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Douglas31

Investing LOC

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This thread has seemed to have been highjacked by bitcoin/cryptocurrencies which everyone now knows was/continues to be a very risky option.  The original question that started this thread was a really good one and the reality is that you don't have to consider only really risky options like cryptocurrency. 

I am just in my first year of law and had a few thousand saved up before started and decided to put a bunch of it into TFSAs and also down payment on a rental for the community that I am planning to return to once I finish school and I took out about $25,000 from my  LOC to get that started. I will have enough to continue to support my education through my student loan and work over the next few years. I will likely continue to dump excess LOC into a TFSA mutual fund that historically has provided annual returns between 5-10%. Since the fall I have made about 8k net from rental and my TFSAs even after considering the monthly costs of interest, property tax and other property expenses and this doesn't even consider that the property that I have is going up in value.

Of course, I have pulled out almost that much from my LOC for tuition/living costs to pay for life since the fall but that means that this investment, is actively providing a return that almost balances my cost of living and a good chunk of tuition costs. Of course, it could tank and I would be more in debt. However, the way I calculate it is that even if this strategy goes modestly (ex 2-5% annual increase in value on property & 5-6% on TFSA) I will be able to check out everything after I graduate and have no debt (or return back to my community with a modest debt but also a  decent mortgage situation). Working part-time in my second and third year could make this situation even better.

Everyone is in a different position but the bottom line is that if you take some time to consider how you invest and take some risk then there is a good chance that you can significantly reduce the level of debt that you have in the years following graduation. Of course, you do have to accept that there is risk to anything like this.  

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So when I sorted my RRSP and TFSA for the year, I realized that I have way too much cash just sitting around in "high interest" (ie 1.1% at PC right now) savings accounts. So I want to get into a normal balanced portfolio. I am thinking of setting up TD e-series mutual funds, which have MER of between 0.3 (Canadian equity index) and 0.5 (International equity index). I kind of know about the existence of etfs, but have no clue about how to purchase/acquire, etc., or what the cost is.

Is it worth educating myself? Anyone have a good rule of thumb?

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I used about 10k of my LOC and put it into my TFSA to buy marijuana stocks shortly after Trudeau got elected. Best decision I ever made.

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On 2/9/2018 at 3:57 PM, Jaggers said:

So when I sorted my RRSP and TFSA for the year, I realized that I have way too much cash just sitting around in "high interest" (ie 1.1% at PC right now) savings accounts. So I want to get into a normal balanced portfolio. I am thinking of setting up TD e-series mutual funds, which have MER of between 0.3 (Canadian equity index) and 0.5 (International equity index). I kind of know about the existence of etfs, but have no clue about how to purchase/acquire, etc., or what the cost is.

Is it worth educating myself? Anyone have a good rule of thumb?

Hey Jaggers, the reddit investing community is a solid start. I'm more of an ETF fan personally for the smaller fees myself. Purchase can either be done through a bank representative or through a personal brokerage account, which aren't difficult at all to start up. They trade the same as shares, and can be bought individually.  For instance, I own $VUN, which tracks the total US market. 

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Just browsed the Reddit Canada investing forum for a few minutes. Man, those guys are buying a lot of weed stocks.

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2 minutes ago, Jaggers said:

Just browsed the Reddit Canada investing forum for a few minutes. Man, those guys are buying a lot of weed stocks.

 

Remember the Dot com bubble?

I have some reservations about weed stocks

I could be totally wrong and miss out on the stock of this century

my concerns are

1. legal vs illegal suppliers- existing illegal suppliers will have a price war to hang on to their existing customers.

     (Canada lost the price war to illegal cigarettes and  have to cut the tax drastically)

     I think it will be a boom for illegal suppliers?  The street price is competitive and tax free.

    http://budzu.com/prices/ca

2. availability- you can grow your own at home. how can you stop someone to grow for others. You need an army of Weed Cop to enforce the weed rule.

3. Prediction on increase in user may be offset by above two concerns.

Just my thoughts

I like to know if there are other good investment ideas

 

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13 minutes ago, Luckycharm said:

I have some reservations about weed stocks

I am not interested in buying any individual stocks, but weed stocks? Way too unpredictable. No one knows where that market is going. I'd rather bet on sports. At least you enjoy watching the games more, so there's some sort of a guaranteed return...

Edited by Jaggers
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How bad of an idea would it be to buy a moderately expensive watch that has historically strong resale value? Not an investment I'd look for a large return on, obviously, but I was thinking it could be a solid store of value with minimal upside and moderate external utility; at least until the 8-year long bull market comes to its inevitable end. 

Edited by hopefulcanadianlawyr

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15 hours ago, Jaggers said:

I am not interested in buying any individual stocks, but weed stocks? Way too unpredictable. No one knows where that market is going. I'd rather bet on sports. At least you enjoy watching the games more, so there's some sort of a guaranteed return...

So I own some shares in a index which tracks the cannabis market. They're speculative. I mean, you've got companies with 16 million in last quarter earnings that have 5 billion dollar market caps. I'd generally just go to /r/investing, over the Canadian version. 

 

33 minutes ago, hopefulcanadianlawyr said:

How bad of an idea would it be to buy a moderately expensive watch that has historically strong resale value? Not an investment I'd look for a large return on, obviously, but I was thinking it could be a solid store of value with minimal upside and moderate external utility; at least until the 8-year long bull market comes to its inevitable end. 

Are you thinking like a Seamaster/Speedmaster/Datejust/Daytona? I think most of the entry level Rolex/Omega stuff in the 5-10k range actually went down in price during the last recession as newly broke people flooded the market with them. 

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20 minutes ago, whoknows said:

Are you thinking like a Seamaster/Speedmaster/Datejust/Daytona? I think most of the entry level Rolex/Omega stuff in the 5-10k range actually went down in price during the last recession as newly broke people flooded the market with them. 

Something like that, yes. That's interesting, do you have a source for that? I am a bit surprised they wouldn't be seen and treated more like gold was, but maybe the lack of liquidity was an issue.  

Edited by hopefulcanadianlawyr

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The Catchup:

Caught up with the readings on here. The only thing that “popped” since January was the stock market, the US dollar, and weed stocks. Crypto corrected and the weak hands were shaken. By the summer and fall we’ll see new all-time highs as partial regulation sets in and more mainstream money floods into the rapidly developing tech and markets. BTC and ETH are solving the scaling issues so soon they will be used for transactions quickly and cheaply. Mainstream attention and adoption is only accelerating this year. Some ponzi scam coins (BitConnect, DavorCoin) got washed out which leaves room for the real projects to grow. 

Some quality top projects will be going much higher into this year. Bitcoin will remain number one and the market leader this year, the rest hard to say on the exact ranking. My only regret is not buying more BTC on that nice dip around $6k first week of February, but then by the summer when new highs are touched it won’t really matter since everything will be up nicely overall. I did buy more altcoin cryptos in January near the highs and will have to wait probably up to 1 year to see a profit on those new riskier positions, versus a few weeks if the buy was timed a month later. Nevertheless, that new buy will only be a small part of the longer term portfolio once new all-time highs are reached on BTC. I’ll sell most of the best performers later this year and keep the rest for 2020 and possibly beyound. There’s a lot of big funds and retail moving into the sector this year. It will be a repeat of 2017 except with a focus on fewer higher quality projects. Take out a log chart and look at yearly BTC price chart versus new accounts and adoption, not weekly chart, and you’ll see that until more than 50% of the population has crypto you won’t be losing investing in the top high quality projects for the next few years. 

If you bought at the highs in December or January, then just wait another half year or year and you should be in profit, especially if you diversified. Some cryptos will perform much better than others of course. This year Litecoin is beating the pack so far in February, but BTC will catchup by summer. Ether did very well too since the start of 2017, and BTC and ETH will exist for years to come. They are like the Microsoft and Google of crypto. There is yet no Amazon, Facebook, Twitter, or Snapchat of crypto.

 
(Disclaimer: I am diversified both mid term and long term in up to 10 different crypto projects. Only invest money that you can afford to lose. 50-90+% volatility in a few weeks is normal in crypto. None of this commentary is intended as investment advice. Just one good early crypto investment can outperform your whole total investment and the rest of your portfolio (assuming you sell on a gain and have a realized profit). Scams and hacks can lead to loss of funds. Don’t trust videos on YouTube or internet board posts.)

 

The Trading:

If you traded the February dip you more than doubled your money in about 2 weeks. If you didn’t, then you’ll still be at profit this year just by holding, even if from the highs (assuming you are somewhat diversified as different cryptos peak at different times and rates). Several months in crypto is like years in traditional markets. The bull run goes up stronger than the correction; don’t be surprised to see BTC 25k+ this summer.

 

The Readings:

Tulip mania: the classic story of a Dutch financial bubble is mostly wrong
https://theconversation.com/tulip-mania-the-classic-story-of-a-dutch-financial-bubble-is-mostly-wrong-91413

 

The Banksters Panic:
94-Year-Old Berkshire Hathaway VP: It’s ‘Disgusting’ People Buy Bitcoin! Additionally, describing the cryptocurrency as “totally asinine,” Munger went further than even Berkshire CEO Warren Buffett, who in January admitted he “didn’t know anything about” the technology.

Other major figures in traditional finance had U-turned on Bitcoin criticism in the past year. JPMorgan CEO Jamie Dimon claimed he “was not a skeptic” in private comments during January’s World Economic Forum, having said he regretted previously calling Bitcoin a “fraud.”

 

The Predictions:

"This 'telephone' has too many shortcomings to be seriously considered as a means of communication." — William Orton, President of Western Union, 1876
"I wouldn't touch Amazon stock with a 10 foot rod!" - Warren Buffet, 2005
"Everyone's always asking me when Apple will come out with a cell phone. My answer is, 'Probably never.'" — David Pogue, The New York Times, 2006
"The internet? Bah! another hype that soon will be forgotten" - Newsweek, 1997"
Google is an algorithm written by geeks, where is the business in that?" Warren Buffet

A 'Currency' Shouldn't Be That Volatile? Gold Spikes As Dollar Plunges. Again and again we are told by those who know far better than us mere mortals that cryptocurrencies can't be currencies because of their volatility... so what do we make of the US Dollar's recent behavior?

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I'm not some investment advisor but I've taken an interest in learning about the stock market. If you have around 80 000, if you opened a TFSA this year, any returns off 5000 would be non-taxable. What I would do with 80k is probably hold on to it. If you invest in the stock market now, it's near market highs and we're at the end of the traditional business cycle (8 years). 

Top investors like Ray Dalio think this year is going to be extremely volatile as we head to the next stock correction. If I had that much money, I'd look to deposit in some guaranteed yield like bonds. I know some don't allow you to withdraw within a year at least so make sure you find one that is without any restriction. Next, when the market does take a 20-30% dip, just pick and choose some reliable companies from the S&P 500. Make sure they pay dividends. Apple, Goldman Sachs, Bank of America, Coca Cola, etc. These are all strong companies whose stocks will guaranteed fall but come back up. This is of course the riskier way as if you pick a stock like Apple. If it drops to 120 and you buy it, there is a risk that it could drop further, so you just have to assume that anything over 30% of a drop is probably good enough to buy and not feel bad about it if it continues tanking.

The alternative route would be to invest in an ETF that mirrors the S&P 500 when it drops 20-30%. I don't like this option that much because the S&P will grow slowly but surely over time, however its the safest one. Assuming Apple dropped 50 bucks (around 30%), let's say you put in 30k into that. That'd be buying 250 stocks of Apple. You'd be making nearly 625 dollars in annual dividends from Apple. Also, if it went up to 150 per share, that'd be a 7500 return within a short period of time. Since it's a more expensive stock, most people would maybe shy away from it in your position but its practically the safest. 

During the last recession, Bank off America bottomed out at 3.96 per share. Within a few months, it quadrupled. I'm not saying you will get a good deal like that again but let's say BAC drops 30%. Its around 32 usd today and it took a 30% drop, it'd be around 22 per share. If you invested let's say 30k in that. You'd have 1363 shares of BAC. Taking a safee guess, maybe the dividend will be 5 cents per share which would be an annual return of 250 dollars+. You'd make 7-8k in unrealized gains assuming BAC went up 5 dollars to 27.

All of  these are safe  guesses and I think you could safely clear 10-15k in unrealized gains. Which is a 15-20% annual return rate more than double what average good investors hit. 

Like I said, I'm not some expert investor but if you're looking for a way to safely grow your money. I cannot think of a better company than Apple. I just don't see much benefits if you invest now. The risk of investing now is too high. Like you said, you do have loan payments coming up. Do you want to be able to pay them 8 years down the road if your stocks crash now or be able to hold onto your cash for a little bit and get a cheap discount.

Wish you all the best with your decision. Just remember, you don't have to take any unnecessary risk if you don't want to. I recommend that you watch interviews of Ray Dalio, Warren Buffett, Tony Robbins, etc. Try to get a philosophy of investing, not necessarily copy what they do. Feel free to message me if you want to hear about other "safe" stocks that I know of.

In sum though, I wouldn't touch Bitcoin or any other risky investments. You have a nice amount of money. However, it is still from a loan. I don't think it's worth it to take a big risk. Just focus on making a smart decision to grow your portfolio. You're in a great position to be debt free sooner than most people are. Investing in real estate is risky because you have to factor in putting a house on rent (the market), you have to wait a year now to sell I believe, your loan payments, etc. You want to be in a decent position where you could have enough money to pay your loans but still grow your portfolio. Again, best of luck!

*note: a lot of my numbers are in USD, so factor that in*

Edited by HarveySpecter1997

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http://business.financialpost.com/personal-finance/stop-using-your-tfsa-to-frequently-trade-stocks-the-cra-may-see-it-as-business-income

Under the tax rules, if a TFSA carries on a business then it must pay income tax on its business income. This has been a focus of recent audit and reassessment activities where the Canada Revenue Agency has been targeting taxpayers who actively traded securities in their TFSA.

The CRA said that “millions of additional taxes have been recovered as a result of audits of TFSAs,” and referred to a recently-released Income Tax Folio which indicates that “the determination as to whether a particular taxpayer carries on a particular business is a question of fact that can only be determined following a review of the taxpayer’s particular circumstances.”

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