Archive for August, 2006

How to Make a “Wash” Trade

August 28, 2006


A reader, Mr. L, sent the following information on how TD Waterhouse clients can avoid paying currency conversion fees when trading US-listed stocks in a self-directed RRSP account. Here is his detailed e-mail, posted with his permission (and slightly edited):

Since my last email to you, I have discovered that one brokerage house does allow you to avoid all of these costly currency conversions. I was just informed today that TD Waterhouse, which I use, will allow me to convert the Canadian cash held in my RRSP to US funds and buy their US Money Market Fund, currently paying 4.26% interest annually (code: TDB166). When I buy a US stock online using TD Webbroker, I merely have to call one day before the trade settles and ask them to sell enough of that money market fund to cover the trade (as mutual funds only take a day to settle, versus 3 days for equities) and no conversions are made back and forth. When I sell the US stock, I again must call them one day before the trade settles to have them buy an amount of the US Money Market Fund equivalent to the trade proceeds. They call this a ‘wash’ trade.

In this way they say that I can avoid paying any further currency conversions beyond the initial one in order to trade US equities. The only hassle is that even though you are trading online, you still have to phone regarding buying and selling the US Money Market Fund. A small price to pay to avoid all of the extra fees and this hopefully will eventually be changed to allow everything to be done online.

As far as I know, RBC Action Direct, which is our primary brokerage account does not offer this feature. US equities comprise a big portion of our portfolios and the ability to do a wash trade makes switching to TD Waterhouse a tempting option. Thank you for the information, Mr. L!

Review: Microsoft Money 2007

August 28, 2006


I use Microsoft Money 2006 to track our household finances. There is no particular reason for choosing Money over Quicken, except that I have a friend who works for Mr. Softie and sends me a copy every few years.

Microsoft offers a free download of Money 2007, which can be used for evaluate the software for a period of three months (Note to Intuit marketing folks: If you allow people to try your software before they buy, maybe you will be able to increase your sales). I downloaded and installed the trial version to see if there are any new features worth having. Turns out that apart from a new budget tracker there is absolutely no reason to upgrade.

It also appears that Microsoft still hasn’t gotten the hang of creating user-friendly software. For instance, to try out 2007, Microsoft recommends that users uninstall the earlier installed version from their computer. I didn’t follow their recommendation and of course, when I removed the trial version, 2006 does not work anymore. It was a bit of a nuisance installing 2006 all over again.

Bottom line: If you have an old version of Money, it might make sense to upgrade to the latest version. I used the 2002 version for many years before upgrading to 2006 last year mainly because stock prices were not being updated correctly. Users with newer versions of the software can safely skip the upgrade.

Keeping up with the Joneses

August 24, 2006


Why do we get the urge to spend money? Why are most of us on a hedonic treadmill, endlessly upgrading stuff with “better” stuff? Is it because credit is so easily available? Are credit cards, which makes it oh-so-easy to spend money that we don’t have, to blame, as we argued sometime back?

I am convinced that the main reason that most of us are on a financial hamster wheel is due to our tendency to keep up with the Joneses. As regular readers know, our twin boys were born last year and we spent most of the past year in an endless cycle of feeding and changing. Naturally, we were mostly confined to our home and our social life was severely restricted that we hardly got a chance to visit our friends.

Sometime back, my wife took the boys to visit her family and I started to attend barbeques and watch soccer games with our friends. And that is exactly where I got the urge to buy more cool toys.

One of my friends had recently purchased a flat-panel LCD TV and I have to admit that a soccer game looks a lot better in HDTV format. It is much harder to go back to an eight year old, bulky television and soccer broadcasts in a standard TV format. Another buddy of mine recently showed me his newly acquired Tablet PC. Now, I have a fairly new laptop at home, but still I felt that all the cool features of the Tablet PC makes it worth having.

Fortunately, I haven’t acted on my impulses, though I am still lusting after a flat-panel TV and dreaming of watching hockey games in a spectacular format. My favourite Yahoo! Finance columnist Laura Rowley offers the following cure in a recent column on this very topic:

To overcome money envy, we need to figure out our purpose, identify what we love and value most, and make our money obey our values by setting specific financial goals. Because if we achieve the things we value most, we’ll be less riveted by what the neighbors are doing.

It’s just that it is easier said than done.