How Not to Lose 3 Billion Dollars!

Posted on May 18, 2012 by lodestone

Maybe you’ve noticed the news headlines today that have announced that a major US bank, JP Morgan, is in the process of losing $3 billion. Yes that is co5rrect it is $3 billion. I’m not sure how many zeros are on the end of the three but there’s a lot.

To put this into perspective in 2008 when the credit crisis hit the US government was doing a bailout in the neighborhood of .7 5 billion. So the question I would like answered is, how big is JP Morgan? It appears to have at least as much money as the US government.

What they have done is make one massive bet that the European investment grade bonds would strengthen. With the bad news out of Greece and other European countries these bonds have actually decreased in price.

In a well structured portfolio, unless you are prepared to take these sorts of risks, it is prudent to own several different styles of investments. Due to the fact that we are not able to see into the future it only makes common sense to have a well diversified portfolio. This includes diversifying between companies, styles of investing and the investments themselves.

This can be an overwhelming task for someone who is not familiar with these things so let us help you protect your investments.

Posted in Investment Strategy, savings | Leave a comment

Getting a big tax refund?

Posted on April 24, 2012 by lodestone

What are you going to do with your refund? Here are a few things to think about before you go and splurge on those new pair of shoes.

Prioritize. Once you’ve found out your getting a refund, take a good look at your situation. The first instinct is to spend the money on something you want or something fun. But hold on, have you evaluated your debts, savings, and priorities. What are your goals?

Why are you getting a refund at all? When you find out your getting a refund your first reaction is to be excited. Take a second and ask yourself what this really means, you just loaned the government your money last year with a interest free loan. Ideally you don’t want to be getting a whopping refund. Take this opportunity to adjust what you were paying the government on your income taxes. Put the money you would have been paying the government into a TFSA to make a little interest.

Along with your prioritizing, conquer that high interest. A large refund gives you the opportunity to pay down some debt. If you conquer the high-interest rate credit cards first, you’ll save more money over time.

Make an extra mortgage payment. Putting an extra payment or two onto your mortgage can save you thousands of dollars in interest
Think about the kids. If you haven’t started already, put some money for their education. If the child is under 18, an RESP is a savings account for education. The RESP is a great idea because of the grants the government puts in (it’s like getting free money).

Prepare for your retirement. It’s always a wise decision to think about your future and contribute to your RSP. Many people don’t plan far enough ahead and need more money than they anticipate upon retirement. If you put money into an RSP this year, you will have a larger tax credit next year as well. Don’t forget, go back and re-evaluate your tax contributions so you don’t pay the government early.

If you are wanting to buy something for yourself; maybe that new pair of shoes, make sure you are watching those prices. Retailers know that money is burning a hole in your pocket. Maybe think about making a wish list and set the money aside in a TFSA or other savings account so you can make sure you are really getting what you want and at the right price. (and making little interest while you wait).

We have more great tips to help save you money. Give us a call or email anytime.

Posted in Personal Finance, savings, Tax Planning, TFSA | Tagged , , | Leave a comment

Can you make your Income work harder for you?

Posted on April 5, 2012 by lodestone

It’s all about Cash Flow

If you Die – Life insurance replaces your cash flow that has stopped
If you are sick – Critical illness insurance pays a lump sum to help you when your income is interrupted
If you are hurt – Disability insurance replaces your lost cash flow
If you want to retire – RRSP’s replace your income from work
Your investments help you to buy things – smoothing out your cash flow

Debt reduces your cash flow and if interest rates rise they can impact it to a large degree if used incorrectly

Debt diversification is likely the greatest enemy of a healthy financial plan. There are several reasons for this. First of all diversification is a theory used to increase the chances of growing investments, when applied to debt it can also cause growth—of course most people do not aim to grow debt. Also when debt is spread over multiple accounts with multiple payment dates it makes it quite difficult for you to organize an effective repayment plan. When you try to manage many different debt accounts it is confusing and expensive.

Unifying debt, combined with cash flow management, is an entirely different approach. To unify debt is to get the total household debt down to as few accounts as possible and automate rapid repayment. Every cent that is not getting used in that moment can be automatically applied directly to the debt.

Let us help you get your debt paid off faster so that you can enjoy life more.

Posted in Cash flow, Debt | Leave a comment

Can I be the Millionaire Next Door?

Posted on February 16, 2012 by lodestone

Who among us has not looked at someone else and thought, “Wow, they are doing so well, I wonder what their secret is?” Well, the secret is, there is no secret. Any one among us is able to retire with a net worth that can easily support us throughout retirement.

I have watched friends, family members, and clients squander away the income they earn, rack up high debt, and plan to spend any income increases in the future. What these people do not get is the bathtub theory of economics… make sure that more money is coming in than going out. Unfortunately not enough people follow this sound piece of advice.

Another hard lesson is that you must learn that the government tax earnings and not necessarily net worth. If you calculate that you are already paying upwards of 40% of your earnings in income taxes, it becomes painfully obvious that by simply increasing your net worth contributions, you will automatically reduce your income taxes. A net worth contribution is commonly known as an RRSP. Typically most people under contribute to this well known tax shelter by a large amount.

To use a hockey analogy, a lot of people play excellent offense (they make a decent salary) but they played terrible defense (they spend everything they make).

If you need help rethinking your current financial strategy please give us a call we would be happy to help you.

Posted in Debt, Estate Planning, Investment Strategy, Retirement Planning, RRSP, Tax Planning | Leave a comment

Will your New Years be better than the last one?

Posted on January 24, 2012 by lodestone

Yeah, I know we have heard all this before but some things never change. Really, it’s not how you start, it is how you finish. In today’s ever changing world, we must also be changing and adapting. If you don’t adapt, you will go the way of the species that couldn’t quite make it.

How many times have we said to someone, “whatever happened to that store or that business?”. Well, generally the answer is they didn’t adapt to new information or new ways of thinking. Ever stop to wonder what happened to Blockbuster the video rental store that just closed down. Well, essentially they had to close their doors because of competition that they did not adapt to.

How does this fit into your world and why should you care? Basically I believe that we live in a much harsher time than we are used to. We need to clarify our values and take away the roadblocks that hold us back. Things like too much of the wrong debt, spending too much of our hard earned money on trinkets not treasures. We need to analyse where our money goes.

We live in a different world today and most of us are still thinking that we don’t have to change and adapt to this new time. We all need to use the new tools that are out there to help us pay down our debt faster and better so that we can free up our cash flow to save more money. Also our investments have change as well. We need more investments that have a strong base of enduring through troubled times. Things like real return bonds that help to capture a premium when inflation hits us in the wallet as well as other great investments.

There are many things that can derail our safe place like excessive debt around the world or short sighted governments that may interrupt the flow of oil causing higher prices for all of us. We need to take steps to get some measure of insurance against that. This is where we can help.

Call us today

Posted in Debt, Economy | Leave a comment

Is your Money Working Smart for you?

Posted on December 14, 2011 by lodestone

Sometimes when we ask our clients questions about their debt we find out that they are paying off their mortgage by putting living expenses on their credit cards or conversely they may be paying off their mortgage but neglecting to save for their retirement.

There is a better way. In our experience we find that people have never really been educated in the proper use of debt. We find that they are paying too much in interest charges which results in them not having enough money to do the investing that they need to do.

For example you may have $5000 in your savings account which is earning you less than 1%. On the other hand you may have a $5000 balance on your credit card which is charging you 18%. Now on the face of it this doesn’t make sense but there are more factors than just these two. Perhaps you are saving for a holiday or a new vehicle and this is where $5000 in your savings is destined to go.

What this strategy is in essence doing for you is you are paying interest on money that you do not owe anyone. You could pay off your credit card with the $5000 in your savings which would save you 17% interest. But typically people do not do that as they feel they need this money for the future.

By utilizing some relatively simple methods to change the way your cash works for you we are able to save you many thousands of dollars in interest charges over your lifetime. By this time next year would you not rather have freed up extra dollars so that you can enjoy life more?

Posted in Debt, Investment Strategy, Personal Finance, savings | Tagged , , , | Leave a comment

Europe’s Debt and How it Affects you

Posted on December 2, 2011 by lodestone

We have been getting phone calls from our clients wondering how latest development in Europe will affect them. Just to recap what seems to have happened is that the world’s central banks have gotten together to make lending between banks easier and cheaper. What was happening is that the European banks due to the euro tumbling in value, were selling off assets in order to raise money for their obligations.

This latest development appears to have solved some of these problems, at least temporarily. As you and I both know when you are in debt and you borrow more money it can never be the true answer. At some point in time the debt does have to be paid and this is a problem that they are struggling with.

What we can foresee is continued volatility in the markets but hopefully not a return to the despair of 2008. By using some alternate investments we are able to take out some of the volatility and still get you a decent return. Give us a call for some better options.

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Investing with 7 Billion People

Posted on November 2, 2011 by lodestone

In case you missed it, the world’s population just hit 7 billion people yesterday. It took about 13 years for the world to add 1 billion people. In 1999 the world’s population was at 6 billion and it’s projected that we will gain another billion people in 10 years.

What do you think that this might have to do with investing? Basically it means that more and more people want more and more commodities. Everyone likes to drink freshwater, eat, drive cars and save their money.

China and India’s population is growing at a far faster rate than ours is here in Canada. Their population is also becoming wealthier. This means that large numbers of people can now afford to replace their bicycles with a car.

Many people speculate that we have hit the peak oil scenario which says we have found all the cheap oil and all new discoveries are going to be much more costly to extract from the earth. This means that while supply is going down demand is going up. In all likelihood we’re going to see much higher prices for our oil and gas in the future.

The same thing applies for investments. Typically when people from China and India wish to save money they tend to prefer precious metals such as gold and silver. As their wealth increases so will their savings rate. This also gives the likelihood of precious metal prices being far higher in the future.

These are just a few ideas that can enhance your wealth. We also have a number of other ideas that can protect your income as well as tax shelter it. Please give us a call to discuss some of these options for you.

Posted in Economy, Investment Strategy, population | Leave a comment

Decent Investment Returns – Are They Possible?

Posted on September 2, 2011 by lodestone

With all of wild gyrations in the markets lately what is the ordinary person to think? Should we crouch down and all invest in a GIC which pays next to nothing or should we throw caution to the wind and invest in the stocks which have been hammered down?
My suggestion would be to look elsewhere. With interest rates being exceptionally low such as ten-year treasuries at 2.25% in the US which also reflect exceptionally low interest rates in Canada; your GIC return rates are also very low. This almost guarantees that you will be eaten alive by inflation. In case anyone has not noticed most everything that we have to buy has gone up in price. The real world inflation has decreased the purchasing power of your money.
An investment with slightly more risk but far greater returns is emerging-market bonds. Countries such as Australia, Mexico, Brazil to mention a few give us a better opportunity for returns than in North America. All those countries have a better credit standing than the United States with much better balance sheets.
These countries have the ability to repay their debt much easier and safer than, for example, the US. In this day and age of extreme volatility the ability to have your principal back is a very valuable thing. Then to have a return on it as well is exceptional.
Give us a call at Lodestone Investment Corp. to have us analyze your portfolio and recommend some innovative ways to help you invest better.

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Are you invested properly?

Posted on August 18, 2011 by lodestone

As many of you know the markets have had a lot of variability lately. They have gone down, then up and then down again. This is all very unsettling in the short term. What we need to focus on is the long term fundamentals.

Essentially what seems to be happening is that fund managers and people in general are selling what they can, in a panic, just to raise cash and to pay off leveraging and excess debt. Any time people panic they generally receive less for what is considered a good asset. So what I am trying to say today is that we need to remain calm.

What seems to have taken a considerable dip is high quality oil and gas companies. Now we all drive back and forth nearly every day, using gas and oil. In fact worldwide demand is somewhat higher than what the world is actually producing. This tells me that eventually prices have to increase. Sometime in the future there’s going to be not enough supply and too much demand.

So essentially what we have is a sale on high quality oil and gas companies. So rather than getting excited about the possibility of paper losses, what we need to do is reevaluate our portfolio and decide if we should be investing more money into these sorts of assets.

This is a very good time for you to be contacting me to determine what we should be putting into your portfolio. What we need to look at is high quality assets that go up over time and are going to protect you against inflation.

Please give Lodestone Investment a call to book your appointment today.

Posted in Economy, Investment Strategy | Tagged , | Leave a comment