Before I talk about the trade, I want to thank DSF for the mention in his recent video that you can watch by clicking on this link recent video about dividend investing .
This past month I was paying attention to some issues that might affect the Canadian banks. Alberta, the economic engine of Canada, is a province in western Canada which has lots of oil in the ground still, even after years of exploration. With the decline in world oil prices over the past several months the oil industry has slowed down and ten of thousands of layoffs. These layoffs have been at corporate offices, drilling services, oilfield service companies and any other company that services the energy sector.
Also during the month, was anticipation of the provincial budget of the government of Alberta. The premier of Alberta, has warned the budget will be drastic and might need a mandate from the people of Alberta to implement it. During the time Jim Prentice has been Premier of Alberta, the price of oil started at around $92 a barrel in mid September 2014. The price of oil has since dropped to about $45 a barrel. Industry is saying that the price of oil could remain low for 2 to 3 years. In the budget released on the 26th of March, there were lots of hikes in user fees, more expensive fines, and the people who make more where asked to pay a little more. I believe this will affect housing, along with the current oil prices, to some degree. The government of Alberta has increase the price of liquor, cigarettes and gasoline.
So What Did I Decide To Do?
I could of decided to invest directly in the energy companies to buy them at a lower price. But instead I decided to go a safer route with purchasing a Canadian bank. With a lot of energy companies having loans with the banks, this will effect the price of the stocks for Canadian Banks. I did not purchase a bank directly instead use call options.
On Mar 27, 2015 I bought 2 contracts for May 15, 2015 TD Call with a $54.00 strike price for a premium of $181.95 including commissions. As I purchased the contracts, I pay the premium for having the right but not the obligation to purchase 200 shares of TD at the strike price prior to or on expiration day. This trade will be in my TFSA.
Disclosure: Long TD (margin account)
DISCLAIMER
I
am not a financial planner, financial advisor, accountant or tax
attorney. The information on this blog represents my own thoughts and
opinions and should NOT be taken as investment or business advice.
Every
individual should do their due diligence to make their own financial
decisions based on their financial situation and tolerance for risk.
Sunday, March 29, 2015
Monday, March 23, 2015
Where To Put Your Money?
A coworker of mine recently stated that the put money into RRSPs. I asked here why? She said to reduce her taxes. Where am I going with this?
Looking At Things Different
A few years back, I came across a book at the book store in the financial section. When I noticed the title I remember I saw the author on the Oprah Winfrey Show. The book in question is Rich Dad Poor Dad by Robert Kiyosaki. The book challenges your beliefs about money and gets you to look at money in a different mind set. So I bought the book and took it home. I read it but never took action. My biggest lesson I took from this experience is that you can read all the books or attend seminars on investing, trading, rental real estate and entrepreneurship that you can get your hands on, but nothing will happen unless your take ACTION!!!!. So after reading the book, I did not take action out of fear.
A few years after this book reading, I heard about Canada's Youngest Retiree Derek Foster. Derek Foster is just an average guy who escaped the rat race at the age of 34. Derek didn't invest in RRSPs as it didn't make sense to him as he was in the lower tax bracket. Derek also wanted to retire early as he did not like working. He invested in stocks that paid dividends and income trusts and REITs that paid distributions. A couple of things helped him a long the way. Derek purchased a huge amount of shares on margin in a cigarette company after the stock tanked due to a lawsuit. These shares increased in value and he sold. Another thing Derek did was take out a loan at 8.5% interest to buy RioCan REIT which was paying a 11.5 % yield and was a monthly payer. So the distribution paid the payment each month. With the distributions increasing over time the loan was paid off quick. The latter to things helped him to escape the rat race a lot sooner then just buying the stocks without any debt what so ever.
Derek became an author and started speaking about dividend investing. I think he now has 5 or 6 kids. He is still out of the rat race and him and his wife home school there children.
So What Did I Finally Decide to Do?
In the early months of 2010, I decided to take action after waking up one morning and saying to myself that I didn't want to live like this anymore. So I decided to start paying myself 30% of my income regardless of where it came from. So two thirds of the 30% went into savings and one third to investing. The money left over at the end of the month went all into the investing account.
As the savings grew and the interest rate on my bank account decreased, I paid myself first 30% of my income to the investing accounts. At the end of the month, I would pay myself first 30% of the investing accounts and 30% of the savings account. If I was cash flow positive at the end of a month, the entire interest from savings account and entire dividend amount paid for the month would stay in their respective accounts.
In an RRSP or 401k, the money is locked in. Therefore if you take it out you are penalized and have to pay tax at your marginal rate as it taxed the same as interest. So I put my money into a margin account and a TFSA account. Although a TFSA is a registered account, you deposit money with after tax dollars so the gains and income within a TFSA are tax free. For disclosure, I have put money into RRSPs in the past, but do not do it anymore.
Conclusion
After deciding to pay myself first, I found life getting less stressful as I was building passive income. The passive income has growth to about $300 a month. I get paid this money regardless of what I am doing and where I am at in the world. These companies tend to grow their earnings and therefore increase dividends to their shareholders.
I am have since moved up paying myself 35% and then recently started 37%.
For those who are interested, there is a company called Sharpe Trade LLC. This is a website that has 2 well known known people writing posts , doing podcasts and videos. There is people behind the scenes also. The two well know people also have a premium portfolios, in which they discuss why the enter a trade and exit a trade before it happens. The website is www.sharpetrade.com. On of the 2 well known people also has a portfolio in which he calls Sharpe Income. This started with $500 and $25 dollar contributions each week. This person also goes on the show his results through a PDF and a spreadsheet.
Disclosure: I have no affiliation with Sharpe Trade LLC.
DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.
Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.
Looking At Things Different
A few years back, I came across a book at the book store in the financial section. When I noticed the title I remember I saw the author on the Oprah Winfrey Show. The book in question is Rich Dad Poor Dad by Robert Kiyosaki. The book challenges your beliefs about money and gets you to look at money in a different mind set. So I bought the book and took it home. I read it but never took action. My biggest lesson I took from this experience is that you can read all the books or attend seminars on investing, trading, rental real estate and entrepreneurship that you can get your hands on, but nothing will happen unless your take ACTION!!!!. So after reading the book, I did not take action out of fear.
A few years after this book reading, I heard about Canada's Youngest Retiree Derek Foster. Derek Foster is just an average guy who escaped the rat race at the age of 34. Derek didn't invest in RRSPs as it didn't make sense to him as he was in the lower tax bracket. Derek also wanted to retire early as he did not like working. He invested in stocks that paid dividends and income trusts and REITs that paid distributions. A couple of things helped him a long the way. Derek purchased a huge amount of shares on margin in a cigarette company after the stock tanked due to a lawsuit. These shares increased in value and he sold. Another thing Derek did was take out a loan at 8.5% interest to buy RioCan REIT which was paying a 11.5 % yield and was a monthly payer. So the distribution paid the payment each month. With the distributions increasing over time the loan was paid off quick. The latter to things helped him to escape the rat race a lot sooner then just buying the stocks without any debt what so ever.
Derek became an author and started speaking about dividend investing. I think he now has 5 or 6 kids. He is still out of the rat race and him and his wife home school there children.
So What Did I Finally Decide to Do?
In the early months of 2010, I decided to take action after waking up one morning and saying to myself that I didn't want to live like this anymore. So I decided to start paying myself 30% of my income regardless of where it came from. So two thirds of the 30% went into savings and one third to investing. The money left over at the end of the month went all into the investing account.
As the savings grew and the interest rate on my bank account decreased, I paid myself first 30% of my income to the investing accounts. At the end of the month, I would pay myself first 30% of the investing accounts and 30% of the savings account. If I was cash flow positive at the end of a month, the entire interest from savings account and entire dividend amount paid for the month would stay in their respective accounts.
In an RRSP or 401k, the money is locked in. Therefore if you take it out you are penalized and have to pay tax at your marginal rate as it taxed the same as interest. So I put my money into a margin account and a TFSA account. Although a TFSA is a registered account, you deposit money with after tax dollars so the gains and income within a TFSA are tax free. For disclosure, I have put money into RRSPs in the past, but do not do it anymore.
Conclusion
After deciding to pay myself first, I found life getting less stressful as I was building passive income. The passive income has growth to about $300 a month. I get paid this money regardless of what I am doing and where I am at in the world. These companies tend to grow their earnings and therefore increase dividends to their shareholders.
I am have since moved up paying myself 35% and then recently started 37%.
For those who are interested, there is a company called Sharpe Trade LLC. This is a website that has 2 well known known people writing posts , doing podcasts and videos. There is people behind the scenes also. The two well know people also have a premium portfolios, in which they discuss why the enter a trade and exit a trade before it happens. The website is www.sharpetrade.com. On of the 2 well known people also has a portfolio in which he calls Sharpe Income. This started with $500 and $25 dollar contributions each week. This person also goes on the show his results through a PDF and a spreadsheet.
Disclosure: I have no affiliation with Sharpe Trade LLC.
DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.
Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.
Saturday, March 14, 2015
Choices You Make
When you go to the grocery store, who make choices of what your coming meals will be in the future. You can chose to buy healthy food, junk food, or a mixture of both. If you decide to go for a drive with no specific plan, every stop sign, traffic light, exit ramp on on ramp you have to make a choice on where go next.
When you get paid from a job, you have to decide what to do with the money. With a job, your first expenses is income taxes such like employment insurance, pension plan by your country, etc. An employee has no choice to pay these taxes. But after that an employee has to make all the choices of what to do with the money next.
What Do You Do Next
The next choice you make with the money determines your future. A poor person will spend it on expenses like groceries, cable, rent or mortgage, restaurants etc. A person with a poor person mindset has all their money goes out the expense column and have nothing left over a the end of month. These people pay everyone else first before they pay themselves first, which is usually nothing as nothing is left at the end.
A middle class person , who makes more money than a poor person, will have more expenses such as mortgage and car. Their money goes out the expense column as their money is used to pay for liabilities and other expenses such as groceries, entertainment etc. The middle class people will get a raise and make choices like the buying a bigger house or a new car. There is nothing wrong with this but delay gratification is needed to get ahead financially by saving and investing in income generating assets.
For an employee that has a rich person mindset, they still have no control over their income taxes from their job. They choose to pay themselves first after the income taxes deducted right off their paycheck. By paying themselves first, they can put this money in their asset column. This has to be done before you pay rent or mortgage, bills, groceries etc. These dollars placed in their asset column are "their employees". Every time you get paid, if you continue with this process of paying yourself first, your savings accounts and investing accounts will grow. Eventually you buy an asset which can generate income for you such as dividend stocks, rental real estate, mutual funds, bonds, businesses in your local community done. These dollars in your asset column are "your employees" that work for you 24/7 and never call in sick. Repeating this process over and over, you income generated by the asset column will become greater than your expenses and you are financially free. Currently right now, this is my approach to reaching financial freedom.
Is there Another Way?
If a person starts their own company by the legal entity corporation, they can use their business setup to buy their investments through a pay yourself first directly though the business structure. This allows them to grow their wealth really fast because it is more tax efficient.
DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.
Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.
When you get paid from a job, you have to decide what to do with the money. With a job, your first expenses is income taxes such like employment insurance, pension plan by your country, etc. An employee has no choice to pay these taxes. But after that an employee has to make all the choices of what to do with the money next.
What Do You Do Next
The next choice you make with the money determines your future. A poor person will spend it on expenses like groceries, cable, rent or mortgage, restaurants etc. A person with a poor person mindset has all their money goes out the expense column and have nothing left over a the end of month. These people pay everyone else first before they pay themselves first, which is usually nothing as nothing is left at the end.
A middle class person , who makes more money than a poor person, will have more expenses such as mortgage and car. Their money goes out the expense column as their money is used to pay for liabilities and other expenses such as groceries, entertainment etc. The middle class people will get a raise and make choices like the buying a bigger house or a new car. There is nothing wrong with this but delay gratification is needed to get ahead financially by saving and investing in income generating assets.
For an employee that has a rich person mindset, they still have no control over their income taxes from their job. They choose to pay themselves first after the income taxes deducted right off their paycheck. By paying themselves first, they can put this money in their asset column. This has to be done before you pay rent or mortgage, bills, groceries etc. These dollars placed in their asset column are "their employees". Every time you get paid, if you continue with this process of paying yourself first, your savings accounts and investing accounts will grow. Eventually you buy an asset which can generate income for you such as dividend stocks, rental real estate, mutual funds, bonds, businesses in your local community done. These dollars in your asset column are "your employees" that work for you 24/7 and never call in sick. Repeating this process over and over, you income generated by the asset column will become greater than your expenses and you are financially free. Currently right now, this is my approach to reaching financial freedom.
Is there Another Way?
If a person starts their own company by the legal entity corporation, they can use their business setup to buy their investments through a pay yourself first directly though the business structure. This allows them to grow their wealth really fast because it is more tax efficient.
A corporation can be used to lower your taxes and to protect your assets if structured properly. As I am not a lawyer or tax accountant I will not talk about the corporate structure in more detail here.
Conclusion:
The income generated my the assets in your asset column, will be taxed more efficiently than employee income. Also the different types of assets will have different taxes. Income though dividend paying stocks is more tax efficient than interest from a bond or savings account as interest is taxed as ordinary income, or marginal rate in Canada. The tax on interest will be the tax rate of your tax bracket, but you will not pay the employment insurance tax or pension plan though your own government. These tax advantages of income other than a job and tax benefits of corporations is why Warren Buffett pays less percentage of taxes than his secretaries.
An easy read about paying yourself first concept is The Richest Man in Babylon by George Clason.
DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.
Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.
Sunday, March 8, 2015
Recent Trade
On March 4, the limit order for my trade went through. I purchased 1000 shares of Sherritt International at $2.35 a share. I wrote recently about trades in regards to this stock, which you can read about here and here. These 2 trades were in different accounts in which one is a TFSA account.
I am holding this stock as a trade, so it will be a short term position. Sherritt International will pay a dividend on April 14, 2015 to shareholders of record on March 31, 2015. This is an added bonus if I have not exited my trade by the end of the month.
DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.
Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.
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| Click to enlarge. |
I am holding this stock as a trade, so it will be a short term position. Sherritt International will pay a dividend on April 14, 2015 to shareholders of record on March 31, 2015. This is an added bonus if I have not exited my trade by the end of the month.
DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.
Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.
Wednesday, March 4, 2015
Dividend Update - Feb 2015
The month of February is another month of dividend income landing in my accounts. This money is used to help pay my expenses if it is needed. If the money is not needed, it is ALL used to purchase new investments to further increase my cash flow.
During the month of February the price of crude oil remained below $55 dollars a barrel. On March 4, the price per barrel is $51.85, as indicated below in the chart. The lower oil prices has started to make its way through the economy. A lot of people who live in other provinces in Canada work in the oil patch in Canada. They work for weeks at a time and then go back to their provinces. So this downturn is going to affect all provinces in Canada.
- Emera - $38.75
- Enerplus (ERF) -$ 46.53
- Killam Properties (KMP) - $5.75
- Royal Bank (RY) - $75.00
- Shaw Communications (SJR.B) - $18.33
- TD Bank (TD) - $47.00
- Boston Pizza Royalties Fund (BPF.UN) - $23.87
- Claymore 1-5 yr Laddered Corporate Bond (ETF) - $0.92
- Cominar REIT (CUF.UN ) - $5.39
- Dream Office REIT (D.UN) - $ 16.61
- Killam Properties (KMP) - $ 14.45
This total represents a 72.57% increase from 3 months ago and 38.36% increase year over year. This a new record of dividend income for me. Enerplus has reduced their dividend by $0.04 per month. This is an oil and gas producer that had good earnings recently but are being cautious going forward due to the current environment we all face of lower oil prices. Recently TD, RY, BNS have announced dividend increases. Three other stocks that I own also recently announced dividend increases. These stocks are EMA, RCI.B, BCE, and SJR.B.
I sold a cover call during the month against by position in TD. The net premium I received on this option is $99.05, which you can read about here. I initiated my position in TD when a short put was assigned at $56.00 strike price.
I also received another distribution payment of $56.00 for my swing trade in Dream Office REIT in my non-registered account. This is not listed above since it is a trade, so I keep the money in the account and do not pay myself first with this payment. I have received $1099.47 in distributions so far on this trade.
I will update my dividend income tab with the new amount. It is great to see money from passive income sources deposited into my brokerage account every single month.
Disclosure : Long all securities above.
Photo Credit: www.mipaq,co.za
DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.
Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.
Sunday, March 1, 2015
Portfolio Update - February 2015
The second month of 2015 is now behind us. During the month of February, the price of a barrel of crude oil (WTI) stayed low and is currently
at $49.76 on the NYMEX. This
drop in price has a big effect on my portfolio due to the weight on the
energy sector in my portfolio. A stock that I hold, Enerplus, has good earnings in their latest report. With the current environment of low oil prices, Enerplus has cut their dividend from $0.09 per month to $0.05 per month starting in April 2015.
Shares added due to drip
3 shares of ERF @ $14.08 for a total of $42.24
1 share of KMP @ $11.20 for a total of $11.20
In my last portfolio update, I wrote that my Bank of Nova Scotia shares have not shown how much new shares were aquired through the full DRIP at the time of the writing. I acquired 0.314967 new shares @ $62.48 for a total of $19.68.
I wrote a covered call on my TD position, for a net premium of $99.05. This money is kept in my investing accounts to use towards acquiring stock purchases. Writing a covered call, allows me to collect some extra money besides the dividend. If the stock price stays below my strike price of $56.00 at the March 20, 2015 expiration date, my shares will not be called away.
On Feb 22, 2015 I wrote about my sale of Sherritt International inside my TFSA. My ROI on this trade was 15.62%. In this same post, I discussed my closing out of Bombardier Inc. Class B shares inside my TFSA. My ROI on this trade was 8.333%. You can read about these two trades here.
On Feb 26, 2015, I sold my 600 shares of Sherritt International in my margin account. My ROI on this trade was 7.47% . I held these shares in my margin account for over a month, prior to my limit order being filled. As of the time of this writing, I do not own any shares of Sherritt International in either my margin or TFSA accounts.
As of Mar 1, 2015, the value of my portfolio stands at $78105.25. This is an increase of 3.303% over last month. My positions TD and RY have increase a lot over the past month which included the news on their dividend raises they just recently announced. I believe these are solid companies to have in my portfolio going forward and will look to average down on these positions in due course. I also contributed some cash to my portfolio.
I will update my investing account tab above. The dividend rates have been updated on the spread sheet . Please note some of the dividend rates might not take effect on the next dividend payment but will within 3 months of their recent announcements.
Disclosure: Long KMP, ERF, BNS, RY, TD
DISCLAIMER
Shares added due to drip
3 shares of ERF @ $14.08 for a total of $42.24
1 share of KMP @ $11.20 for a total of $11.20
In my last portfolio update, I wrote that my Bank of Nova Scotia shares have not shown how much new shares were aquired through the full DRIP at the time of the writing. I acquired 0.314967 new shares @ $62.48 for a total of $19.68.
I wrote a covered call on my TD position, for a net premium of $99.05. This money is kept in my investing accounts to use towards acquiring stock purchases. Writing a covered call, allows me to collect some extra money besides the dividend. If the stock price stays below my strike price of $56.00 at the March 20, 2015 expiration date, my shares will not be called away.
On Feb 22, 2015 I wrote about my sale of Sherritt International inside my TFSA. My ROI on this trade was 15.62%. In this same post, I discussed my closing out of Bombardier Inc. Class B shares inside my TFSA. My ROI on this trade was 8.333%. You can read about these two trades here.
On Feb 26, 2015, I sold my 600 shares of Sherritt International in my margin account. My ROI on this trade was 7.47% . I held these shares in my margin account for over a month, prior to my limit order being filled. As of the time of this writing, I do not own any shares of Sherritt International in either my margin or TFSA accounts.
As of Mar 1, 2015, the value of my portfolio stands at $78105.25. This is an increase of 3.303% over last month. My positions TD and RY have increase a lot over the past month which included the news on their dividend raises they just recently announced. I believe these are solid companies to have in my portfolio going forward and will look to average down on these positions in due course. I also contributed some cash to my portfolio.
I will update my investing account tab above. The dividend rates have been updated on the spread sheet . Please note some of the dividend rates might not take effect on the next dividend payment but will within 3 months of their recent announcements.
Disclosure: Long KMP, ERF, BNS, RY, TD
DISCLAIMER
Recent Trade - Sale
In January, I wrote about purchasing 600 shares of Sherritt International at $2.40 per share. Sherritt International has resource based company with operations in Canada, Cuba and Madagascar. Sherritt International is involved in the production of nickel, cobalt, oil and electricity.
On February 26, my limit order went through for the sale of the 600 shares at $2.60 a share.
Initial Cost: $1446.00 including commissions
Proceeds of Sale : $1554.00 including commissions
Profit = $1554.00-$1446.00 = $108.00
ROI = $108/$1446.00 = 7.47%
DISCLAIMER:
On February 26, my limit order went through for the sale of the 600 shares at $2.60 a share.
Initial Cost: $1446.00 including commissions
Proceeds of Sale : $1554.00 including commissions
Profit = $1554.00-$1446.00 = $108.00
ROI = $108/$1446.00 = 7.47%
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DISCLAIMER:
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