Capital Comments

Mutual Fund Fees - What you need to know

Dan Walkow, CFA, CMT — Wed, 21 Jul 2010 23:24:25 +0000

Most investors who buy mutual funds are unaware of the hidden charges embedded in the funds themselves. If not required to “write a check” hidden fund fees continue to escape investor’s attention. The United States Securities & Exchange Commission aims to force transparency, a win for investors.

If you invest in mutual funds read more here.

The Risks of Following the Crowd

Dan Walkow, CFA, CMT — Sun, 20 Jun 2010 12:51:31 +0000

We have seen the enemy and it is us….

When it comes to successful investing in this era the laws of human nature have not changed. Humans are social creatures and for the most part feel good when they are part of the crowd. In this era of instant communication by “live business TV” and the constrant real time feed of the internet information flows real-time and on a global basis “emotional risk intensifies.”

Investing is not a local thing anymore and when the ” crowd” gets excited pushing investment values to and fro on an acclerated basis. This leads to sharper and more volitle moves in security prices.

The danger for most investors is that they get their information through the popular news flow and form their opinions accordingly. This is human nature but in the world of investing it is a dangerous and often costly exercise.

The emotional pull to be part of the crowd more often than not leads to buying investments at rich prices already bid up and therefore postioned for disappointment.

The most signifigant impediment to making successful investments is our own emotions and desire to be part of the crowd.

Now more than ever, when it comes to investing, the old saw applies; believe nothing of what you hear and half of what you see.

Great piece at the Wall Street Journal on a recent study on the reasons why investors get caught up in the crowd mentality. Read it here.

Arizona Immigration Targeting

Dan Walkow, CFA, CMT — Sun, 13 Jun 2010 16:24:24 +0000

Now its the kids. Arizona is creating quite a stir with its illegal immigration targeting. Read more here.

New Bank Overdraft Rule in the USA

Dan Walkow, CFA, CMT — Sun, 13 Jun 2010 15:45:53 +0000

Up until now if you took more out of your checking account that you had, creating a negative balance your bank typically honoured your check and whacked you with an overdraft fee.

Not anymore.

If you try to overdraft your account your request will be denied—unless you pay for overdraft protection, more fees!

E2 US Visa Holders at Risk on Renewal

Dan Walkow, CFA, CMT — Sun, 30 May 2010 14:08:58 +0000

Holders of E2 visas in the United States must have the visa renewed every two years and according to a recent article in the New York Times renewal is no slam dunk and can the process can be very subjective.

Folks who move to the US to set up a business with an E2 face renewal risk. Read about a recent case at the New York Times here.

Beware Principle Protected Notes

Dan Walkow, CFA, CMT — Sun, 23 May 2010 16:06:37 +0000

I have never been a fan of financially engineered products by Wall Street or Bay Street as more often than not these products benefit the broker or issuer far more than the client.

In recent years the latest “shell game” is a product called principle protected notes. These are very complicated deals where the capital value of the investment is supposedly “protected” meaning that if the market goes down that the investor is guaranteed the principle at a certain date. Furthermore these things are very expensive and because the charges are “internal” and embedded in the investment itself one cannot not see the true cost.

These types of investments are commonly issued by insurance companies in both Canada and the USA.

These types of products go against most of the basics I look for in an investment including transparency, low-c0st, liquidity and ease of understanding.

Gretchen Morgenson at the New York times documents a classic case here. Worth a read if you own or are considering buying one of these investments.

Strategies for a Volatile Market

Dan Walkow, CFA, CMT — Sun, 18 Apr 2010 16:20:23 +0000

The past several years have been a game-changer in terms of investment strategies with “buy and hold” strategies providing little in the way of investment returns for many investors. Making money requires a much more nimble approach where tactical asset allocation techniques, sector rotation and profit specific targeting are the order of the day.

GREGORY ZUCKERMAN of the Wall Street Journal has a very good article on how to Play the Bubbles like the pros. You can read it here.

China’s Rules to Curb Property ‘Madness’ Will Take Effect Now

Dan Walkow, CFA, CMT — Sat, 17 Apr 2010 10:12:54 +0000

Chinese authorties take further action to rein in runaway real estate prices. Under the new rules, down payments for second homes must be at least 50 percent, up from 40 percent, and mortgage rates can’t be lower than 110 percent of benchmark rates, the State Council said. Banks should also raise down payment ratios and rates for third homes “by a broad margin,” it said.

Read more here.

Should I convert my IRA to a Roth IRA?

Dan Walkow, CFA, CMT — Tue, 06 Apr 2010 12:28:33 +0000

The widely anticipated expansion of the Roth IRA conversion program steamrolled into 2010 in a blaze of hype and publicity, but a new report shows consumer interest has been more of a whimper than a bang. This tax break offers basically one year in which anyone with an Individual Retirement Account (IRA) can shift the money into a Roth IRA and never again pay tax on it.

I think one of the most appealing aspects of the new IRA rules is for those investors who have more than enough retirement savings and are looking to “pass down” their IRA to their children who can grow and withdraw assets tax-free.

When is a pension not a pension?

Dan Walkow, CFA, CMT — Sat, 03 Apr 2010 10:36:06 +0000

The Problem:

Canada Revenue Agency tells me I was not eligible to split pension income with my wife in 2007 and 2008. Now I have a huge tax bill with a penalty. The income came from a registered retirement income fund and a locked-in retirement income fund. That money came from my defined-contribution pension plan when I left Sobeys in 2006. I am now 58 years old.

The Pain:

Only lifetime income paid directly from a pension plan qualifies for the federal pension credit and for splitting with a spouse to save tax, unless it is transferred to you on the death of an earlier spouse. Your RRIF and LRIF withdrawals will not qualify as pension income until you reach 65. It’s another example of discriminatory treatment toward folks without a pension plan.