For many people it’s almost impossible not to have opinions about stocks. Even those who use a low-cost indexing approach to investing like me find themselves with a strong opinion about a company’s prospects from time to time. For those who commit real money to their opinions, I have a suggested mindset for trading. Imagine an office building with 1000 people working away on clusters of the latest powerful computers. The workers are former physicists. String theory wasn’t challenging enough for them and they went looking for greater mathematical challenges. Now they are all working together developing advanced trading strategies. The next time you trade an equity imagine these former physicists being on the other side of the trade selling whatever you’re buying or buying whatever you’re selling. I’m not saying this just to scare readers; this is a fairly accurate depiction of the trading universe. I’m a believer in owning equities and taking some investment risks, but tra...

Readers of investing blogs tend to be those who enjoy spending time thinking and talking about investing. However, most people would rather talk about foot fungus than investing. These people see investing as a necessary evil and want to handle it in the easiest possible way. It seems like a no-brainer that the easiest way to invest is to hand your money over to a financial advisor and just do whatever he or she says. Even if we ignore the high cost of paying the typical advisor, I’m not convinced that the answer is this obvious. The term “DIY investor” conjures up images of a group of people boring their spouses at a party with endless talk of whether Apple or Google stock will go up or down. But it doesn’t have to be this way. An investment portfolio can be just about as simple as a bank account. For example, an investor could just divide investment funds into thirds: one-third for a Canadian stock index, another for a U.S. stock index, and the last for a bond index. New ...

The National Post reports that a politician in Glooscap First Nation in Nova Scotia is paid $978,468 per year. This is very high, but sounds much worse when considering that the reserve has only 300 members. It gets worse, though. Apparently only 87 members actually live in the community. With a little math these numbers lead to a suggestion that would probably help these 87 people greatly. Perhaps we could get rid of the politician and divide the pay equally among the residents. This works out to $11,246 per person per year. I’m guessing that these people would be better off with the money than whatever service the politician provides.

Many people are unhappy with the size of their cell phone bills but imagine the shock a Quebec woman got when she was charged $47,000! Her story had a happy ending, but many others whose stories don’t make the news aren’t so lucky. From an informal poll of a few friends it seems that getting hit with an unexpectedly high cell phone bill is quite common. Maybe they’re not as high as $47,000, but they are higher than anticipated. This happens often enough that it seems to be part of the business plan of cell phone providers. A useful feature to protect cell phone users would be a monthly cap. If I expect my usual cell phone bill to be $100, I might volunteer for a feature where my service gets shut off if my monthly bill hits say $500. The idea is that this would be an immediate cut-off so that my bill could never exceed $500. This would only happen if I were being hit with some expensive charge that I didn’t understand in advance. Some people wouldn’t want such a feature, bu...

Preferred shares are tempting for fixed income investors mainly because they pay higher returns than many other fixed-income investments. These higher returns come with the inevitable higher risks. BlackRock has helped to spread the risk by coming out with a new exchange-traded fund called XPF that tracks the S&P/TSX North American Preferred Stock Index. The downside is the cost. The management fee is 0.45%, which is fairly high for an index ETF. The HST adds a little more: 0.03%. Then there is the currency hedging. Half the fund is invested in U.S. preferred shares and the currency exposure is hedged back to Canadian dollars. Such hedging usually seems to cause tracking errors in fund returns. Another thing to consider is that while XPF has 120 underlying holdings, they are from a relatively small number of companies. For example, I counted 18 holdings of various Royal Bank preferred shares. Presumably, if there is risk of default on one Royal Bank preferred share, th...

With much fanfare, the new GM Company had an initial public offering (IPO) last week. Sadly, some shareholders of the old General Motors Corporation think that their old shares will be converted into the new GM shares that closed Friday at US$34.26 per share. This will not happen. The old GM Corporation was renamed to the Motors Liquidation Company as part of its bankruptcy process. All the old GM stock was renamed MTLQQ. These shares closed on Friday at 18.46 U.S. cents per share. The Motors Liquidation Company sold its assets to the new GM Company. The ultimate value of the MTLQQ will be decided after the bickering among old GM’s creditors is done. This value is likely to be very low and will have nothing to do with the shares in the new GM Company. So, in a couple of steps, General Motors Corporation has restored its name to the same initials. However, the old one was “Corporation” and the new one is “Company”. In the shuffle, the old shareholders are left with very li...

New research suggests a strong correlation between math skills and wealth . Other skills such as a good memory had far weaker correlation with wealth. Big Cajun Man runs the numbers on taking the bus versus driving to work. Despite the fact that the numbers strongly favour the bus, he explains why he continues to drive.