I’m too tired to write about anything today We had our Xmas office party yesterday and we are going to the restaurant with friends this evening… I know, I wasn’t supposed to go the restaurant until Xmas… I guess this is why the word “exception” was created

iceman

If you have to read one article this weekend, it has to be this awesome piece of creativity by Baker at Man vs Debt: The X-men Guide to Unlocking Your Financial Mutant Powers. I just love mutant powers

Here are other great articles:

Find a few careers tips at Bargaineering.

Who’s going to be the next Google? By Intelligent Speculator.

3 principles of successful investors by Million Dollar Journey.

Getting a payday loan by The Credit Toolbox.

Multiple Income Streams at Mrs. Micah.

Gift Cards (the Good, the Bad and the Ugly!) at Cash Money Life.

What are these homeowners thinking? At Canadian Capitalist.

It’s okay to not be saving for your retirement in your 20’s and 30’s at Four Pillars.

Do you have any gold in your portfolio? At the Ending the Rat Race.

Top 100 investment lessons by The Dividend Guy.

5 factors that might burst the housing bubble by Canadian Finance Blog.

Carnivals:

Festival of Frugality

Carnival of Money Stories (Editor’s Pick!)

Carnival of Financial Planning

Carnival of Money Hackers

Carnival of Personal Finance

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Yesterday, I had talked about High Yield Bonds ETFs and other products available (like mutual funds) in order to benefit from this asset class. During a bear market, high yield bonds are one of the first asset classes to get pummelled like a 16 year old boy being initiated during football training camp. The second asset class to get its butt kicked is Small Caps.

Small cap companies have the smallest size on the stock market. They usually show very important growth rates during bull markets as it is easier to grow when you are small as opposed to when you are big and established (just think of how hard it is to move a couch potato ).

On the other hand, small caps are also vulnerable to the economic situation because they depend on consumption growth and need a lot of credit to operate. Some of them don’t even show a profitin the business yet (but they show a lot of potential!).

Then, when the market is getting a cold (not to mention the H1N1 we had last year!), they are the first ones heading to the hospital. While some of them bleed to death, the survivors are stronger and ready to explode during the market recovery.

How to trade small caps?

There is a very similar situation between the high yield bonds and the small caps when it comes down to trading them. You can decide to pick a few stocks and hold them with your prayers that “everything is going to be fine”. They are very hard to predict for any DIY investors as we don’t get much information from financial analysts or financial publications on small caps.

This may be one of the only asset classes I would head more toward a small cap mutual fund than a small cap ETF. Why? Because the knowledge and being on the field can really make a difference when it comes down to selecting the survival of the fittest.

When you choose the small cap ETFs you have to live with all the corpses and the super star at the same time. This could affect your return big time. With the mutual fund, you take the risk that the portfolio manager is wrong but if you select a good one, he can bring in amazing returns.

Another important point would be that you don’t have much choice in small cap ETFs in Canada (I found only one!). Therefore, the mutual fund may be a great pick.

Here are a few funds (I picked the top 5 on morningstar according to 5yr return – second table) and ETFs you can trade in order to get the benefit from the small cap growth:

Related posts:

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I have made a major point of honour to take note of what life teaches me. We sometimes go through tough periods and we don’t really know why it is happening to us. We get hit as hard as being creamed by a train and we are standing in the middle of nowhere asking the very same question over and over again: “Why Me?”.

I actually found the answer to this question a long time ago: “Why You? Because sometimes life is a b&?%”. In fact, it’s nothing personal about you; it is only how life works. Once you have understood this simple (but tough to accept) concept, you can learn from life. And since human beings have a very short memory in general, I suggest you take note of your thoughts once a bad event occurred. This is what I am doing with the recent market crunch of 2008. Some people generated amazing returns by taking little risk. Here’s how they did it:

High Yield Bond Spread

There is always a normal spread between each type of bonds. For example, provincial bonds will be traded with a premium compared to federal bonds. AAA corporate bonds will follow almost the same premium compared to the provincial bonds and so on.

However, during a bear market, the spread between high yield bonds (aka junk bonds) becomes abnormally important. The par value of those bonds melts like chocolate bars in a microwave. Therefore, there is a huge spread between their yield and more secured bonds. Many investors leave the high yield bond market during economic crunches because they think that all of those companies are heading towards bankruptcy.

How To Benefit from High Yield Bonds Eventual Surge?

During every market recovery, one of the best asset classes is the high yield bonds (based on the above mentioned explanation). So if you are patient and man enough (or should I say woman enough?), you can benefit from this gap in the market.

High Yield Bond ETFs

If you buy 2 or 3 companies, you may make a mistake and lose a lot of money (after all there are companies that declare bankruptcy during bear markets ), however, you can buy a pool of High Yield Bonds through ETFs.

Since we are not really interested in the guarantee aspect of the bond, nor its yield (remember, you want to capture the price gap), you don’t have to worry about not holding the bonds and holding the high yield bond ETFs instead. The index will follow the market and give you back the growth during the recovering. This asset class was one of the first to hit the double digit returns in 2009. During more recovery markets, you can expect high yield bonds to jump by 20% to 30% in a span of a few months. This is why it’s a good asset class to consider after a few months of panic .

If you want additional support to trade High Yield Bonds ETFs, I recommend the following tools:

INO Free Trading Course

I had mentioned it on my blog last week; this is a 10 lesson course on trading. The first lesson is actually to understand the importance of psychology in price movement. This should help you consider when it is the time to buy your high yield bond ETFs. You can register by clicking on this link. I have personally registered and can swear that it’s free and that you will receive your lessons by email.

Once you have decided to trade, here is a list (Canadian and US as of the beginning of November 2009) of High Yield Bond ETFs on the stock markets:

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I recently received an email from Pete (name has been changed, duh!). He has been a loyal reader of The Financial Blogger and he is seeking advice looking at his future career options. Here’s the email he sent me:

Hi There

I just wanted to know what your advice would be.

I would like to make a decision between completing the MBA or CFA .(Is there something else?)

I currently work full time in a large insurance company on the infrastructure ops and development side and am married with 2 kids and another one on the way.

I have an undergrad in accounting, a few diplomas and a CFP certification.

I currently view myself as someone that is good at planning and organising, has vision and likes to look at things from a high level (bird’s eye view).

From a personal perspective, I feel that I need to complete one of the above qualifications to make myself more marketable in the work place. But at the same time, I have a dream of one day (soon hopefully) working for myself.

My working years these past 12 years have been in financial services. My wife is a stay at home mom and I get the feeling that she prefers it that way. So I need to work to bring home the bacon.

I’m good at strategising, and also good working with money. I can work on my own and also on a team, but I tend to be the quiet, thinking team player

I know both qualifications require tremendous sacrifices.

Given my personal circumstances, what would be my best option at this point in time?

Here are a few general thoughts:

• First things first, the decision of doing either a CFA or a MBA will require a lot of your time.
• Prepare your wife and your children, explaining that you won’t be around for a good 2 years (for the MBA) or 3 years for the CFA).
• The CFA will require self discipline as you don’t have any classes or teachers… just books!
• The CFA will also require self learning skills in order to understand the books.
• The MBA will give you a general view of the world and requires a lot of time for group projects. You will also have to travel to attend school (unless you do an online MBA but employers opinions are divided regarding this option).

Having said that and considering your profile (from what I know of your situation) I would choose the MBA because;

• It will help build a great network where you can find several resources for your future project (starting your own company).
• It will enhance your bird’s eye view and push your managing and strategic skills to another level.
• With an MBA, you will be able to get a management position. This is one of the requirements for most interesting management positions anyway
• It’s easier to do than a CFA .

On another note, the CFA title is very appreciated due to the hard work and natural genius that is required to achieve the title. However, this will lead you to highly analytical positions such as financial analyst and traders. This is not related to management at all.

So I guess that if you eye a management career or want to start your own business, you are way better off with an MBA. On the other hand, if you would like to become a stock market specialist, the CFA is the right choice.

And what about you?

Do you have any other feedback to give to Pete?

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A little bit more than a week ago, Citigroup announced that they would sell 100M$ worth of shares during the first Primerica IPO. Last year, they tried to sell the company and were unsuccessful, since then they have decided to “pull a few bucks” out of their cash cow.

Over last weekend, I spoke with my friend who still works for Primerica and I asked him if he was nervous about the concerns I outlined in my post about Primerica going public. He told me that he wasn’t nervous at all.  Actually, the news was not introduced to the agents with the same information.

While the Primerica IPO information from Bloomberg last week was quite limited (the journalist spent more time describing Primerica and explaining the timeline than talking about the IPO), my friend received more detailed information.

Primerica goes public… for a second time

This fact was confirmed by another Primerica contact, it is the second time that an IPO was issued for this company. Primerica was founded in 1977 by A.L. Williams . At one point in time, Primerica had over 250,000 agents and decided to go public (for the first time) under the ticker ALW.

Then, Citibank (the former appellation of Citigroup) bought all the Primerica shares and took it private again within the Citi family. At that time, they had decided to trim the Primerica sales force and change the name of the game for insurance agents. This is why many of them either quit or were invited to to pursue other career options. They went from 250,000 agents down to about 80,000.

The main goal behind buying Primerica was to benefit from the huge sales force and not only offer insurance and investment services but all banking products (bank accounts, loans, lines of credit, mortgages, etc.). As of today, that vision has been a partial success since most Primerica agents didn’t offer all products. Time has changed, and so did the vision, so I was told.

It’s good news overall

My friend was telling me that the IPO was pretty good news as most shares will be offered (and probably bought) buy Primerica VPs. Therefore, they will regain more control over “their” company and will try to dissociate themselves from Citigroup (who might not have the greatest image to be associated with these days).

Who knows, at one point (this will require additional public offerings), they might even offer products other than Citi’s. This could transform them into real insurance brokers and offer even better (less expensive?) products.

While 100$M shares is just opening the door to a world of opportunities, this won’t change much in the day to day for now. If Primerica VPs can afford to buy all the shares and remain in control, I guess this could be very good news for them. It is interesting to see how news can been seen from 2 different perspectives, both with valid arguments. Only the future will tell us if the Primerica IPO was a good thing or not!

One thing is for sure, once Primerica shares hit the public floor, it will generate some interest for stock traders and will show on their track investment apps!

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Welcome to this new edition of the Festival of Stocks! For this festival, I have decided to share my thoughts on a few investment products you may have or consider to include in your portfolio. If you are new to The Financial Blogger, I may suggest you read those investment related posts:

- 10 Trading Lessons for Free

- Top 10 Dividend Stocks in Canada

- 9 Free Investing Resources

- 4 best stocks in 2009

#1 ETF’s (Exchange Traded Fund)

For someone who knows a little bit about stock markets and economy, building a portfolio with ETF’s may be the best solution. ETF’s can track anything you may think of (this is probably their biggest flaw at the same time!). So you can build a customized portfolio and fees are minimal. ETF’s are definitely the best products available on the market right now (again, for someone who knows what he is doing!).

The Smarter Wallet presents Should You Trade Stocks Online? posted at The Smarter Wallet.

Canadian Investor presents Should Penny Stocks Be In Your Investment Strategy? posted at Canadian Penny Stocks Blog.

Steve Alexander presents MFI Stock Review: Sturm Ruger & Co Inc. (RGR) posted at MagicDiligence – The Best Magic Formula Stocks.

AlexG presents Jim Rogers Financial Times Interview Novemver 03, 2009 | All Things Jim Rogers posted at All Things Jim Rogers.

#2 Mutual Funds

Several bloggers hate mutual funds or despise them. However, mutual funds can be very useful depending at what financial stage (and knowledge) you are. For example, for someone who is accumulating on a bi-weekly or monthly basis, investing periodically in a mutual funds will allow him to participate in the market with a small amount (things you couldn’t do if you would buy ETF’s). You also have managed solutions for clients who don’t want to take care of their investment but still want to invest. Overall, mutual funds are not as bad as they are described by a few financial journalists / bloggers.

Zach Scheidt presents Vitamin Shoppe Adds to Successful IPO posted at ZachStocks.

GLBL presents Get the Swine Flu H1N1 Stocks! posted at BuyMyStockPicks.com.

Intelligent Speculator presents Will commodity ETF’s exist a year from now? posted at Intelligent Speculator.

D4L presents Johnson & Johnson (JNJ) Dividend Stock Analysis posted at Dividends Value.

Mike Piper presents Where to Rollover My 401k posted at The Oblivious Investor.

#3 CD’s (Certificate of Deposits)

In French, those are called CPG. It means Certificat de Placement Garanti. However, we call them Certificat of Pauvreté (poverty) Garanti (Guaranteed) in the banking industry. While this provide the ultimate security, rates are so low that you will barely protect your investment from inflation once you have calculated applicable taxes. In other words, I don’t really like them

Matt_SF presents Traders Know it?s a Gold Bubble, Why Don?t You? posted at Steadfast Finances.

Jeff Rose presents What is a Penny Stock? posted at Jeff Rose.

Leslie Brown presents The Definitive Silver ETF Guide (Five Minute Edition) posted at ETF database.

Darwin presents 2009 Stock Market Returns YTD from Around the World – Shocking! posted at Darwin’s Finance.

#4 Dividend Stocks

I really like dividend paying stocks. Most of them are Blue Chips and offer a great stability in your portfolio while providing a constant income at the same time. The only thing to be careful with is to not consider dividend stocks like pure fixed income. As we have seen in 2008, even those shares can fluctuate a lot.

Mike presents Jumping On the Bandwagon posted at Minting Pennies – Personal Finance, Investing, and Microfinance.

Silicon Valley Blogger presents OptionsHouse Review: Low Commission Broker posted at The Digerati Life.

Super Saver presents A Bubble is Coming posted at My Wealth Builder.

#5 Bonds

If included in a bond ladder, municipal bonds and corporate bonds could be of great help in your investment portfolio. This will stabilize the volatility and can provide some good yield if you make your trades on the right timing (think about junk bonds in early 2009, this was the best performing asset class during the first 6 months!).

TIP Guy presents Stock Pre-Screening Process and Metrics | TIPBlog.in posted at TIPBlog.in.

TradingStocks.com presents Investing in Bonds posted at Trading Stocks.

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We have watched Peter Pan (version 1932…. Or the oldest version… still in color thought) yesterday with our children. Amazing enough, they loved it (and it was far from Bakugan!). I was surprised to see that magic really don’t have age! Anyway, that was my cool family moment of the week

As of what happen with my weight, I am getting heavier! I am not at 183 pounds. I “treat” myself too much with food and desert these days… but I still go to the gym 4 times a week. While I don’t feel I am getting fatter, I am certainly getting a few pounds in muscles… I’ll have to be careful if I want to lose some weight before xmas!

Here are some great read for the weekend:

-
Canadian Drips by Million Dollar Journey

Successful ETF by Intelligent Speculator

H1N1 Stocks by Buy My Stock Picks

A Cheap Beginner Investing Book by ABC’s of investing

Investing in Small Caps by The Dividend Guy

Jobless Spending Plan by Canadian Dream

Should The Government Bail out our Pension Plan? by Four Pillars

4 lessons from my first job by Mrs. Micah

Complete and exhaustive Netflix Review by Cash Money Life

Real Estate Agents Don’t understand Finance By Wisdom Journal (in fact, they don’t understand much ).

The Financial Slip Up by Bible Money Matters

10 Things Your Baby Doesn’t Need that Can Fund Their College Education. by The Fiscal Geek

Promoting your side business without going broke by Green Panda Threehouse

87% of problems at work solve in 72 hours by Frugal Dad

Last week’s Carnivals:

Festival of Frugality

Carnival of Twenty Something Finance

Carnival of Personal Finance #230

image source: Raymond Brown

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I remember when I started working at the bank at 22, I was an administrative clerk in the back office of a brokerage company. I was balancing trades on stock options and futures, making $30,000. Back then, I was already thinking about making a 6 figure income. I really wanted to hit the magic $100,000 salary as fast as I could.

Well 6 years later, I can finally say that I have hit my goal in 2009! It is funny how most people would not even disclose their salary to their spouse and I announce it publicly on my blog . I actually don’t really care about how much my neighbour or friends make, it seems that the subject of one’s salary (and money in general) is taboo. I am not writing the article to brag (trust me, a lot of people are making much more than me!), but more to explain how I did it and prove that there is nothing magical or unnatural about reaching a 6 figure income.

Work hard until you get your promotions

For several years, I worked very hard and always did more than what I was asked. Most people won’t do it because they think they are not paid to do extra. While they are right in a way, climbing up the company ladder require sacrifices and extra work. How can you shine if you do exactly what your co-worker does? You do your job right and you are good at it? Congratulations… but you are already paid for doing your job right and for that they let you come to work tomorrow. If you want a promotion, you have to step up and go the extra mile.

Don’t complain

Another important point is to avoid complaints. You can argue, you can debate your point of view (this is another good way to shine) but not in a negative, whining fashion, (want some cheese with that). People don’t like whiners in general, they like winners

Get your employer to pay for your tuition

My employer paid for my mutual funds licence, my CFP (Certified Financial Planner) designation and my MBA. While I can’t quit my job for the next 3 years without leaving them a big check to reimburse those fees, I have now hold a whack of diplomas to improve my employability and salary (companies tend to pay more money for someone with a lot of paper to put on the wall ).

Consider fringe benefits

My employer gives me the opportunity to pay less on my mortgage and line of credit along with a share participation program (they add 25% of my deposit amount). Those are calculated in my annual income in order to get to the 6 figures as I would not get a rebate on my mortgage if I worked elsewhere than for this bank . A buck saved, is worth more than a buck earned (due to the tax man)

Get a sideline

While my company did not earn much income last year (it did pay for my internet bill ), it is getting bigger and bigger as part of my overall income. This year, I am able to have a few expenses paid (like internet and my laptop) and I am also able to withdraw a small amount out from it.

So I won’t see the 6 figures on my notice of assessment yet, but when I calculate all of my income sources, I am slightly over the mark of $100,000…. Thx to my year end bonus! As you can see, there was nothing extraordinary to be done in order to achieve it. If I did it, I am sure that you can!

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I don’t know why, but I am in the mood for Christmas this week After finding a way to save money before Christmas, I am suggesting some great financial gifts for your child. I’ve noticed that my children have been spoiled by gifts from their grandparents and  awesome godmother and godfather. My basement is already full of toys and each Christmas and birthday, I spend hours cleaning up their playroom to make way for the incoming crowd of toys. So, I thought about how amazing it would be if they might receive a few financial gifts instead. So if you have to spend money for a gift this year, you may want to offer something useful instead of buying the 5^th Transformer (I’ve looked everywhere and couldn’t find the latest Michaela ).

Gift ideas for 0 to 5 years old

- Invest in an RESP

Investing in an RESP is probably the greatest gift you could give to a young child. Even if you invest a small amount of money, this will grow to become a substantial amount and other people might want to contribute too.

- Buy a cash register

This is a toy, but your child wants to imitate events he sees at the store. When they are older (4 and 5 years old), you can also give them fake coins to play with as well. This will be their first contact with “capitalism”.

Gift ideas to 5 to 12 years old

- Buy a share certificate

Have you ever seen a share certificate? They look pretty awesome! You can select a company that your child is familiar with (Disney for example) and order a real share certificate. They are becoming rarer by the day, but you can still order them through a broker. Your child will have a nice share certificate and ithe value of it might go up throughout the year. You can then sit with him and show him where to see his share value on the internet.

- Offer them a financial contract

At the age of 5, I will offer my son a financial contract. I will give him an allowance every two weeks (like a pay check) and he will have to save a part of his money in order to “invest” it. I hope that he will learn to save and invest on a regular basis over the years with this method.

Gift ideas to 12 to 18 years old

- Buy a personal finance book (The Wealthy Barber or Rich Dad, Poor Dad)

I really like personal finance books and my favourites for someone who will start their financial adventure are definitely the Wealthy Barber and Rich Dad Poor Dad. Both books explain financial aspects in a clear and easy to understand manner. On top of that, both books tell a story so you don’t feel like you are at school and learning numbers in a boring way!

- Open a mutual fund account

You can open a mutual fund account with his previous investment and start investing for him. He will receive his statement quarterly and will be able to follow the market gradually. If he is lucky, he will lose his first $100 at the age of 16 and understand how the stock market really works (it goes up and it goes down ).

- Buy conference tickets

There are tons of personal finance and personal growth conferences out there. Attending one with your child will not only be a great parent-child activity but will also give him great tools for his adult and financial life!

Gift ideas for 18 years old and older

Just give them your car keys and they will be fine hahahaha!

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That’s it! The Christmas countdown has already started. In fact, I noticed it had started on November 1^st… only minutes after Halloween ended, stores were putting their Christmas decorations out. While I think it’s a bit crazy, but perhaps it can help us prepare a Christmas budget ahead of time.  As a result, the January credit card bill should be less painful when it arrives .

I have tried to think about how I can save money for my Christmas gifts and how much it would actually take. Since I have 2 children, I have quite a bit to gather .

Saving 3 coffees a week ($40)

I have decided that I would cut coffee at work until Christmas. I still enjoy one at home before I leave but I had this little vice of having another one while I start my laptop at work and take a peak at the stock market opening. I have traded the nice, warm Caramelo Coffee from Second Cup for a clear, refreshing glass of water. This will not only save me $2.25 per day (which means about $40.50 until Christmas) but it will also help me stay in shape. Can’t really say that cream and sugar is a good thing for my belly…. Even though it tastes so good! So with $40, I will able to buy at least 1 gift!

Cutting down on restaurants ($225)

We spend a lot of money in restaurants. In fact, it is not rare that we order in on Friday’s and then go out to eat with our children on Saturday, helps reinforce table manners . Therefore, we easily spend $75 to eat out on a weekly basis. Since there are about 6 weeks until Christmas, I will try to cut 3 weeks of restaurants out. However, just saying that we will cut on restaurants is not enough. We need something worthwhile to replace these special occasions in order to suffer less. Instead of trying to cut modify our choice of restaurants, I have thought of changing our habits and simply not going to restaurants at all.

Solution #1: Special Feast Fridays

I suggested to my wife that we could prepare a special meal on Friday night and have dinner together. So we cook grilled cheese or pasta for the children then put them at bed around 8pm and then, we can cook a nice meal to eat alone like we used to do. While this will result in slightly higher grocery bills, we will still save money, eat healthier food and spend more quality time together.  And honestly, what could be more fun than sharing a bottle of wine while preparing a gourmet meal with the love of my life…

Solution #2: Invite people over

Instead of going to restaurants on Saturdays, we have decided to invite people over for dinner. We will see more of our friends and still have a great evening. The great part is that we will also get invited by them eventually. Therefore, it will cost less than a bill for 4 people (William is not eating as much as I do!) at the restaurant. In order to make sure we don’t over spend on food, we ask our guests to bring the wine and we take care of the rest.

Instead of spending $75 per month, I plan on spending around $35 more on groceries and save about $40 a week. This way, we won’t feel like we are missing something, we simply change our habits. Who knows, we might like it enough to keep doing it after Christmas!

Cutting all non-necessary expenses ($200)

Life is full of unnecessary daily expenses. How many times do we see something that we like and just buy it on the spot? This will probably be my biggest challenge; not spending on extra food, extra wine, clothes or electronic gadgets until Christmas. For the first 2 frugal ideas, I am able to change my lifestyle in order to help us out. But for this one, I will simply sacrifice my lifestyle in order to fit into my Christmas budget!

So in the next 45 days, I should be able to save $465 for Christmas gifts. This is $10 per day. It shouldn’t be that bad, don’t you agree? If you have other Christmas saving ideas, I’m looking forward to read about them!

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