What Should You Actually Consider When You First Start Investing?

When you are a complete beginner looking to make your very first investment and you talk to someone that is highly experienced there is a pretty good possibility you will not understand much and you will not care about various different things of high importance for that person. Obviously, as a professional nobody can really share much knowledge in just a few lines but what should be mentioned is the first time investor does not care about standard deviation or emerging markets.

The most important thing you do want to think about when you make your first investment is risk. You want to know if there is a big change that the money will be lost or not. You are told to learn as much as you can about diversification, how to spot gold and include it in your portfolio, how to keep growing the portfolio and how to analyze markets. At the end of the day this is not what you are interested in. Besides the risk involved in any investment, you surely think about the following.

Time Needed When Investing

When you invest in stocks you are committing yourself for the long run. The money that you get back will normally be profitable at a suitable amount after around 5 years. A ten years investment plan is actually preferred. When you need the money back in just 2, high yield savings accounts are preferred.

Diversifying The Investment

Most of the investors need to diversify based on many different possible investments. A highly important decision is the money you put into bonds as compared to the amounts associated with stocks. If you want to invest for the long run, more money has to be added to stocks.

Associated Costs

Many investments will have some associated costs. They may be small but when you multiply them over the duration of the investment you can be faced with a pretty high impact on the results. A one percent fee, as an example, can easily take out thousands of dollars over investment duration. This is why you should always know everything about fees and costs.

Ease Of Investment

Not all people love studying investments and learning everything they can about them. Some are simply interested in doing a really quick and simple investment. Even so, you do need to put some effort into it. The good news is that you can easily use free tools in order to track investments or spreadsheets. If you do not want to analyze and track investments, you need to make sure the investment you choose can be handled like that.

Final Thoughts

When you make your first investment you need to seriously consider the factors mentioned above and you want to be as serious as possible. Remember that your money will be locked for a period of time or you would end up losing money. Because of this, it is very important that you always invest just the amount that you can live without for the duration of the investment.

How do you buy stocks?

So you’re looking to get into the world of investing are you? Great. The stock market has long been a mystifying place for most, but it’s quite simple really. With the proper education and practice you can be well on your way to investing for retirement. Let’s start out with learning exactly what a stock is first.

So what exactly is a stock?

First of all stocks are different from other investments because they are pieces of an actual company.  Unlike mutual funds which are investments that are comprised of any number of companies and are repackaged and sold to an end user.  Additionally there is more than one type of stock, for examples stocks can be purchased based on the class of shares, different classes offer different privileges.  But for this article we will assume that common stock is being purchased.

A common stock is simply a type of security that involves ownership in a business and represents a claim on a portion of the companies assets and earnings.


To buy or sell any stock you need to get in contact with a broker.  A broker is a licensed individual or corporation that will purchase and sell shares on the market on your behalf.  Brokers are trained in the legal requirements that need to be followed in order to make these transactions, ie.  registering trades with the appropriate governing authorities.


 Should I go with a discount brokerage or a full service brokerage?

The most basic decision an investor must make is the type of brokerage house they want representing them.  As of today there are essentially two options, discount brokerage or full service brokerage.  This decision is far from easy to make.  A discount broker will not offer guidance as to which purchases you make.


Discount brokerages are online entities like Interactive Brokers, or Questrade. More often than not these companies will provide a research platform to view fundamental data for companies trading on exchanges that you are investing in.


However, if you are reading this article on how to buy stocks chances are good that you don’t know how to choose them either.   Conversely at a full service broker you will be provided with research based on your investing style and risk tolerance.


Essentially you will have a guide to help you navigate through different investments.  A full service brokerage will provide you with an account manager that will be there to answer questions that may arise about your future or current investments.

Should I keep stocks inside my RRSP?

In addition to the differences listed above between full service and discount brokerages there is another important consideration to keep in mind and that is whether you want to keep stocks inside your RRSP or not.  There is plenty of information on  RRSPs on www.stocktrades.ca.  Before you make any decisions it is important to keep in mind the tax saving benefits of RRSPs and TFSAs as opposed to holding stocks outside of a plan which will then be subject to full taxation.


We hope this article gave you an idea of what a stock is and how you can go about purchasing them. It’s imperative that you read, read, read, and read some more when learning about investing. It takes years to learn the intricacies of the stock market. In fact, most investors are in a constant cycle of learning, as the markets always change.



All That Glitters: Investing in Gold

Gold is a safe-haven investment that is the perfect hedge against stock-market volatility. On Wednesday, 14 June 2017, gold was trading at $1,276.83 per ounce, up $11 on the day. The precious metal has generated returns of 9.43% over the past 6 months, or $109.10 per ounce since January. This is on par with the performance of the S&P 500 index, and the Dow Jones for the year to date. As a safe-haven commodity, gold tends to rally when investors adopt a risk-off approach to equities markets. We have seen gold briefly surging towards the $1,300 per ounce level in 2017, only to retreat towards its current levels as calm returns to the markets.

It is interesting to point out that the USD average annual percentage returns in gold have been volatile since 2012. At that point, gold averaged 7%, followed by a 28.3% decline in 2013, a 1.5% decline in 2014 and a 10.4% decline in 2015. During that stage, Wall Street was exceptionally bullish and traders were not interested in safe-haven investments such as gold. The tide started to turn in 2016 as the Wall Street rally lost momentum and continued at a modest pace. Last year, gold averaged 8.5% returns in USD, and for the year to date it is already up 10.1%. Gold has performed strongest when measured in Indian rupees (INR) with a total return since 2002 of 506.7%.

Recent Trends with Gold

Gold tends to gain favor with investors and traders when geopolitical uncertainty is rampant. For gold bugs, there has been plenty of this uncertainty with the French presidential elections and more recently the UK general election. In the run-up to the UK election, there was tremendous uncertainty in markets. Prime Minister Theresa May’s lead was initially 20 percentage points, but that dried up dramatically as election day neared. The outcome of the general election was certainly not positive for the Prime Minister, and she saw her lead shrink with a hung parliament after the June 8 election. Traders wasted no time and there was a huge spike in gold trading volumes.

However, they were not purchasing gold – they were selling gold.

This surprise trend had more to do with the anticipated consequences of a shock election result on the GBP than it did with the safe-haven asset. In other words, the rush to gold took place to benefit off the depreciation of the cable (GBP/USD pair) after the general election. Indeed, the sterling weakened from around 1.30 to under 1.27 after the election and traders made a packet by selling the dollar-denominated commodity on the markets. Consider that gold was priced at around £993 before the election and approximately £1007 in the aftermath. A stronger USD can be exchanged for significantly more GBP.

Where to Next with Gold?

Saxon Trade specialist, Montgomery Clayton Esq. had this to say about gold prospects: ‘Interest rate hikes have a pronounced effect on the gold price. Typically, these decisions are priced into markets well ahead of time. The Fed has embarked upon a policy of gradual tightening, with multiple rate hikes since the global recession in 2009. The June Fed decision is an important one in that it gives clarity to the future direction of Fed policy. Gradually increasing interest rates indicate that the Fed is moving towards a federal funds rate of around 3%.’ As the interest rate increases, so the demand for the USD increases accordingly. Understanding how gold is priced is crucial to trading it. Since gold is a dollar-denominated asset, it typically moves in the opposite direction to rate hikes. Foreign buyers of gold can afford less when the price is relatively more expensive, and demand decreases.

5 Best tips to invest in the stock market

People are obsessed with finding easy ways to earn a ton of money without putting in effort proportional to their aims. Business and dealings associated with risks such as lottery tickets and binary options have worked out for some people to increase the ownership of their liquid assets, however these are not reliable sources and there are plenty of problems other than risk associated with them. Investing in the stock market can make you increase your ownership enough to surprise you. Here are a few good tips to help you start up your journey as an investor.


  • Know your purpose


A stock market takes a lot of time to start bearing considerably beneficial returns unless you are extremely lucky. If you expect your money back with some profits in the next few years to pursue some prospects such as your child’s education, then the stock market isn’t the right place to invest, insurances and government securities are. Like any other risk associated businesses, there is not guarantee that the money will flow back with profits. If you are keen in investing in the stock market make sure you save a considerable portion of your annual earning to invest and capitalize on your building profits.


  • Holding your ground


A stock market can also be explained as a battle of emotions. In the short term, if the prices of the company whose shares you possess start falling because of a loss of customer confidence or simply a rumor against them, thousands of questions form in your mind which question your investment. You need to keep your wits about you and not let these price shocks impact you, and for that purpose you need to have a strategy before purchasing the share. Have an exit strategy through which you will recognize when you will buy or sell stocks and work using that strategy without letting emotions cloud your vision.


  • Versatility in investment


If you are new to investing, it is always wiser to hold socks of different companies than to invest in the same country or industry hoping to gain benefits from its short term rising influence in the market. This is important because a price shock in one industry will not impact your generated profits elsewhere and in the best case, can help you cover up for any sale you make that goes in a loss. Moneybanker is a good transparent service if you want loans to start up your investment in multiple dimensions.


  • Limit leverage


Using borrowed money to invest in the stock market can sound appealing for beginners because in their ideal world, their profits can easily be used to pay back what they borrowed with interest and still have enough to live off in ease. That is not the case in real life, because as stock prices go up, the percentage of earning you are obliged to pay to your broker/loaner increases and ultimately your return is less. Worse off, if the stock prices go down, you have to sell the stock to pay the loaning authority and you are left with nothing, so if you are new to the stock market, start by investing with your own money.


  • Know your tolerance level


Investments in the start tend to make investors anxious, because there is no guarantee whether the graph will go up or down from there, and this anxiety is bad for mental health. Be honest with yourself and make investments that do not make you feel too nervous about your money, because this nervousness gives rise to emotion based decisions which decrease your performance in the stock market.

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.

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: http://business.financialpost.com/financial-post-magazine/every-company-needs-a-money-manager-and-so-might-every-wealthy-investor 

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 GuruFocus.com

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%.

Impact Investing

“If the head has been making investments and the heart giving it away, it’s time to unite the head and heart and make money more” – The Case Foundation

The following is a brief summary of the panel discussion entitled Families Embracing the Future at The Campden North American Family Office Conference held in Boston this past November. The moderator was Northland Wealth Management’s CEO, Arthur Salzer. Arthur’s panellists were Justin Rockefeller and Antonio Ermirio de Moraes Neto.

An estimated 60% of families lose their wealth by the second generation and 90% by the third. Many multi-generational families are exploring what they can do in order to improve these odds by uniting families around values and positive legacies, thereby more closely involving family members in responsible long-term investing. Over the past few years, “impact investing” has gained in awareness and popularity with families of significant wealth. 

Impact investing is when investments are made into companies , organizations, and funds with the intention to generate measurable social and/or environmental impact alongside a financial return. The key is that the impact gets measured along with the financial component, because, as the saying goes, “what gets measured gets done”.

Mr. Moraes,  27 years old, and a member of the Brazilian family that the industrial conglomerate, Votorantim, believes that impact investing can be one of the crucial components to generate financial wealth for families. Done prudently, impact investing can deliver the required financial return but at the same time have the potential to excite the passion and dedication of the next generation.  By encouraging the participation  of the next generation impact investing attempts to create an environment  conducive to fostering the commitment necessary    for maintaining the wealth of the family.   

Antonio shared his thoughts on why he was drawn to impact investing and how it  lead him to form his firm, Vox Capital.

“Being a 4th generation member of a large family business in Brazil, I was since young inspired by the example of great entrepreneurs and innovators. As my own path, it became absolutely clear, when I was 16, that my purpose in life is to reduce social inequalities in the world. And nothing better to do this than an innovative and scalable business model, with a new mindset to serve society”.

Vox is targeting investment in companies that serve Brazil’s household with  a monthly income of less than $1,500 USD – this demographic represents  nearly 160 million people or 85% of Brazil’s population. Vox is investing in companies that operate in the healthcare, education and the housing sectors. So far, it has made 4 private equity investments and 5 convertible debt investments. While the track record of Vox is just under 4 years, it has been generating more than acceptable double digit returns since its founding.

Mr. Rockefeller, at 36 is a member of the Board of Trustees for the Rockefeller Brothers Fund – an international philanthropic organization. The fund  was formed in 1940 in New York City by Mr. Rockerfeller’s grandfather and great uncles.   The Rockefeller Brothers Fund drew some large media attention recently as it divested of its oil & gas investments this past fall – this is a monumental change as the Rockefeller wealth came largely due to its ownership of Standard Oil. Standard Oil  was the largest oil refiner and first multinational company in the world during the early 1900s. Before its divestiture, Standard Oil eventually gained control of nearly 90 percent of theUnited States’ oil production.

However, it is Justin’s new venture, The ImPact (www.impact.org), which he co-founded, to which Mr. Rockerfeller is dedicating much of his attention.

“The ImPact is a non-profit/NGO membership organization comprised of investors who pledge to make impact investments, track their social impact and financial performance, and share that data with others who have made The Pact. The mission of The ImPact is to increase the probability and pace of solving social problems by improving the flow of capital to businesses that have measurable social impact.”

While every family’s motivations, operational context and goals are unique, impact investing may not fit every family. Therefore, rather than prescribing a single approach, there are many approaches available. Using groups such as The Impact, or investing in private equity funds that specialize in this area may be a start.   

Rest assured that impact investing will be an area that Northland Wealth will be exploring further and sharing its findings as to how it may benefit your family.

5 Ways To Find Money For Your New Business

When it comes to trying to start a new business, the toughest part, without fail, is going to be trying to get the necessary money in order. Typically you won’t be making any money before you start, which mean you need to get an initial sunk investment into the venture, and that means pulling cash out of thin air in most cases.

But, there is a method for this procurement of thin air when you begin to look more closely at the possibilities. Common ways include working to get a credit line, asking friends and family for an investment, minimizing and selling belongings you don’t need, looking into getting grants (if you’re a non-profit), or looking for sponsorships from established companies or brands.

Getting a Credit Line

If you don’t automatically have all of the cash you’re going to require to run and maintain your business, your next best bet is to start getting a business credit line. This is going to involve a few steps, and it’s important that you have things in order in advance like having a separate bank account for business transactions, and all of your licenses in order as well.

Asking Friends and Family

Especially if you don’t have a lot of collateral, or maybe you don’t have a lot of experience in the business field, your friends and family can potentially be you best early financial collaborators. Now, there are definitely best practices for asking for money from family and friends, because you don’t want to get in legal or familial issues because of details that weren’t discussed when the initial lone happened. Families can either succeed together in business deals, or get torn apart.

Minimizing and Selling

Sometimes the problem with trying to find new money is that you haven’t totally exhausted your available resources. And by this I mean, before starting a new business venture, you should minimize your personal stuff, selling anything valuable you have that you don’t need or use anymore. You’d be amazed at how much upfront cash you can get for things like unused electronics, video games, music, or exercise equipment.

Grants For Nonprofits

If you’re starting a business that can be considered non-profit, there are a ton of options that you have in terms of trying to get grants from state or federal governments. Especially if your company has anything to do with children or with education, see what your options are for requesting money or reduced interest rate loans.


And finally, if your idea is good enough, you might be able to get some sponsorship money from individual donors or possibly even companies that are willing to invest in your concept. Sometimes you’ll have to give up some of your management independence, but having early financial support might be worth that consideration.

4 Ways To Spend Less Money During Retirement

Your retirement years are meant to be a time of restful relaxation. This is your opportunity to pursue the hobbies and activities that you just haven’t made time for yet. Retirees typically have a set income from investments, pensions, and other sources that needs to stretch to cover their remaining years. Don’t let money matters put a damper on your retirement. Use these simple tricks to keep your spending under control without sacrificing the things you love.

Create a Budget


Image via Flickr by 401(K) 2013

Budgeting your funds mindfully is essential to both managing and saving money. It’s impossible to trim your spending if you don’t know exactly how it’s happening. Sit down and determine a reasonable amount for all of your monthly expenses. Make sure you include not only your fixed spending, such as a mortgage or car payment, but your variable spending, as well. Budget for entertainment, eating out, cosmetics, clothing, and anything else you like to purchase.

Go through your bank and credit card statements and tally up every penny over the course of at least three months. Are you staying within your means? If not, it’s time to reconsider your lifestyle habits and see where you can cut back.

Downsize Your Home

Your mortgage payment is probably the largest single expense that you have each month. If you want to minimize your expenses in retirement, downsizing your home is an efficient way to do it. Do you still maintain bedrooms for children who have moved out? Do you have a spacious yard with high upkeep costs? Exchange those empty childhood bedrooms for a single guest room. Consider a smaller lot of land that’s easier to maintain. Downsizing your home can cut back on both your expenses and your work.

Protect Yourself Against the Unexpected

While there are many places that you can safely trim expenses, insurance and warranties aren’t among them. Protect yourself against the unexpected in retirement so you don’t have to worry about a massive expense from illness, injury, natural disaster, or home repair.

Insure yourself, your vehicles, and your home appropriately. Top this off with a home warranty from a company like TotalProtect to cover additional incidences. While insurance covers you in certain disasters, a home warranty helps you manage repair and replacement costs associated with everyday use. With a combination of both, you’re safe from a variety of high expenses.

Watch for Senior Discounts

You may be surprised at the number of places that offer senior discounts. Stores like Ross, Kohl’s, and even Goodwill host special senior discount days when you’ll enjoy additional savings on your purchases. Entertainment discounts are available everywhere from movie theaters to cruise lines to national parks. Gyms, salons, grocery stores, and restaurants are all known to offer discounted rates. When in doubt, always ask. There’s no harm in checking for a discount before you pay your bill.

With smart strategies like these, you can stretch your retirement funds to offer ample enjoyment, covering all the things you love most during these golden years.