In the last post we talked a bit about options and how they work. As promised this post is going to demonstrate an example use of an option to demonstrate a practical application.
I think the layman understanding of an option is that it is a way of increasing risk and return – i.e. that they are speculative risky investments used to get rich (or die trying).
A popular topic recently (thanks John Oliver) is how badly we’re all getting screwed by mutual funds.
Mutual funds are a ubiquitous retirement savings tool; generally people get them offered through a company which serves their workplace (i.e. Manulife) and hold them in an RRSP. The problem lots of people like to find with mutual funds (to make themselves sound smart) is that the fees the specific mutual funds charge you (the largest of which is referred to as a management expense ratio or “MER”) is large compared to the annual return and erodes the amount of money you’ll have when you retire.
How legitimate is this complaint? Continue reading
Many people hear things in the news about stock options – they’re a hot topic, don’t big fancy tech guys make all their money from them – for example the all-knowing 2nd coming of Jesus Christ Elon Musk? The below article is going to achieve a few things – What is a stock option, how do they work, how do you value them? It’s getting pretty long so I will try to cover some of the practical uses (which there are!) of options in a later post. Continue reading
Since this is a personal finance blog it was just a matter of time until a post on budgets came up – the golden goose of personal finance, the almighty budget.
Budgets are boring – really super boring – not only are they boring to think about they’re boring and no fun to implement. More importantly, I think that the use they provide is often overstated for the simple reason that for most people that “need” a budget, a budget isn’t going to solve their problems – why is this? Continue reading
The following article is based on a drunken discussion between me and two friends – govern yourself accordingly.
Have you ever wondered how terrible TV seems to persist? How Judge Judy still on the air after like 20 seasons? How can this happen in 2016 you may wonder – when we could just be watching re-runs of the real housewives of Atlanta? I am by no means an expert in the television business so the below is a simplified examination but it’s a great example of how basic economic concepts can result in what many people see as inopportune outcomes. Continue reading
Further to the post about the recent rule changes related to mortgages in Canada we are going to continue out suite on housing by investigating one of the biggest tax windfalls to ordinary Canadian – the principal residence exemption. It’s a pretty nifty idea and the calculation is fun because it’s a very accessible example of how tax planning can save oodles of cash.
The recent changes proposed to mortgage rules by Bill Morneau closed this “loop-hole” to non-residents, why is that? What’s so great about it that it required being closed? Continue reading
So by now I’m sure my informed readers (there are literally dozen(s)) have heard of the new changes announced this week to mortgage rules announced by Justine “Shiny Pony” Tru-dope’s Finance Minister Mr. Bill Morneau.
While on the surface many people are cheering this as a valiant attempt to save the middle class and help keep house prices affordable, but I think we can show below that the reality is quite different and this move should be derided by those looking to enter the market. Continue reading
Have you noticed how car ads these days are stressing bi-weekly payments? When you think about it is a pretty obvious ploy, try to shape purchasing habits by showing the affordability of a purchase hoping to sway a buyer.
Interestingly this observation has a lot of similarities as to how record low interest rates in Canada have led to what many consider (this for another article…) to be an overheated housing market. Let’s see how this works: Continue reading
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