Stocks - What've you got? Where you going?

[SeeGeeWhy]

I hold a handful of royalty trust units and roll the monthly cash distributions into a registered account which I use to buy mutual funds. Basically I do this so I can passively contribute to my annual limit, and max it out at the end of the year with any performance bonuses without having to dip into my pocket too much on a monthly basis to do it.

I work for a royalty trust so I am able to buy units on a $1/$1 ratio (meaning I buy $1 worth, my employer contributes equally). I obviously max this out as I am immediately doubling my money. If my company were to ever dip below a return on distribution rate (annual distributions divided by unit value) of 12%, I will sell them to buy into a royalty trust that is able to maintain that level. Obviously, the higher the better. It also helps if the trust is tax protected (i.e. young) so it's distributions are not taxed at full rates. This way the money I am using to put into tax sheltering is low or no tax dollars... I figure it's the best bang for my buck tax wise.

Of course, there is also the issue of taking profits on the actual unit value. I really wish that Harper puts into effect the whole "no tax if you reinvest the money within x amount of time" law he was campaigning with.

My mutual fund blend is a mix of domestic dividend income, and asian equities. Both are performing very well right now. I wouldn't have been able to do this if the gov't didn't lift foreign content restrictions. I am staying as far away from US investments as I can for now. Yikes that place is a disaster.

I'm also about to plop a bunch of cash to buy a share in a privately held energy fund... basically gives you access to stocks of non-public o&g start-ups. Stands to do well if natural gas prices go back up.

But the RRSP and fund strategy is just a sidebar thing... it's my "no brainer" money move that I am using to generate some kind of a nest egg.

My real motivation is to build equity to borrow against and buy out the ownership of a business, build the equity in that business and leverage it to buy another, and so on... Similar model to what a lot of people do with housing, but I am more interested in businesses so that's the way I am going to go. More cash flow, more opportunity, just plain sexier.

Hopefully I'll do well enough that the nest egg will be unnecessary.

But! The first thing I did with my money was clear all debts. If you are paying interest ANYWHERE it is sapping any and all efforts you are making with your other money and should be dealt with immediately. The only debt I have right now is my mortgage... and I am not so sure I am going to keep it for that much longer. The fiancee and I may sell and then rent until the market comes down. We can use the money we've made in the recent boom to invest elsewhere instead of keeping a paper profit in our condo.

Anyone else read RBC's latest quarterly report on the state of housing? I forsee a lot of work for at least a decade in Alberta.. meaning demand for housing will continue to be here for at least that amount of time. Yet, economic indicators such as affordability are starting to reach a point where they are not sustainable... I am really confused as to which way to go on this. Thoughts?

Here is the link http://www.rbc.com/economics/market/hi_house.html

[Incinerator]

Originally Posted by Dynamic

I just got a $1600 back, and I'm really confused after reading this thread what to do with it. Any suggestions would be greatly appreciated.

Im 20 years old on monday, and I partially live at home so I have alot of money that just goes into a normal bank account. It just sits there and does nothing which can't be the best way to grow my money.

Anyways what could a person do with 2 or 3 thousand dollars, keeping in mind I can also put away $500 a month or more to also grow my money.

Also I don't have a credit card, I just bought a new car 6 months ago, and I plan staying with my current employer for a while. What would anyone with any knowledge about financial planning do???

Thanks

The safest way would be to just go open up an account at ING and stick those 2-3 grand into a GIC, their term varies from 90 days to 5 years so you got a lot of flexibility there, since you're not doing anything with the money anyways it's better than letting it collect dust in your regular account. those $500 a month you can stick it into ING's savings account and you can move that money back into your regular account whenever you need it. That's the safe way to grow your pile of cash a little, and you don't have to worry about watching the stocks jump up & down.

[SeeGeeWhy]

Originally Posted by Incinerator

The safest way would be to just go open up an account at ING and stick those 2-3 grand into a GIC, their term varies from 90 days to 5 years so you got a lot of flexibility there, since you're not doing anything with the money anyways it's better than letting it collect dust in your regular account. those $500 a month you can stick it into ING's savings account and you can move that money back into your regular account whenever you need it. That's the safe way to grow your pile of cash a little, and you don't have to worry about watching the stocks jump up & down.

Yeah, this would be better than a regular bank account, but it still sucks. You're hardly beating inflation with one of those cash performer accounts or a GIC.

I hate GICs with a passion.

My advice to you young feller with the $2K would be to sell your car and buy a used one in decent shape with the cash first and foremost. Unless you really need it. Live within your means and you'll be raking it in monthly, trust me.

As for that $2000... it all depends on what you want to do and where you want to go. I'd suggest you do the following:

Come up with 50 things you want to have accomplished by the time you are 50, and what your net worth will be at that time. With all the different investment options out there, you really need to know what your goals are before you can make a choice on how aggressive you need to be.

Come back and post what you want your net worth to be and we can keep talking!

[firebug]

Originally Posted by SeeGeeWhy

But! The first thing I did with my money was clear all debts. If you are paying interest ANYWHERE it is sapping any and all efforts you are making with your other money and should be dealt with immediately. The only debt I have right now is my mortgage... and I am not so sure I am going to keep it for that much longer.

Be careful with this statement.

Not all debts are bad, especially mortgage debt. Take a look at you cost of capital ie. if you can get a better return on your investment than what you pay in interest you should do the investment.

For most people CC debt is the first thing that should go as that is a 12-28% after tax return that they would need to replace, which is tough for most people to expect.

Mortgage debt however is the cheapest money most people will ever get, and finding an investment that will provide greater than a 5-7% after tax return is not too tough especially in a sheltered account like an RRSP.

Use a spreadsheet or quicken and compare in 30 years the difference in your net worth between paying off a 6% mortgage and investing in an 8 - 10% RRSP... the decision should be obvious.

I try and keep no more than 25% equity in my home at any time, and will strip any excess out on a periodic basis in order to invest at a better return, and to increase the leverage on my real estate gains.

Best regards,

~bug

[Agamemnon]

I just bought my first stock today; Sino-Forest Corporation @ 6.82. That's basically its high point for the year... but what can I say? I've got a feeling

I also got in on the IPO for Red Mile Entertainment. Don't really know much about them, they made Heroes of the Pacific and own the rights to the first Jackass video game. I bought 800 shares @ 1.25 US.

[Shazam]

http://www.canstock.com