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Financial planning questions



 
 
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  #1  
Old September 26th 03, 03:02 PM
Jim
external usenet poster
 
Posts: n/a
Default Financial planning questions

Hi Folks,

I have a need to get organized with a view toward retirement. I've never
used a financial planner before, and have questions. Please understand
that I am an engineer at heart, and have little experience in the area
of financial planning and portfolio management. I am on a learning curve
here, in advance of retirement.

1)It appears from all that I've read, that my interests will be far
better served in paying a planner to direct me while leaving the job of
arranging my portfolio to me. I like that idea because I learn from the
experience (hopefully not by my mistakes). Am I correct in assuming that
it will be a less costly route for me (assuming I don't screw up) since
commissions won't be payable to a financial planner acting as a broker?
I'll pay for his/her time only right?

2) I've been searching the web looking for a Canadian (Toronto area)
financial planner and so far every one I've found seems more interested
in doing the investing for me (i.e. paid by commissions against my
investments). Without meaning to insult anyone, I have doubts as to the
advice a broker/planner will offer since it is his interest to get me to
invest in his products (the ones he represents) and that might not be
the best path for me. How do I find a planner who will give unbiased,
independent advice?

Any words of wisdom in respect to my questions or general words of
wisdom will be gratefully received.

Thanks


  #2  
Old September 26th 03, 05:19 PM
Don Zimmerman
external usenet poster
 
Posts: n/a
Default

"Jim" wrote in message
.. .
Hi Folks,

I have a need to get organized with a view toward retirement. I've never
used a financial planner before, and have questions. Please understand
that I am an engineer at heart, and have little experience in the area
of financial planning and portfolio management. I am on a learning curve
here, in advance of retirement.

1)It appears from all that I've read, that my interests will be far
better served in paying a planner to direct me while leaving the job of
arranging my portfolio to me. I like that idea because I learn from the
experience (hopefully not by my mistakes). Am I correct in assuming that
it will be a less costly route for me (assuming I don't screw up) since
commissions won't be payable to a financial planner acting as a broker?
I'll pay for his/her time only right?

2) I've been searching the web looking for a Canadian (Toronto area)
financial planner and so far every one I've found seems more interested
in doing the investing for me (i.e. paid by commissions against my
investments). Without meaning to insult anyone, I have doubts as to the
advice a broker/planner will offer since it is his interest to get me to
invest in his products (the ones he represents) and that might not be
the best path for me. How do I find a planner who will give unbiased,
independent advice?


Some years back I was in the same position as you, and I can assure you
everything you are saying is true. You are taking the right approach.
Finding a "fee only" financial advisor is not easy, and my wife and I
eventually stopped looking. But now we are glad we did, because we soon
discovered that "doing it yourself" is not at all as difficult as you might
think. If you spend a little more time reading and asking questions like you
just did, you may find that you can handle it all on your own.



  #3  
Old September 26th 03, 05:19 PM
Don Zimmerman
external usenet poster
 
Posts: n/a
Default

"Jim" wrote in message
.. .
Hi Folks,

I have a need to get organized with a view toward retirement. I've never
used a financial planner before, and have questions. Please understand
that I am an engineer at heart, and have little experience in the area
of financial planning and portfolio management. I am on a learning curve
here, in advance of retirement.

1)It appears from all that I've read, that my interests will be far
better served in paying a planner to direct me while leaving the job of
arranging my portfolio to me. I like that idea because I learn from the
experience (hopefully not by my mistakes). Am I correct in assuming that
it will be a less costly route for me (assuming I don't screw up) since
commissions won't be payable to a financial planner acting as a broker?
I'll pay for his/her time only right?

2) I've been searching the web looking for a Canadian (Toronto area)
financial planner and so far every one I've found seems more interested
in doing the investing for me (i.e. paid by commissions against my
investments). Without meaning to insult anyone, I have doubts as to the
advice a broker/planner will offer since it is his interest to get me to
invest in his products (the ones he represents) and that might not be
the best path for me. How do I find a planner who will give unbiased,
independent advice?


Some years back I was in the same position as you, and I can assure you
everything you are saying is true. You are taking the right approach.
Finding a "fee only" financial advisor is not easy, and my wife and I
eventually stopped looking. But now we are glad we did, because we soon
discovered that "doing it yourself" is not at all as difficult as you might
think. If you spend a little more time reading and asking questions like you
just did, you may find that you can handle it all on your own.



  #4  
Old September 27th 03, 03:33 AM
Tony Wright
external usenet poster
 
Posts: n/a
Default

I was in exactly your position 18 months ago. Two years off retirement and
had never made any real financial plans for retirement. Coincidently I am
also an engineer.
I started off writing my own very crude spread sheet to see how far my
RRSP's and pensions etc would get me after retirement. I started by assuming
a conservative 5% return on my investments and 70% of final earned income
required during retirement. To my surprise my plan seemed to look quite
feasible but I was left with two nagging doubts
1) Was my plan missing something or was I making wrong assumptions
2) I really needed investment advice to make sure the returns were actually
realized. I had only ever bought mutual funds in the past and had no real
investment experience.

I hooked up with a fee for service planner who was recommended by a friend.
I never even considered a commissioned financial planner, there is no way
you will get unbiased advice. The planner took all my information and
plugged it into a fancy program that spat out fancy coloured graphs etc.
Guess what - the answer was the same as my crude spread sheet! He
recommended an overall portfolio bonds/stocks/income trusts/ preferred
shares etc but I have since realized that this kind of portfolio advice is
available all over the internet. He said he wasn't licensed to give direct
investment advice so he recommended a full service broker. The broker took
over all my accounts and recommended specific investments to match the
portfolio suggested by the planner. The portfolio has been in place 6 months
and has done quite well but the broker would have had to have been an idiot
not to make money over the last 6 months. The broker commissions are
horrendous!

All I have really got from the planner and broker is the realization that
the planning/investment process is well within my own capability. To be
fair, they gave me some basic information and more importantly helped me
realize that they brought nothing special to the table. Without them I would
always have been wondering if I was missing something.

I now have my own E-trade accounts and yesterday e-mailed the broker to tell
him I was canceling all my accounts with him. The E-trade commissions are
much lower and I have flexibility and freedom to do things my way. The
planner doesn't know it yet but he is history as well. I won't be renewing
in December.

The whole planning/investment/tax thing is nothing like as difficult as you
think. If you have worked as an engineer you are well capable of doing your
own research and making your own financial decisions. There is lots of
research that shows financial advisors are right less than 50% of the time,
you will do better tossing a coin. Join several of the many investment
forums on the internet and subscribe to a service like Globeinvestor Gold.
Get an on-line discount brokerage account and start trading. You will learn
quickly by doing. It's also a lot of fun.

That's my experience, I hope it helps
Tony



"Jim" wrote in message
.. .
Hi Folks,

I have a need to get organized with a view toward retirement. I've never
used a financial planner before, and have questions. Please understand
that I am an engineer at heart, and have little experience in the area
of financial planning and portfolio management. I am on a learning curve
here, in advance of retirement.

1)It appears from all that I've read, that my interests will be far
better served in paying a planner to direct me while leaving the job of
arranging my portfolio to me. I like that idea because I learn from the
experience (hopefully not by my mistakes). Am I correct in assuming that
it will be a less costly route for me (assuming I don't screw up) since
commissions won't be payable to a financial planner acting as a broker?
I'll pay for his/her time only right?

2) I've been searching the web looking for a Canadian (Toronto area)
financial planner and so far every one I've found seems more interested
in doing the investing for me (i.e. paid by commissions against my
investments). Without meaning to insult anyone, I have doubts as to the
advice a broker/planner will offer since it is his interest to get me to
invest in his products (the ones he represents) and that might not be
the best path for me. How do I find a planner who will give unbiased,
independent advice?

Any words of wisdom in respect to my questions or general words of
wisdom will be gratefully received.

Thanks




  #5  
Old September 27th 03, 03:33 AM
Tony Wright
external usenet poster
 
Posts: n/a
Default

I was in exactly your position 18 months ago. Two years off retirement and
had never made any real financial plans for retirement. Coincidently I am
also an engineer.
I started off writing my own very crude spread sheet to see how far my
RRSP's and pensions etc would get me after retirement. I started by assuming
a conservative 5% return on my investments and 70% of final earned income
required during retirement. To my surprise my plan seemed to look quite
feasible but I was left with two nagging doubts
1) Was my plan missing something or was I making wrong assumptions
2) I really needed investment advice to make sure the returns were actually
realized. I had only ever bought mutual funds in the past and had no real
investment experience.

I hooked up with a fee for service planner who was recommended by a friend.
I never even considered a commissioned financial planner, there is no way
you will get unbiased advice. The planner took all my information and
plugged it into a fancy program that spat out fancy coloured graphs etc.
Guess what - the answer was the same as my crude spread sheet! He
recommended an overall portfolio bonds/stocks/income trusts/ preferred
shares etc but I have since realized that this kind of portfolio advice is
available all over the internet. He said he wasn't licensed to give direct
investment advice so he recommended a full service broker. The broker took
over all my accounts and recommended specific investments to match the
portfolio suggested by the planner. The portfolio has been in place 6 months
and has done quite well but the broker would have had to have been an idiot
not to make money over the last 6 months. The broker commissions are
horrendous!

All I have really got from the planner and broker is the realization that
the planning/investment process is well within my own capability. To be
fair, they gave me some basic information and more importantly helped me
realize that they brought nothing special to the table. Without them I would
always have been wondering if I was missing something.

I now have my own E-trade accounts and yesterday e-mailed the broker to tell
him I was canceling all my accounts with him. The E-trade commissions are
much lower and I have flexibility and freedom to do things my way. The
planner doesn't know it yet but he is history as well. I won't be renewing
in December.

The whole planning/investment/tax thing is nothing like as difficult as you
think. If you have worked as an engineer you are well capable of doing your
own research and making your own financial decisions. There is lots of
research that shows financial advisors are right less than 50% of the time,
you will do better tossing a coin. Join several of the many investment
forums on the internet and subscribe to a service like Globeinvestor Gold.
Get an on-line discount brokerage account and start trading. You will learn
quickly by doing. It's also a lot of fun.

That's my experience, I hope it helps
Tony



"Jim" wrote in message
.. .
Hi Folks,

I have a need to get organized with a view toward retirement. I've never
used a financial planner before, and have questions. Please understand
that I am an engineer at heart, and have little experience in the area
of financial planning and portfolio management. I am on a learning curve
here, in advance of retirement.

1)It appears from all that I've read, that my interests will be far
better served in paying a planner to direct me while leaving the job of
arranging my portfolio to me. I like that idea because I learn from the
experience (hopefully not by my mistakes). Am I correct in assuming that
it will be a less costly route for me (assuming I don't screw up) since
commissions won't be payable to a financial planner acting as a broker?
I'll pay for his/her time only right?

2) I've been searching the web looking for a Canadian (Toronto area)
financial planner and so far every one I've found seems more interested
in doing the investing for me (i.e. paid by commissions against my
investments). Without meaning to insult anyone, I have doubts as to the
advice a broker/planner will offer since it is his interest to get me to
invest in his products (the ones he represents) and that might not be
the best path for me. How do I find a planner who will give unbiased,
independent advice?

Any words of wisdom in respect to my questions or general words of
wisdom will be gratefully received.

Thanks




  #6  
Old September 27th 03, 05:09 PM
Don Zimmerman
external usenet poster
 
Posts: n/a
Default

"Tony Wright" wrote in message
.. .
I was in exactly your position 18 months ago. Two years off retirement and
had never made any real financial plans for retirement. Coincidently I am
also an engineer.
I started off writing my own very crude spread sheet to see how far my
RRSP's and pensions etc would get me after retirement. I started by

assuming
a conservative 5% return on my investments and 70% of final earned income
required during retirement. To my surprise my plan seemed to look quite
feasible but I was left with two nagging doubts
1) Was my plan missing something or was I making wrong assumptions
2) I really needed investment advice to make sure the returns were

actually
realized. I had only ever bought mutual funds in the past and had no real
investment experience.

I hooked up with a fee for service planner who was recommended by a

friend.
I never even considered a commissioned financial planner, there is no way
you will get unbiased advice. The planner took all my information and
plugged it into a fancy program that spat out fancy coloured graphs etc.
Guess what - the answer was the same as my crude spread sheet! He
recommended an overall portfolio bonds/stocks/income trusts/ preferred
shares etc but I have since realized that this kind of portfolio advice is
available all over the internet. He said he wasn't licensed to give direct
investment advice so he recommended a full service broker. The broker took
over all my accounts and recommended specific investments to match the
portfolio suggested by the planner. The portfolio has been in place 6

months
and has done quite well but the broker would have had to have been an

idiot
not to make money over the last 6 months. The broker commissions are
horrendous!

All I have really got from the planner and broker is the realization that
the planning/investment process is well within my own capability. To be
fair, they gave me some basic information and more importantly helped me
realize that they brought nothing special to the table. Without them I

would
always have been wondering if I was missing something.

I now have my own E-trade accounts and yesterday e-mailed the broker to

tell
him I was canceling all my accounts with him. The E-trade commissions are
much lower and I have flexibility and freedom to do things my way. The
planner doesn't know it yet but he is history as well. I won't be renewing
in December.

The whole planning/investment/tax thing is nothing like as difficult as

you
think. If you have worked as an engineer you are well capable of doing

your
own research and making your own financial decisions. There is lots of
research that shows financial advisors are right less than 50% of the

time,
you will do better tossing a coin. Join several of the many investment
forums on the internet and subscribe to a service like Globeinvestor Gold.
Get an on-line discount brokerage account and start trading. You will

learn
quickly by doing. It's also a lot of fun.


Congratulations. You are so right. I noticed one odd thing about your
experience. Your fee-for-service financial advisor referred you to a broker
who charged large commissions for implementing the plan, but later you found
out on your own that you could do better at E-trade. If that advisor had
your interests at heart, why didn't he refer you to E-trade in the first
place? I am wondering if even some of the fee-only people could have agendas
you have to watch out for.



  #7  
Old September 27th 03, 05:09 PM
Don Zimmerman
external usenet poster
 
Posts: n/a
Default

"Tony Wright" wrote in message
.. .
I was in exactly your position 18 months ago. Two years off retirement and
had never made any real financial plans for retirement. Coincidently I am
also an engineer.
I started off writing my own very crude spread sheet to see how far my
RRSP's and pensions etc would get me after retirement. I started by

assuming
a conservative 5% return on my investments and 70% of final earned income
required during retirement. To my surprise my plan seemed to look quite
feasible but I was left with two nagging doubts
1) Was my plan missing something or was I making wrong assumptions
2) I really needed investment advice to make sure the returns were

actually
realized. I had only ever bought mutual funds in the past and had no real
investment experience.

I hooked up with a fee for service planner who was recommended by a

friend.
I never even considered a commissioned financial planner, there is no way
you will get unbiased advice. The planner took all my information and
plugged it into a fancy program that spat out fancy coloured graphs etc.
Guess what - the answer was the same as my crude spread sheet! He
recommended an overall portfolio bonds/stocks/income trusts/ preferred
shares etc but I have since realized that this kind of portfolio advice is
available all over the internet. He said he wasn't licensed to give direct
investment advice so he recommended a full service broker. The broker took
over all my accounts and recommended specific investments to match the
portfolio suggested by the planner. The portfolio has been in place 6

months
and has done quite well but the broker would have had to have been an

idiot
not to make money over the last 6 months. The broker commissions are
horrendous!

All I have really got from the planner and broker is the realization that
the planning/investment process is well within my own capability. To be
fair, they gave me some basic information and more importantly helped me
realize that they brought nothing special to the table. Without them I

would
always have been wondering if I was missing something.

I now have my own E-trade accounts and yesterday e-mailed the broker to

tell
him I was canceling all my accounts with him. The E-trade commissions are
much lower and I have flexibility and freedom to do things my way. The
planner doesn't know it yet but he is history as well. I won't be renewing
in December.

The whole planning/investment/tax thing is nothing like as difficult as

you
think. If you have worked as an engineer you are well capable of doing

your
own research and making your own financial decisions. There is lots of
research that shows financial advisors are right less than 50% of the

time,
you will do better tossing a coin. Join several of the many investment
forums on the internet and subscribe to a service like Globeinvestor Gold.
Get an on-line discount brokerage account and start trading. You will

learn
quickly by doing. It's also a lot of fun.


Congratulations. You are so right. I noticed one odd thing about your
experience. Your fee-for-service financial advisor referred you to a broker
who charged large commissions for implementing the plan, but later you found
out on your own that you could do better at E-trade. If that advisor had
your interests at heart, why didn't he refer you to E-trade in the first
place? I am wondering if even some of the fee-only people could have agendas
you have to watch out for.



  #8  
Old September 27th 03, 09:27 PM
DMacD
external usenet poster
 
Posts: n/a
Default

"Don Zimmerman" wrote in
:

"Tony Wright" wrote in message
.. .
I was in exactly your position 18 months ago. Two years off
retirement and had never made any real financial plans for
retirement. Coincidently I am also an engineer.
I started off writing my own very crude spread sheet to see how far
my RRSP's and pensions etc would get me after retirement. I started
by

assuming
a conservative 5% return on my investments and 70% of final earned
income required during retirement. To my surprise my plan seemed to
look quite feasible but I was left with two nagging doubts
1) Was my plan missing something or was I making wrong assumptions
2) I really needed investment advice to make sure the returns were

actually
realized. I had only ever bought mutual funds in the past and had no
real investment experience.

I hooked up with a fee for service planner who was recommended by a

friend.
I never even considered a commissioned financial planner, there is no
way you will get unbiased advice. The planner took all my information
and plugged it into a fancy program that spat out fancy coloured
graphs etc. Guess what - the answer was the same as my crude spread
sheet! He recommended an overall portfolio bonds/stocks/income
trusts/ preferred shares etc but I have since realized that this kind
of portfolio advice is available all over the internet. He said he
wasn't licensed to give direct investment advice so he recommended a
full service broker. The broker took over all my accounts and
recommended specific investments to match the portfolio suggested by
the planner. The portfolio has been in place 6

months
and has done quite well but the broker would have had to have been an

idiot
not to make money over the last 6 months. The broker commissions are
horrendous!

All I have really got from the planner and broker is the realization
that the planning/investment process is well within my own
capability. To be fair, they gave me some basic information and more
importantly helped me realize that they brought nothing special to
the table. Without them I

would
always have been wondering if I was missing something.

I now have my own E-trade accounts and yesterday e-mailed the broker
to

tell
him I was canceling all my accounts with him. The E-trade commissions
are much lower and I have flexibility and freedom to do things my
way. The planner doesn't know it yet but he is history as well. I
won't be renewing in December.

The whole planning/investment/tax thing is nothing like as difficult
as

you
think. If you have worked as an engineer you are well capable of
doing

your
own research and making your own financial decisions. There is lots
of research that shows financial advisors are right less than 50% of
the

time,
you will do better tossing a coin. Join several of the many
investment forums on the internet and subscribe to a service like
Globeinvestor Gold. Get an on-line discount brokerage account and
start trading. You will

learn
quickly by doing. It's also a lot of fun.


Congratulations. You are so right. I noticed one odd thing about your
experience. Your fee-for-service financial advisor referred you to a
broker who charged large commissions for implementing the plan, but
later you found out on your own that you could do better at E-trade.
If that advisor had your interests at heart, why didn't he refer you
to E-trade in the first place? I am wondering if even some of the
fee-only people could have agendas you have to watch out for.


I have received advise from professional advisors and investors. I think
the best advise that I received was from an investor friend that I have.
He isn't filthy rich but he has had enough savy to make money in good
times and avoid losing lots of money in bad times. He didn't give me
specific investment tips as his investment style was probably not suited
for me. What he did say when it came to investing was a few simple
rules:

1. Don't be gready! Hanging in on a high flying stock too long will
ultimately result in a loss. Set profit taking points.

2. Watch what other investors are doing and consider doing the opposite.
When people are rushing to stocks or bonds, it usually means the
stocks/bonds are becoming over-priced. That's the time to have a
structured plan to sell portions of the stock as prices rise. The
reverse is true also. As a headsup, one way of doing this is to also
watch what the executives of a company are doing. Executives of large
corporations must disclose their trades of company stocks to the Security
commission where their stocks are traded. This becomes public knowledge.
Generally, if they are selling, it's usually a sign that the company may
be heading for some tough times. If they are buying the reverse may be
the case.

3. Buy quality and understand what you are buying. Look for stocks that
have a long history of earnings and before you buy, understand the
company and what they do. Are they an industry leader? Do you buy their
product? If so...why? You minimize your risk when you buy a quality
product.

4. If an investment sounds too good to be true (high return for little
investment) it probably is.

5. Understand your risk tolerance. If you can't deal with possibly
loosing your entire investment, then choose a safer investment. Your
returns may be smaller but you will sleep better at night.

6. Be aware of fees. Unless you want to get into day-trading, invest
for the long term. Day-traders understand the cost of trading stocks vs
the potential payout. Those of us(like myself) that have a lot to learn
about trading should buy quality stocks that move at a slower steady pace
and hold them for the long term. Fees on trading will eat away at your
profits. Likewise, high MERs on mutual funds do the same thing.

7. Diversify. Hold a well balanced portfolio of stocks, bonds and GICs,
etc. that mirrors your risk tolerance. On the stock side either use an
ETF (Exchange Traded Fund low MERs) that mirrors an stock index or
purchase quality stocks. Don't own too many stocks that you can't keep
up with current news. Owning 10 or so quality stocks that you can follow
the news on is better than owning a 30-40 or 50 stocks that you can't
keep up current events.

8. If you don't understand the cycle of cyclical stocks (energy stocks,
resource stocks) then stay out of it. Getting in at the wrong end of the
cycle can be disasterous. Buy quality industrial or retail companies that
tend to have steady profits no matter what time of the year/cycle your
in. Buy stocks in companies that people have to buy their products
irrelevant of what is happening in the world. (eg. no matter what
happens, everyone must eat. Hence grocery chains, etc.)

9. Pay particular attention to the return on the investment before you
buy. The P/E (Price to Earnings) ratio of a stock, will tell you how
long it will take for you to get your investment back. The P/E ratio is
the price of the share divided by the projected earnings. The result is
how many years it will take you to get your investment back if you held
onto the stock. Not many people are willing to wait 20 or so years to
get their money back. Hence a P/E ration of 20 or more will indicate that
the stock is over-priced (or as some say Over Sold) while a P/E ratio of
around 15 is deemed to be about par. Below 15 stocks are usually under-
valued (some say Under Sold). Although this is only a part of what you
should be looking at when buying stocks, it's a good indicator of what's
a good deal or not. As an FYI... the S&P/TSX index of companies is
currently sitting at about a P/E Ratio of 30. A little over priced for
my liking.

10. The most important rule is....be skeptical of what you read on the
internet (including what I am writing). Take it and perform an acid test
on the concepts then formulate your own opinion. Take nothing as gospel
as the views may work for that person and not you. There are many places
to try out concepts for free. Sign up to Globeinvestor, MoneySense,
Yahoo Money etc. to name a few that charge no fees and create a portfolio
with play money. See how the concept operates and once satisfied you are
comfortable with it, start using your own money.

As I am not a financial advisor, these are just my views only and I do
not want anyone to take it and run with it without investigating deeper.

DGM

  #9  
Old September 27th 03, 09:27 PM
DMacD
external usenet poster
 
Posts: n/a
Default

"Don Zimmerman" wrote in
:

"Tony Wright" wrote in message
.. .
I was in exactly your position 18 months ago. Two years off
retirement and had never made any real financial plans for
retirement. Coincidently I am also an engineer.
I started off writing my own very crude spread sheet to see how far
my RRSP's and pensions etc would get me after retirement. I started
by

assuming
a conservative 5% return on my investments and 70% of final earned
income required during retirement. To my surprise my plan seemed to
look quite feasible but I was left with two nagging doubts
1) Was my plan missing something or was I making wrong assumptions
2) I really needed investment advice to make sure the returns were

actually
realized. I had only ever bought mutual funds in the past and had no
real investment experience.

I hooked up with a fee for service planner who was recommended by a

friend.
I never even considered a commissioned financial planner, there is no
way you will get unbiased advice. The planner took all my information
and plugged it into a fancy program that spat out fancy coloured
graphs etc. Guess what - the answer was the same as my crude spread
sheet! He recommended an overall portfolio bonds/stocks/income
trusts/ preferred shares etc but I have since realized that this kind
of portfolio advice is available all over the internet. He said he
wasn't licensed to give direct investment advice so he recommended a
full service broker. The broker took over all my accounts and
recommended specific investments to match the portfolio suggested by
the planner. The portfolio has been in place 6

months
and has done quite well but the broker would have had to have been an

idiot
not to make money over the last 6 months. The broker commissions are
horrendous!

All I have really got from the planner and broker is the realization
that the planning/investment process is well within my own
capability. To be fair, they gave me some basic information and more
importantly helped me realize that they brought nothing special to
the table. Without them I

would
always have been wondering if I was missing something.

I now have my own E-trade accounts and yesterday e-mailed the broker
to

tell
him I was canceling all my accounts with him. The E-trade commissions
are much lower and I have flexibility and freedom to do things my
way. The planner doesn't know it yet but he is history as well. I
won't be renewing in December.

The whole planning/investment/tax thing is nothing like as difficult
as

you
think. If you have worked as an engineer you are well capable of
doing

your
own research and making your own financial decisions. There is lots
of research that shows financial advisors are right less than 50% of
the

time,
you will do better tossing a coin. Join several of the many
investment forums on the internet and subscribe to a service like
Globeinvestor Gold. Get an on-line discount brokerage account and
start trading. You will

learn
quickly by doing. It's also a lot of fun.


Congratulations. You are so right. I noticed one odd thing about your
experience. Your fee-for-service financial advisor referred you to a
broker who charged large commissions for implementing the plan, but
later you found out on your own that you could do better at E-trade.
If that advisor had your interests at heart, why didn't he refer you
to E-trade in the first place? I am wondering if even some of the
fee-only people could have agendas you have to watch out for.


I have received advise from professional advisors and investors. I think
the best advise that I received was from an investor friend that I have.
He isn't filthy rich but he has had enough savy to make money in good
times and avoid losing lots of money in bad times. He didn't give me
specific investment tips as his investment style was probably not suited
for me. What he did say when it came to investing was a few simple
rules:

1. Don't be gready! Hanging in on a high flying stock too long will
ultimately result in a loss. Set profit taking points.

2. Watch what other investors are doing and consider doing the opposite.
When people are rushing to stocks or bonds, it usually means the
stocks/bonds are becoming over-priced. That's the time to have a
structured plan to sell portions of the stock as prices rise. The
reverse is true also. As a headsup, one way of doing this is to also
watch what the executives of a company are doing. Executives of large
corporations must disclose their trades of company stocks to the Security
commission where their stocks are traded. This becomes public knowledge.
Generally, if they are selling, it's usually a sign that the company may
be heading for some tough times. If they are buying the reverse may be
the case.

3. Buy quality and understand what you are buying. Look for stocks that
have a long history of earnings and before you buy, understand the
company and what they do. Are they an industry leader? Do you buy their
product? If so...why? You minimize your risk when you buy a quality
product.

4. If an investment sounds too good to be true (high return for little
investment) it probably is.

5. Understand your risk tolerance. If you can't deal with possibly
loosing your entire investment, then choose a safer investment. Your
returns may be smaller but you will sleep better at night.

6. Be aware of fees. Unless you want to get into day-trading, invest
for the long term. Day-traders understand the cost of trading stocks vs
the potential payout. Those of us(like myself) that have a lot to learn
about trading should buy quality stocks that move at a slower steady pace
and hold them for the long term. Fees on trading will eat away at your
profits. Likewise, high MERs on mutual funds do the same thing.

7. Diversify. Hold a well balanced portfolio of stocks, bonds and GICs,
etc. that mirrors your risk tolerance. On the stock side either use an
ETF (Exchange Traded Fund low MERs) that mirrors an stock index or
purchase quality stocks. Don't own too many stocks that you can't keep
up with current news. Owning 10 or so quality stocks that you can follow
the news on is better than owning a 30-40 or 50 stocks that you can't
keep up current events.

8. If you don't understand the cycle of cyclical stocks (energy stocks,
resource stocks) then stay out of it. Getting in at the wrong end of the
cycle can be disasterous. Buy quality industrial or retail companies that
tend to have steady profits no matter what time of the year/cycle your
in. Buy stocks in companies that people have to buy their products
irrelevant of what is happening in the world. (eg. no matter what
happens, everyone must eat. Hence grocery chains, etc.)

9. Pay particular attention to the return on the investment before you
buy. The P/E (Price to Earnings) ratio of a stock, will tell you how
long it will take for you to get your investment back. The P/E ratio is
the price of the share divided by the projected earnings. The result is
how many years it will take you to get your investment back if you held
onto the stock. Not many people are willing to wait 20 or so years to
get their money back. Hence a P/E ration of 20 or more will indicate that
the stock is over-priced (or as some say Over Sold) while a P/E ratio of
around 15 is deemed to be about par. Below 15 stocks are usually under-
valued (some say Under Sold). Although this is only a part of what you
should be looking at when buying stocks, it's a good indicator of what's
a good deal or not. As an FYI... the S&P/TSX index of companies is
currently sitting at about a P/E Ratio of 30. A little over priced for
my liking.

10. The most important rule is....be skeptical of what you read on the
internet (including what I am writing). Take it and perform an acid test
on the concepts then formulate your own opinion. Take nothing as gospel
as the views may work for that person and not you. There are many places
to try out concepts for free. Sign up to Globeinvestor, MoneySense,
Yahoo Money etc. to name a few that charge no fees and create a portfolio
with play money. See how the concept operates and once satisfied you are
comfortable with it, start using your own money.

As I am not a financial advisor, these are just my views only and I do
not want anyone to take it and run with it without investigating deeper.

DGM

  #10  
Old September 27th 03, 10:51 PM
Don Zimmerman
external usenet poster
 
Posts: n/a
Default

"DMacD" wrote in message
...

I have received advise from professional advisors and investors. I think
the best advise that I received was from an investor friend that I have.
He isn't filthy rich but he has had enough savy to make money in good
times and avoid losing lots of money in bad times. He didn't give me
specific investment tips as his investment style was probably not suited
for me. What he did say when it came to investing was a few simple
rules:

1. Don't be gready! Hanging in on a high flying stock too long will
ultimately result in a loss. Set profit taking points.

2. Watch what other investors are doing and consider doing the opposite.
When people are rushing to stocks or bonds, it usually means the
stocks/bonds are becoming over-priced. That's the time to have a
structured plan to sell portions of the stock as prices rise. The
reverse is true also. As a headsup, one way of doing this is to also
watch what the executives of a company are doing. Executives of large
corporations must disclose their trades of company stocks to the Security
commission where their stocks are traded. This becomes public knowledge.
Generally, if they are selling, it's usually a sign that the company may
be heading for some tough times. If they are buying the reverse may be
the case.

3. Buy quality and understand what you are buying. Look for stocks that
have a long history of earnings and before you buy, understand the
company and what they do. Are they an industry leader? Do you buy their
product? If so...why? You minimize your risk when you buy a quality
product.

4. If an investment sounds too good to be true (high return for little
investment) it probably is.

5. Understand your risk tolerance. If you can't deal with possibly
loosing your entire investment, then choose a safer investment. Your
returns may be smaller but you will sleep better at night.

6. Be aware of fees. Unless you want to get into day-trading, invest
for the long term. Day-traders understand the cost of trading stocks vs
the potential payout. Those of us(like myself) that have a lot to learn
about trading should buy quality stocks that move at a slower steady pace
and hold them for the long term. Fees on trading will eat away at your
profits. Likewise, high MERs on mutual funds do the same thing.

7. Diversify. Hold a well balanced portfolio of stocks, bonds and GICs,
etc. that mirrors your risk tolerance. On the stock side either use an
ETF (Exchange Traded Fund low MERs) that mirrors an stock index or
purchase quality stocks. Don't own too many stocks that you can't keep
up with current news. Owning 10 or so quality stocks that you can follow
the news on is better than owning a 30-40 or 50 stocks that you can't
keep up current events.

8. If you don't understand the cycle of cyclical stocks (energy stocks,
resource stocks) then stay out of it. Getting in at the wrong end of the
cycle can be disasterous. Buy quality industrial or retail companies that
tend to have steady profits no matter what time of the year/cycle your
in. Buy stocks in companies that people have to buy their products
irrelevant of what is happening in the world. (eg. no matter what
happens, everyone must eat. Hence grocery chains, etc.)

9. Pay particular attention to the return on the investment before you
buy. The P/E (Price to Earnings) ratio of a stock, will tell you how
long it will take for you to get your investment back. The P/E ratio is
the price of the share divided by the projected earnings. The result is
how many years it will take you to get your investment back if you held
onto the stock. Not many people are willing to wait 20 or so years to
get their money back. Hence a P/E ration of 20 or more will indicate that
the stock is over-priced (or as some say Over Sold) while a P/E ratio of
around 15 is deemed to be about par. Below 15 stocks are usually under-
valued (some say Under Sold). Although this is only a part of what you
should be looking at when buying stocks, it's a good indicator of what's
a good deal or not. As an FYI... the S&P/TSX index of companies is
currently sitting at about a P/E Ratio of 30. A little over priced for
my liking.

10. The most important rule is....be skeptical of what you read on the
internet (including what I am writing). Take it and perform an acid test
on the concepts then formulate your own opinion. Take nothing as gospel
as the views may work for that person and not you. There are many places
to try out concepts for free. Sign up to Globeinvestor, MoneySense,
Yahoo Money etc. to name a few that charge no fees and create a portfolio
with play money. See how the concept operates and once satisfied you are
comfortable with it, start using your own money.

As I am not a financial advisor, these are just my views only and I do
not want anyone to take it and run with it without investigating deeper.


Good! I like that! I agree with everything you say.



The only slight qualification I would have is your number #2. I sort of
think that if you do you follow #3, then #2 will be unnecessary. It is
probably basically true that when hoardes are buying is the time to sell and
vice versa, but in practice it is difficult to jump in and out at the right
time. If you buy quality for the long term, then frequent trading is
unnecessary. Of course, if you want to do it for fun and can afford to take
losses, that is another matter.



One thing I would like to add to your list, especially for a new investor,
is to investigate dividend reinvestment plans (DRIPS). These avoid fees and
management expenses and, if you select good sound companies with a history
of rising dividends, all your money goes to work and you have compounding
over the long term with not much risk.



 




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