.
  • Understands your needs of cash from your portfolio through time.
  • Pays great attention to risk management.
  • You trust implicitly.
  • Provides advice that is always in your best interest.

15. What are the best books on investing?

Read “The Richest Man in Babylon” by George S. Classon.

16. What skills are needed to succeed in distressed debt/special situations investing?

By definition, distressed securities are experiencing financial or operational distress, default or are under bankruptcy. There is a very real possibility that any investment could result in a loss of most or all of your investment. For these reasons, I would likely not invest in this type of investment as it does not exhibit the risk and return profile I seek that would be suited to my clients.

The skills to succeed come down to spending enough time to really understand this type of product. But given the time commitment required, you might better use it toward investigating other types of investments.

17. What are the best books about special situations investing?

As I don’t have much interest in this high risk area as these investments likely aren’t suitable for my clients, I don’t know offhand any books on special situation investing to recommend.

18. What are the best web sites to follow for value investing-oriented investment ideas?

Morningstar, Value Line and Zacks might be good places where they write about stocks as well as provide you with resources to help you in stock selection.

19. Who are the best value investors in the U.S. with under $1 billion in capital?

I don’t typically use third-party managers. You might look at a Credit Suisse article called “On Streaks, Perception, Probability and Skill.” It discusses identifying skilled managers versus those that are just lucky.

You might also read an article by Ernst Gronblom called “Choosing Money Managers.”

20. What are the best mutual funds for value investors?

I don’t sell mutual funds. Mutual funds tend to be more expensive and more appropriate for retail investors.

With more money to invest – at least $100,000 to get in the door, but most will want at least $500,000 – you can hire a portfolio manager at a competitive cost who can help you through

  • Generating higher returns and/or lower risk by selecting the right asset mix, selecting good investments, sheltering income from taxation, controlling risk and setting aside funds for anticipated needs (so you are not forced to have to sell investments when they are down). An experienced investment professional may also help you avoid making costly emotional or irrational investment decisions.
  • Eliminating, reducing and deferring income taxes so you’ll have more money growing faster to meet your goals.
  • Protecting your family against devastating financial losses – like the death, disability or illness of the family breadwinner, property loss, theft or damage, and liability claims. Without such protection, your lifetime of savings could get wiped out.
  • Design an effective estate plan so your estate will be distributed according to your wishes, minimize tax and transfer costs, and protect your legacy from a variety of creditors. This not only gives you peace of mind but hopefully will ensure your life savings is there to take care of your loved ones throughout their lifetime.

21. For an individual relatively unsophisticated nonprofessional investor, what are the most undervalued asset classes today and what are the best funds or mechanisms to invest in them with a buy-and-hold mentality?

An unsophisticated nonprofessional investor should not buy individual stocks but rather stick with large-cap stock market index investments through either exchange traded funds or mutual funds formats. They should also not put all their money in the stock market. Take a look at iShares S&P 500 ETF with an MER of 0.04%.

The New Economic BOOM In Canada

What The Future Of Trade Will Look Like In Canada?

The New Economic BOOM In Canada

Courtesy of the Government of Canada

The New Canada-European Union (EU) Comprehensive Economic and Trade Agreement (CETA) will benefit Canadians by creating new job opportunities and help to expand the middle class. CETA is a modern and progressive trade agreement that will generate billions of dollars in bilateral trade and investment. It will provide both greater choices and lower prices to consumers. When CETA is fully implemented, the EU will have eliminated tariffs by 99%.


The new Progressive Trade Agreement will enhance the middle class:

This marks the beginning of a new era in trade agreements. The free trade agreements will also promote and protect cultural diversity and strengthen the middle class while helping to ensure that everyone can participate in it and benefit. It is a progressive free trade agreement that covers virtually all sectors and aspects of Canada-EU trade which will eliminate and/or reduce barriers.


Canada’s strategic plan for long-term economic growth: The path to growth is through CETA:

It is expected that more EU companies will invest in Canada in order to take advantage of Canada’s preferential access to the United States and other markets, while non-EU companies will invest in Canada so as to take advantage of our preferential access to both the EU and the United States. Investment provisions in CETA will provide Canadian investors and their investments with greater certainty, stability, transparency and protection which will guarantee more favourable and secure access to the EU market.

The value of bilateral trade in goods between the EU and Canada was €63.5 billion in 2015. Machinery, chemicals and transport equipment dominate the EU’s exports of goods to Canada. Pearls and precious metals as well as mineral products dominate the imports of goods from Canada. Machinery and chemicals also constitute an important part of the EU’s imports from Canada. The value of bilateral trade in services between the two partners amounted to €27.2 billion in 2014. European investors held investments worth €274.7 billion in Canada while Canadian direct investment stocks in the EU amounted to almost €166 billion in 2014.


Rt. Honourable Justin Trudeau, Prime Minister of Canada declared that:

“The signing of CETA is a historic occasion. This modern and progressive agreement will reinforce the strong links between Canada and the EU, and create vast new opportunities for Canadians and Europeans alike—opening new markets for our exporters, offering more choices and better prices to consumers, and forging stronger ties between our economies.”

This will allow Canada to have access to the EU’s 500 million consumers. Canadian workers will significantly benefit from its’ increased access to this 28-country market which generates $20 trillion in annual economic activity. Stronger economic relationships are the single best tool for Europe and Canada to improve our citizens’ standards of living. Canadian companies will grow and thrive in Europe. The agreement is fair. CETA will create new opportunities for farmers which will translate to lower prices for all consumers.


CETA is the ‘blueprint’ for future new trade agreements:

CETA,, will encourage more investment in Canada.  European firms will have new advantages when it comes to obtaining investment projects approved in Canada. This new agreement will make it easier for company staff and other professionals to work on both sides of the Atlantic and for firms to relocate their staff, temporarily, between the EU and Canada. In turn, this will help European companies to manage their operations in Canada. Similarly, it will also be easier for other professionals to temporarily supply legal, accounting, architectural and/or other similar professional services. European officials say that it will eliminate 99% of tariffs and will ultimately save European companies €500 million ($548 million) per year.

CETA gives Canadian service providers greater market access than the EU has ever granted to any of its’ other trading partners. This means significant opportunities, in the EU market, will boost Canadian businesses’ bottom financial line. In 2015, the EU imported $16.5 billion of goods/services from Canada. The EU is currently Canada’s second largest source of foreign direct investment with an estimated stock valued at $180.9 billion. Europeans will have easier access to investments in Canada, and vice versa. It will be easier for professionals like accountants, engineers and architects to offer their services between the two markets. The EU is also Canada’s second most important source of new technologies and a key partner in science and technology cooperation: (



A new standard for global trade!

On February 15th, 2017, the European Parliament voted in favor of the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada. This concludes the ratification process of this deal at the EU level.



Hon. Chrystia Freeland, P.C., M.P., Minister of International Trade declared: “New economic opportunities abroad mean growth here at home and more jobs for middle-class Canadians. Over the past year, I have met representatives of many businesses that are benefiting from our progressive trade agenda and policies, and in 2017, we intend to expand on these opportunities so Canadian businesses can grow and succeed.”


“I’ve had an excellent experience interacting with the Trade Commissioner Service in Canada and abroad. Their professional and prompt service has helped Team Eagle access programs, such as CanExport, to grow our business reach.” Paul Cudmore, General Manager and COO, Team Eagle


“Canada is a great brand in foreign markets. We have something unique to offer.” Eli Gershkovitch, Owner, Steamworks Brewing Company


Concluding Thoughts:

In short, the future is looking bright for Canadian entrepreneurs and businesses especially those involved in importing and exporting of goods and services. As a Canadian myself, I feel very privileged to live here and have the life style and safety it provides.

Be sure to follow my free analysis on the stocks, commodities and the Canadian market at:

Chris Vermeulen