Category Archives: Investing

My Worst Investing Mistakes

My investing career started early in life. Back in high school I ran a social studies project where we bought shares in a junior mining company. We made some money and then I decided to buy out everyone else and hold the stock myself. Well that didn’t go so well. After a few years I owned about $25 of stock out of my original $200. I sold and avoided the stock market for years, but I still didn’t learn my lesson yet.

Now my current mistake is a diamond mine, Tahara (TAH), I bought over a year ago back when the mine wasn’t even open yet. There was a lot of hype around the stock and it climbed for several months and I had this feeling at one point I should just take my gains and run. I didn’t. Now the stock, even after a reverse share split, has fallen to the point of being a penny stock again.

Yet strangely enough I have no current plans to sell the stock. I bought it with a different frame of mind this time. I know that I’m speculating and I realize that that is not the same as investing. I also realize that I don’t have very much money invested into the company so if it bottoms out and I have nothing. I’m not worried, because this is my form of lottery tickets. Perhaps this is the reason I have gone to index investing with my RRSP.

It’s been an entertaining ride so far and I promised myself I would give the company five years after start up to see if they can’t make a go of it. Even if I just take a lose at the end, at least I get to claim a capital lose on my tax form.

So what was your worst mistake? If you feel like sharing, please leave a comment.

The Emergency Fund Myth

One piece of standard advice that I just hate is that you should keep an emergency fund of three to six months worth of expenses. I personally don’t have one, instead I keep a unused line of credit that can cover about five months of expenses.

Why do I avoid an emergency fund? I plan for an entire year’s worth of normal expenses in advance, so having the car insurance or Christmas come due is hardly a surprise. I save a set amount each month into my high interest savings account and pull out the money for those yearly expenses when the come up. That way I’m not having too large of a sum of money sitting around, uninvested and losing its value to inflation but I do have a large enough fund to help cushion those unexpected expenses.

As for a true emergency, I have used the line of credit before and found it worked out fine. After our baby was born ten weeks early, we had a lot of unexpected expenses (hotels, food) including the replacement of one of the main structural beams in our house for $9,000 and the car lease buyout for $8,000 (the story on the lease is an entirely new post). The total damage was about $22,000 in three months. So after maxing out the line of credit and stripping down every penny I had saved in non taxable accounts I was still $5000 short. So I took an offer of help from my parents and took out a loan from them for $5000 to be paid back in 8 months.

In 12 months I had manged to pay off the entire debt, which given the size of the emergency I feel is a perfectly acceptable time frame. So depending on your own situation, you may be better off with a $0 emergency fund.

Paying for the Kid’s Education (RESP)

As I was doing my estimates for retirement, it occurred to me that I was planning to retire exactly as my kid will be in post secondary education. So how can I do both? Simple I don’t plan to pay for my kid’s entire education.

It’s not that I’m not going to help, but I didn’t have my entire education paid for, so why would I pay for all of my kid’s education? I personally found that when my parents stopped paying the bill my spending dropped by about $2000/year. It forced me to question my spending habits and really made me think “Do I really need to buy this?”

I personally found the easiest way to fund a RESP for my kid is to take the Child Tax Benefit and that $100/month from the Federal Government and pour it into a RESP to receive the Education Saving Grant . In my case, that works out to $120/month of government’s money that is then topped up to $150/month. So it costs me nothing until the kid no longer qualifies for the $100/month at which point I will continue to fund that amount in every month.

As to where to put the money. I suggest you read the following from the Canadian Capitalist, which is a great post with links to many helpful resources.