Tax-Free Million Courtesy of TFSA

Tax-Free Plan

noreply@blogger.com (CanadianEntrepreneur) — Thu, 19 Mar 2009 03:19:00 +0000

Tax Free Plan –

I am using a TFSA to build up a portfolio on which to retire on tax free. I will invest yearly the maximum that the TFSA allows. Using this system even at a 10% annual interest rate it would take 30 years to save up $1,000,000. This is not bad considering that you’d definitely be able to live off of your dividends, and they’d all be tax free! It is however very capital intensive as you would have to make the contribution yearly for 30 years. Assumption: that inflation is 2% and therefore contribution will go up 2% a year. The government has stated that contributions will be tied to inflation but will only be increased in $500 increments; I have simplified this assumption by just increasing the contribution by 2% a year.

For conservatism let’s step this down to 5%.

At 5% you would earn the equivalent of $34,000 before tax after 30 years of saving. While $34,000 after tax is plenty to live off of, it may not be enough for a “comfortable” retirement.

Instead of either of these two “long term” strategies, I am going to pursue a day trading (or more accurately) week trading strategy to get there a lot quicker. It will look like the following below. Note: those are not years, those are weeks. Now I realize that as soon as I get beyond a certain size it will be difficult to trade for as large gains as I can when I start (because I’ll start changing the market). But at a certain point I plan to do this full time and will therefore have more time to manage my trades to spread out my impact on the market.

Note: $3,500 is used instead of $5,000 as I currently had $1,500 invested prior to coming up with this plan, that $1,500 is considered “dead money” in my strategy. The $1,500 is currently in a loss position but is producing 12% yearly yields. I have kept the $1,500 as an income producer rather than losing by trading it now as TFSA you don’t pay tax on your gains, but you don’t get tax credits on your losses. The money is however dead to me for trading purposes. Aside from general market risk, dead money is another risk I face. I have created this term, however I have a detailed strategy that I follow closely. My strategy involves never taking a loss (unless in certain circumstances when my strategy permits it, mostly due to opportunity costs).

etc...at 114 weeks meeting the goal of $1,000,000.

In this blog I will provide weekly updates as to my progress.

The deal with oil prices?

noreply@blogger.com (CanadianEntrepreneur) — Mon, 20 Oct 2008 02:26:00 +0000

Why is it that we can't just enjoy lower oil prices. With a recession on the horizon and demand diminishing it would be nice to enjoy the lower oil prices this would afford us all. However OPEC has different ideas. By cutting back supply they can increase oil prices. This would artificially raise oil prices. Now I know OPEC's cartel is no hidden secret. What I don't understand is how countries like the U.S. don't do anything about OPEC. With lower oil prices the power hungry U.S. economy might recover quicker. Having higher oil prices prolongs the recession. Score one for OPEC and greed. From an environmental perspective however higher oil prices = hopefully less driving+ more incentive to work on renewable sources. So in the long run OPEC might shoot themselves in the foot and make oil prices irrelevant, here's hoping I live to see those days.

The Fall of the Canadian Dollar

noreply@blogger.com (CanadianEntrepreneur) — Sat, 18 Oct 2008 21:54:00 +0000

I was trying to analyze why the Canadian Dollar(CAD) was falling relative to the U.S. Dollar(USD). I would have thought that the CAD would have stayed on par or risen to the USD with the U.S. adding nearly another trillion onto their national debt. I wouldn't think that adding an extra digit onto the debt counter would be a positive note for people to regain their faith in the USD.

However, it seems as though our resource based economy must have gotten the best of us. Seems as though since less resources are being purchased, less foreign companies have to buy CAD in order to purchase our goods. This is what I believe the reason is behind why the CAD has fallen so steeply against the USD these last two weeks.

So whats bad for travellers is good for our companies. Hopefully as a country we will experience some boosted sales due to the lower dollar making us more cost competitive with the U.S.

New Multi-family Property and Dividend Stocks

noreply@blogger.com (CanadianEntrepreneur) — Sat, 18 Oct 2008 05:23:00 +0000

So I've added a new multi-family property to my portfolio. The property is actually a 5-plex. I had some difficulty acquiring it because the bank was being fussy over the details. Anything over 3 units and they want a appraisal and signed leases. Luckily enough I had enough of their trust to get an unsecured loan and went ahead with the purchase. If all goes well the property should provide a 20% cash on cash return.

I also bought some cheap REIT's after the crash. Some fetching around 10-30%. I've been very interested in dividend paying stocks and income trusts lately. A lot seem to be trading at a steep discount right now because of all the mess. If you sort though the mess though it seems that a few companies have been getting treated a little unfairly in the markets.

Good luck to those who lost money in the last few months and good luck to those who still have some cash to throw in the game, I definitely believe there are some good deals out there right now.

Stocks vs. Bonds the Portfolio Question

noreply@blogger.com (CanadianEntrepreneur) — Thu, 29 Mar 2007 03:17:00 +0000

For an investor many crucial differences exist between stocks and bonds. Stocks typically have higher returns while bonds have more security. Stocks dividends are usually partially tax deductable for an individual investor and completely tax deductable for a corporation. The lower returns of the bond may well be worth the reduced risk that an individual investor is under although the gains in terms of interest in zero-coupon bonds or any coupon bonds are taxed at the individuals current marginal tax rate.

Controversial so called "junk bonds" provide high returns in exchange for more risk of default. Millions of dollars have been made buying these bonds with low S&P ratings and achieving higher returns. The question to ask would be if these higher returns compensate the investor appropriately for their risk. Many bonds have a built in feature of corporations not being allowed to default on payments unless they go bankrupt. This causes the bonds to have less risk then equity in the same firm. Bond holders also only have the opportunity to achieve limited gains as dictated by the bond contracts coupon rate, while shareholders have the opportunity to make unlimited gains.

I beleive that in a well balanced portfolio and individual should include both stocks and bonds. If the risk side of my portfolio consisted of stocks then I would balance that out with lower risk bonds. Meanwhile if I was participating in the higher risk junk bond market I would balance that out with stocks that have lower risks. It is my belief that a strong portfolio should consist of approximately 10% risky equity, 40% moderate equity, 20% low risk equity, 20% of varying degrees of bonds and 10% of risk-free's such as treasury bills (T-bills).

The whole portfolio diversification is dependent on an individuals risk tolerance though. I am have been working on a financial theory of mine which would produce maximum returns over years while minimizing riks. If successful my investment portfolio would drastically change to hold the mixture of securities I beleive I can create that would achieve above most fund managers returns. Fund managers who tell you they can acheive above average returns are lying and you should not beleive them. The best you can do is earn what the market earns, any attempt to earn more then the market can just as easily provide you with low or negative returns. More on this topic in the future.

Entrepreneurial Pastimes

noreply@blogger.com (CanadianEntrepreneur) — Sun, 25 Mar 2007 19:46:00 +0000

As my first post I will outline some of the entrepreneurial activities I have taken part in to date. As a note though this blog over time will include financial insights, finance topics, corporate newsworthy events and various other business topics other then those of my entrepreneurial undertakings.

It all started at a young age, not out of greed but out of feelings of accomplishment and a sense of something to call my own. The first every entrepreneurial activity I took part is probably one that many people may have begun their careers doing, mowing lawns. It wasn't simply mowing my parent's lawn for allowance or just mowing the neighbour's lawn. It was advertising on local bulletin boards and mowing multiple lawns. The venture was too big for myself so I had some friends help me out. This all happened when I was 12 years old.

After a successful summer and some money in the pocket I then grew an attachment towards doing things myself. On a later summer when I was 15 when the entrepreneurial itch stuck again I started a recycling company. The venture consisted of a five-foot high well visible plastic recycling box down at the beach to collect recyclables. Unfortunately at that point I didn't have any contacts to turn the recyclables into money. Fortunately though the local beach was a popular place to drink beer. That meant that we returned the beer bottles and cans for 10 cents a piece at the local beer vendor and then dropped off the recycling at the local recycling station. To my partner and I it meant some cash in the pocket and helping out the environment.

One day I was sitting around with my friends who worked as marketers and had excess product left over, which in this case was candy. While any 16-year-old would typically just eat the candy, I thought up the idea to sell it out of our locker at school. Here gave birth to the organisation that I formally named, "The Locker Store." What started off selling small packs of lemon gum and blueberry twizzlers soon began to grow into a legacy. We sold many varieties of chocolate bars, candy, chips, drinks and our very own custom made Locker Store pens. We generated sales in the thousands of dollars all out of our locker at school. We even had the privilege of running the concessions at one of our schools battle of the bands events. I will leave the Locker Store topic though because it was the broadest initial entrepreneurial experience of my life to date and will probably require more posts in order for me to give it due credit.

After graduating from high school and going into university my enterprising took a break. Only in second year university did I get what I call "the itch" again and bought a piece of rental property. It is a duplex that needs some renovation before it can start generating some revenue for me. This is an ongoing topic as it is my latest implemented entrepreneurial activity.

Ideas come to me all the time and it makes me want to get them out there. Unfortunately I need capital to be able to undertake some of my larger ideas. That is the phase I am in now, gaining capital in order to implement some of my bigger ideas. I am under 20 years old and own a duplex and many investments, all with my own steam. I view what I am doing now as an adventure since I am trying to build up to something great with my own smaller entrepreneurial activities leading to larger ones that will hopefully someday lead to my full time job.