More ETFs

Ishares manages most ETF's in Canada. Here is the link to their product page:

ishares ETF's

Avoid the higher MER ones, keep it as simple as possible. In fact, if you don't know what it is, just by the name, avoid it at least for now. For example, I don't know what the Russel 2000 index is, and I wouldn't buy that ETF right now. I do know what dividends are, what the tech sector is, so those I might consider.

Investing - Pt 2 - monitor your performance

I use Google Finance Canada to track investments. It is easy to set up, and I can keep track of all of the stocks that I own, the performance since I purchased and current day, and other stocks that I am watching for interest. Google also has the best interface for searching. You can type in the name of the company or the stock, and it will find the company, related news, and a graph of the stock performance instantly. You can zoom in and out of the graph.

I put a link in firefox to google's "my portfolio", so that at any time I'm less than 5 seconds away from all my investment info. Right now my shares in Bell are down 32 dollars.

What Google finance doesn't have is accurate price to earnings ratio and dividends. So when it comes to narrowing down a stock, I still use my discount brokerage for that info. I'll explain why those are important some time soon.

Digital SLR

New DSLR recommendation?

The Canon XS looks like the best bet. Apparently it is a bit plasticky feeling, but has the most features and great image quality. There are decent reasonable lenses you can upgrade to (get the 18-55IS with the camera) such as the 55-250 for $349 (for telephoto). To go wide it will be pricey though, around $700 for a wide angle lens. The Canon has no movie mode and is a bit slow when using the back screen to focus.

The Sony A300 looks like a good alternative. I'd get it over the A200 or the A350.

Nikon is not really up to date with the Canon and Sony feature wise, but the D60 and D40 are decent cheaper cameras. Their higher end lineup including the D90 is excellent, but over $1000.

I like the look of the Panasonic G1 DSLR as they are very small. $750 with lens.

I never looked closely at Olympus and Pentax. I think they are niche players. I know Olympus had one DSLR very cheap (like $349 with two lenses) at Futureshop recently.

DPreview.com has reviews on most DSLRs.

Ken Rockwell's website has a ton of info. Don't be put off by the big lens on the front, his advice is basically to spend the least amount possible. Also, don't expect great pictures from a new camera. Getting outside and taking pictures and learning about composition is where good photos come from. Good stuff.

Cheers,
Scott

Start Investing

A few people in the last few weeks have asked me about the 'basic basics', as in the very first steps. So I started this blog.

First of all:

• Don't buy mutual funds.
• Don't talk to financial advisers. Most are mutual fund salesmen or insurance salesman. Sometime down the road you may want to find a fee based financial adviser, but you'll be better off if you have a base level of investment knowledge already.
• Don't listen to anyone who talks about hot stocks.

Ok.

The first step is to open an account at a discount brokerage. A "discount brokerage" means little or advice, so you won't be getting calls from your stock broker like movie stars and CEO's do. You also have to buy and sell yourself, but it is very easy.

Most banks offer discount brokerages, I used Scotia Mcleod for awhile. RBC's is called Direct Investing. They are all good options, but look at the fees. Fees are your enemy. What you want is zero account fees, and $20 or less trade fees.

Right now Sandy and I are using two accounts, one with QTrade, and one with Scotia Itrade (formerly e-trade). The independent places like these two usually have slightly lower fees than the banks (like 7 dollars less per order).

Check out the discount brokerage, fill in the form, I think you have to mail it in. You should open a cash account to start, if you want, open an RRSP account. Often the RRSP account requires a 15K minimum balance to avoid fees. One reason we went with itrade is that it has no minimum balance for RRSPs.

When you have the account you can transfer money from your normal bank account, like a bill payment.

Generally your investments should be around 2.5 to 3k per purchase. The reason is that you want to keep the fees to a low percent of your investment. For example, $20 buy and $20 sell fees add up to $40, or 4% of a 1k investment. BUT if you invest 4K for each stock, then you only have to make 1% to cover the fees. Remember every percentage point counts. This is exactly why mutual funds, that take out 2.7% or more per year (but they do it every day so you don't notice), are not worth it.

Once you have your account, choose your first two or three stocks. A good idea to get started is an ETF. They are collections of stocks, like mutual funds, but without the 250K annual salary "manager". You buy them through the trading screen like any other stock.

ETFs just follow the underlying index. Instead of a 2.25% MER (warning PDF link) they have something like 0.25%, or less. Plus, they are up front about the MER and it is easy to find.

I have some XIU - ishares large cap. Basically the 60 largest companies in Canada. The MER is 0.17%. That I can live with. It pays dividends too. Another good ETF is XIC - it is the TSX. Hey, you only have to look at the front page of the paper to see how your investments are doing. Over the long term, you know the TSX will go up.

With ETF's you're done. Since you invested in the 60 largest companies in Canada, you don't need to worry about one or two of them going down. Overall the market will rise. Here is the secret: it is impossible for you to pick the one stock that will go up huge next year. However if you have an ETF, you will get in on that stock, because it is part of the collection.

I bought some XEG for $14.something per share. It is the energy sector. I think oil and gas companies will be successful in Canada but I don't want to research them individually. So, take the amount you want to spend, $2500, and calculate the number to buy, 180. Usually I round to a near number, for example for about $3020 you can get 200 XEG.

Go to your account, sign in and make the purchase. When you choose "order type" choose market. It will ask you to confirm and tell you the cost and the fees. For these big stocks, the ask price and bid price are very close, so you don't need to worry about the other options like stop limit.